Draft Non-Contentious Probate Fees Order 2017

Oliver Heald Excerpts

Wednesday 19th April 2017 General Committees

[The Minister for Courts and Justice (Sir Oliver Heald)]

I beg to move,

That the Committee has considered the draft Non-Contentious Probate Fees Order 2017.

The purpose of the draft order is to implement a new, fairer, banded structure of fees for a grant of representation, commonly known as a grant of probate. These new fees come under the category of enhanced fees. As the Committee may be aware, in section 180 of the Anti-social Behaviour, Crime and Policing Act 2014, Parliament gave the Lord Chancellor the power to set certain—not all—court and tribunal fees at levels above what the service costs to provide. The income generated by those enhanced fees is ring-fenced, to provide an efficient and effective system of courts and tribunals.

The Government are investing close to £1 billion to reform the courts and tribunals and the criminal justice system, but such a system requires funding for the long term. In 2015-16, the running costs of Her Majesty’s Courts and Tribunals Service were £1.9 billion. We recovered only £700 million of that in fees. That position is unsustainable, and it is right that we look to the users of the service to pay more where they can afford to do so. Parliament understood the importance and value of our world-leading justice system and the financial pressure that the Courts and Tribunals Service faces. That is why it passed the power in the 2014 Act. It is under that power that the Government have laid this draft order.

The draft order introduces a new banded structure for probate fees, where the fee payable is no longer a flat fee but instead related to the value of the estate. That is not a new concept. Between 1981 and 1999, probate fees were linked to the net value of the estate, but that scheme was replaced in 1999 by a flat fee for solicitors, with a supplement for personal applications. In their response to the Government consultation, the senior judiciary agreed that the 1999 move back to a flat fee was a regressive step.

Under the new structure, we are raising the threshold below which no fee is payable from £5,000 to £50,000. That change means that more than half of estates will pay nothing; we are lifting about an extra 25,000 estates every year out of fees altogether. For those estates that will have to pay a fee, estates under £300,000 will pay £300, which is a minor increase from the current £255 fee for personal applications. In total, more than 90% of estates will pay £1,000 or less.

I acknowledge that the most valuable estates will face higher fees, but those fees will only ever be a small proportion of the estate being inherited—a maximum of 1% of the total value. We believe it is fair to ask those who can afford to pay more to do so. These new fees will help to provide a stable financial footing for the Courts and Tribunals Service, allowing the Government to continue to provide an efficient and effective service and to subsidise other parts of the courts system that do not recover their costs in fees, including domestic violence proceedings in the family courts and mental health tribunals. I therefore commend the draft order to the Committee.

--- Later in debate ---

[Sir Oliver Heald]

We have had a good debate and some interesting points have come out that I hope I can address. I acknowledge the point made by my right hon. Friend the Member for Chipping Barnet that the most valuable estates will face higher fees, but those fees will only ever be a small proportion of the estate being inherited. We are capping it at 1% of the total value. We believe that it is fair to ask those who can afford to pay to pay more. The new fees will help to provide a stable financial footing for the Courts and Tribunals Service generally, allowing the Government to continue to provide an efficient and effective service, and there is a cross-subsidy between areas such as this and other parts of the system that do not recover their costs in fees and would probably never be able to. That includes domestic violence proceedings in the family courts and mental health tribunals, and there are other obvious areas where that is the case. The power, which was debated in Parliament, allows for a fee to be charged that is higher for some areas than the costs, in order to provide an overall structure for the Courts and Tribunals Service that delivers a more substantial payment from the users of the system generally.

I was asked whether this is a tax on estates. The Office for National Statistics has not classified it as such as we speak, but the accounting classification that is given would not change the Government’s view that this is a payment under a specific scheme for a service. Of course, within accounting circles there are other, similar service fees which the Government charge, some of which are classified as taxes and some of which are not. In practical terms, I do not believe that it makes any difference to what we are talking about, which is a fee for a service. It has been suggested that we are misusing the power in section 180 of the 2014 Act to impose a tax, but section 180, which was debated and passed by Parliament, gave the Lord Chancellor this very power; a clear power to charge above cost. There is nothing unexpected about this, it was consulted on, so I think it is wrong to suggest that this measure is in any way a misuse of the power; it is exactly what it was intended for.

The hon. Member for Bolton South East mentioned inheritance tax. Of course, the Government are delivering on our commitment to take the family home out of inheritance tax for all but the richest by raising the effective threshold for married couples and civil partners to £1 million. The amount of money that has already been released to families in that way is, of course, far more than we are talking about today. It is not unusual in a consultation for a fee change to be unpopular—another point made by the hon. Lady— but the purpose of a consultation is not simply to conduct an opinion poll on whether people in a particular category want to pay a particular fee. It is also to look at the structure of it, the way the policy is framed more generally, to look at whether it is right to have a progressive scheme, as this is, or to have a regressive scheme of the sort which the hon. Lady supports. It is always surprising to me when a Labour Party spokesman speaks up for a regressive tax. Surely, one would expect the Labour Party to support progressive taxation or, in this case, a progressive fee, so this is a rather odd approach for it to take.

My hon. Friend the Member for South West Bedfordshire spoke about affordability. The fee will always be recoverable from the estate, so executors will not end up out of pocket personally. Executors have a number of options to fund the fee, so that no fee should be unaffordable. In most cases, we expect the banks to release enough cash from the estate to pay the probate fee. We know from Her Majesty’s Revenue and Customs that the average estate is 25% in cash.

We have also been working with the British Bankers Association and the Building Societies Association, and their bereavement principles encourage members to allow necessary payments to be made where possible within the law. Where an executor is not successful initially in accessing funds from a bank or building society, the Probate Service will—as part of its service—write to the relevant institution to provide reassurance that the assets are needed for the fee.

Other avenues of funding are also available, including a loan scheme. If these options have been exhausted, the Probate Service itself can give limited access to specific assets in the estate for the purpose of paying the fee. If there were a case of hardship, which there should not be, given the nature of the fee, the Lord Chancellor has a general power to provide help. I hope that satisfies my hon. Friend on those points.

The hon. Member for Bolton South East raised some other issues. She may want to consider that if a couple jointly own a property as joint tenants in the normal way, and one of the parties dies, the property would pass to the remaining spouse or partner in the joint ownership. It would pass by operation of law and would not form part of the estate in terms of the value for the fee. It is worth bearing in mind that we are talking about situations other than that and not one where one party to ownership dies and the other party inherits by survivorship.

With those few points, I hope the Committee will support the order.

Question put.