I beg to move Amendment No. 57, in page 20, line 37, after 'words', insert 'mobility allowance'.The purpose of the amendment is to make the mobility allowance, which is in course of being introduced for disabled drivers and others, tax-free instead of taxable as the Government propose. I understand that the mobility allowance provided for in recent social security legislation is intended to be a £5 a week taxable allowance for disabled people of working age and children aged five or over who are unable, or virtually unable, to walk. As it is phased in, it will replace partly a number of existing allowances and arrangements for helping with the mobility of the disabled, and partly it offers an alternative, because I understand that the existing invalid tricycle will continue to be an option for those who prefer to take that rather than the new cash allowance. It also extends help for this category of people to rather wider groups than those covered by the existing provision for helping the immobile disabled. I think that in principle it is generally welcomed on all sides. What is at issue on this amendment is not whether it is a good idea, although we might argue about some of the details. It is whether it should be taxable or tax-free. As I say, the purpose of the amendment is to make it tax-free rather than as the Government intend, taxable. I am encouraged to see that the Minister of State is to reply to this debate, because I want to say a few words about a brief exchange which he and I had in the "Clause stand part" debate in Committee. The hon. Gentleman made some play of my alleged want of principle in having moved some amendments to make things taxable and others making things tax-free. I thought that that was a little hard, bearing in mind that it is not open to the Opposition to move amendments making things taxable. To make things tax-free or to reduce taxation is the only way that we have to raise matters in amendments to the Finance Bill. In order to avoid the hon. Gentleman going over the argument about my principles, perhaps I might explain that, in general, I think that in an ideal tax and social security system there is a great deal to be said for all benefits being taxable, provided that it is part of a wider reform like a tax credit scheme, of which I am a supporter. Meanwhile, we have to deal with the tax and social security system as it is, and at times it seems to be verging on a shambles. In this context, virtually all benefits for the disabled are tax-free. This is one of the few which are to be taxable. In other words, we are discussing not my principles, but, as it were, the Minister's, the Treasury's or the DHSS's principles. But on what principle is it that most benefits to the disabled are tax-free and this one is to be taxable? That is the primary point that I am trying to get at. Upstairs the Minister had two main arguments. To be fair, he had to deploy them somewhat hastily because I raised the matter unexpectedly in the "Clause stand part", debate, not on a formally tabled amendment. The first argument was that the new mobility allowance would replace a smaller tax-free allowance. That is true to some extent, although the previous smaller tax-free allowance had a much narrower coverage than the new mobility allowance. The fact that it replaces a smaller allowance and that, therefore, because the allowance is larger it is reasonable to tax it does not seem to me to hold up. It would depend on the figures. It would need to be a larger allowance to cover the addition of motoring, travel and transport costs, apart from anything else. I do not attach much importance to that argument, unless it is backed by figures showing that it is still more generous and other figures showing that it is reasonable to tax it in relation to its impact on different people. The second argument was that it would give more help to those with smaller means or, as it were, that it would give less help to the better off. That is a fairly standard argument that we have heard from the Minister of State and other Treasury Ministers on a number of points. I put it to the hon. Gentleman that that is not so in the case of this mobility allowance in the context of the treatment of disabled people. The fact is that war disablement pensions, industrial injury benefits, both contributory and non-contributory, and invalidity pensions are non-taxable. What is more, they vary in amount according to where, when and how one becomes disabled. Therefore, the tax-free base for a disabled person varies enormously in an almost random way and is not systematic. It follows that the effect of adding a taxable allowance on top of this strange and incoherent system has random effects on different types of people. Because they are receiving different tax-free incomes from different sources but will receive the same mobility allowance, the tax effect on them may be quite different. Other similarly disabled people who are in work and, by definition, will be paying tax, assuming that they are over the tax threshold, may be getting less than other disabled people in tax-free benefits but paying the full basic rate of tax on their mobility allowance, thereby substantially reducing its value to them. That means that there is no necessary correlation between the amount of help which this measure will give and the income or means of the person to whom it is being provided. 11 p.m. I should like to make certain other points. The first is a simple straightforward comparison—I suppose this is the nearest analogy one can get—with the mobility allowance, namely, the attendance allowance introduced by the previous Government. In broad terms we have one allowance which is aimed at those who are disabled in a way which means that they need a great deal of looking after, and that is tax-free, and another allowance which is aimed at dis- abled people who need special help with getting about, and that is to be taxable. I can see no conceivable basis on which that distinction within the tax system is to be drawn. I strongly suspect the answer to be that the Treasury was simply feeling in a more generous mood when the attendance allowance was being introduced some years ago than it is feeling at the moment when the mobility allowance is being introduced. I understand Treasury worries about taxation and borrowing requirement and all the rest in the present context, but that does not seem to be a good argument for this distinction between different types of help for disabled people. If it is accepted that some disabled people, on no systematic basis, will receive significantly less benefit from this allowance than others, I take it the Minister will accept that any disabled person paying basic rate of tax on a full mobility allowance derives much less benefit than before. According to figures I have been given, the mobility allowance fully taxed at the basic rate will not—by some way—even cover the tax costs in motoring for a person of this sort. I have figures which suggest that actual tax costs—not the total costs—of VAT. car duty on a vehicle, petrol duty and other taxes which have to be taken into account in running quite a small car fitted for a disabled driver will be between £195 and £215 a year, and that, while it is taxable, the mobility allowance will provide £169, which is considerably less. It will, therefore, not even cover the tax costs. I have no time to go through a further series of figures, but I would simply say that on a calculation I have been given by one organisation particularly concerned with the needs and interests of the disabled, the mobility allowance would have to be about £200 tax-free to provide some advantage to those receiving one of the existing benefits, the tax-free private car allowance. Ministers should review the intention to make the benefit taxable in the light of the questions I have raised and because the new allowance will not even cover the tax costs in some cases, nor compensate other people for the increase in their motoring costs, compared with what the present private car allowance was worth when it was introduced. The situation at the least seems to be a muddle. I hope that Ministers will be able to consider it. It would be sensible if I said something more about points put to me by the Joint Committee on Mobility for the Disabled, because a lot of people are affected by this. There is the situation of the disabled passengers, unable to transfer from a wheel-chair to the passenger seat of an ordinary car, who therefore cannot use hire cars. They have to have specially adapted vehicles if they are to enjoy mobility outdoors at all. People in that situation are forced to resort to private motoring and cannot use taxis. The mobility allowance is unlikely to pay anything like the extra costs which will be imposed by the need to provide private motoring. There are cases where the new mobility allowance will not come close to the tax element in private motoring. I might touch on the figures I have been given about total costs of running a car for the disabled driver now by comparison with the situation when the private car allowance of £100 a year was introduced in 1972. The cars in the table before me range from the Mini-type, of less than 1,000 cc, up to cars of 1,500–2,000 cc, in each case with various adaptations. In 1972 a Minivan conversion cost about £460 to run for 10,000 miles a year. It is now costing nearer £900, or nearly double. For the larger vehicle, of 1,500–2,000 cc, the 1972 figure was about £670 a year, and it is now substantially more than £1,100. The increase is not proportionately so large, but it is still substantial in absolute terms. Compared with the value of the private car allowance in 1972, the mobility allowance now needs to be about £200 a year tax-free to provide the same amount of mobility for the people affected. That is a significant figure, with which the £169 of the new mobility allowance compares unfavourably. That £169 is what the allowance is worth to anyone who is forced to pay tax on it at the basic rate of 35 per cent. Can the Minister justify his argument advanced in Committee upstairs, which I acknowledge was used in some haste, that by making the new mobility allowance taxable he is making sure that the maximum amount of help goes to those most in need? The existing variation in taxability of various benefits to the disabled and, above all, the fact that the benefits vary greatly, according to how and when and in what circumstances the disablement occurs, mean that he cannot be sure of that. The effects are likely to be random. In particular, they could be unfair to disabled people who are not sufficiently disabled to be unable to work and are, therefore, in earning employment and likely to pay full tax on the full value of the mobility allowance. Why is the attendance allowance tax-free and the mobility allowance taxable? I can see no principle or common sense in that. I understand that as part of the changeover the Government intend to withdraw the existing concession on the vehicle excise duty for disabled drivers. It has been suggested to me that that intention has been stated, but I have been unable to check. It would be a very mean-minded action. I hope that the Minister can assure me that it will not be taken, and that he will respond reasonably favourably to what I have said.
My hon. Friend the Member for Braintree (Mr. Newton) has put forward an unanswerable case. Of course, one is grateful for the mobility allowance, which is very beneficial and has filled a gap in the relief which should be given to the disabled. But I have always understood it to be a general principle that the benefits to the disabled are untaxed.I have always complained about this when I have pleaded in the House for tax-free pensions to war widows. I have said that if a person survives and is merely disabled his pension is tax-free, but if he dies the pension to his dependants is charged to tax. To that extent I think it rather unfair to the dependants of those who suffer death that there should be this distinction. However, there has been that distinction between benefits payable to those who suffered war injuries or industrial injuries and pensions arising from death. Certainly the closest case to this is the benefit known as the attendance allowance, as my hon. Friend the Member for Braintree has said. The mobility and attendance allowances are similar allowances. In the case of the attendance allowance the benefit is tax-free, but in the case of the mobility allowance it has to be taxed. Some strange logic has been put forward by Treasury Ministers during the argument on this subject. It is said that the mobility allowance is a larger allowance to take the place of something that was rather smaller. Because it has been increased, that is supposed to take into account the fact that it is taxable. This is not a good argument to break a principle. I ask the House to retain the principle which has been recognised over many years, that benefit to those who have been disabled should be tax-free, and to agree that in the case of the mobility allowance that principle should be fully recognised.
The hon. Member for Braintree (Mr. Newton) asked me one specific question about the vehicle excise duty concession to which I do not know the answer. I will find it out and write to him. I do not know whether or not it is intended to withdraw it, but I will let him know.I turn to the main point which he and the right hon. Member for Crosby (Mr. Page) raised; namely, the fact that the mobility allowance is to be taxed. It is to be taxed because of a conscious decision by the Government. We have decided that the fairest way of ensuring that those in greatest need get the most benefit under this mobility allowance is to tax it. Therefore, those who pay little or no tax will benefit more than those who have higher incomes and pay a greater amount of tax. That is a conscious decision by the Government. We accept entirely that there are anomalies in this area. I do not accept that it is a matter of principle that benefits to the disabled are not taxed. Many of the benefits are analogous to sickness benefits—for instance, the non-contributory invalidity benefit. It was believed right that this benefit should not be taxed because sickness benefit in general is not taxed. If we were starting again—and I believe that the hon. Member for Braintree would agree with me—the system should be to tax most of these benefits on the principle that then we would ensure that the benefit went to the person in greatest need. This new mobility allowance goes some way towards that principle. 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 that it should not be taxed. That might have been an anomaly. It could well have been argued that the attendance allowance should have been taxed on the same principle. In relation to the mobility allowance, we are introducing the principle that it is better and fairer that these payments should fall into the taxable brackets. It could be argued that £260 is not high enough and that it should be £300 or £400. However, that still does not destroy the argument that on the ground of fairness these payments should be taxed so that the greatest amount goes to those in greatest need.
Is the hon. Gentleman saying that because the mobility allowance is to be taxed it would be right to tax the other benefits received by the disabled? He cannot have it both ways. Is he putting forward the frightening proposition that the Government believe that all disability benefits should be taxed?
No, I made my position quite clear. I said that if we were starting again with a new system, one might very well go along with the principle that all benefits of this kind should be taxed. But we have a system in which there are anomalies. Many of these benefits are not taxed, and there is no intention to tax them. But now we are introducing a new mobility allowance which covers a wider field than the old £100 cash mobility payment for private car owners, or payment in lieu of the provision of an invalid vehicle. This is a much wider benefit and covers a wider range of people. After tax at the standard rate of 35 per cent., the person who receives this allowance is still better off—compared with the £100 he would have received previously—to the tune of £69 a year. The mobility allowance extends the benefit further. It is a greater benefit despite the fact that it is taxed, because even at the standard rate of tax a person is still better off. If a person is in the higher realms of tax or the higher bands of investment income surcharge, the position is different.
Will the hon. Gentleman explain why the much more major new benefit which is about to be introduced, the new child benefit, is to be tax-free?
I would not wish to be drawn into that point. As I said, there are anomalies in these matters. But it was decided that because the mobility allowance was a new allowance covering a wider range of people at a higher rate than the previous allowance, it would be fairer in these circumstances—and I think that the hon. Gentleman would go along with the principle—to provide that these payments should be taxed, so that those at the lower end of the scale get greater benefit and those who pay tax on their income and have higher incomes receive a lower benefit as a result.That may not satisfy the hon. Gentleman, as may not the level of the payment, but I think that the principle is right. That is why the Government have decided that the mobility allowance should be taxed.
The Minister of State obviously appreciates that I am thoroughly dissatisfied by that answer, which does not stand up at all. Many of us would agree that if we are starting afresh with a completely new tax system, we would make all the benefits taxable. However, what cannot be defended is the use of that argument as the basis for making one benefit taxable in isolation, when not even the Minister of State can pretend that it hangs together with the rest of the sysem.If the Minister wants to establish a new principle in the system, he should not come forward with bits and pieces, putting one bit on such-and-such an allowance and doing something else with another. He should come forward with a proposal for reform—what my hon. Friends were working towards with the tax credit system—for which we have been waiting in vain for a considerable time. That is one basis on which I am not satisfied. I am not prepared to have this maverick allowance thrown into a different status in the tax system on the basis of no principle whatever in relation to the rest of the existing benefits and the tax system. Not even the Minister of State has been able to identify any principle which holds the treatment of this particular benefit in line with any other existing benefit or the other major new benefit which the Government are proposing. As I said earlier, it is not my principles which ought to be in question but those of Labour Members. It is absolutely clear that on this matter there is no principle which justifies it in terms of the system as a whole. Secondly, the fact that the allowance, even if it is fully taxable, will be worth more than the old private car allowance seems neither here nor there. The point is that if it is taxable it will be worth less in real terms to those who pay tax on it than the old tax-free allowance, because £169 after tax, at today's motoring costs, is less than £100 tax-free at previous motoring costs. If it is the Government's intention to bring about a real reduction in the value of help between groups of the disabled, well and good. That is what is being done, although the Minister has not acknowledged it. His answer was profoundly unsatisfactory. I do not blame him; he was not in the Treasury when this was cooked up and he has been given an indefensible brief. He has my sympathy but he cannot expect my support.