My Lords, nine years ago I took part in this debate, as did many others in your Lordships’ House. I was deeply moved then, as was the noble Lord, Lord Alli, by the cases and arguments put by the noble Baroness, Lady O’Cathain, which were repeated so eloquently today by the noble Baroness, Lady Deech.
I agreed absolutely that we need to address the problem of inheritance for people—they may be sisters or may not even be blood relatives—who none the less share a home for a long time and then face the problem of an inheritance tax which could push them into the shadows of residential care. I absolutely accept that that must be addressed. I hoped at the time we argued this, and still hope, that this should be addressed by the Treasury agreeing, very simply—it does not need legislation—that you can roll up inheritance tax on the first death to the death of the second person. As I understand it, that is all one needs to do. The state is not denied any money, but the sibling or carer who is left does not have the threat of losing their home held over them. That is the way to go. When it comes to extending or even considering this as part of an extension of civil partnerships, I obviously have no problem with this being part of a review, but I had two fundamental objections nine years ago and they remain for me today to consider this as possibly an extension of the civil partnership.
First, a civil partnership has a legal entry and a legal exit, which is equivalent to divorce. Take, for example, a mother and daughter who enter into a civil partnership, in good faith, partly to protect the home. The daughter may be in her forties or fifties; her mother dies, she inherits and is protected. If she is in a civil partnership and five years down the line meets a man whom she chooses to marry, she has to divorce her mother—her civil partner—to enter into a new marriage with a man. She may alternatively decide that when her mother has died and that civil partnership has ended she will form another civil partnership with her own grown-up son. Therefore the property cascades down the generations without ever touching the Treasury at any point.
This can be done through a revision of inheritance tax. It cannot in my view be done through a civil partnership which has to be divorced before you can enter another one or, indeed, before you enter a marriage. The notion that a daughter can divorce a mother in order to marry somebody else, or that a sister and brother can divorce each other because they each wish to marry someone else brings the notion of civil partnership, its ceremonies of entering and its divorce, into disrepute.
The second problem, which is why I was engaged fairly heavily the last time round, is that you cannot separate inheritance advantages from social security
liability. If two people, whether they are a carer and the person cared for, a mother and a daughter, or a brother and a sister, enter a civil partnership in the hope of avoiding or postponing inheritance tax, they take on mutual responsibility for each other in social security. That means, for example, that if a frail elderly mother and a son enter a civil partnership to spare the son a big inheritance tax bill, he becomes wholly financially responsible for his mother, if he can afford it. For the first time ever, he will be means-tested for his mother’s support; his mother will have no independent rights to social security benefits because she will be his dependent. If he can afford to pay for her, the state does not need to. She loses her independence of social security income because the son, by virtue of the civil partnership, has taken on that responsibility.
I could enlarge on that, but noble Lords can see the consequences. If a sister and a brother enter into a civil partnership, then they become mutually financially responsible for each other in social security terms, including children and the like. The problem is that one cannot separate out the upside, in terms of inheritance law, for carers, or for a mother and a daughter or for sisters, without taking on, in all fairness, the downside of responsibility for social security.
I suggest to your Lordships that for every couple who gain through inheritance, there will be three or five poorer people, with no wealth to enjoy at inheritance and who have fairly modest incomes now, who will be losers. I do not think your Lordships would want that to happen. All I suggest is that noble Lords review and press to review the situation of inheritance tax and the ability to roll it up. In that way I think that we address the problem.
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