EXEMPTION OF PENSIONS IN RESPECT OF DEATH DUE TO WAR SERVICE ETC. (Hansard, 9 July 1979)

§ Mr. Denzil Davies
I beg to move amendment No. 51, in page 4, line 41, leave out ' Service in the armed forces of the Crown or '.

The Temporary Chairman
With this we may take amendment No. 52, in page 5, line 3, leave out ' due to peace-time service '.

§ Mr. Davies
Both are probing amendments, merely to discover what is meant by the drafting of the Bill. Amendment No. 51 seeks to delete the words: service in the armed forces of the Crown ". I have some difficulty understanding the subsection. The clause deals with what is referred to in a shorthand way as war widows. Why are those words there in contradistinction to war-time service in the merchant navy or war injuries? Subsection (2) deals with death in war or death as a result of injury in war. Will the widow of a Service man who is killed in peacetime on an Army base, possibly knocked down by Army transport, benefit under that legislation? If so, that highlights the difficulty of singling out one group of widows for benefits, which the Minister mentioned when referring to working widows.
Amendment No. 52 is narrower. It seeks to find out why the words in respect of death due to peace-time service in relation to service before 1939 are found in paragraph (b). Why cannot paragraph (b) be covered by paragraph (a)? The words in paragraph (b) relate specifically to peacetime service, so why should they be different from paragraph (a), which merely relates to service in the armed forces of the Crown "?

§ Mr. Kilroy-Silk
I moved the amendment in 1976 that exempted 50 per cent. war widows' pensions from income tax, and I take the unusual step of congratulating the Government on bringing forward this clause, which takes that process much further. It exempts entirely the dwindling band of war widows from tax on their war widows' pensions.
190 I do not want to rehearse the arguments on the question whether war widows were a special case and fell into a special category, apart from other claimants, for tax exemption on their benefits. It was a controversial issue. Only 17 of my right hon. and hon. Friends went with me into the Lobby to secure the 50 per cent. exemption.
The case is not proven that war widows should be treated differently. It is a matter of emotion and personal commitment. We feel, however, that war widows are in a special category because of the service that their husbands gave to our country and the way in which they died, and should therefore be treated differently. One was not amenable to arguments of statistics or comparability with other groups. As the debate demonstrated at the time, it was a clear-cut case, one side or the other.
I am pleased that this dispute has now come to an end and that war widows, who have campaigned vigorously and vociferously, so far with limited success, to get their pensions entirely exempted from tax, find themselves in this position. I congratulate the Government and warmly welcome their commitment.

§ Mr. Graham Page
I had intended to make the same remarks as the hon. Member for Ormskirk (Mr. Kilroy-Silk) on clause stand part, but since the debate has been opened I would like to add my congratulations to the Government on recognising, in their first Finance Bill, the justice of the case that has been pleaded over many years for war widows to receive full exemption. The hon. Member for Ormskirk was lucky three years ago in seeing the 50 per cent. exemption accepted. I had put down an amendment to his amendment to increase the exemption to 100 per cent.
I have forgotten how long ago I started the campaign to free war widows' pension from taxation. We were almost the only country in the world that was not granting war pensions to widows free of tax, giving an equivalent benefit to them. This had been done for the widows of our previous enemies, who were receiving far more prestige and consideration than we were giving to war widows in this country. It is a matter for congratulation that the Government have now recognised this fact only too well. It had been recognized 191 that the war disabled were entitled to receive a pension free of tax, but, for some reason, until three years ago we taxed fully the war death pension.
Justice has not been brought entirely to the widows. Those of the First World War and the Second World War are receiving much lower pensions than are the Northern Ireland widows. There are only about 15,000 widows of the Kaiser's war and about 50,000 widows of Hitler's war still living. Those few are receiving much less than the widows of men who have died in the Northern Ireland conflict. Why this difference? Why cannot there be parity? Why is there still this unfairness towards the widows of the First and Second World Wars?
I welcome the 100 per cent. freedom from tax that is now granted to the war widows' pension, but it is not entirely sufficient. I join with the mover of the amendment in asking for clarity on two points set out in the amendment. There seems to be some ambiguity. I hope that the Financial Secretary will be able to clear our minds and assure us that there is no ambiguity and that the drafting of the clause has been carefully considered.

§ Mr. Lawson
I can give the assurance, both to the right hon. Member for Llanelli (Mr. Davies) and to my right hon. Friend the Member for Crosby (Mr. Page), that the drafting has been carefully considered. The purpose is to ensure that no distinction is drawn, as it would be drawn if the amendments, which I accept are probing amendments, were accepted. The intention of the drafting is to ensure that no distinction is drawn in respect of the tax treatment of war widows' pensions which would depend on the conditions of service or the theatre of war in which the death occurred.
It would be wrong to say, for example, that widows of men killed in either the Great War or the Second World War should get the tax exemption but that the widows of men killed in Cyprus, Aden, Northern Ireland or Malaya should not.

§ Mr. Denzil Davies
Am I to understand that service in the Armed Forces of the Crown means war service—that there must be a war or armed conflict before the widow can claim?

§ Mr. Lawson
The point is that the widow has to be receiving a war widow's pension in the first place before there can be any question of her pension being exempt from tax. Therefore, if the death that made her a widow would not qualify her for a war widow's pension, clearly the clause would not apply.

§ Mr. Davies
Perhaps the Minister does not follow my question. May I give the example that I gave before? Let us suppose that a Service man was killed by a truck in one of the Army depots, at a time when no war was being fought near that depot or anywhere else. Would his widow be exempt from tax on that pension if, indeed, she was receiving a war widow's pension in respect of that death?

§ Mr. Lawson
This clause relates to war widows' pensions and to no other type of widows' pensions. If a widow got a war widow's pension because of a death in Northern Ireland, the clause would render that pension free from tax. It would be almost impossible administratively to find out from every war widow the circumstances in which her husband had been killed and thereby determine, as the amendment would have us determine, whether the tax exemption would apply.

§ Mr. Davies
I am sorry to press the Financial Secretary, but he is still not clear. Perhaps he does not want to tell the Committee, but is he really saying that the widow of a Service man who is killed while serving in the Army will receive a tax-free pension although her husband's death had nothing to do with war?

§ Mr. Lawson
This is a simple matter. If the circumstances are such, whether there is a war on or not, that the widow is entitled to a war widow's pension—

§ Mr. Davies
There does not need to be a war?

§ Mr. Lawson
No—she has to be entitled to a war widow's pension. In those circumstances, she would get exemption from tax.

§ Mr. Rooker
Is it not the case that the widow of a Service man killed on a base would not get a war widow's pension? She would get a pension, which would be taxable, but not a war widow's pension. Is that not so?

§ Mr. Lawson
That is absolutely right.

§ Mr. Rooker
Then why not say so?

§ Mr. Lawson
I have said it three or four or five times—that it is only in those circumstances, when there is a conflict of some kind and a war widow's pension arises in the first place, that there can be exemption from tax. If a soldier has a night out and falls off a bridge and is drowned and his widow is not entitled to a war widow's pension, there is no question of relief from tax. The position is simple. I am surprised that the right hon. Member for Llanelli wishes to detain the House longer on this matter.
I am grateful to the hon. Member for Ormskirk (Mr. Kilroy-Silk) and my right hon. Friend the Member for Crosby for their comments. This provision is the fulfilment of a pledge that we made in the election and which we have carried out in our first Budget. I pay tribute to the work that my right hon. Friend the Member for Crosby has done year after year to bring the plight of war widows to the attention of the House. He deserves the Committee's congratulations.

§ Mr. Denzil Davies
I asked the Minister a specific question why paragraph (b) in respect of death during peacetime service was so drafted in relation to service before 1939.

§ Mr. Lawson
There are certain deaths in conflicts in peacetime service. It would be wrong for the provision to be confined to war service, in the sense of the First or Second World Wars. There is a conflict in Northern Ireland. for example. The paragraph refers to any person or allowance at similar rates and subject to similar conditions which is payable by the Ministry of Defence in respect of death— ". Those pensions will be paid by the Ministry only if the death occurs in conditions of conflict analogous to war. The drafting of the clause is based on the simple premise that where there is entitlement to a war widow's pension there will be exemption from tax. It does not change any entitlement.

§ Mr. Graham Page
I should like answers to two matters relating to the drafting of the clause. Clause 9 (2)(c) reads: any pension or allowance which is payable under the law of a country other than the United Kingdom and is of a character substantially similar to a pension or allowance falling within paragraph (a) or (b) above. If the foreign pension is taxed at source can the United Kingdom widow claim as an allowance that deduction if there is a double taxation treaty? I assume that she can.
Where tax has been deducted up to the present from the war pension, what is the machinery for the widow to get back her tax? I ask that because when there was 50 per cent. relief there was confusion. The machinery did not work well. I hope that it has been improved.

§ Mr. Lawson
My right hon. Friend the Member for Crosby (Mr. Page), with his well known perspicacity and attention to detail, asked two important questions. The answer to his first question is that, where the United Kingdom has a double taxation agreement with a country that taxes war widows' pensions, the pension of a war widow who is a national of that country but resident here will be subject to taxation at source. The country paying the pension has the right to tax it. Where there is no double taxation agreement, as in Guyana, India and Sri Lanka, the tax treatment of war widows' pensions paid to a widow resident here will depend on the domestic legislation in those countries.
Some war widows living in the United Kingdom may still have to pay tax—though not United Kingdom tax—on their foreign war widows' pensions. I hope that that satisfies my right hon. Friend on that point. On the question of the machinery, I hope that there will be no problems, but I will look into it and write to my right hon. Friend.