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9 Dec 2002 : Column 128continued
Mr. Jonathan Djanogly (Huntingdon): The Thalidomide Trust, which is based in my constituency, was established in 1973 to administer ongoing compensation offered initially by the Distillers company to the victims of thalidomide. The trust is responsible for supporting all the British survivors of the thalidomide tragedy, currently numbering some 450 individuals.
Many of the beneficiaries, most of whom are aged between 39 and 42, are now raising families and engaging in a variety of careers and activities. To give some idea of the severity of the disabilities faced by the survivors, about 10 have no hands, arms or legs; a further 100 have either no arms or no legs, or so-called flipper arms or legs; and the majority of the remainder have short limbs, particularly arms, and hands with no thumbs.
It is important to point out that as the victims age, their needs are changing. Many are experiencing deterioration of their health and medical condition, which is both making life today more difficult and causing them to worry about the future. For example, some are finding that, because the lack of some limbs has caused them to overuse others, arthritis and similar complaints are gravely compounding the disabilities that they have worked long and hard to overcome.
It is worth pointing out that thalidomide victims do not fit the typical description of a disabled personsomeone who has all their limbs, but requires the use of a wheelchair. Thalidomide victims have unique needsfor example, they might be unable to reach buttons at ticket barriers, or to work locks and catches, or to carry loads owing to their having deformed shoulder joints. Those problems will not diminish with the passing of time; in fact they will certainly become worse. They were a factor in the generous decision made in 2000 by Diageoa successor company to Distillersto pay a further #32.5 million to the trust at present day values.
The trust was set up as a charity because it was believed that its objects, being charitable, would result in all distributions made to beneficiaries being tax exempt, but that proved not to be the case. However, the then Government agreed that there had been a genuine misunderstanding about the tax treatment of the payments made to beneficiaries by the trust. On that basis, in 1974, the Government paid a sum of #5 million to the trust to offset the tax payable on distributions. Further payments totalling #12.8 million were made to the trust in 1975, 1979 and 1996 by Distillers and its successor company, Guinness.
It is important to note that each time a request was made by the trust to the Government, such a request was made on the basis of offsetting the effect of tax on the distributions of the trust, and the same formula for calculating the offset was used in each case. Another important point is that previous Governments' payments to the trust do not set any sort of precedent for other charities, which might give the Government reason not to wish to give the traditional relief to the Thalidomide Trust again. That is because a class action compensation settlement being made today would normally be established as a structured settlement, with payments in all normal circumstances being tax exempt.
Even taking previous Governments' tax payments into account, it could not be said that the trust has not paid any taxindeed, although Governments have paid #12.8 million to the trust since 1974, they have received taxes of more than #15.5 million from the trust, and are likely to take another #20 million in tax receipts between 2002 and 2022, thus providing a Treasury profit over the years of about #23 million. In practice, about #12 million of that tax has been recovered by beneficiaries claiming tax allowances, but that still leaves the Government approximately #11 million in profit.
The tax position of thalidomide beneficiaries is that victims without other sources of income are able to reclaim the difference between the tax that the trust deducts from distributions to them and their personal allowance of the basic rate of tax. That means that beneficiaries can achieve tax reclaims typically a year after they have received the payments, although, unfortunately, it is believed by the trust that many of the beneficiaries do not take advantage of that, either because of their lack of understanding of the system, or because of the need to employ accountants to prepare their tax returns for them.
To return to the current position, if the formula that was applied to previous extensions to the original Distillers covenant were to be used, the Government should now be paying the trust #6.1 million. The Government have implied that the trust has a significant pot of money, and that that in itself is a reason for it to pay tax. Although the covenanted sums may indeed sound significant, they are relatively modest compared with many modern-day court settlements, and in any event are less following recent stock market falls. The money needs to last for a long time, and current annual payments to victims range from between #5,000 and #25,000 a year, the average annual payment being only #11,000. Unfortunately, however, on 30 July this year the Chancellor turned down the trust's request to be treated in the way that every past Government had allowed. As a result, no Treasury payment is now being offered in respect of the recent Diageo covenant. The decision has now been confirmed in a letter that I received from the Chancellor this morning.
Many people, including the trustees and certainly the victims themselvessome of whom are here todaymany of their supporters across the country and, indeed, over 80 Members of Parliament who signed early-day motion 107 have been extremely perturbed and disappointed by the Government's decision.
Following my own election in June 2001, I asked for an update by way of a written question on 18 July 2001, and then wrote to the Chancellor asking for replies to Mr. Major's letter on 32 January 2002, and again on 15 April 2002. Finally I asked for a reply by way of a further written question on 10 June 2002, to which I received a one-word reply from the Chief Secretary to the Treasury, namely XShortly". Given that this was hardly a new issue, having been a settled course of action since 1974, I feel that the Government's 17-month delay in responding sits uneasily with their claim to value the trust's work. None the less, I shall address the Chancellor's key contention as set out in his letter. He wrote