§ Order for Second Reading read.
§ 7.52 p.m.
§ The Solicitor-General (Sir Harry Hylton-Foster)
I beg to move, That the Bill be now read a Second time.
The office of Public Trustee was established by statute in 1906 but, as the House is aware, a number of things have happened since then. The Public Trustee has given, under various holders of the appointment, notable and sympathetic public service to a number of people, particularly in relation to small trusts, and has established a considerable goodwill. Last year he was administering more than 17,500 trusts at an estimated total value of £250 million.
His business has been followed by two progressive bugbears, in the first place the ever-increasing cost in salaries, pensions and overhead expenses, of giving such a service to the public; and, on the other hand, the increasing competition from other corporate trustees, chiefly banks and insurances companies, who enter ever more and more into the business of administering trusts. Then, of course, modern taxation has made it much more difficult to hand down the savings of a working life, so that much fewer trusts are created. I would also remind the House, if hon. Members need reminding, that the Public Trustee has, by Statute, to be self-supporting in a monetary sense.
516 Amidst these adverse trends the previous Lord Chancellor appointed a Committee of Inquiry, in March, 1954, into the Public Trustee Office, the terms of reference being:To consider the work of the Public Trustee and to advise whether any changes should be made in his functions or methods of business, in the organisation of his office or in the financial conditions under which he operates.The Committee worked under the Chairmanship of Sir Maurice Holmes, and did its work with extreme dispatch and efficiency. I know that the House would wish me to express our gratitude to these busy and distinguished persons for the services which they rendered.
The Committee reported in May, 1956, and among the most important of its recommendations was that improvements should be made in the method of charging fees in the Public Trustee Office. That is the concern of the Bill, which confers powers to enable a new system to be introduced. Anyone who has looked at the existing fees orders would, I suspect, agree with me in thinking that they provide for extremely diverse fees and are distastefully complicated. I have no wish to trouble the House with the details, but I will merely say that they involve in some cases an elaborate calculation in order to assess what the fees should be; and in the context an elaborate calculation is expensive.
The aims of the new system which we would seek to introduce in pursuance of the Bill would be to secure greater fairness in the incidence on parties of the fees, and to make the administration more simple by cutting out fees which are complicated and expensive to assess 517 and collect. The Committee thought that the method which would produce the most equitable results as between the life tenant and the remainder-man of these trusts was to have two main fees, both payable out of capital, an acceptance fee, as now, and a composite management fee for the administration of the trust, to be payable out of capital and to be fixed annually at a rate sufficient to meet the estimated expenses of the office for the financial year in question.
That recommendation we have accepted, but legislation is necessary to put it into effect because of the requirement that the fee should be paid out of capital. At present the Public Trustee has to decide in relation to each particular trust, on the ordinary general equitable principles applicable in these cases, whether the fee has to fall upon capital or on income, and what is required is legislative power to enable him to charge the new management fee to capital in every case.
The basic operation of the Bill is performed by Clause 1, of which subsection (2) provides, in effect, that every future fees order made after the passing of the Billshall indicate, with respect to every fee fixed by the order, whether it is to be payable out of capital or out of income.Subsection (3) gives the Public Trustee power, notwithstanding that enactment, to say that a fee shall be paid out of income instead, in certain cases. The object is to meet cases in which it is obviously right that the fee should be paid out of income. The kind of case one would have in mind is where the trust consists solely of an annuity and there is no capital, or where we should have to realise a capital asset at a disadvantage in order to meet the fee. That power is conferred upon the Public Trustee only with the consent in writing of the person who is beneficially entitled to the income where that person is of full age.
Clause 2 is transitional. It requires the Public Trustee to go on charging the existing fee in certain cases where it is obviously right to do so, as where the matter is governed by an order of the court or where the Public Trustee has entered into some arrangement or agreement with regard to his fees.
518 This is a highly technical matter and I cannot conceive that the House would desire me to trouble it with further details; but I am at the disposition of hon. Members should any point arise which would require information or explanation.
§ 7.58 p.m.
§ Sir Frank Soskice (Newport)
The Solicitor-General, in a short, crisp speech, has introduced this endearing little Bill to the notice of the House. I feel that both sides of the House would accept that its purpose should be commended and that it is necessary for the proper administration of this Department. The House would also desire to join in the tribute which the right hon. and learned Gentleman paid to Sir Maurice Holmes and his colleagues for the valuable report they have produced.
I would not seek to embark upon an extensive inquiry into the framework or structure of the Bill, because its purpose is obvious. It enables the management fee to be substituted for the present system of fee charging. That seems to me an improvement upon the present method. It is simpler and more equitable.
I would put two questions to the right hon. and learned Gentleman. I have no doubt that the Government have given thought to a recommendation of the Holmes Committee which has not, as I understand, been embodied within the scope of the Bill. That recommendation relates to the cancellation of the withdrawal fee. The Holmes Committee expressed the view that the withdrawal fee is at the moment very inequitable, and gave reasons. Those reasons have, apparently, not commended themselves to the Government and, I understand, the withdrawal fee will still be charged.
I gathered from what was said by a noble Lord in another place that, in future, it will be charged upon a somewhat reduced basis. I would be grateful if the right hon. and learned Gentleman would say a word about the withdrawal fee and tell us the reasons which led the Government to the conclusion that that particular recommendation of the Holmes Committee should not be adopted. I should be grateful if he would enlighten the House on that aspect of the Bill.
The only other question I want to put is whether we are to take it that the 519 Government have decided not to accept any of the other recommendations of the Holmes Committee? The Holmes Committee does not limit its recommendations solely to the basis upon which fees are to be charged, but it does make other recommendations on a rather wider plane as to the future scope and basis upon which the Department should be run. I take it from the fact that the Bill is limited to its present form that the Government have formed the view that, at any rate for the present, none of the other recommendations ought to be accepted. I should be very grateful if the right hon. and learned Gentleman could say a word in answer to those two questions.
Subject to that, speaking for myself, I should certainly agree with the view of the right hon. and learned Gentleman that the Bill should be accepted on Second Reading.
§ 8.2 p.m.
§ The Solicitor-General
I am very glad to seek to answer the questions asked by the right hon. and learned Member for Newport (Sir F. Soskice). Perhaps I might deal with the second one first. The most compact way of doing that, if hon. Members have available the Report of the Holmes Committee is to ask them to refer to the summary of recommendations, on page 21. I can tell the House about the recommendations in their entirety in that context.
The first was a recommendation that the Property Advisers Section of the office should be abolished by stages. We have not thought fit to accept the recommendation for total abolition, but a reduction of the Section has been planned. The second was for the amalgamation of the Manchester office with the London office. That has been done. The third was for modification of the regulations governing the audit of trust accounts. That has been done. The next related to an advertisement programme to make better known the advantages of the Public Trustee services. As to that, I can only say that it is under consideration. The right hon. and learned Member and the House will appreciate that it is a rather delicate matter not to overdo the adver- 520 tising and, at the same time, to reveal the services which are available.
The next recommendation dealt with the matter with which the Bill is concerned. There was a recommendation that there should be an Exchequer grant to cover the loss incurred in administering estates of low value. The right hon. and learned Member will remember that in May last year it was announced in the House that we were unable to accept that. The last recommendation related to the letting at an economic rent of so much of the London office as is surplus to requirements. That has already been done.
I am greatly obliged to the right hon. and learned Member for mentioning the question of withdrawal fees. It is true that the Committee recommended the abolition of withdrawal fees as inequitable and that we have found ourselves unable to accept that recommendation. That was for the very simple reason that, after very careful consideration, we came to the conclusion that the only practicable way of ensuring the equitable distribution of the burden of fees would be to have some kind of withdrawal fee. The un-remunerative estate from the point of view of the Public Trustee is one administered by his office for a short time.
If trusts which are administered only for a very short time were to pay only the acceptance and management fee they would be administered at a loss. Since the Public Trustee has a statutory obligation to pay his own way, "at a loss" means at the expense of other trusts and other beneficiaries. In the end, he would have to raise the other fees inequitably to meet the loss. For that reason it seemed to us that the best way to avoid inequity was to retain a withdrawal fee. On the other hand, the intention is to reduce it from the 2 per cent. at which it now stands.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House.—[Colonel J. H. Harrison.]
§ Committee Tomorrow.