Non-Contentious Probate (Fees) Order 2018

Lord Keen of Elie Excerpts

Tuesday 18th December 2018 Lords Chamber

Moved by

[Lord Keen of Elie]

That the draft Order laid before the House on 5 November be approved.

Relevant documents: Special attention drawn to the instrument by the Joint Committee on Statutory Instruments, 40th Report, 6th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)

[The Advocate-General for Scotland (Lord Keen of Elie) (Con)]

My Lords, the title is instructive: “Non-contentious”. The purpose of the draft order before us today is to implement a new, more progressive banded structure of fees for a grant of representation, commonly known as a grant of probate. The banded fees relate to the value of the estate. These new fees come under the category of “enhanced fees” and noble Lords may be aware that in Section 180 of the Anti-social Behaviour, Crime and Policing Act 2014, Parliament has given the Lord Chancellor the power to set certain court and tribunal fees above the cost of providing the service. The income generated by these enhanced fees must be used to fund an efficient and effective system of courts and tribunals.

Noble Lords will recognise the importance of a fair and functional justice system not only to court users but to society as a whole. The decisions made in the courts and tribunals convict the guilty, protect the innocent and help ordinary people take back control of their lives. This Government are committed to providing a world-class courts and tribunals system that supports victims and vulnerable people, is easy for ordinary people to use and maintains access to justice for all.

However, such a system requires proper funding. It has long been the case that users of our courts system contribute towards its costs, and we believe that this remains both relevant and reasonable as it reduces the burden on other taxpayers. Crucially, by asking those who use the courts to pay more where they can afford to do so, we are able to fund areas where we charge no fees to vulnerable victims and users: for example, for domestic violence and non-molestation orders, and for cases before the First-tier Tribunal concerning mental health.

The Government are investing £1 billion to modernise and upgrade the courts system so that it works even better for everyone, including victims, witnesses, litigants, judges and legal professionals. This includes introducing changes to our probate service, which offers an important, valuable and supportive service to those who are bereaved. The change to the probate service will aim to reduce the burden on those who are applying for a grant of probate. Some examples of how we are doing this include providing the public or their representatives with the option to initiate cases online; enabling applicants to pay more conveniently; and replacing the swearing of an oath with an online statement of truth.

In 2017-18 the running costs of Her Majesty’s Courts & Tribunals Service were £1.8 billion. We recovered only £710 million of that in fee income. That position is unsustainable, and it is right that we look to the users of that service to contribute more. Parliament understood the importance and value of our world-leading justice system and the financial pressure that the Courts & Tribunals Service faces, which is why it passed the power in the 2014 Act to which I referred a moment ago. It is under this power that the Government have laid this draft order.

The order introduces a new, fairer banded structure for probate fees. The fee payable is no longer a flat fee but instead relates to the value of the estate—a more progressive proposal. The new fees are fair and proportionate. Under the new structure, we are raising the threshold below which no fee is payable from £5,000 to £50,000, so that more modest estates are protected. That will lift around an additional 25,000 estates per year out of having to pay fees altogether. Overall, more than half of all estates will pay nothing, either because they are exempt or because they do not require a grant of probate. For those which pay, around 80% of estates will pay £750 or less. Moreover, the new model will mean that the revised fees will never be more than 0.5% of the value of the estate.

As noble Lords will know, the previous Government initially announced their plans to introduce enhanced probate fees on 24 February 2017, following a public consultation. The relevant draft affirmative SI was laid in Parliament soon after. The order was debated and passed by the Commons Delegated Legislation Committee on 19 April 2017, but the announcement of the general election meant that there was no time for it to be debated and considered for approval in both Houses.

Various criticisms were made of the previous order, and the Government looked very closely at these in deciding to reintroduce changes to probate fees. These concerns were centred largely on the level of fees rather than on the principle of a banded structure. The criticisms were that the fees were excessive. The Government accept this point and the revised fee scheme we are introducing has reduced fees payable at all bands. The highest fee payable has reduced from £20,000 under the previous proposal to £6,000 under this proposal. The new banded fee structure does not amend the underlying policy rationale and will retain the same progressive banded structure as the earlier proposal, in which the fee payable relates to the value of the estate. This represents a fair and proportionate fee payable for obtaining a grant of probate.

I acknowledge that the JCSI has drawn the attention of the House to this order, and the SLSC also reported concerns. I have also noted the concerns raised by the noble Lord, Lord Beecham, in his amendment, which are related to the SLSC report. Furthermore, I acknowledge the amendment tabled by the noble Lord, Lord Marks, which echoes points raised by the JCSI. I will therefore address these points in turn, which I hope will outline clearly the Government’s position in relation to these arguments.

The JCSI reported the draft SI for doubtful vires and unexpected use of powers, as it felt that the new fees amounted to a tax and questioned whether the imposition of this level of fees was anticipated when the primary power was approved. It went on to argue that the basic premise of a fee is directly related to the cost of the service. The SLSC also made these points but went further, arguing that, as a result of the savings envisaged as part of delivering a reformed probate service, the fees were disproportionate. I must respectfully disagree with both committees.

Section 180 gives the Lord Chancellor the explicit authority to impose enhanced fees to,

“prescribe a fee of an amount which is intended to exceed the cost of anything in respect of which the fee is charged”,

and that is what this order seeks to do. In doing so, the Lord Chancellor must have regard to, among other factors,

“the financial position of the courts and tribunals for which the Lord Chancellor is responsible, including in particular any costs incurred by those courts and tribunals that are not being met by current fee income”.

The Act is also clear that any income from these fees,

“must be used to finance an efficient and effective system of courts and tribunals”.

These provisions clearly demonstrate Parliament’s intention that the Lord Chancellor should be able to set fees above cost in one part of the system to subsidise other parts of that system, and to maintain the effective operation of the system as a whole.

The JCSI has suggested that the concept of a fee is subject to inherent limitations in relation to the service for which it is charged. Again, we do not accept this. The specific legislative provision in Section 180 of the 2014 Act breaks the link between the cost of the service and the fee that may be charged. This was clearly the intention of Parliament in making such a provision. The proposals in the order are consistent with the primary power and the assurances given to Parliament at the time the Bill was considered. This is not the first time that the Government have sought to introduce enhanced fees or fees which relate to the value of the issues at stake—for example, fees for certain civil money claims. For these reasons, we do not consider that the draft probate fees order is an unexpected use of the Section 180 power. We are using it in exactly the way that Parliament intended.

Finally, I have made it clear that, as the fee is not tied to the cost of the service under the enhanced fee powers, I disagree with the idea that the fee changes are disproportionate, in light of reform to the probate service which aims to make the service more efficient. As we have already made clear, users will experience a better system which has benefited from significant investment from the taxpayer. It is still right that the additional income is used to cross-subsidise in other areas where vulnerable users and victims are charged either no fee or a nominal fee.

More specifically, we have significantly reduced the fees at all levels compared to our previous proposal, which I believe responds to concerns about what fee is proportionate. We are clear that this is an application fee for a specific service: to obtain a grant of representation to deal with a person’s estate. This is distinct from general taxation, which is paid into a consolidated fund held by HM Treasury. Charging fees is justified as a way of funding our courts system to provide access to justice, which the Government are committed to maintaining.

I have already reminded your Lordships’ House that the Lord Chancellor, when setting these fees, is required to have regard to the financial position of the courts and tribunals. Another factor that must be considered is the principle that access to the courts should not be denied. In considering this fundamental principle of access to the courts, we have been careful to ensure that nobody will find themselves unable to apply for a grant of probate on account of the fee. These fees will never be unaffordable. The probate fee and any reasonable expenses are recoverable from the estate and determined by the value of that estate, so the executor will not be permanently out of pocket. Any difficulty in paying the fee will, by definition, be one of cash flow rather than affordability. I would nevertheless like to take this opportunity to set out the safeguards in place to support executors.

In most cases, we believe that the executor will be able to access funds in the estate to pay the fee—including, for example, bank accounts and savings belonging to the estate. HMRC data indicates that the average estate is around 25% cash, and the fee will never be more than 0.5% of the value of the estate.

We have been working with UK Finance, the Building Societies Association and the Money Advice Service. The industry has set out bereavement principles to encourage its members to support the bereaved and allow necessary payments to be made where it is possible to do so within the law. Furthermore, where an executor is not successful initially in accessing funds from a bank or building society account, the probate service is willing to write to the relevant institution to provide reassurance that the assets are needed to pay the fee. Other avenues of funding will also be available, including a personal or executor’s loan. In those cases where executors are unable to take advantage of any of these options, they can apply for a limited grant of probate to provide them with partial access to specific assets of the estate for the sole purpose of paying the fee. This application would not attract an additional fee.

--- Later in debate ---

[Lord Keen of Elie]

My Lords, I am obliged to all parts of the House for contributions to the debate on this order. The noble Lord, Lord Pannick, correctly identified that there are two issues. One is whether the proposal is constitutional or unconstitutional. The second concerns fairness. Of course, at times the two arguments have merged. I will endeavour, however, to address each in turn.

On the question of whether the instrument is intra vires or not, I have to say that it is quite clear that statutory justification for it is given by Section 180 of the 2014 Act. The noble and learned Lord, Lord Judge, may, for reasons he has expressed in the past, deprecate the extent to which Parliament has given powers to the Executive in this regard: I think that in this instance it is entirely proper. Nevertheless, the power is there. On the point raised by the noble Baroness, Lady Hamwee, with reference to Section 180(3)(a) and (b), subsection (b) was referred to in the impact assessment, where it was determined that there was no identifiable or significant impact upon competitiveness in this context—which is hardly surprising in the circumstances.

The noble Baroness, Lady Meacher, suggested in the context of the vires of the instrument that it was necessary that the fee should be equal for all involved, otherwise it would be a tax. With great respect, at present there is no fee for estates worth less than £5,000: the current system is not equal in that respect. It is certainly my recollection that the probate fee was progressive until about 1999. The fixed fee came in only in the recent past, less than 20 years ago. Again, one has to see this in context. Let me be clear: the idea of progressive fees is not exceptional or unusual. A civil money claim for £1,000 may often be far more complex and demanding than a civil money claim for £100,000, but the fee in respect of civil money claims is progressive by reference to the sum to be recovered. These elements already exist in our system.

With this instrument, we are intending to remove more than half of all estates from any probate fee whatever, yet the logic of the noble Baroness, Lady Meacher, would be that we cannot do that because if we did the fee would not be equal for all involved. It is entirely appropriate that there should be a progressive fee system, just as there has been in the past and just as there is with other elements of judicial and related claims. In that context, an application for probate is an application for, in essence, a determination of status in order that somebody can ingather an estate and distribute it, so it is in a sense a judicial process, albeit, as it has developed over the years, it is seen as an administrative application.

There is clear statutory authority for the making of this order and the introduction of these sensible and proportionate fees in this context. The provision is there; I will not seek to repeat it. On the issue of fairness, I emphasise that more than half of all estates will be taken out of any fee whatever, the maximum fee will be £2,500, and the fee can never exceed 0.5% of the value of the estate.

The noble Lord, Lord Sharkey, raised some of the observations that have been made with respect to charities. Let us be clear: if a legacy is left to a charity and it is of a fixed sum, it will not be impacted at all by the provision. It would arise only in those—perhaps exceptional—circumstances where the entire estate is left to the charity. One has to appreciate that it is only in those exceptional circumstances that there could be any indirect—I emphasise that—effect on the value of the legacy itself.

At the end of the day, we are taking a proportionate and sensible approach to the need to ensure that we can maintain access to justice throughout our entire courts and tribunals system. We have been fair with regard to the level of the fees which have now been fixed for this purpose. I emphasise that we are dealing with a question of fees, not with the issue of a tax. In that regard, therefore, I invite noble Lords to concur with my Motion.

[Lord Beecham]

How does the Minister reconcile the position the Government have taken with the guidance to departments in Managing Public Money, to which I referred?

[Lord Keen of Elie]

There is clear statutory authority for the fixing of these fees in order that there can be an element of cross-subsidy between the various elements of the courts and tribunals system. It is justified by that statutory permission.

[Lord Marks of Henley-on-Thames]

My Lords, the Minister put his case, supported by other noble Lords, on the basis that these probate fees will be used to, in effect, cross-subsidise the courts and tribunals system, and for increased spending on access to justice. Your Lordships will know that I am a staunch advocate of access to justice, that I believe in spending on legal aid and in renewing the court estate, and that I am concerned about the quality of judges. But the spending for those laudable aims ought to be met out of general taxation, raised in the ordinary way envisaged by the Bill of Rights and other statutes since: by amendable primary legislation subject to the full scrutiny of Parliament, not out of the hypothecation of excessive fees—which are, to use the committee’s phrase, taxes “dressed up as ‘fees’”—to subsidise that sort of spending. I agree with the noble Lord, Lord Beecham, that the Government’s guidance on managing public money, which compares fees with the costs of producing a service and says that that should be borne in mind by government, is apposite.

I usually agree with the approach of the noble Lord, Lord Pannick—which has persuaded the noble and learned Lord, Lord Judge, and, to a certain extent, the noble and learned Lord, Lord Mackay—on statutory construction. However, it escapes me how he managed to construe Section 180 of the 2014 Act without looking at the meaning of “fee”. Section 180(1) provides:

“In prescribing a fee under an enactment specified in subsection (2), the Lord Chancellor may with the consent of the Treasury prescribe a fee of an amount which is intended to exceed the cost of anything in respect of which the fee is charged”.


The noble Lord says that he can infer from that—and the Minister jumps on that statement—that it does not matter by how much the fee exceeds the cost of providing the service. I respectfully commend the approach of the noble and learned Lord, Lord Brown of Eaton-under-Heywood, who asked that very question. There has to be a stage at which the amount charged so far exceeds the cost of the service that the Government are not charging for a service but are seeking to raise money. That is what is involved in the cross-subsidisation and at this level I suggest it has to be a tax. That is the way that it was treated by Managing Public Money, the Government’s guidance, and that is the way that both the Joint Committee and your Lordships’ committee saw it. I do not accept the construction contended for by the noble Lord.

It is disappointing that the noble Lord, Lord Beecham, suggested that the Labour Benches will abstain. I hope that noble Lords on the Labour Benches will in fact support my fatal amendment. Of course, it is a serious matter, but I suggest that this statutory instrument ought to be struck down precisely because it is seeking to dress up taxes as fees in a way that is impermissible. That is a wrong use of the statute. In answer to the noble and learned Lord, Lord Judge, the statute may be slightly carelessly drawn—it could have been more specific—but that should not be used by Ministers to drive a coach and horses through the statute when seeking to rely on the enabling powers to pass statutory instruments. That is what they do when they use the permission to exceed the cost to drive through a wild, excessive charge such as this one.

Striking this statutory instrument down is the correct course to take. A regret amendment will not achieve the end that ought to be achieved. The Government will be at liberty to reconsider their position and bring back revised fees, certainly, but not fees on this scale, which many noble Lords have deplored. I have heard nothing that dissuades me from seeking to test the opinion of the House.