HC Deb 14 July 1981 vol 8 cc1117-22

'In section 219(1)(a) of the Taxes Act (which, as amended by Schedule 2 to the Social Security (Consequential Provisions) Act 1975, charges to income tax benefits under certain provisions of the Social Security Act 1975 or the Social Security (Northern Ireland) Act 1975 except unemployment benefit, sickness benefit, invalidity benefit, attendance allowance, non-contributory invalidity pension, maternity benefit and death grant), after the words "non-contributory invalidity pension" there shall be inserted the words "mobility allowance,":.—[Sir David Price.]

Brought up, and read the First time.


Sir David Price (Eastleigh)

I beg to move, That the clause be read a Second time.

I hope that the happy spirit will continue as we debate my new clause. Its object is to take mobility allowance outside the scope of income tax and hence to make it tax-free. I must once again declare a personal interest. I think all hon. Members know that my wife is a recipient of mobility allowance.

The House will recall that mobility allowance was introduced by the then Labour Government on, not inappropriately, Friday 13 September 1974. The purpose of the new mobility allowance was made very clear in the then Government statement: The Government believes that the best solution to this complex problem"— the immobility of the disabled— lies in making greater mobility available to a wider range of the disabled so many of whom are at present immobilised by lack of ability to pay for it.

The House will observe that there was nothing in that statement to suggest that it had anything to do with income, salary, remuneration or perquisites. It was a direct cash allowance to assist disabled people to be more mobile. It was an important improvement in the scheme of things for the handicapped. It gives a degree of freedom of mobility to those whose disabilities make them very immobile.

I salute the Government on the improvements that they have made in the level of the mobility allowance. As the House knows, this year the annual uprating took the mobility allowance from £14.50 a week to £.16.50 a week. There are about 195,000 beneficiaries. That is a figure that I have received in a recent parliamentary answer.

Why is the mobility allowance taxed when other similar allowances are tax-free? That is the key question. I have a long list of allowances which are tax-free. At this late hour, in the interests of time, I shall not read them out. They are numerous. They are virtually all tax-free. If anyone challenges me, I can produce replies to recent parliamentary questions.

Why is the mobility allowance taxed? I suggest that it has nothing to do with principle—that somehow mobility allowance is of a different character from, say, attendance allowance or the many allowances that go to the war disabled. We know from replies by then Treasury Ministers when this allowance was introduced that it was simply the arithmetical expediency of the moment. I quote the words of the right hon. Member for Llanelli (Mr. Davies), who was then a Treasury Minister. In 1975 he said: I concede that the attendance allowance cannot be argued to be different from the mobility allowance, and under the previous Conservative administration it was decided it should not be taxed."—[Official Report, 17 July 1975; Vol. 895, c. 1875.] Therefore, there was no matter of principle in the view of the Government who introduced mobility allowance that distinguished it from attendance allowance. It was simply on the narrow calculations of the budgetary arithmetic of the moment. I do not believe that that is a sufficient reason to retain a major injustice that has continued since the mobility allowance was introduced.

This point was debated in 1975, 1976 and 1978. I shall not embarrass ministerial colleagues who spoke in those days in favour of making mobility allowance tax-free. I have numerous quotations with me, but it is too late to bore the House with them. I shall merely quote what I might call the classic Treasury reply, which came from the right hon. Member for Ashton-under-Lyne (Mr. Sheldon). He said: The reason for taxing mobility allowance is the same as that for taxing all benefits—administrative practicability."—[Official Report, Standing Committee A, 27 June 1978; c. 1708–9.]

I suggest that mobility allowance is not a proper subject for taxation. I do not make any appeal to the Treasury because this is the International Year of Disabled People, or anything as primitive or as sentimental as that. I appeal simply on the matter of principle and consistency—that this is not a proper subject for taxation.

1.30 am

I take my right hon. Friend's mind back to before the introduction of the mobility allowance. In those days the arrangements for the disabled and the immobile were that they got a three-wheeler motor car—a bit of hardware—if the recipient satisfied certain conditions. I was not aware, nor is there any evidence, that any recipient of such a vehicle was ever assessed by the Inland Revenue for benefit in kind. Subsequently, four-wheelers were introduced. Instead of taking a Ministry four-wheeler, it was possible to get a cash allowance, provided certain tight rules were satisfied, which was never taxed or taken into account by the Inland Revenue. Prior to the introduction of the wider mobility allowance, no one receiving help, either in cash or hardware, from the Government was taken into tax by the Inland Revenue.

When the mobility allowance was introduced, the Revenue made a change without any authority, so far as I know, and decided that it should be taxed as though it was income or income in kind. Income is defined under schedule E to the Income and Corporation Taxes Act 1970. This states: Tax under this Schedule shall be charged in respect of any office or employment on emoluments therefrom". The word "emoluments" is defined in section 183(1) as all salaries, fees, wages, perquisites and profits whatsoever.

By no stretch of the imagination can "perquisites", which seems the only relevant word in that definition of income, be extended to include mobility allowance. I reflect upon the reply of my right hon. Friend the Financial Secretary on the previous new clause. As a matter of law, I put it to him that the mobility allowance should not be taxed.

The standard argument deployed by Treasury Ministers since the allowance was introduced is that of cost. According to a reply I have received, the cost is £10 million. My right hon. Friend is, of course, concerned about the public sector borrowing requirement and the Government's Budget strategy. If he concedes my new clause, the amount involved will be £10 million. Out of a public sector borrowing requirement of £10,500 million, this represents less than one-tenth of 1 per cent. My right hon. Friend is a man of great determination. I put it to him as kindly as possible that I doubt whether he will get the public sector borrowing requirement correct within one-tenth of 1 per cent. It would be a most remarkable achievement if he succeeded.

The correct figure represented by the new clause is 0.095 per cent. I am prepared to abandon my new clause if my right hon. Friend will guarantee to me that he will get the public sector borrowing requirement within that degree of accuracy. I shall give him a tenfold lead. I am prepared to say 0.1 per cent. or even to raise the odds to the extent of saying 1 per cent. If he says he cannot achieve that accuracy, he can concede my new clause as a matter of principle and law without detracting from the Government's Budget strategy.

I am confident that my right hon. Friend will respond as handsomely to my proposition as I have put it to the House. Should he have doubts about accepting the proposal for the obscure reasons that move the Treasury mind but are denied to we humble mortals, I offer him a trade-off—that he gives a guarantee that when invalidity and other benefits that clearly are income are brought into tax he will take mobility allowance out of tax. There are many benefits that should properly come into tax. The mobility allowance, like the attendance allowance, should be below the tax threshold because it is an allowance that society gives to seriously handicapped people to bring them up to the starting gate in life. They are, therefore, of a different nature.

I bring no sentimentality to my argument. I do not call in aid, as happened on an earlier new clause, the International Year of Disabled People. This new clause involves a permanent problem. In straight justice and practicability, my new clause is proper and correct, and I do not know what possible reasons my right hon. Friend can have for rejecting it.

Mr. John Hannam (Exeter)

This is not the first time that we have debated a new clause aimed at relieving recipients of the mobility allowance from taxation. I recall tabling amendments to a number of Finance Bills in the past since the mobility allowance was introduced in 1977, and no doubt if the Government do not accept the new clause tonight I shall table more amendments to future Finance Bills.

The allowance should be regarded as—and is—a disablement costs allowance. It is not a benefit or form of income. It therefore should not be taxed. My hon. Friend the Member for Eastleigh (Sir D. Price) has more than adequately put the case for tax exemption, so I shall not take up the House's time by repeating what he said.

The allowance was brought in to extend help for disabled people and give mobility to those people who are virtually unable to walk. The purpose was twofold: first, to enable basically disabled people to purchase and drive their own specially adapted vehicles; secondly, to enable severely disabled people who are unable to handle their own vehicles to have transportation as disabled passengers.

We supported the introduction of the allowance because we wanted disabled people to get about and live as normal a life as possible, to enable them to get to work where they could earn money and contribute taxes in the normal way, pursue normal lives and have a social existence. It is, therefore, wrong in principle to tax the very allowance that is designed to cover basic costs.

The attendance allowance was the other major costs allowance that was introduced during the past decade. That is not taxed, and rightly so. I do not disagree with the general principle that income-supportive benefits should be taxed. However, benefits which bring disabled people up to the starting point of living—to the starting gate, as Peter Large, the Disabled Income Group spokesman has often called it—should not be brought into taxation. They are designed to offset a basic disadvantage and are not a form of supplementary income.

The present system of disablement benefits has long been recognised as a rag-bag. It is a tradition of this House to pay lip service to the restructuring of the entire system to remove the poverty traps and the anomalies that exist. However, we keep increasing the size of the problem, and Treasury Ministers then say that the cost of changing the system has become so great that it is out of the question.

So whenever we have an opportunity to show that we understand the inequality of the present system and of the taxation of this allowance, and to move towards a general disablement costs allowance—a below-the-line costs payment—that is non-taxable, we should seize that opportunity. The present situation means that a disabled person who has a mobility allowance on top of income in the form of social security benefits, which are non-taxable, will probably escape tax on his mobility allowance. If he is a disabled person whom we have encouraged to go out and earn money and pay tax, he will have to pay a large part of his mobility allowance back in taxation. That cannot be fair.

We could debate many other issues such as mobility allowances for the blind arid partially incapacitated. However, the new clause is based on a clear principle. It should be accepted.

Mr. Lawson

The House appreciates the sincerity with which my hon. Friend the Member for Eastleigh (Sir D. Price) introduced the new clause. We also appreciate the work of my hon. Friend the Member for Exeter (Mr. Hannam) through the all-party disability group and in other ways. As he said, this is not a new subject for debate.

There was one new argument, however. We heard a seductive argument from my hon. Friend the Member for Eastleigh, who said that if we could forecast the public sector borrowing requirement within £10 million the argument should not be conceded but that if we could not. do that it should be conceded. It is possible that he cannot estimate his own income to within £10. That is not a reason why he should give me £10, because he would be £10 worse off if he did. That is the way in which the Treasury is obliged to examine the claims and requests put to it.

My hon. Friend also suggested that, as a matter of law, it was wrong to tax the mobility allowance. The debate did not hinge on a matter of law. All social security benefits are theoretically liable to tax, except those specifically exempted under section 219 of the Taxes Act. The mobility allowance has never been exempted. That is the strict legal position.

The whole question of benefits which are liable to tax and those which are not is a mess. There is no great logical distinction, so far as I can discern, between those that are allowable for tax and those that are not. Parliament has taken particular decisions at particular times.

My hon. Friend the Member for Eastleigh mentioned the attendance allowance, which is not liable to tax, and asked what the difference was. In Standing Committee on the Finance Bill 1978 the then Financial Secretary, the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), said that the attendance allowance was "different." He developed his argument by saying that one could always find differences and similarities and that the position was difficult.

We have had it quite clear—this is agreed by the Opposition Front Bench—that the general tendency or drift should be bring benefits into tax rather than take them out. In this Finance Bill there are provisions to bring unemployment benefit into tax. We have also announced our intention to bring the remaining untaxed, short-term benefits, for example sickness and invalidity benefits, into the tax net at some stage.

Mr. Clement Freud (Isle of Ely)

I have been listening with care. Is the Financial Secretary saying that his reply to the new clause is to threaten to bring the attendance allowance into the tax net?

Mr. Lawson

No. The Government have no intention whatever of bringing the attendance allowance within the tax net. I was speaking of the general tendency. The hon. Gentleman will remember what we did about the war widows' pensions when we took them out of taxation. I do not say that there is total consistency but I was speaking of the main thrust. It is nothing new. It is desirable that we should be open and honest about these matters on both sides of the House. Our general tendency is to believe that benefits should be brought into tax where possible.

Mr. Maxton

Does not the Minister agree that when in this area large sections of our community essentially already receive their travel, in the form of company cars, almost tax-free, to give that benefit to some of the weakest in our society would be beneficial?

1.45 am
Mr. Lawson

That does not have much to do with the new clause. I am sure that if it had been, my hon. Friend the Member for Eastleigh would have made that point.

In addition to the confused question of principle and the taxability of benefits, there is also the question of costs, to which my hon. Friend rightly alluded. We were faced with a choice because there are always competing claims on resources. We wanted to do something on the mobility allowance. We were faced with the choice whether to increase the mobility allowance or to remove it from tax. The choice which we took was to increase the mobility allowance substantially more than the rate of inflation, so that a significant increase in real terms is coming up this November.

The point has been made already in the debate that, since the Government took office, the mobility allowance has been increased by 65 per cent. That is considerably more than the increases which have been made in any other social security benefits over the past two and a half years. That illustrates the importance which we attach to the mobility allowance and to helping the people who are in receipt of and who need the mobility allowance. There have been other measures to help the disabled, the doubling of the blind allowance in this Finance Bill being one of them.

On this occasion we did not feel that, in addition to increasing the allowance, we could afford to take it out of tax; nor were we satisfied that that was the right answer in any event. My hon. Friend has made a number of powerful arguments. Although I regret that I cannot accept his new clause on this occasion, we shall firmly bear in mind the points which he has made.

Sir David Price

Does my right hon. Friend accept the point which I made at the end of my speech? Looking to the future, as he rightly said and as previous Treasury Ministers have said, many benefits that are currently outside taxation should be brought in and there is the concept of those which bring handicapped people up to the starting line in life. I would put the mobility allowance into that category. Those benefits are of an entirely different order from those which are income support. I am entirely with him, as the right hon. Member for Ashton-under-Lyne (Mr. Sheldon) was in the previous Government, in arguing in favour of bringing those into taxation. As someone who served with the right hon. Member in the old Select Committee looking at tax credit, I am entirely at one with him. However, I ask my right hon. Friend to think about this. Mobility allowance joins constant attendance allowance as something entirely different. That is the point which I want to establish.

Mr. Lawson

The line and the distinction which my hon. Friend seeks to draw is a little more complicated than he makes out. Those whose total income is above the starting point pay the most tax. That is the nature of our system. Therefore, it is not as simple as that. We shall bear in mind the arguments which he has put forward, and that is one of the arguments which we shall strongly bear in mind. I mean that. I ask my hon. Friend, since he has made his point and we have had a valuable debate, to have the courtesy to withdraw his new clause on this occasion.

Sir David Price

Those are seductive words from my right hon. Friend. I shall not embarrass him, the Opposition or the Government Whip by quoting remarks made by Conservative Front Bench spokesmen on previous occasions. I hope that my right hon. Friend will allow me and my hon. Friend the Member for Exeter (Mr. Hannam) to bring representatives to discuss with him the point that I raised. I do not believe that it affords the difficulty that he thinks it does.

I do not wish to swank, but I have been involved in this area for many years. I do know a little bit about it. It is extremely late at night. I notice that there is little support for my new clause from the Opposition Front Bench. I beg to ask leave to withdraw the new clause.

Motion and clause, by leave, withdrawn.

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