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New Clause—(General Scale Of Rates Of Estate Duty)

Volume 529: debated on Wednesday 7 July 1954

The text on this page has been created from Hansard archive content, it may contain typographical errors.

In relation to estates of a principal value not exceeding five thousand pounds, the following scale of rate of estate duty shall be substituted for the scale set out in the Seventh Schedule to the Finance Act, 1949:—

Principal Value of Estate

Rate per cent. of duty

Not exceeding £3,000Nil
Exceeding £3,000 but not exceeding £4,0001
Exceeding £4,000 but not exceeding £5,0002

Provided that if the rate or amount of duty which would have been charged on any estate or interest in property of any kind whatsoever other than that on which duty is charged under this section would have been less had this section not been enacted, the rate and amount of duty charged or to be charged on such other estate or interest shall be the same as it would have been if this section had not been enacted.—[ Mr. Dalton.]

Brought up, and read the First time.

I observe that later on the Order Paper there is a new Clause proposed by the right hon. Member for Blackburn, West (Mr. Assheton)—[Estate duty (extension of certain exemptions)]. These two new Clauses seem to cover the same ground, and can be discussed together, if that be convenient to the House. [HON. MEMBERS: "Hear, hear."] So be it.

7.15 p.m.

I beg to move, "That the Clause be read a Second time."

It is interesting to note that even at this late hour the right hon. Member for Blackburn, West (Mr. Assheton) has been kind enough to put down a new Clause which, so far as I can judge, is identical in purpose with that which I am now moving. I hope that, if the Government are obstinate, the right hon. Member will find his way into the same Lobby as myself.

The purpose of the proposed Clause is to give further relief at the lower end of the Estate Duty scale to the smallest, and only to the smallest, estates. I would have been glad if it had been possible to discuss this matter at the Committee stage, but in the form in which the proposed Clause was then put down it was held to be out of order. Having taken expert advice, we have now brought the matter into order by adding a proviso, which is a remarkable example of legal English. I do not think I need recite it, but I am assured that the words beginning
"Provided that if the rate"
and concluding with the words
"had not been enacted"
remove any possibility that this change in the scale of Estate Duty at the lower end might, even indirectly and subsequently, increase the charge upon some second party to a settlement or some other person remotely interested. I am glad to find that the proposed Clause is therefore in order and can be debated.

As the Chancellor of the Exchequer will recall, it was the great Sir William Harcourt, founder of the modern Estate Duty who, in 1894, gave it its present shape and initially fixed the level of exemption at £100, a very low figure indeed. In the intervening period, a number of Chancellors of the Exchequer have modified the scale, but, curiously enough, not for more than 50 years was any modification made at the bottom of the scale. For example, Mr. Asquith—I will cite one or two cases to illustrate what occurred—in 1907 touched up, if I may use such a colloquialism, the Estate Duty scale, but did nothing at the bottom end. He put up the rates on the larger fortunes.

Mr. Lloyd George twice, while he was Chancellor of the Exchequer, touched up the Estate Duty scale, first in 1909 and again in 1914. After the First World War, Sir Austen Chamberlain set an example to Labour Chancellors of the Exchequer by doubling the rate of duty on the very highest estates, over £2 million. Indeed he more than doubled the rate: that should be remembered by Conservatives as part of their tradition. The late Sir Austen Chamberlain, seeking to reorganise our finances after the First World War, felt that the highest estates should pay more. The present Prime Minister was of the same opinion in 1925. He steeped the scale. Finally, before the Second World War, Lord Snowden, then Mr. Philip Snowden, did the same in 1930. During the war, I believe—I have not checked the later events because they are very well in our memory—both Sir John Simon, as he then was, and Sir Kingsley Wood further put up the scales.

The extraordinary thing is that although those eminent men, belonging to the three parties, from time to time adjusted the scales, at no time did any of them make any improvement at the lower end, which remained as it was fixed by Sir William Harcourt, in 1894, at £100. Fifty-two years were to pass before any alleviation was brought to the poorer families who were subject to Estate Duty.

In 1946 I suggested—I think the Opposition of that time accepted my proposal—that we should raise the level from £100 to £2,000. That is where it stands now. I can, therefore, claim that I was the first Chancellor since the time of Sir William Harcourt in 1894 to adjust the scale in that manner.

I took great care, of course, to lose no revenue by doing this. I also adjusted the scale at the upper end to bring in a total of £22 million more revenue in that year, although I was able to exempt by raising the exemption level from £100 to £2,000—this illustrates another point that I wish to elaborate in a moment—no fewer than 75 per cent. of the estates which would otherwise have been liable. That is a very dramatic example of the grave inequality which prevails in regard to property passing on death, and it also reflects the grave inequality in the property owned by the living.

One of the arguments in favour of raising the exemption limit which I employed during the debates of 1946 was that one is not only doing an act of distributive justice but also making great administrative savings, in that, evidently, fewer officials are required to keep track of the estates liable to duty if one reduces them to only a quarter of the previous number. That argument still has weight today, although it has less weight since we are now dealing with an exemption limit of £2,000 and not £100. Nevertheless, it still has weight in the proposal which I make to lift the exemption limit from £2,000 to £3,000.

It is clear from the figures given in Table 102 on page 110 of the latest Report of the Commissioners of Inland Revenue that more than half of the estates which are now subject to duty, given the limit of £2,000 which I introduced in 1946 and which has not since been changed, lie in the range between £2,000 and £5,000. I hope that the Chancellor will be able to give us the effect of my proposal in terms of the number of estates which would be fully exempted.

As a matter of statistical presentation, it would be rather interesting if the Inland Revenue Commissioners—they are very good; their Annual Report is one of the most interesting productions on our economic front—could, instead of giving us the figures in respect of the single range from £2,000 to £5,000, break the figures up and give us those in respect of the range from £2,000 to £3,000 or £3,500 and then from that figure up to £5,000 in order to break the figures into at least two brackets instead of one.

According to the information that we get from the table, 52·8 per cent.—more than half—of the total number of estates subject to duty in the last recorded year lie within the range of £2,000 to £5,000; in other words, at the bottom of the scale. One of the advantages of accepting the proposed Clause would be that it would still further restrict—and restrict much more than in proportion to any loss of revenue, for that would be a trifle—the number of cases in which the Revenue authorities would have to be busy with the smaller estates after death. It would then be clearer even than it is now that many of them need not be examined in detail.

H. G. Wells once used a phrase which I liked and have always remembered. Wells was in favour of many forms of property, but he said that inheritance was a fatty degeneration of property. I think that is a good description, particularly of the fat estates. It is in regard to such estates that in debates on Estate Duty the Opposition have argued that there was great merit in the duty in so far as it fell with considerable weight on the larger estates, thereby preventing an ever-increasing inequality of property ownership.

I do not regard the very small estates at the lower end of the scale, where the proposed Clause is designed to operate, as falling within the picturesque phrase of H. G. Wells. When we are dealing with estates of £2,000 to £5,000, and even somewhat above that, we may regard them as being within the range which can reasonably be reached by an artisan or other person without large income or initial advantages.

These estates at the bottom end should be dealt with tenderly. We should do justice all the way down the scale. Justice at the higher levels requires a high contribution, but at the lower levels—I hope that the hon. Member for Edinburgh, South (Sir W. Darling) will later on give me his support for the proposed Clause—the time has come when we should take a further step along the road which I blazed eight years ago. Eight years is long enough to wait before taking another step along that path.

With regard to cost, I have looked at Table 104 on page 113 of the Report of the Commissioners of Inland Revenue. I will take the total net capital values in respect of the range between £2,000 to £5,000, which is £127 million. What I am proposing is to reduce the levy by 1 per cent. on the range from £2,000 to £4,000. On the range between £2,000 to £3,000 the levy is now 1 per cent., and I propose that it should be nothing at all. On the next level, on the range exceeding £3,000 but not exceeding £4,000, I propose that the levy should be 1 per cent. instead of the 2 per cent. which it is now. With regard to the range between £4,000 and £5,000, I propose that the levy should remain at its present level, and I propose that simply in order to continue the smooth graduation of the scale—if the Government proposed something more generous, I should advise my hon. Friends not to resist it—and to avoid a sharp break in the scale.

My proposal only covers the first two brackets, and the cost would evidently be, on the basis of the figures which I have given, noticeably less than 1 per cent, of £127 million, the net capital value represented by the estates up to the £5,000 level, because the reduction to 1 per cent. does not go all the way but applies only to the range between £3,000 and £4,000. I guess—the Chancellor will no doubt have the exact figure—that the cost will be less than £1 million a year, and the Chancellor can surely spare that.

This is less than the cost of the other Estate Duty relief in respect of family businesses, on which we had lengthy debates. This relief would be much more equitable than that. I do not want to reopen the debates on the other relief. Nevertheless, the relief which I propose would be wholly to the benefit of the smallest people. That cannot be said for the family business relief, for that does not do anything for a large number of the smaller people whom I have in mind hare, and the family business relief will also do something for a number of very wealthy people who are not, in my view, particularly deserving recipients of relief at this time. My proposal would be wholly for the benefit of the smallest estates, and it would cost less than the family business relief.

7.30 p.m.

I hope that the Chancellor will review this matter in a friendly way, that it will appeal to his sense of what it would be just and reasonable to do at this time. It would relieve estates which are very worthy of being further relieved, because eight years have passed since I raised the level on which Estate Duty should be paid from £100 to £2,000. The lot of the kind of people whom we have in mind has not improved in the last few years owing to the ever-rising cost of living due to the abolition of the food subsidies. These are a very deserving body of people whom I am commending to the Chancellor's attention.

I should like the Chancellor to join me, when the history of these days is written, as a man who did care for the interests of the poorest section of those subject to Estate Duty. At present, I feel a little lonely—so far I stand alone in some lonely place—but I should like the Chancellor to join me. We could have most interesting talks about other things, too. Let us stand together on some high place below which there could be an inscription—it would go rather well in Latin, but I offer it in English—somewhat in these terms:
"Alone among the Chancellors of the Exchequer in this modern age, while firmly collecting through the best of all taxes from the large estates of the rich their just contribution to the common good, he justly relieved the small estates of the poor."

As the right hon. Member for Bishop Auckland (Mr. Dalton) said, the new Clause which appears later on the Order Paper in the names of myself and some of my hon. Friends deals with the same subject as the Clause which he has just moved. I am very tempted, of course, by the right hon. Gentleman's speech to disclose in full to the House the wide differences of opinion which exist between him and me on the subject of Estate Duty. I, for example, do not think that Estate Duty is a good form of tax. I never have thought so.

I believe that if it is thought desirable, or necessary, to institute some form of capital tax, to institute it at the moment when the head of the family dies, and to levy it at the most difficult period in the life of a family or a business, is neither intelligent nor humane. I shall not, however, pursue the general argument, as, on this occasion. I do not want to upset the right hon. Gentleman because I am hoping in a little while to persuade him to support the new Clause which is down in my name. I want to convince him that in one or two details it has merits which his Clause lacks.

The right hon. Gentleman tried to convince hon. Members on this side, that Conservative Chancellors of the Exchequer had constantly increased Estate Duty. I am sorry to say that several have, but most of them have been ex-Liberals. I represent a truer—

Sir Austen Chamberlain surely left the Liberal Party at a very early age?

He came from a very radical family. I suggest that my approach to this matter represents the Conservative point of view much more closely than did that of the late Sir Austen Chamberlain.

Coming for a minute to the details of the Clause moved by the right hon. Gentleman, as far as I can understand it—I agree that these matters are extremely difficult and complicated—it provides that, where the settled property escapes Estate Duty on the first death, as a result of the Clause it should, nevertheless, be exempted on the second death. If this formula were adopted, it would create the rather curious situation that if Estate Duty is exempt on the first death by reason of it being under £2,000, it pays it on the second death, but if it is exempt because it is less than £3,000 but more than £2,000, then it is exempt en the second death as well.

That certainly is not very defensible, and the new Clause which stands in my name goes further than the one moved by the right hon. Gentleman. Therefore, I feel sure that he will be glad to adopt it. It grants exemption on the second death in cases where Estate Duty is not paid on the first death because the value of the estate is below the new exemption limit.

It also has another advantage over the right hon. Gentleman's Clause in that it clears up the general anomaly under which, under the existing law, an estate of just over £2,000—for example, an estate of £2,001—is franked against any rate of duty payable on the second death by a I per cent. payment on the first death, while an estate of, say, £1,999 is liable to a rate of Estate Duty arising on the second death because none was paid on the first death.

Therefore, it seems to me that the wording of my proposed new Clause brings about more precisely what is in the mind of the right hon. Gentleman than does the Clause which he has actually moved. Of course, we shall no doubt hear from the Front Bench what the official view is on the matter, but I suggest that there are some advantages in my new Clause which are not in that of the right hon. Gentleman's. Therefore. I hope that hon. Members on this side of the House will agree to support it.

On the general argument put forward by the right hon. Member for Bishop Auckland, I think there is great sympathy on this side of the House for the small estates. I should like to have seen the Clause put down in the name of the hon. Member for Burton (Mr. Colegate) and in that of the the hon. Member for Orpington (Sir W. Smithers) adopted. That would have suited me much more, but I understand that it would have been very expensive. The right hon. Member for Bishop Auckland pointed out that, happily, this proposal does not cost a very great deal. I hope that my right hon. Friend the Chancellor will be able to confirm that, and I wish to add my voice to that of the right hon. Gentleman in begging the Government to accept my Clause. It only goes a small way in the direction which we all want to go. Indeed, we on this side of the House want to go much further, but if the right hon. Gentleman the Member for Bishop Auckland is willing to help in a small way, then, as far as I am concerned, I want to go along with him.

The right hon. Gentleman put to me the hypothetical question whether, if the Government rejected the new Clause, I would go into the Division Lobby with him. I do not think it necessary to answer hypothetical questions particularly as this seems such a desirable Clause and one which finds support on both sides of the House. I hope that I shall not be placed in the difficulty in which the right hon. Gentleman thought I might find myself. Therefore, at the appropriate time, I shall move the new Clause which stands in my name.

I think it will be to the convenience of the House if I rise now, because I think there is a chance of expediting the business on this matter. If we can make progress now, then we shall be able to make a real inroad into the work, and it will not be necessary to keep the House sitting too late. Otherwise, with the business projected for tomorrow, we may have a difficult time.

That is not my sole reason for rising now, because we always try to listen to the different points of view. My reason for thinking that we can expedite matters is that the right hon. Gentleman who moved the new Clause and the right hon. Gentleman who followed him find me in a very agreeable mood this afternoon. When I listened to the right hon. Member for Bishop Auckland (Mr. Dalton), I could not help thinking that he was staging a Bishop Auckland benefit. Certainly there was nothing lacking in his language extolling the praise of his own exploits in lowering the lower rates of Estate Duty, and he made a passing reference to the wounding fact that higher rates of Estate Duty were introduced by himself, as the House will remember, in 1949.

It was in 1946 that I made the change which we are now discussing. and I collected a little further revenue from Estate Duty by raising the rate on the higher scales. Sir Stafford Cripps, when Chancellor of the Exchequer consolidated—to get it on the record—Legacy and Succession Duty into Estate Duty.

It took place in 1946 under the right hon. Gentleman and in 1949 under his successor—that is correct.

The right hon. Gentleman suggested that I might meet him in another place in happier circumstances. I was not quite clear about whether he was referring to another place along the corridor, which would be an extremely unlikely eventuality for both of us—at least I hope so in my case—or whether he was imagining that we were to meet in the life hereafter, in which case I think it most unlikely that I shall be relegated to the same situation as that in which the right hon. Gentleman may find himself. It would be a situation altogether too warm for me. Whatever other place the right hon. Gentleman may have been referring to. I should certainly be glad to meet him and to discuss these points.

His right hon. Friend the Member for Leeds, South (Mr. Gaitskell) complained earlier that the Government were not concerning themselves in the least about the more needy section of the population. This was a very unfair jibe which did not enliven our debate and created no intellectual stir in the Chamber. A situation arises today in which I can easily satisfy the right hon. Gentleman by saying that this is a reasonable advance and I should like to put the House out of pain by saying that I shall be ready to accept the Clause in the name of my right hon. Friend the Member for Blackburn, West (Mr. Assheton).

In view of the subject, I think it would be wrong if I did not explain to the right hon. Gentleman opposite the reason I prefer this Clause. I prefer it precisely for the reason given by my right hon. Friend the Member for Blackburn, West, because subsection (2) and subsection (3) of my right hon. Friend's Clause more suitably meet the situation arising out of the passage of settled property as between spouses than the proviso which the right hon. Member for Bishop Auckland invented so as to get his Clause in order. The reason is that in the case of the estate below £2,000—as explained by my right hon. Friend—there is no provision in the proviso of the right hon. Member for Bishop Auckland about exemption. The exemption and the proviso are only provided for in the case of estates of between £2,000 and £3,000.

Estates exempted below that would, on the passing of settled property from spouse to spouse on the death of the first, result in the second spouse having to pay death duty. That is not satisfactorily drafted and subsections (2) and (3) of my right hon. Friend's Clause cope with that situation, and preserve the situation for the second spouse. For that reason, I think that the second Clause is better than the first, and that is why I accept my right hon. Friend's Clause. The cost of this concession would be some £400,000 in the current financial year and about £900,000 in a full year.

In the course of these Finance Bill debates, I have not been able to make many concessions—some would say any concessions—although some minor alleviations have been considered, and very rarely conceded. In this case I do not think that I should be altering the financial poise or balance of the country by making this small concession. I think that it will go to people who are certainly worthy of receiving it.

The right hon. Gentleman asked me for further figures. It will exempt about 15,000 estates from duty and a further 12,000 from half the duty and so it will have a certain application. However, I should like to add, in taking up the remarks of my right hon. Friend the Member for Blackburn. West, that in my opinion Estate Duty weighs heavily, not only on modest estates such as these, but as heavily, and with even more serious consequences for the country, on the larger estates. I have never been ashamed to say—I said it in a debate the other night—that I most radically disagree with the right hon. Gentleman's quotation from H. G. Wells, that there is a sort of fatty degeneration involved in this process.

7.45 p.m.

We are thinking of the future generation and not fatty degeneration. While it is possible to pass a degree of fatty degeneration from one generation to another, it is equally possible that one generation may pass to another most noble and excellent traditions and property, which is in the interests not only of the family, but of the country. I think that these things should be said, because the weight of the Estate Duty is such that it is affecting the continuity of some of our traditions. I do not wish, any more than does the right hon. Member, to perpetuate the wrong sort of habits or contributions to the welfare of our country, but we have great traditions and we should allow them to be carried on with that sense of service with which they have been accumulated, and that is the spirit in which we ought to envisage this matter.

In answer to my right hon. Friend the Member for Blackburn, West, I would say that I am unable this year to make any major concessions for the very good reason set out in my original Budget speech—because the ordinary balance sheet of the country does not permit it. But we are tackling with determination the problems which I set out in my Budget speech with as much clarity as possible. The country is responding with increased production. Things are buoyant in the country. Things are improving. While, unfortunately, I have not been able to make further concessions this year, we must face the future with precisely that sort of cheerful feeling round our hearts which the right hon. Member for Bishop Auckland had when he was Chancellor—and for not such a good reason as I have it myself.

It would spoil the atmosphere of this discussion, and not enable us to proceed with the business as I want to proceed with it in accepting this Clause moved by my right hon. Friend, if I did not say that the remarks of the right hon. Member for Bishop Auckland, although not entirely coinciding with my political philosophy or principles, were couched in an agreeable and kindly manner, and I hope that he and his hon. Friends will permit the business to proceed.

I am happy that the Chancellor has been able to accept in essence what I have been arguing for. It may well be that in some respects the provisos contained in the Clause of the right hon. Member for Blackburn, West (Mr. Assheton) fit the marginal cases better than mine, and I would not debate that. I am glad that the Chancellor has accepted the new scale. That is the important thing—the changes at the bottom of the scale.

I would not wish the debate on this subject to be further prolonged, but I am very glad that at any rate I was one of the initiating agents in, at long last, provoking a concession from the Chancellor which I am sure will benefit very much those who will enjoy it. There is no doubt that those who are deserving will benefit. Whatever view may be held about the remainder of the death duty scale, on this the Chancellor and I are in agreement, that this particular change will improve the death duty scale as a whole, and I therefore welcome his speech.

I think that it might be convenient—and I am quite prepared to do so—if I asked leave to withdraw my Motion in order that the proposed new Clause in the name of the right hon. Member for Blackburn, West may be accepted.

Motion and Clause, by leave, withdrawn.

The two Clauses were discussed together but I will put the Question when we reach the proposed Clause in the name of the right hon. Member for Blackburn, West (Mr. Assheton).