All of us who have sat through this seven-hour debate will agree that it has been exhaustive and, for some of us, perhaps, exhausting, too. In my 22 years' experience of the House few debates in Finance Bill Committees have aroused quite such passion or attracted so large and continuous an attendance, at least on the Opposition benches. I do not think we have had many debates in which the speeches have been so deeply felt. I pay my respects to the sincerity of all those who have criticised me in this debate and I shall comment on some of their contributions as I proceed. [column 1548]
Today, we have concentrated a good deal more on the central theme of the new capital transfer tax than we did last night. That, after all, is the central issue in a debate on whether the clause should stand part of the Bill.
The purpose of the capital transfer tax, as I said yesterday, is to make effective a law which has been on the statute book for 80 years and whose purpose, at least for the last 60 years, has been to prevent vast aggregations of inherited wealth from being passed on undiminished from generation to generation. Yet, as we all know, and as has been admitted on both sides of the Committee, estate duty has been increasingly avoided because rich men put their wealth into trusts or give it away to their children before they die.
The House and the country should be aware that estate duty affects only a small minority of the population. Roughly speaking, one person out of 1,000 is currently affected in a single year, and over a lifetime of, say, 70 years, it affects roughly one person in 12 of the population. So only a small minority are affected.
Of that small minority, the great majority have paid this tax without complaint and without trying to avoid it. All of them—the majority of this minority—will be better off under the capital transfer tax. The rates are lower and, with respect to the hon. Member for Blaby (Mr. Lawson), the principle of levying the tax on the gross value is applied just as much under estate duty as it will be under the new tax. There is no difference between the two from that point of view.
More important—this was welcomed on both sides—there is an exemption for the spouse, which means that thousands of widows who, as I said yesterday, on average outlive their husbands by 18 years, will enjoy substantial advantages over that period which they do not enjoy under the existing estate duty.
Mr. Peter Rees
I must correct one statement by the Chancellor. On gifts inter vivos at the moment, the donee is accountable and pays tax on the amount given and not on the grossed-up amount. Will the right hon. Gentleman, for the record, correct his entirely misleading statement of the existing law?[column 1549]
With great respect to the hon. and learned Gentleman, I do not think that he was listening to what I said. I said that legacies under estate duty are paid gross with tax in exactly the same way as transfers under the capital transfer tax—[Interruption.] I am not talking about gifts now. The purpose of the capital transfer tax is to plug many loopholes in the estate duty.
The wealthiest part of the minority of whom I was talking have regularly avoided the tax and it has been almost without effect on the vast aggregations of wealth. It is at those vast aggregations that it has always been essentially aimed. It has become clear in the debate that many Conservative Members—perhaps the majority—do not wish to change that situation. Indeed, the right hon. Member for Farnham (Mr. Macmillan) was quite frank yesterday when he said that it was essential that estate duty should remain a voluntary and avoidable tax, because if it did not, many consequences that he would not wish to see might follow.
His own belief was clearly implicit in the contributions of many of his hon. Friends. They, too, wish estate duty to remain an avoidable tax. On the other hand, the Labour Party, the Liberal Party and, I think, a large number of Conservative Members who have spoken, have made it clear that they do want to change the situation. However much they may disagree in detail with the capital transfer tax, they regard the avoidance of estate duty as a scandal which should be halted. That is the purpose of this tax.
Mr. Maurice Macmillan (Farnham)
I hope that the right hon. Gentleman is not intentionally misleading the House. I took considerable trouble to point out that I thought that any form of tax on capital which was penal would be fatal and that this reform, which the right hon. Gentleman claims is a reform of the estate duty, should not be carried out except in the context of a much wider reform of the taxation of capital. I was at some pains to go into the detail of the way in which I thought that that might be done.
I listened to the right hon. Gentleman's speech, as I have listened to every other speech in this debate, with great care. Unfortunately, the Hansard report of his speech is not available to us today because it was made, like many speeches, late at night——[column 1550]
Mr. Robert Carr (Carshalton)
Is it in the Library?
However, I hope that the right hon. Gentleman will agree that he actually used words which expressed the opinion that if estate duty were not an avoidable tax, the type of family business to which he referred could not survive. I do not think that he will deny that. If I am wrong, I shall apologise, but I think that he will find that that is what he said. This was also implicit in the speeches of a number of other Conservative Members.
Those of us on both sides who wish estate duty to become an effective tax recognise the natural desire of parents to pass on the fruits of their labour to their children. The great majority of our people have this right, absolutely unconfined by the law, and will continue to have it when the capital transfer tax is in operation. That tax will affect only that small minority of the population to whom I have referred, who would be liable to estate duty if they did not avoid it through gifts, transfers or other devices.
We on the Government side believe that, if there is no limit on the ability of the wealthy minority to pass on the fruits of their labour to their children, we introduce into the class structure of this country a degree of rigidity, indeed, immobility, which is deeply damaging to both its economic efficiency and its social unity—[Interruption.] There is overwhelming agreement on this point in the country. It was strongly endorsed by The Times in a leader in August, which gave an unconditional welcome to the tax in the form in which it was then described and in which it has now been presented to the Committee—[An Hon. Member: “What about its leader this morning?” ] I read that leader. One of the interesting things about it was the fascinating contrast that it presented with a leader in the same newspaper only a few months ago.
Does the right hon. Gentleman wish to achieve the objectives that he has outlined even if the method that he has chosen causes the destruction of existing private businesses—whether firms, manufacturing businesses, or whatever—and prevents the growth of new ones?[column 1551]
I am coming to that point in a moment, if the right hon. Gentleman will allow me. This is one of a number of specific issues—not a very large number, to be fair—on which many hon. Members have concentrated. In my later remarks in the early hours of this morning, I talked about the conclusions that I had reached, after listening to the debate, on charities, historic houses, woodlands and small firms. As for small businesses, I listened carefully to what was said last night and today by the hon. Members for Gainsborough (Mr. Kimball) and Blaby, and I shall certainly reflect on what they said. If I feel it desirable to introduce changes in the tax to meet those points, I shall do so, but I shall come back to that matter in a moment.
The hon. Member for Blaby, in his engaging way, however, also suggested that terrible consequences would follow if any of us invited his widowed mother to stay with him. I assure him that, on this as on many matters, the hon. Gentleman is totally mistaken. A man who invites his mother to stay with him is not liable to pay tax on the rent he might otherwise have charged, unless he has found it necessary to enter into a formal arrangement giving her a right of occupation. Even then, he would not be liable unless the rent he charged was considered by the Revenue to be greater than he could pay out of his income. I hope that we shall not have any more of that ridiculous fantasy from the hon. Member or anybody else.
I hope that I made it clear, and I hope that I persuaded right hon. and hon. Members, that if reasonable arguments are put—as many were put in the course of this debate—in the later stages of consideration by the House of Commons, in Committee or elsewhere, I shall listen and seek to meet them, but there is here a fundamental issue, on which a real division emerged in the course of the last seven hours' discussions—a division which emerged most clearly in the speech of the right hon. Member for Finchley (Mrs. Thatcher) in opening for the opposition on the clause yesterday.
We on the Government side listened as intently as did her right hon. and hon. Friends to her speech to discover what slogan might be emblazoned on her [column 1552]campaign banner, because we know that she seeks—this is an honourable ambition—the right to lead her party and the country towards the 21st century. The fact is that she went backwards and not forwards, to one of the oldest slogans in political history.
Mr. Peter Hordern (Horsham and Crawley)
On a point of order, Mr. Fitch. Surely we are dealing here with a most important part of the Finance Bill. Cannot we be spread these totally irrelevant considerations?
The Temporary Chairman
I have not heard anything out of order.
The relevance is this——
The question of leadership has no relevance at all.
Many of us would say “Amen” to that.
The right hon. Lady's whole speech was a defiant reassertion of birth and privilege—of the right of inheritance against the whole current of democratic politics in the 20th century. She started unblushingly yesterday by explaining how, under the present tax régime, the wealthy not only can but do order their affairs so as to avoid estate duty, providing that they can afford to hire an experienced tax counsel. She made it clear that success in her Utopia should depend not on one's own ability but on the wealth of one's parents. She asserted that the future of a major part of British industry should lie with men who owe their position to the accident of birth and not to what the right hon. Member for Stafford and Stone (Mr. Fraser), whom we wish well, described as energy, initiative and drive.
Mr. Nott (St. Ives)
On a point of order, Mr. Fitch. I seek your guidance. Is the term “liar” a parliamentary term?
The Temporary Chairman
I did not hear the term used.
Mr. Nicholas Ridley (Cirencester and Tewkesbury)
On a point of order, Mr. Fitch. The Chancellor of the Exchequer has now traduced two of my right hon. Friends and put words into their mouths which I did not hear them use when they were making their speeches. Will you ask the Chancellor to return to a discussion of the clause and not to traduce [column 1553]my right hon. Friends, who have made very valuable contributions to the debate?
The Temporary Chairman
That is not a matter of order. It is a matter of debate.
The hon. Gentleman was not in a position to hear those words spoken because he was not here at the time.
The hon. Member for Gainsborough, I think it was, described the right hon. Lady as “the blessed St. Margaret” . The fact is that she emerged in this debate as La Pasionaria of privilege. She showed that she has decided, as the Daily Express said this morning, to see her party tagged as the party of the rich few. I believe that she and her party will regret it.
The Temporary Chairman
Several Hon. Members
On a point of order, Mr. Fitch. Is it permissible for the Chancellor to treat the Committee with such gross contempt as to suggest that that is a summing up of the most important financial debate the House of Commons has had since the war?—[Interruption.]
The Temporary Chairman
Order. That is not a point of order.
On a point of order, Mr. Fitch. Are you satisfied that the Chancellor has in fact resumed his seat? He has not answered the debate, which has taken place over a period of seven hours.
The Temporary Chairman
I am perfectly satisfied that the Chancellor has resumed his seat. I have already called Mrs. Thatcher.
On a point of order, Mr. Fitch. Are you aware that during the debate the hon. and learned Member for Dover and Deal (Mr. Rees) indulged himself in what I can only describe as gutter McCarthyism, and my right hon. Friend's speech made the position clear?
The Temporary Chairman
I think we should get on with the debate.[column 1554]
Mrs. Margaret Thatcher (Finchley)
I wish I could say that Denis Healeythe Chancellor of the Exchequer had done himself less than justice. Unfortunately, I can only say that I believe he has done himself justice. Some Chancellors are macro-economic. Other Chancellors are fiscal. This one is just plain cheap. When he rose to speak yesterday we on this side were all amazed how one could possibly get to be Chancellor of the Exchequer and speak for his Government knowing so little about existing taxes and so little about the proposals which were coming before Parliament. If this Chancellor can be Chancellor, anyone in the House of Commons could be Chancellor.
I had hoped that the right hon. Gentleman had learnt a lot from this debate. Clearly he has learnt nothing. Whatever the theory of this tax, which will have a very far-reaching effect upon the country, he might at least address himself to the practical effects, because it will affect not only the one in a thousand to whom he referred but everyone, including people born like I was with no privilege at all. It will affect us as well as the Socialist millionaires.
Whatever the theory, this tax is fundamentally damaging in two ways. First it damages the economic structure of our society by its effect on private businesses, on farming, on woodlands and on shipping. Secondly it damages the very nature of our society by concentrating power and property in the hands of the State and of those politicians whose only ambition is the pursuit of power for its own sake.
We believe that the future of freedom is inseparable from a wide distribution of private property among the people, not concentrating it into the hands of politicians.
We can say little for this tax. We cannot commend it. It is difficult to amend it. It should be withdrawn.
Question put, That the clause stand part of the Bill:—
The Committee divided: Ayes 262, Noes 239.