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Charge Of Income Tax For 1975–76

Volume 895: debated on Thursday 17 July 1975

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I beg to move Amendment No. 118, in page 18, line 23, after 'more', insert

'or that she is a widow whose deceased husband had previously received this relief on grounds of age'.

With this we shall take Amendment No. 120, in clause 30, page 20, line 6, after 'upwards', insert

'or by a person who proves that she is a widow whose deceased husband had previously received the additional relief provided by this sections '.

These amendments arise from two concerns which I have pursued throughout the stages of this Bill in the House and Committee. The first concerns the position of widows. I moved amendments in Committee and in the House to give an additional personal allowance to widows, especially those who are now at work. I should have pressed those amendments on Report if they had been selected.

Secondly, I am concerned with the situation of retired women of over 60 who do not receive the same benefits as retired men. Women must wait until they are 65 before they attract the benefits received by other elderly people under the tax system. Under the National Insurance Scheme the retirement age of women is 60. I argue that women should be treated favourably from the age of 60 under the provisions of the tax system, which purports to help retired people. Both those claims are just, and I hope that we shall have an opportunity to press them at another stage.

It is appropriate to place the position of widows on record. Speaking in Committee on 26th June the Minister of State said:
"There is a single person's allowance, a married couple's allowance and in between there is the widow who has many of the liabilities of the married couple. She falls somewhere in between."—[Official Report, Standing Committee H, 26th June 1975; c. 557.]
That is perhaps a slightly Delphic statement, but it is an explicit recognition that the widow has a special position which is not properly recognised by the tax system.

10.30 p.m.

I hope that those remarks made by the Minister of State mean that the Government will think about the problem between now and next year, especially about the proposal which I put forward for an additional allowance for widows who are at work to deal with the grave injustice they feel and the considerable disincentive they experience because of the way they are affected by the tax system. That is incidental to the amendments we are discussing.

In one sense the two amendments bring together the concern about widows and the concern about the treatment within the tax system of women over 60. We are talking about the clause which gives an additional exemption from investment income surcharge for people over 65 and, in respect of Amendment No. 120, the clause which gives an additional personal allowance to people over the age of 65.

I am concerned about a matter that I had not fully registered when we discussed this subject upstairs, but it has since been drawn to my attention. A woman of under 65, whose husband is over 65 and qualifies for these reliefs, also qualifies for them as part of the family. Relief will be given from the investment income surcharge, and an extra age allowance will be given. But suppose the husband dies. The widow will experience all the normal problems of widowhood, and in addition, will find that her tax liability has substantially increased because no one in the family is over 65. She loses those tax advantages at the very time she most needs them.

Neither I nor my hon. Friends wish to press the amendments, which may be defective. I can see other ways of tackling the problem. The amendments continue the benefit for the widow, whatever her age, provided that the husband qualified for them before he died. It could be argued that this advantage should be confined to widows who are already over 60 rather than to all widows. It could be argued that it should be extended not merely to women whose husbands had survived long enough to attract the additional benefits but to cases where the additional benefits would have been attracted had the husband lived.

I have in mind a letter which has come to me not from a constituent but from another source, which reads as follows:
"Last year I became an old-age pensioner on reaching 60, and in the same year became liable for investment income surcharge when the level upon which this is levied was reduced to £1,000. Had my husband survived he would have been 67, and we should have been exempt from this reduction in the level of the income so taxed."
I see the difficulties of this, but it is in many ways a valid point. I can perhaps back it up by quoting further from the letter, which shows clearly how some people who are affected by these problems feel:
"In effect our savings of my husband's working years are being taxed, as far as I am concerned, six times—income tax and surtax paid during his lifetime, estate duty and the capital gains tax charged on the investments realised to pay the estate duty, the income tax I pay which is deducted at source, and now the surcharge. At a time when inflation has eroded the value of the investment income, increased the actual cost of direct taxation and increased also the basic cost of the inescapable necessities of life…it seems to me that a widow who has paid estate duty should be treated for investment surcharge purposes as if her husband were still living if he would have been eligible for relief, and if she herself is an old age pensioner".
The letter then deals with the difficulties of this lady's situation. It is a point worth considering whether a woman who is living on the investment income from her husband's estate, having paid estate duty, should qualify for the extra relief under the investment income surcharge which would have been obtainable had her husband lived.

Further, one could argue that the concession that I am proposing should be extended to widowers who had wives older than themselves and would have attracted relief in that way. With the world as it is, and with the practical realities of our society, this problem is primarily likely to affect women. That is partly because they are normally younger than their husbands and partly because women tend to outlive men by some distance, as anyone who has been into an old people's home will have had no difficulty in observing. This is an issue worth exploring, and in particular in terms of the amendments. I shall very much welcome the observations of whichever Minister replies.

I rise briefly to support the amendment moved so eloquently by my hon. Friend the Member for Braintree (Mr. Newton). I believe that the amendment particularly affects constituencies such as mine, which have a larger than average proportion of elderly people living in them. I shall be interested to hear from the Government some estimate of the cost that an alleviation of the proposals contained in the Bill would represent. I imagine that it would be a fairly minimal sum, although the benefit would be considerable.

It seems from the constituency mail that I receive that many people suffer substantially from the higher tax which is payable on the loss of a member of the family, bearing in mind that their outgoings and their gross incomes do not change substantially. I could quote many examples which are similar to those that have been outlined by my hon. Friend. I know of one lady who had to replace a cistern tank in her house at a cost of £150. Those are the sort of outgoings that must be considered in terms of high taxes that eat into fixed incomes. This is a fairly minimal request that we make of the Government to assist a hard-pressed section of the community.

I take this opportunity of briefly saying in a wider context that I greatly regret the fact that we are asking the elderly and those with slender savings incomes to bear the cost of the profligacy of the current generation of politicians. I do not include only the present Government in that category. Emotive words such as "estate" and "investment income" often hide the fact that people have throughout their lives worked hard and done without many things to ensure that they have some minimal savings to live off during their retirement. They do so so that they can provide for themselves without recourse to the State, so that they can ensure that they can provide their own health services, for example, without having to turn to other people.

I know that this has been said before but it is worth reiterating from my part of the world. I strongly believe that we should encourage such attitudes. It is surely healthy to encourage people to provide for themselves and to return to some of the Edwardian virtues of hard work and thrift. I believe that in days when credit is the smart thing to have there is precious little encouragement for people to save, and there will be even less if legislation of this sort is enacted. I hope that the amendment will be pressed.

A number of amendments have touched upon the problems of widows, and the proposals have tended to follow a similar pattern. They have first drawn attention to the problems and then tried to alleviate the situation in not dissimilar ways by trying to obtain financial compensation.

We approach the problem of widows knowing that no financial compensation is adequate for the loss that has been sustained. Therefore, it is difficult to deal with the financial problems on their merits and try to divorce them from the practical problems of the sacrifice and sense of loss which has been sustained.

Amendment No. 118 deals with the concession governing investment income surcharge. It is a principle of our tax system that the husband's and wife's income is aggregated and considered to form that of one household, and that social unit is taxed as an entity in itself. As that entity changes, so the taxation also changes. Increasingly in these discussions we shall have to examine the situation of the widower, whose needs perhaps we have tended to ignore in the past. It is wrong to extend sympathy to the one without extending it to the other. Therefore, we try to bring about changes which will help them both.

My view is—and I have said this on a number of occasions—that any money available is best used through the social security system. That directs most resources to those who have the most grevious problems. That will be my continued approach to these problems.

The Minister said that he preferred to see money being used to the best advantage through the social security system, and perhaps that remark should not go unchallenged. Will he consider the situation of widows who try to undertake part-time jobs to bring about some earnings for themselves and to gain some self-respect, but then find themselves brought up against the tax threshold? They cannot understand the justice of a situation in which they seem to be worse off than those who depend wholly on what the State can provide.

I did not refer to this as the only area in which to direct funds for those in greatest need. I am not saying that other requirements should be overlooked.

The problems of widows with children are among the most acute. Here we have brought about—I say this with some pride—a really most astonishing increase, given our economic situation, whereby the additional allowance has now shot up to £280 from what it was. This is very valuable and is much appreciated by those with the most severe problems, not only of distress but of need as well 10.45 p.m.

Perhaps I may say something about Amendment No. 120, which deals with the age allowance and would extend the benefit of the age allowance to a widow under 65, if her deceased husband had previously been entitled to the allowance because he was over 65. There are two kinds of comparison that we are making here. The comparison that the hon. Member for Braintree (Mr. Newton) sought to make, and the comparison that the hon. Member for Chichester (Mr. Nelson) also sought to make, was between the position of the wife at the time when her husband was alive and the position it subsequently became following his death. One can see that that is a matter where it has changed obviously to her disadvantage, but there is another comparison that one also has to make, and that is between this widow and another person of a comparable age and circumstances who is separated, perhaps under very tragic circumstances, or who is single or divorced. A variety of circumstances can exist and lead to many problems. There is also the problem of the widower. That is another comparison that the House has to take into account in order to achieve a fair balance, and that must be our aim.

There is one problem that this amendment would bring about were it to be enacted. It would provide an age allowance to a widow younger than her husband, who had to be over 65 to get this benefit. This would apply irrespective of the age of the widow. I fail to understand why a young widow—to take an extreme case, it could be a very young widow, even in her twenties, or any widow much younger than her husband —should obtain this particular advantage by comparison with, say, the widower to whom I was referring or the single or separated or divorced person. It is very hard to say why such a person should qualify for this advantage by comparison with others.

We can well understand the need to do more as time goes on, as we are able to identify the problems, and as more money, one hopes, becomes available. I do not think it is in that way suggested that we are able to provide the greatest help but rather in the other ways that I have indicated. For these reasons I cannot accept the amendments.

I am rather disappointed, not so much by the fact that the Financial Secretary does not feel able to accept the amendments, which I entirely understand, but by the general way in which he has replied. It is no good his expostulating. He might wait until he has heard what I have said.

The first part of his argument was almost entirely directed to amendments which we discussed in Committee and not to this one at all. I am not talking at the moment about providing widows with some financial compensation, as he put it, in respect of their widowhood. I am trying to get at the specific case of a widow who finds that she is financially penalised as a result of her husband's death because he had got into the age group where he was attracting these extra reliefs and, in effect, those reliefs disappear on the same income which is by then the widow's income. It is very difficult to defend a situation in which a married couple have been getting certain tax advantages, the husband dies, and his widow loses those advantages. I do not believe that anyone can find that a satisfactory situation.

I cannot think that the Financial Secretary did me the courtesy of listening to my arguments. I said that there might be a good case for confining this concession to widows over the age of 60. I accept the problem of the very young widow which might arise. Equally, I can see the point about widowers, although in a practical world this is more likely to affect widows.

I do not think that there is a great deal between me and the Financial Secretary. But I wish that he had been a little more forthcoming in acknowledging the indefensible situation of the widow who is perhaps herself past retirement age but loses benefits because she has not reached the age of 65 when her husband dies over the age of 65. That is very difficult to defend. I know that the Financial Secretary is a sympathetic man, and I hope that he will give further thought to this matter over the next year or so.

With those remarks, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.