My Lords, my amendment is fatal, and I do not move it lightly. The Government propose to increase fees for probate applications from the current flat rate of £215 for individuals or £155 for solicitors’ applications on all estates worth £5,000 by introducing a sliding scale of fees rising from £250 to £6,000 on all estates worth £50,000 or more. The fee is to be banded with a maximum £6,000 fee kicking in at £2 million. These are dramatic increases. According to the impact assessment, the existing fees reflect average administrations costs. That is why a solicitor’s application costs less than an individual’s application, simply because it costs less to administer. For estates above £2 million, the increase is twenty-eightfold. Just that increase would be 27 times the actual cost of administration. The Government expect these so-called enhanced fees to generate a profit of £145 million a year, rising as estate values increase.
The noble and learned Lord relied in his all-Peers letter and relies today on Section 180 of the 2014 Act as, “clear authority to set fees above cost to cross-subsidise other parts of the courts and tribunals system”. He says, “The level of fee does not have to be related to
the cost of the service and all additional income raised from enhanced fees can only be used to fund an effective and efficient courts and tribunals system”. He is quite right to point out that Section 180 permits,
“a fee of an amount which is intended to exceed the cost of anything in respect of which the fee is charged”,
but it permits only a fee, not a tax. These are probate fees and not court fees. The element of cross-subsidisation on which he relies is wrong in principle, because he is using a totally different part of the system to subsidise court fees.
The Minister has pointed out that a similar proposal was made in 2017, but with an upper fee of a massive £20,000, and he understated the outcry that it provoked. The proposal was not pursued to conclusion—anyway, the 2017 election intervened. Then as now, the draft SI was considered by both the Joint Committee on Statutory Instruments and by your Lordships’ Secondary Legislation Scrutiny Committee. Your Lordships’ committee’s current report, published on 21 November, states:
“The Government estimate that the revised fee structure will generate over £145 million in additional fee income in 2019–20, which they plan to use to pay the running costs of other parts of Her Majesty’s Courts and Tribunal Services. We wonder whether the House envisaged the power being used for this degree of cross-subsidy when the Act was passed. This Committee’s concern about the revised fee structure remains the same as it was for the draft instrument laid in 2017: ‘while section 180 … permits the levying of enhanced fees, we are surprised to see it used to this extent. To charge a fee so far above the actual cost of the service arguably amounts to a ‘stealth tax’ and, therefore, a misuse of the fee-levying power.’”
As for the difference between the £20,000 fee proposed in 2017 and the £6,000 fee proposed now, the committee expressed the view, with which I agree, that,
“the underlying principle behind the charge has not changed”.
The Government explain:
“Even the highest fee in our scheme would represent no more than 0.5% of the value of the estate”.
The Minister repeated that today. The committee thought that this sentence, relating the fee to the value of the estate,
“gives the fee the appearance of a tax rather than a fee linked to the actual cost of providing the service”.
The Joint Committee reported on 5 December even more strongly, stating:
“The Committee draws the special attention of both Houses to this draft Order on the grounds that, if it is approved and made, there will be a doubt whether it is intra vires, and that it would in any event make an unexpected use of the power conferred by the enabling Act”.
It reminded Parliament that it had called last year’s draft order to the special attention of both Houses, on the grounds that,
“(a) the charges prescribed by it would in substance constitute a tax on estates, rather than probate fees, and may therefore be ultra vires; and (b) the Committee doubted whether Parliament contemplated that the enabling powers would be used in the way proposed by the Lord Chancellor”.
It distinguished enhanced court fees intended to pay for the Courts Service from enhanced fees for probate applications intended to subsidise the running of the Courts & Tribunals Service generally. The committee stated that,
“applying for probate is not to be compared with the commencement of proceedings. A person can choose whether to litigate, and therefore whether to incur the fees payable on issuing a claim—which
may be recoverable from the defendant if the case succeeds. In contrast, executors have to obtain probate to allow them to administer an estate, and the fee for doing so is not refundable. This is an administrative process, akin to the registration of a life event. Nobody applying for an uncontested probate would think for a moment that they were engaging in litigation. That makes it difficult for the Committee to accept that a power to charge enhanced court fees can be extended naturally to require probate fees to reflect the general costs of the court and tribunal system”.
The point that executors have no choice but to apply for probate was powerfully made by the Law Society in its briefing for today’s debate. The committee thought these probate fees were like stamp duty and used the phrase “dressed up as ‘fees’”. It reminded Parliament:
“It is an important constitutional principle that there should be no taxation without the consent of Parliament, which must be embodied in statute and expressed in clear terms. In the Committee’s view, the 2018 Order is a measure of taxation for which there is no clear statutory authority”.
The committee referred to the 1921 case of the Attorney-General v Wilts United Dairies. However, there is older and more fundamental authority on the point of that case. In relation to tax-varying measures proposed in Clause 8 of the European Union (Withdrawal) Act, the Delegated Powers and Regulatory Reform Committee complained that the powers would enable the creation of what it called tax-like charges. It said:
“Fees and charges for services or functions should operate on a cost-recovery basis, leaving taxation for a Finance Bill”,
which it rightly described as,
“a principle enshrined in Article 4 of the Bill of Rights 1688”.
The question for this House is whether it is appropriate to treat the enhanced fees proposed in the draft order as fees or a tax. I invite the House to accept the view that what the Government are intending to do here is, impermissibly, to introduce a tax by secondary legislation by a misuse of their power under the 2014 Act.
I accept that a fatal amendment is unusual. However, the Cunningham committee, in its report Conventions of the UK Parliament in 2006, concluded that there are situations in which it is right for the Lords to threaten to defeat a statutory instrument, citing as an example,
“where special attention is drawn to the instrument by the Joint Committee on Statutory Instruments or the Lords Select Committee on the Merits of SIs”.
That is so in the case here for both those committees. Both committees took that course. I would add to the specific examples in the list produced by the Cunningham committee that where a proposed SI offends against the fundamental principle that taxation requires primary legislation that is fully amendable, that is a matter of constitutional importance which entitles this House, in our role as guardians of the constitution, to reject an SI on that basis.
I have two further short points. First, these charges are to be paid up front. There is no provision, as there could have been, for the Government to defer payment where necessary until the assets of the estate, often real rather than liquid assets, are realised. Executors are not always beneficiaries; they are often friends or relatives of the deceased acting out of kindness. I see no reason why they should be subjected to these substantial charges payable before—often years before—the assets of the estate can be realised. This is a point
well made by the briefing prepared for today by the Institute for Family Business, which cites asset-rich but cash-poor farming businesses as an example.
The Minister’s response to this point is that they can borrow the money, and he made that point again today. Perhaps they can in certain circumstances, perhaps even in most circumstances, but at a cost that is often considerable, both financial and administrative. The burden of obtaining a loan is often very significant. The alternative response that the noble and learned Lord gave at the all-Peers meeting that he kindly arranged to discuss this SI was that solicitors would no doubt offer credit. I have to say that that does not match my experience of solicitors paying disbursements for their clients.
My other point is that there are specific remissions of fees proposed in respect of deaths in the 2004 tsunami and deaths as a result of the July 2005 terrorist attacks. I suggest that if there were to be prescribed remissions, there ought to be a power to remit far more widely in other cases. The power to remit fees in exceptional circumstances, the safety net mentioned by the Minister, does not seem to me to answer that criticism.
However, this last was a minor point in respect of this SI, which is of course unamendable—and the fact that it is unamendable is something that noble Lords may well wish to take into account when deciding how to vote on this Motion. My principal point is one of constitutional importance, however, and I suggest that on that basis this House should decline to approve the order. I beg to move.