On that point I would like to say something with regard to Section 20 of the Bill which, owing to the exigency of time, I had not an opportunity of referring to on the Second Reading of the measure. This is a section which, in fulfilment of the terms upon which the Third National Loan has been issued, gives the Minister authority to accept stock in that loan at par value in discharge of any death duties which may be due to the State. This is an important special taxation privilege. I have looked up the figures for the various years since 1926 and I find that, on the basis of the figures for Free State Government securities represented in the aggregate total of the gross personalities of estates dealt with by the Revenue Commissioners in the years 1926, 1927 and 1928, the total amount of stock likely to be presented for death duties in this way will be, I think, not less than £150,000.
In the course of his Second Reading speech I think the Minister stated that the value of the privilege would be about £6,000 per annum; he apparently estimates, therefore, that the amount of stock thus presented will not be more than £100,000. For reasons which I do not wish to go into in detail, because the figures are rather involved, I think that is a low estimate. I am prepared, however, to split the difference with the Minister and to assume that the total amount of Third National Loan securities which will be presented to the Exchequer in discharge of Death Duties will be about £125,000. That is to say, the Minister will have presented to him stock to the nominal value of £125,000, for which he will only have received 93½ per cent. when it was issued, and which on acceptance by him will represent, therefore, a net loss to the Exchequer each year of about £8,100. If we capitalised this on the terms on which the loan was issued we find that the present value of that amount, if it be paid each year, say, over a period of twenty years, is about £268,000, and that, I estimate, will be the total cost of this concession.
What are we going to get for it? I think we will get nothing. I think this is one of those concessions which are very like the ornaments which one sees upon a wedding cake; they appear to make it slightly more attractive but they add nothing to its value.
First of all, the concession as to death duties is of very uncertain value to the recipient. He does not know how soon his heirs will have the privilege of presenting stock, which he bought at 93½, to the Minister and getting credit from the Minister for it at £100. Even a patriarch may be an optimist in this matter. I certainly have no doubt that a person, who invested in this Third National Loan, even if he were ninety years of age, would still hopefully aspire to celebrate his centenary. We may be quite certain, therefore, that a person buying a loan with this kind of concession attached to it discounts it to the very uttermost. I have absolutely no doubt that the concession in the particular case of our Loan, counted for nothing in the minds of most of the individual investors who purchased this stock, that it was something which the Minister simply gave away without getting any adequate value in return. If you consider the fact which I have put before you that even the oldest of us hope to live more than the allotted span, and if you also bear in mind that it is their heirs more than the individual purchasers of the stock who will benefit by a concession of this sort, you can see, as I have said, that this kind of concession makes the stock very little more attractive than it would be if the concession had not been attached to it at all. I submit that it would be far better for the Minister to have faced this matter boldly, and even if he had to fix the nominal rate of interest on the loan at a slightly higher figure it would be better and more straightforward to have done that, because both the State and the investor himself would know where they are.
I have dealt with the reactions of this matter upon the private individual. I have endeavoured to give the reasons why to my mind the concession is not very attractive to him. Neither is it of great attraction at first sight to the corporate investors. In many cases this Loan was purchased by corporations, insurance companies and banks, which will, in due course, I presume, proceed to unload a large amount of their holdings upon the market. When they considered the terms upon which this Loan was issued they looked at the immediate return which it would give them. The thing may appear to them as a kind of catch-penny concession which, as soon as its value becomes appreciated by a certain number of people—and that will take time—will enable them to dispose at a fairly substantial profit of the stock which they have purchased. A bank buying stock buys it upon the basis of its nominal rate of interest, in this case 4½ per cent., and upon nothing else. In the course of a year or so it may proceed to dispose of it to its customers. There will be a certain number of elderly men to whom the manager may tactfully hint that it would be a good thing for them to transfer their holdings from the First or the Second National Loans into this, simply because of the fact that if by any chance they should pass away at any date subsequent to six months after the transfer of the stock to them their heirs would get a very substantial benefit from the Exchequer. Some may accept that point of view and may buy. But remember this will be merely a transfer, I submit— on the figures for the past three or four years—from one form of Government security to another. You will have people realising their holdings in First and Second National Loans and investing them in the 4½ per cent. Loan. What will be the effect? You will have the 4½ per cent. Loan appreciate in the market and you will have the 5 per cent. Loan correspondingly depreciate. At the same time you will also have this effect, that every future Minister for Finance will have to accept at its face value stock which his predecessor issued at 93½ per cent.
I think that is simply another case of what is being so often pointed out from these benches, of the Minister's predilection for mortgaging the future. If he can tide over today he does not give a thought for to-morrow. It does not matter to him that every year this will make it incumbent on his successors to find an extra £8,100 for which they receive no adequate return. If there is anybody in the community who will get benefits from the concession in Section 20 it will be those large corporate investors who bought this stock in the hope that later on, when they could point out to individual investors the advantage that that section might afford them so far as their heirs' liabilities for death duties are concerned, who will be able to make a profit.
