" Payments of pensions or allowances under the Social Security Act 1975 in respect of widows and their children shall not be treated as income for any purposes of the Income Tax Acts.".—[Mr. Meacher.]
§ Brought up, and read the First time.
§ The Temporary Chairman (Mr. Michael English)
With this we may take new clause 12, entitled " Personal relief for widows ".
§ Mr. Meacher
First, Mr. English, I must apologise to the Committee on behalf of my right hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley), who, in response to an engagement that he entered into several months ago, has today been opening a conference on mentally handicapped children in Edinburgh. I am sure that the view held by both sides of the Committee is that my right hon. Friend has a fine record of experience in and knowledge of these matters. I shall do my best to represent his views in introducing the new clause.
There can be no doubt that there is a tremendous amount of feeling and support for the proposal embodied in the clause—namely, the exemption of widows' pensions from tax. There are, of course, many widows and widows' organisations throughout the country. No one likes paying more tax than is necessary, but feeling goes a great deal deeper than that. There is widespread feeling and bitterness among widows about their need to maintain their family standards, to be self-reliant, to be independent and not to fall back on the social security system, which they wish to avoid at all costs. Those needs and desires are constantly and unfairly thwarted by the burden of tax that they have to bear.
The widow's pension is £19.50 a week. If a widow works full time and earns, for example, £60 a week, she will pay tax of £16.40 a week. Therefore, almost the whole of the widow's pension is swallowed up in tax on her modest earnings. Naturally, working widows are resentful about that, especially when they recall 376 that their pensions were secured as a result of their husbands' contributions paid out of taxed earnings. Their awareness of the double taxation adds to their sense of grievance.
I am well aware of the traditional Treasury reply. Perhaps I may give it now so that I have a chance to reply. It has been given many times from the Dispatch Box. It is that as all income should be taxable, singling out widows' pensions for exemption from tax would not be justified. But that argument no longer holds water when the Government single out war widows' pensions for exemption.
There are two alternative tenable positions. Either we exempt all widows' pensions, or none. What cannot be justified is the exemption of a few but not the rest. Why have the Government adopted that course? No doubt the Government will say that war widows are in a special category. I take a different view. The criterion for assistance should be the financial need of the widow rather than the social merit or the social status of the husband, or the circumstances of his death. That is my view.
The situation of the war widows has already been recognised by a markedly higher differential cash pension, which is currently £25.30 for a war widow, £20.05 for an industrial injuries widow and £19.50 for the rest of the widows. There is considerable recognition of the special situation of the war widows. Recognition of their special position cannot be the reason for the Government tax exemption for them. I suspect that the reason is more calculated than that. The Conservatives are hoist on their own petard. Having supported a Labour Back Bench revolt to secure a 50 per cent. tax exemption in 1976, the Conservative Government are now extending it to 100 per cent. for war widows. They are not going further, as logic and principle would seem to justify, but simply because it is cheap. The cost of extending it from 50 per cent. to 100 per cent. for war widows is £4 million, according to a Treasury answer, or £6 million in a full year. Only 40,000 widows—about 1 per cent. of all widows —will benefit. Even of those, only about one-half will be taken out of the tax range. As they are war widows, their 377 number will gradually decline over the years.
Cheapness is always a bad reason, in equity. Here it opens up obvious anomalies. First, why should a war widow, who already receives a considerably larger pension, now receive on top a tax exemption that is denied to other widows? Secondly, is a widow whose husband dies of pneumoconiosis, contracted in the mines or, as happens so frequently in my constituency, of byssinosis, as a result of working for 30 years in the textile mills, less deserving than a war widow? Thirdly, if the Treasury's sacred principle of regarding all income as taxable is once breached—it was breached in 1976, and that breach is being carried further in this Bill—how can the Government draw the line so arbitrarily just to include one small category of widows?
I suspect that the real argument is not about principle but about cost. The cost of the amendment that I am putting forward would be, according to a Treasury answer given on 11 June this year, about £90 million. That may seem a fairly sizeable sum, but it also needs to be seen in perspective. The Government have been giving away, in very substantial tax handouts to the rich and to the high earners, a sum which, on their own evidence, they calculate at about £650 million. Indeed, there is one measure out of this package of measures to benefit the higher paid which involves giving away no less than £200 million. That is the cost of raising the investment income surcharge threshold. Almost the whole of this handout will be concentrated among those earning above the national average wage.
Although the cost of the amendment would be £90 million, the Government cannot say that the money is not available. It is available and it is purely a question of the Government's political priorities. Are these tax concessions to go wholly, exclusively or overwhelmingly to managers and directors who are mostly on well above average incomes, or are they to go, at least partly, or in something more than a minuscule way, to widows who are mostly on well below average incomes?
On these grounds, I hope that the Government will reconsider their political priorities sufficiently to accept the new clause.
§ Mr. Tony Durant (Reading, North)
I should like to comment on new clause 12. We went round this course last night; therefore, I shall not delay the Committee long. I want only to make the case again on behalf of widows.
Last night we talked about allowing the widows to claim the married women's allowance in order to provide an incentive for them to go out to work. That amendment was moved very ably and we had a most interesting debate on it. My proposal suggests that 50 per cent. of the widow's allowance be disallowed for tax purposes. This will cost about £45 million and does not go as far as the hon. Member for Oldham, West (Mr. Meacher) would like to go. He suggested that all of the widow's pension be disallowed for tax purposes. If I may say so, I thought that he was harping a bit on the question of the war widow's pension. Perhaps he ought to talk to his hon. Friend the Member for Ormskirk (Mr. Kilroy-Silk), who last night welcomed the Government's decision to allow the war widow's pension to be tax free. As he was the mover of the original motion relating to the 50 per cent., I thought that he acted most honourably in welcoming the Government's decision. I do not deprecate the main arguments of the hon. Member for Oldham, West, but he was rather harping on the aspect relating to the war widow's pensions.
We talked last night, in a quite interesting debate, of all the reasons why the working widow is placed in a difficulty. The need for her to go out to work was strongly emphasised by the hon. Member for Woolwich, East (Mr. Cartwright). It was right to concentrate on that aspect because it is a fundamental fact. In all my dealings with the National Association of Widows, there is a constant reiteration that after the initial year the desire of widows, after the shock has faded. is to get out and about and to get back into society. Work is a wonderful avenue by which they can do this. We talked about this at some length last night As the hon. Member for West Lothian (Mr. Dalyell) reminded us, these widows often have expectations. They often have higher standards. They often have houses to maintain, and all the extra costs. This is another important aspect on which we touched last night. What I find odd in all Government thinking is that the State has 379 accepted for a long time that widows are a special case. They receive a pension, so the Government must accept that widows are a special case and have a special problem. It seems odd that every time the Government, of whatever complexion, claw back that pension through tax. That is a great pity. I am suggesting that a 50 per cent. allowance be made for tax, which is a modest step in the right direction.
Another matter which was raised in our debate last night, and which needs re-emphasising, is that there is an increasing number of young widows. It is an important factor of which the Government must take more congnisance. Widows are not all old ladies living in hotels in Bournemouth with a couple of Pekinese. Those days are gone. Many widows are young women who face parsimony and they feel bitter about their situation.
I accept that the Government's wish and policy in the Budget to give war widows complete relief from tax is an understandable move. There is an emotional background to that. As the hon. Member for Oldham, West said, there is no real logic to it. It is emotional. It is understandable, because it results from a campaign for war widows which has gone on for a long time. As the hon. Member for Oldham, West rightly said, the effect on the widow is exactly the same. It is perhaps more honourable to have a photograph of one's husband on the mantelpiece with a medal beside it, but the net financial effect of overwork, or some disease such as cancer, is exactly the same.
Regrettably, too few husbands, particularly young husbands, prepare for the fact that they may leave a widow behind. As they get older perhaps they think about this sort of thing, but certainly when they are young it does not seem to be important. When a woman is suddenly alone, she faces a number of problems which she has probably not had to think about previously. If she lives in a house for which her husband has been paying, there is the mortgage. If she lives in a council house, there is the problem of the transfer of the tenancy. There are problems with the will and probate, and understanding social security benefits.
380 As Members of Parliament, we all sit at our desks during surgeries and receive visits from people asking about benefits. I am often caught out regarding what benefits a person is entitled to, and a widow has to face many of these issues on her own. She perhaps has to sort out the income tax. Many widows get a special short-term allowance when their husbands die and do not appreciate that it is subject to tax. Suddenly they have a large tax bill. There are, of course, arrangements that can be made with the Inland Revenue, but the widow is not aware of those arrangements. Therefore, they have the further problem of running into tax arrears on top of everything else. The tax on a widow's small pension —and it is small—is something that we as a nation should look at more carefully.
I received a letter from the National Association of Widows which rather belies what the hon. Member for Oldham, West said. The National Association of Widows does not decry the fact that war widows receive their pensions tax free.
§ Mr. Meacher
The hon. Member has made reference to me several times in that context. I do not decry the fact that war widows receive tax exemption, either on 50 per cent. or 100 per cent. of their pension. What I say is that if we go in that direction we should be consistent and logical and extend it to other widows.
§ Mr. Durant
What I am about to read supports what the hon. Gentleman has just said. I shall read from the letter I received from June Hemer, the founder and honorary general secretary of the National Association of Widows. She says:We are, of course, very happy that the pensions of War Widows are now to be free of tax, indeed many of our members are also War Widows, they regret as we do the divisions of categories of widows "—which covers the hon. Gentleman's point.In a budget designed to give incentive to work, and rightly so, this division is accentuated.Therefore, that supports the point which the hon. Member for Oldham, West made, although I felt that he went on about it at some length.
Last night, the Financial Secretary said that the whole matter of widows was under review. Therefore, I am putting 381 another alternative to him to consider. First, there is the question raised last night with regard to the married woman's allowance. and I am now suggesting a 50 per cent. disallowance.
I hope that my hon. Friend will take this point on board. There may be better ways of doing this, but he must act soon because widows will not wait much longer. The feeling in the country is rising weekly and monthly. I have seen this during the last four years in which I have been involved with widows' organisations. Rallies at Central Hall and meetings in individual constituencies get more and more violent and angry. Widows are in the main reasonable people. I therefore urge the Government to realise that time is running out and that they had better come forward with some suggestion, certainly in the next Budget.
§ Mr. John Cartwright (Woolwich, East)
I must confess to being a somewhat reluctant supporter of the new clause. In principle, I tend to the view which the Financial Secretary took last night when resisting the amendment that I put before the Committee. I tend to the view that all income should be taxable. Once we raise the question of exemptions we get into very dangerous waters. I incline to the view that if we exempt one long-term benefit—widows' pensions—in equity we are in some difficulty in resisting a similar approach in relation to retirement pensions and other long-term benefits. One exemption of this sort inevitably leads to another.
I would not have supported the new clause but for two facts. First, no other help is on offer for widows. The Financial Secretary effectively resisted my attempt last night to try to give assistance to the working widow. At this stage in the Finance Bill, there is no possibility of introducing an amendment that deals with the question of a householder's allowance. The Financial Secretary told us that a review of the whole problem of widows and their taxation was being conducted, but he was not very encouraging. He was certainly unwilling to give any indication that there would be any positive outcome from that review by the time we discuss the Finance Bill next year. Therefore, it seems to me that at present this is the only way in which to make progress towards helping widows, who in my view need and deserve some assistance.
382 Secondly, I support the new clause because the principle has clearly been established by the way in which the Government are treating war widows. I hope that the hon. Member for Reading, North (Mr. Durant) will not think that I am harping on this point. In a sense, it is the weak link in the Government's armour. I know that the Financial Secretary was a somewhat reluctant supporter of the idea of exempting war widows' pensions for tax purposes. When we debated this in the House he declared himself of the view that something should be done for the war widow, but added that this was not the right way to do it. However, having set out all the reasons why it was not the right way to do it, he eventually accepted it, because at the end of his speech he said that there was room in politics for a sentiment which transcended logic and that that was the only argument for doing something for war widows.
The sentiment which transcends logic has again been repeated in this Finance Bill by the total exemption of the war widow's pension. Like the hon. Member for Reading, North and my hon. Friend the Member for Oldham, West (Mr. Meacher), I do not criticise that help. I do not begrudge it going to war widows, because I am sure that they deserve it. What I worry about is why it goes only to that particular group of widows and is not available for other widows.
The point made by my hon. Friend the Member for Oldham, West is valid. There is something repugnant about treating widows in a different way. There is something repugnant about making some sort of value judgment in respect of widows. A judgment should not be made between a war widow and a woman who is widowed as a result of industrial injury, accident or illness. They are all widows and have the same needs. They should be treated in the same way. However glad widows are that their war widow sisters will be getting that extra help, they will not understand why they too will not receive it.
It is on those grounds that I support the new clause.
§ Mr. John Home Robertson (Berwick and East Lothian)
In normal circumstances I should not be rising to take part in the Committee stage of the Finance Bill.
383 I would rather leave that to the financial geniuses on both Front Benches—to the estate agents on the Government Benches and the anti-estate agents on the Labour Benches.
Like certain other of my hon. Friends, in normal circumstances I should prefer not to support such a clause as new clause 12. As has been said, it would give a 50 per cent. tax exemption on the widow's allowance. I would far rather support a measure that would give widows, along with others in need, a fair income on which they could be taxed. I dislike the concept of perks and special tax exemptions that look like charity. We do not, however, live in normal circumstances. We have a Government wedded to the two-pronged economic strategy of cutting public expenditure, including that on social services, and cutting taxation.
Over the next few years my right hon. and hon. Friends will have to do a great deal of peering into the twilight of Tory logic. If we do that now we can see a slight chink of light in the form of tax cuts that could help widows. Even if there is to be no more public expenditure on better benefits for widows, they may be able to benefit from tax cuts. We shall have to make the best of a bad job over the next few years and we should begin to do that now.
The Government's tax cuts have so far benefited only those with high incomes. That has been well demonstrated by speaker after speaker from the Labour Benches. One does not have to be clever to understand that other people in general will be worse off. The new clause gives the Government an opportunity to redeem themselves and help a section of the population that richly deserves to have its needs better recognised—widows in general and working widows in particular.
I wish to be fair. In the 1976 Finance Bill Conservative Members used their votes to support a number of my right hon. and hon. Friends in giving 50 per cent. tax relief to war widows. Clause 9 of the Finance Bill goes further and exempts war widows' pensions altogether from tax. I applaud that. I am sure that my hon. Friend for Oldham, West (Mr. Meacher) did not intend to cast aspersions on that move. We all welcome it. No one could be more deserving of 384 sympathetic treatment than the widow of a soldier killed on active service defending his country or in Northern Ireland. I congratulate the Government on the genuine idealism they have shown in granting tax relief to these war widows, and invite them to pursue that logic a little further.
Last night, in replying to another amendment that would have helped widows, the Financial Secretary mentioned the dangers of setting a precedent by creating such an exemption. I believe that he also mentioned that during the Committee stage of the Finance Bill in 1976. The fact remains that the exemption has been given. It is incorporated in the Bill. The Government have opened the stable door and I invite them to bolt through it and extend these benefits to other widows. What is the difference, in terms of need and merit between a widow whose husband died in the war and one whose husband died at work as a result of an accident or of cancer or some industrial disease?
In my constituency we rely very largely on primary industry—fishing, agriculture quarrying and mining. These are dangerous industries where accidents occur and in which industrial diseases are likely to be contracted. Inevitably, from time to time some men die young. Then, of course, there are young widows who must go out to work to supplement their income. But we have not only young widows who work but widows of all ages in our surgeries complaining about the level of taxation on their pensions. Only last Saturday a widow from a village near Dunbar in my constituency came to my surgery and gave me a pay slip. In two weeks she had done 17 hours' work and earned £18.78. On this amount she paid £9.10 tax. This seems to be a heavy dose of taxation for that kind of income.
Many widows of all ages must supplement their pensions in order to get a reasonable income on which to live. Many resent being taxed on their whole income including their pension, particularly when their pension is so pitiful. I am not proud of the fact that the Labour Government did not do more to help these people. My hon. Friend the Member for West Lothian (Mr. Dalyell) was right when he said last night that this was an infinitely more important issue in the minds of the electorate than devolution 385 and many other issues. It is a pleasure to agree with him. We have had this problem brought to our notice over and over again.
In recent years we have heard a lot about the West Lothian question. Let us hear a lot more about the Berwick and East Lothian question—about widows and how we can achieve more for them. This is a big issue throughout the country. I offer some friendly advice to the Government. They badly need something popular at the moment, as they seem to be very unpopular in many areas, particularly the North-East of England and Scotland. If they were not I might be out of a job.
New clause 12 gives the Government a golden opportunity to do three things—to fulfil their pledge to cut taxation; to bring all widows into line with war widows; and to do something honourable and popular which might enhance their image with the electorate. Even if the Minister cannot support the new clause, I appeal to Conservative Back Benchers to support it tonight.
§ Mr. Dalyell
I did not intend to take part in the debate tonight because it shows all the signs of being a re-run of last night. However, I felt I should take part, first of all, because of the accusation against my hon. Friend the Member for Oldham, West (Mr. Meacher) of harping.
It should be said fairly clearly that there are a lot of disgruntled widows in this country. For example, take the widow of a young coal miner. I have a number of coal mines in my constituency, and there is a feeling that those who die as a result of pit accidents or pneumoconiosis are being discriminated against. My hon. Friend the Member for Ashfield (Mr. Haynes) knows about this kind of issue. Or as another example, consider the widow of someone who dies in the fire service. The situation is invidious. Pandora's box has been opened and once a decision has been taken on war widows, many other consequences flow. I wish there to be no misunderstanding on that score.
I want to ask a question. This may have been answered last night, but I do not think that is the case. We are all at a great disadvantage through not being pro- 386 vided with copies of the printed Hansard. We cannot check these matters in the normal manner. It is difficult to read the present version of Hansard, though I do not wish to reflect on the efforts of those who produce the typescript.
My question is as follows: are there any readily available figures in the Treasury showing the cost of bringing all widows into line with war widows? I suspect that the sum is enormous, but I do not think that the figure was given last night. If we are to continue to debate this topic, I believe that we should be clear about the cost to the Treasury. Indeed, it would be extremely helpful if we could be given a cost analysis of the new clause.
§ Mr. Lawson
I begin by answering the point put to me by the lion. Member for West Lothian (Mr. Dalyell) as to the cost to the Treasury if all widows were put on the same footing as war widows. The cost would be of the order of £100 million.
However, we would then be asked why the matter should be left there. Many arguments would be deployed for pensioners to be freed from tax. It would be argued that many pensioners are worse off than many younger widows. No doubt a case would also be made—and I made this clear in the full debate on this subject last night—that divorced or separated wives bringing up families are in very much the same position as widows. There would be a further immense cost if a similar provision were granted in that respect.
No hon. Member on either side of the Committee wishes to pretend that there is no great grief and sense of loss in widowhood. The bereavement is real and great. The question is where the line should be drawn. What has differentiated this brief debate from the rather longer debate which the Committee had yesterday is the emphasis placed on the treatment of war widows compared with that meted out to other widows.
The hon. Member for Woolwich, East (Mr. Cartwright) was assiduous enough to look up my words in Standing Committee in 1976 when the 50 per cent. exemption was debated. I then said—and I maintain this view—that in pure logic there is no reason to breach the principle that all income should be taxable and no 387 reason to suggest that war widows' pensions should be free of tax. I also said that there were occasions in politics when matters of emotion transcend logical consideration.
Where should the line be drawn? To a certain extent, the House decided in 1976 that the line should be drawn at war widows and that they were a special and different category. It can be argued that it is not the right place to draw the line, but it is a matter of judgment. It is not a new judgment. As far back as 1919 a Select Committee of the House decided that war widows' pensions should be free from tax although that recommendation was not implemented.
The war disability pension has always been specifically free from tax. I have always felt that to be one of the strongest arguments in favour of exempting the war widows' pension. The great majority of countries, on whichever side of the last war they happened to be, pay war widows' pensions tax-free even though the ordinary widow's pension is not tax-free. Therefore, we are not the only country to do this.
There is a strong feeling in many countries of the world that there is something special about a man who has given his life for his country on active service and that that sacrifice should be recognised in the treatment of this widow. I cannot justify that in logic but it is something that many hon. Members have felt. That is why the 50 per cent. exemption was granted in 1976 and that is why we have decided, in line with the feeling of Parliament at that time, and—I hope—at this time, that we should go all the way along that route. However, it is wrong to suggest that because we have taken this step it follows inexorably that we should go the whole way with other widows' pensions.
My hon. Friend the Member for Reading, North (Mr. Durant) made an admirable supeech in introducing his new Clause. He struck a better tone than that of the hon. Member for Oldham, West (Mr. Meacher), who made many unjustified charges. That hon. Member said that the tax cuts in the Budget went overwhelmingly to those on above average incomes, citing the income tax cuts of more than £600 million on the higher 388 rate thresholds and higher rates of income tax out of the total income tax cuts of £4¼, billion. Therefore it is untrue to say that the bulk of the tax cuts apply to those on higher incomes.
The hon. Member for Berwick and East Lothian (Mr. Home Robertson) referred to a widow in Dunbar who came to him about the amount of tax that she was paying on her pension. I suspect that she was paying at the old rates because the new rates apply partly in this month and fully in October. She will find that she has been relieved by the reductions taxation of the Budget. Much of what has been relieved by the reductions in points to the fact that it is the rate of income tax which is too high, particularly on low incomes. That applies to many and not merely to widows.
We have done much to alleviate that in the Finance Bill with the sizeable rise of 18 per cent. in the threshold. I concede readily that it is not enough and we will seek to go further in future years. My hon. Friend the Member for Reading, North referred to the great anger felt by his constituents. That anger has grown in recent years largely because the income tax burden has grown. I hope that as the income tax burden is reduced widows will feel less angry. I do not mean by that that I am unsympathetic to the sense of loss and bewilderment and the difficulties that they encounter when they lose their husbands.
My hon. Friend for Reading, North was helpful in suggesting what more might be done—if anything should be done—to help widows through the tax system. We shall consider all suggestions. That is part of what I meant when I said that there would be a review. We have not yet come across a suggestion which commends itself to us, largely for the reasons mentioned by the hon. Member for Woolwich, East.
It is right that, even in a brief Committee stage, we should debate twice a subject of such importance. The hon. Member for Oldham, West is speaking on behalf of the right hon. Member for Stoke-on-Trent, South (Mr. Ashley). I understand why he could not be here. I hope that he thinks that he has served his purpose and that his hon. Friend will withdraw the new clause.
§ Mr. Meacher
I listened carefully to the Financial Secretary. No one could be content with the general drift of his remarks. He did not justify differentiating the position of war widows in terms of a tax exemption when war widows already receive recognition of their special position by a substantial increase of £5.80 in their cash pension. The Financial Secretary did not quote the most telling part of the speech made in 1976 by my right hon. Friend the then Financial Secretary. He said that war widows should receive a plain, straightforward increase.
It would be possible to withdraw the tax exemption—whether it is 50 per cent. or 100 per cent.—and to give an increase purely in terms of the cash pension. That is a positive suggestion which I hope the Government will take into account in their review. The war widow already receives an extra cash benefit. If the Government saw fit, that could be increased further.
The Financial Secretary did not answer the main question, namely, how is it 390 possible to differentiate between the position of the war widow and that of the widow whose husband dies in an accident at work or as the result of an occupational illness? That is an invidious distinction which will be difficult to sustain to widows.
The Financial Secretary argued that the benefits of the Budget do not go disproportionately to the better off. I said that the bulk of the tax benefits, per capita, go overwhelmingly to the better off. We are talking of £100 million. That is small fry compared with the total benefits distributed by the Government.
I take refuge in the Government's promise to examine the whole question of benefits to widows. The Government can be certain that we shall return to this matter on the next Finance Bill. I beg to ask leave to withdraw the new clause.
§ Motion and clause, by leave, withdrawn.