§ 9.45 p.m.
§ Mr. Philip Goodhart (Beckenham)
I beg to move Amendment No. 263, in page 7, line 5, after "Cross" to insert "and Meritorious Service Medal".
After the volume of entirely justified abuse that has been poured on the Treasury Front Bench in the last few minutes it is rather strange that perhaps for the first and probably for the last time in Committee on the Bill, I would like to start by congratulating the Treasury for putting this particular Clause in the Bill.
I am sure that there is very general agreement over the proposal that the small annuity which is awarded to holders of the George Cross should not be taxed. The award of the George Cross is one of the highest honours that can be bestowed on any man or woman in this country. The annuity that goes with the George Cross is only a token of the nation's gratitude, and I am sure that we ought not to tax that token.
I hold the view, which, perhaps, is not shared so widely, that all the various small annuities and gratuities that go with medals awarded for gallantry, or for long and meritorious service in the Armed Forces, should be free of all tax. The Amendment, however, deals only with those who receive annuities for the award of the Meritorious Service Medal. This medal is awarded to warrant officers, N.C.O.s and men in the Army and the Royal Marines who have served their country well and with distinction for many years.
At present, there are 5,750 old soldiers who hold this medal, as well as about 250 Royal Marines. An annuity of £10 a year goes to some of the holders of the medal—750 soldiers and 40 Royal Marines. The remaining 5,000 old soldiers and Royal Marines will receive their annuity only when one of the present recipients of the annuity dies. Then the annuity of the dead soldier or Royal Marine is passed on to the person with the next greatest seniority. At present, it is highly unlikely that any of these men will receive the annuity before he reaches 75 at the earliest.
1788 The direct cost of the annuity to the Government is £7,900 a year. Adding some consequential changes in the pension rates, the overall sum amounts to a little more than £20,000. The direct cost we are considering this evening is the tax on £7,900. These men who receive the annuity at the moment have, in my opinion, had to wait too long for their annuity. When they receive it, it is certainly not over-generous. I do not believe that it should then be taxed.
The cost of this concession would at the very most amount to £3,000 a year. It is plain that the great majority of the 790 men who at the moment receive this small annuity do not pay anything like the standard rate of Income Tax. So I would suggest that the cost of accepting the Amendment would be in the neighbourhood of £1,000. So the Amendment is the cheapest in terms of money of any of those that have found their way on to the Notice Paper.
For that reason, as well as with a view to being just a little more generous to those who have served us well in past years, I hope that the Treasury will be able to accept the Amendment.
§ Commander Harry Pursey (Kingston upon Hull, East)
I rise to support the arguments of the hon. Member for Beckenham (Mr. Goodhart) that all Fighting Services annuities and gratuities should be tax free. This is a case, as I hope to show briefly, of the equivalent of the Treasury "pinching pennies from a blind man's tin."
As a third generation of ex-Service lower deck men in my family, no one appreciates better than I do the jungle of anomalies of Fighting Services decorations, annuities and gratuities, and the question of paltry payments being made more paltry by petty Income Tax deductions. Nevertheless, there is a case for special consideration for the Meritorious Service Medal, and this despite the variations of conditions for its award during the last century and since.
The Meritorious Service Medal was instituted in 1845, 120 years ago This was nine years before the Crimean and Baltic Wars and 11 years before the Victoria Cross was instituted. Queen Victoria instituted the Meritorious Service Medalto afford a greater encouragement to Noncommissioned Officers and Soldiers of Our 1789 Army who may have distinguished themselves, or who have given good, faithful and efficient service.Distinguished service meant something in those days of plundering and pilfering.
I should emphasise that the Meritorious Service Medal was not awarded for long service and good conduct, because William IV had instituted the Army Long Service and Good Conduct Medal twelve years earlier. Therefore, the Meritorious Service Medal is one of our oldest medals, and certainly was one of the most important and highest awards at that time for distinguished service.
The main point with which we are concerned, however, is the annuity and the Income Tax charged, in only some cases, on it. Incredible though it may sound, the 1845 annuity was £20, whereas the 1965 annuity is only £10, or half the original sum. Therefore, distinguished service today is worth only half what it was in the time of Queen Victoria. Admittedly the Army argues that the annuity attracts the appropriate pensions increases, but what is a 10 per cent. increase on £10 per annum? It is the munificent sum of £1 per annum.
The Amendment seeks to exempt the £10 annuity from Income Tax, in the same way as the larger annuity of £100 for the Victoria Cross and the George Cross is exempt, and why not? The value of the annuity has decreased since it was first paid—for three reasons. Originally, it was £20 and tax free, and £20 was then £20 in golden sovereigns and not paper money. Today it is only £10 and taxed, and the value is not what it was 120 years ago. There can be no argument about administrative difficulties in exempting the Meritorious Service Medal annuity from Income Tax, because the V.C. procedure can be used. Clause 11 of the Bill provides:Annuities paid to holders of the George Cross … shall be disregarded for all the purposes of the Income Tax Acts".10.0 p.m.
What is the number of holders of the Meritorious Service Medal, and what is the total annual payment? The hon. Gentleman has given some figures and I accept them. Two years ago, on 13th February, 1963—the answer is recorded in column 1284 of HANSARD—the Secretary of State for War, in answer to a 1790 Question from me, said that the number of holders was 5,700 and the annual allocation of money was £7,500. An equally important, if not more important, question is: what are the ages of the recipients of the annuity when it is awarded? On the same date, the Secretary of State for War said that the average age of holders of the medal who were awarded the annuity was 77, and that the last of the current holders of the medal would receive the annuity in up to 30 years' time. Just fancy that man being awarded the medal and annuity and having to wait 30 years or more before getting the annuity.
The ages vary in different regiments because there are block allocations to regiments. In all cases, it is a matter of waiting for dead men's shoes and more often than not a medal holder dies before he receives his annuity. I ask the Committee to consider the position of the well-known Chelsea pensioners, in their scarlet coats, with chests proudly out, wearing their Army Service medals, particularly when in a Chelsea pub recounting their experiences of earlier wars over free beer. Some of these "old sweats" with the Meritorious Service Medal are rising 80, some rising 90, and some, perhaps, rising 100. The Navy recently had an old seagull, admittedly not a Meritorious Service Medal holder, who celebrated his 100th birthday. He had drawn his pension for 58 years, since 1907, the year I joined the Navy. Among the Chelsea pensioners drawing the annuity will be men who served in the First World War, half a century ago, and, perhaps, earlier colonial wars or even the Boer War.
Just picture the pettifogging meanness of the Treasury in snatching back from these "old sweats", in the twilight of their lives, shillings out of the meagre few pounds of their Meritorious Service Medal annuity. This is why I argue that it is the equivalent of the Treasury pinching pennies from a blind man's tin. I appeal to the Chancellor to give favourable consideration to this meritorious case and to put the annuities of Meritorious Service Medal holders in the same position as the present annuitants of the Victoria Cross and of the George Cross now as a result of Clause 11 in this Finance Bill.
§ Brigadier Sir John Smyth (Norwood)
I thank the Chancellor for having included Clause 11 in the Bill. As I told the Prime Minister when he accepted the claim on 4th February, it gives great satisfaction to the 122 living holders of the George Cross in the Commonwealth and to their 233 living comrades of the Victoria Cross.
I want to say just a few words about the George Cross. The George Cross was, of course, a product of the Second World War. It was instituted by His Majesty King George VI, in 1940. The idea of this decoration was that it would be for deeds of supreme gallantry equivalent to those for which the Victoria Cross was awarded but not on the field of battle. Therefore, it has often been referred to as the "civilian's V.C." But, in fact, over 90 per cent. of the awards of the George Cross were made during the war to men and women in the Armed Forces. It ranks, of course, next to the V.C. and above all other decorations.
When it was instituted, the 122 living holders of the Empire Gallantry Medal exchanged that medal for a George Cross and since that time in 1940 there have only been 135 awards of the G.C. Today, as I have said, 122 holders of the G.C. are still living in the Commonwealth. Most are in the United Kingdom, but others are in Australia, Belgium, Canada, India, Israel, Jordan, the George Cross Island of Malta, of course, New Zealand, Pakistan, the Sudan, Uganda and Sarawak.
The centenary year of the V.C. was 1956 and in that year the Victoria Cross Association was formed. We at once invited the George Cross holders to associate membership and then to full membership of the Association. In 1959, I put a Question to the then Prime Minister, Mr. Harold Macmillan, to ask whether, instead of the small and complicated allowances which were then eligible to some of the holders of the V.C., he would grant the £100 tax free annuity to all ranks, and this the House accepted in 1959.
But that was, of course, an invidious position for the George Cross holders and it was particularly difficult in the Association, of which I have been the Chairman since its formation, to have half the members in receipt of the annuity and others in receipt of nothing. That was 1792 why, soon after the present Government took office, I proposed to the Prime Minister that he should grant the same £100 tax-free annuity to holders of the George Cross as had been granted to the holders of the Victoria Cross.
The Victoria Cross and George Cross Association is useful as well as ornamental in that it provides to the Commonwealth a link of comradeship in the many countries I have mentioned. As hon. Members will know who have been to our reunions, there is tremendous comradeship when holders of the V.C. and the G.C. meet every other year in London. Only the other day I received the following message from the Chairman of the British Legion, which was very much appreciated by members of the Association:There is no doubt that you have forged yet another of those intangible but most effective links of gossamer which are yet as steel in holding us together in a changing world.I commend this Clause to the Committee.
§ Mr. MacDermot
May I begin by thanking the hon. Member for Beckenham (Mr. Goodhart) and the right hon. and gallant Member for Norwood (Sir J. Smyth) for the courteous references which they have made to the action of my right hon. Friend in including this Clause in the Finance Bill? It was, of course, in fulfilment of a pledge given earlier by my right hon. Friend the Prime Minister. As we all know, the Committee and, more particularly, the holders of these great distinctions, the Victoria Cross and the George Cross, are all immensely indebted to the right hon. and gallant Member for Norwood for the way in which he has persuaded Prime Ministers, on either side of the House of Commons, to favour this proposal.
What we are being asked to consider is whether this exemption from tax for these annuities should be extended to the annuity payable to holders of the Meritorious Service Medal. I remind the Committee that when it decided to grant a tax-free annuity to holders of the Victoria Cross, it was emphasised that this was a quite exceptional measure which was related to what was regarded as a unique award. It is not in any sense in conflict with that that the Committee has subsequently decided to extend it to the George Cross holders, because that award, of course, as the right hon. 1793 and gallant Gentleman has just said, is regarded by us all as being the civilian equivalent of the Victoria Cross, and it is because we think of them, as it were, in parallel that we think it right that parallel treatment should be afforded to them.
But it would be a very different decision if we were to extend this treatment to the Meritorious Service Medal. The proposal in the Amendment is that the annuity should carry tax exemption, but there are two ways in which this decoration can carry a financial award. If the medal was awarded for gallantry in the First World War, an addition of 6d. a day may be added to the holder's pension, and it is the oldest 750 holders of the medal who receive the annuity, properly so-called, of £10 a year. The effect of the Amendment—I do not imagine that it was intentional, but it would be the effect as drafted—is that only the holders of the annuity properly so-called would benefit from the exemption proposed, and we would continue to tax the additional pension awarded for gallantry.
This annuity is attached for long and faithful service plus longevity and on principle, if we were to grant a tax exemption for this annuity, it would be difficult to distinguish it from Service pensions generally, because it is an award in respect of service. There are other awards which carry financial benefits with them—the Distinguished Conduct Medal, the Conspicuous Gallantry Medal, the Distinguished Service Medal, the Military Medal and the Distinguished Flying Medal. No doubt if we were to extend it to the Meritorious Service Medal, we would immediately be asked to extend it to these others, and it would be difficult to refuse.
1794 I am not asking the Committee to reject this proposal on the straight financial ground of the matter of cost. However, we must recognise that if we were to extend it in the way suggested, we would inevitably have to extend it considerably further. We would introduce a dangerous principle by extending it to what, in effect, was a form of pension for long service, and immediately what was intended to be a quite unique tribute to unique gallantry would lose much of its force and effect.
May I remind the Committee of what was said by Mr. Harold Macmillan when he was Chancellor of the Exchequer and when he accepted the principle of this tax-free annuity in respect of the holders of the Victoria Cross:I would ask the House, however, to say, as it will affect all future Chancellors of the Exchequer, that if this decision is made today, our successors should enter into a self-denying ordinance and not quote this as an example for turning almost all pensions of the Crown, which are all earned by an act of good service and merit, into a reason why the law should be put into abeyance in other cases."—[OFFICIAL REPORT, 11th July, 1956; Vol. 556, c. 416.]I appeal to hon. Members to act in the spirit of those words, to continue the self-denying ordinance and not to accept the Amendment.
§ Mr. Goodhart
In the hope that more generous instincts will eventually prevail, I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause ordered to stand part of the Bill.