My Lords, I will not join in the discussion about what is or is not a Conservative principle, but it is clear that this measure is in fact highly contentious, drafted as it is by the irony division of the Ministry of Justice.
Its 2016 predecessor was also highly contentious, as it attempted to impose probate fees of up to £20,000. The consultation response, which has not so far been mentioned, to the 2016 proposal was overwhelmingly negative. It was opposed by both the Law Society and the Bar Council, among others, and both Houses were, to say the least, worried and unenthusiastic about the proposal.
The grounds for opposition were clear. The proposal was a tax poorly disguised as a fee. It may well have been ultra vires. The use of Section 180(3) of the Anti-Social Behaviour, Crime and Policing Act 2014 as a legal base for the absolutely enormous increase in costs may well not have been within what Parliament envisaged. As the noble Baroness, Lady Meacher, noted, there was no indication at all as that Bill proceeded through Parliament that the power in Section 180(3) would be used to prescribe probate fees to fund the Courts & Tribunal Service generally.
The 2018 version of the SI that we debate today is different from its 2016 predecessor in only one main respect: its charges are lower. In the abandoned 2016 version, the probate fee for estates of £2 million was set at £20,000. In this version, the fee is £6,000. That is a reduction in the quantum only. It does not address the objections raised to the principle of such a charge, so very far above the cost of providing the probate service.
As noble Lords have said, the current probate fee is flat across all sizes of estate. It stands at £155 for an application made by a solicitor and £215 for an individual application. Those fees are based on cost recovery. The principle of cost recovery as the basis for charging for the service is abandoned by this new SI. An estate worth £2 million will pay nearly 40 times the actual cost of the service.
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Responding to the Government’s response to its review of the 2016 proposal, the JCSI said:
“The Committee understands that, where a statute authorises the charging of a fee in respect of a service, the word ‘fee’ has connotations of recovery of costs, direct or indirect, incurred in the provision of the service concerned or in the administration of the process, and that there must be express authority to charge a fee which exceeds the cost of the service”.
The committee also acknowledged that Section 180(3) provided that authority. But it went on to say that:
“Nonetheless it remains a power to prescribe a ‘fee’, a concept which is subject to inherent limitations about the relationship to the service for which it is charged – including (arguably) one of proportionality”.
The committee was not convinced that the generally worded provision to charge enhanced fees gave the Lord Chancellor a licence to compel executors to pay whatever amount she regarded as appropriate for the
purpose of providing funds for the courts and tribunals as opposed to the probate registry in particular. The Joint Committee noted that:
“It is an important constitutional principle that there is no taxation without the consent of Parliament, which must be embodied in statute and expressed in clear terms”.
Those views were about the 2016 order. They apply, word for word, principle for principle, to the 2018 version now before us.
Our own Secondary Legislation Scrutiny Committee, of which I am privileged to be a co-opted member, reached essentially the same conclusion in its report of 21 November. The report noted that the proposed scale of fees did not obtemper the normal requirements set out in Managing Public Money. It concluded that, despite the reduction in fees between 2016 and 2018,
“to charge a fee so far above the actual cost of the service … amounts to a ‘stealth tax’ and, therefore, a misuse of the fee-levying power”.
The fact is that the Government have already admitted that this is a tax and not a fee. The 2017 Spring Budget papers acknowledged that it would be classified as a tax in the national accounts, as the Charity Tax Group has pointed out. It is clearly a tax on estates. The people affected would largely be the relatives of the deceased and charities. The impact assessment confirms that. It says on page 8:
“Beneficiaries of the estate may incur a cost if, because of the increased probate fees, they receive a smaller proportion of the deceased’s estate. This will mainly affect relatives of the deceased, but may also impact charities”.
The impact assessment makes no attempt to quantify the impacts of this additional tax, but the Institute of Legacy Management has. It said that the charities would lose up to £10 million a year.
I hope that, when he comes to reply, the Minister will not attempt to paint that sum as trivial. I am sure he knows how stretched charities are at the moment, especially small charities, and how much we depend on their activities. I notice, too, that the impact assessment twice asserts that the new arrangements will reduce the taxpayer subsidy. They will not. They will simply add a further tax to be paid on the inheritance from relatives.
This SI proposes a further charge on inheritance. The charge is not a fee. It can be 40 times higher than the cost of providing the service. It is most definitely a tax. It will hit relatives and charities. It has no sound basis in law. It is an abuse of the powers in Section 180 of the 2014 Act. It is also an abuse of parliamentary procedures. It attempts to raise a tax via secondary legislation, avoiding full parliamentary scrutiny and the possibility of amendment. It would be a tax levied without the proper consent of Parliament embodied in statute. With this SI, the Government are trying to impose a tax by stealth and by improper means. As the Joint Committee on Statutory Instruments noted,
“The Lord Chancellor is not permitted to impose a tax”.
He is not, and we should not let him. I urge the House to reject this instrument.