HC Deb 24 February 1977 vol 926 cc1619-20
8. Mr. Luce

asked the Chancellor of the Exchequer what representations he has received from widows about their taxation treatment.

23. Mr. Madel

asked the Chancellor of the Exchequer if he is planning an early meeting with the National Association of Widows to discuss taxation; and if he will make a statement.

Mr. Denzil Davies

I receive a number of representations from hon. Members and widows' organisations to secure special tax treatment for widows. The hon. Member for Staffordshire, South-West (Mr. Cormack) has recently asked my right hon. Friend the Financial Secretary to meet a small deputation to discuss the taxation of widows. A meeting is being arranged; any representations will be considered most carefully.

Mr. Luce

Does the hon. Gentleman realise that there is widespread anxiety because it is thought that widows are treated unfairly in tax terms compared with married women and other single women, particularly as their pensions are taxed? Will he ask the Chancellor of the Exchequer to rectify this injustice in his Budget?

Mr. Davies

When the hon. Gentleman says that widows' pensions are taxed, he is incorrect in the sense that when widows receive no income from any source apart from their State pension, the tax thresholds are such that they pay no income tax. The problem arises when the widows have income that takes them above the tax thresholds. This is a difficulty that partly reflects the increase in inflation and partly our inability to revalorise tax allowances. I accept that there is a problem, but it does not affect widows who receive no income except their State pension.

Mr. Ward

Is my hon. Friend aware that there is a great deal of misunderstanding among widows, the elderly and those receiving small additional incomes about the way in which their tax is calculated? Will he look at the method by which taxation is presented to those who are being taxed to try to make it more readily understood?

Mr. Davies

I agree with my hon. Friend that there is considerable misunderstanding, partly because widows' pensions are subject to the whole of the Schedule E procedure and all their allowances are set off against their pensions. Any income from employment is immediately taxed at the rate of 35 per cent. and it seems to the widow that she is paying a higher rate than the married women working alongside her. In fact, when all income is taken into account, she is not paying a higher rate.

Mr. Newton

Is the hon. Gentleman aware that, apart from the disincentive to working widows, one of the most serious injustices in the tax system is the treatment of widows and single women between the ages of 60 and 65? Does he accept that something must be done about this problem?

Mr. Davies

The hon. Gentleman is right. The problem is most acute for those women aged between 60 and 65 because the age allowance is not available then. For women over 65 age allowances are quite generous and take widows out of the tax net. However, I accept that there is a problem for women aged between 60 and 65.

Mr. George Cunningham

Is not the married man's allowance the real-anomaly here? If that were removed and the assistance that it would yield were shifted to children's allowances or child benefit, would that not help to remove the difficulty faced by widows?

Mr. Davies

If we had extra revenue or income, we mgiht be able to solve the problem to some extent. However, not only widows are affected. Other single women are in a similar position and if we singled out widows, it would be discriminatory and unfair to those other single people.