Annex 1: C.1288/01 Inland Revenue and HM Treasury
1. Mr B complained that the Inland Revenue (the Revenue) and HM Treasury (the Treasury) had acted unfairly by failing to treat his claim (as a widower) for a payment equivalent to Widow’s Bereavement Tax Allowance (the allowance) in the same way as they dealt with a claim by Mr Christopher Crossland (another widower)1. He complained that the Revenue and the Treasury had unfairly refused to apply their discretion in the circumstances of his case, despite the friendly settlement offered to Mr Crossland, whose circumstances, said Mr B, were comparable with his own.
2. On 18 June 2001 the Ombudsman decided to suspend the investigation in view of an application by Liberty (the National Council for Civil Liberties) for judicial review of the Revenue’s refusal to grant another widower, Mr Wilkinson, a payment equivalent to the allowance: the Ombudsman saw Mr B’s complaint as having raised technical and legal issues on which the outcome of Mr Wilkinson’s judicial review would likely have a bearing.
3. The allowance was introduced in 1980 to provide a deduction against income for tax purposes. According to section 23 of the Finance Act 1980 only a widow is entitled to such a reduction in arriving at her income tax liability. Initially, the allowance was provided to a widow in the year of the death of her husband. In 1982 the scope of the allowance was extended to afford relief in the tax year following the death of a husband, provided that his widow had not remarried. (Section 262(1) of the Income and Corporation Taxes Act 1988 says that when a married man whose wife is living with him dies, his widow shall be entitled to an income tax reduction in the year of her husband’s death and in the following year.) For years up to the tax year 1994-1995 the allowance was deductible from income before tax rates were applied, which meant that it produced a saving equivalent to the highest rate or rates of tax applicable to the individual concerned. From 1994-1995 onwards the relevant provisions were changed so that the allowance produced a fixed rate of saving. As part of a policy of reform of personal income tax reliefs, the Finance Act 1999 abolished the allowance in respect of deaths occurring after 5 April 2000, thus removing any distinction between widows and widowers for tax purposes.
4. The Ombudsman’s remit is to investigate the administrative actions of government departments such as the Revenue and the Treasury. The Ombudsman has no power to determine who should receive the allowance – that is a matter for the Revenue in the first instance, and on appeal for the Commissioners of Income Tax (the appeal commissioners). Under section 5(2)(a) of the Parliamentary Commissioner Act 1967 (the 1967 Act), the Ombudsman is generally debarred from investigating any matter in respect of which an aggrieved person has, or had, a right of appeal to an independent tribunal such as the appeal commissioners. Also, under section 5(2)(b) of the 1967 Act the Ombudsman is generally precluded from investigating a matter in respect of which a person has or had a remedy by way of proceedings in any court of law. Section 12(3) of the 1967 Act declares that the Ombudsman is precluded from questioning the merits of a decision taken without maladministration by a government department in the exercise of discretion vested in it. Section 5(5) of the 1967 Act provides that in determining whether to initiate, continue or discontinue an investigation under the Act, the Ombudsman shall, subject to the provisions of that section, act in accordance with her own discretion. Finally, section 10(4) of the 1967 Act provides that the Ombudsman may from time to time lay before Parliament such reports derived from the exercise of her functions as she thinks fit.
Background to the complaint
5. On 24 April 1997 Mr Crossland, a widower, made an application to the European Court of Human Rights. He argued, following the death of his spouse, that the failure of the Revenue to grant him relief equal to what he would have received had he been a woman, constituted sex discrimination in breach of the European Convention on Human Rights (the Convention). The nub of his case was that the failure to grant him a payment equivalent to the allowance was a breach of Article 14 of the Convention (the prohibition of discrimination), read with Article 1 of Protocol 1 and Article 8 (the right to peaceful enjoyment of possessions and the right to respect for private and family life). On 9 November 1999 the Government resolved Mr Crossland’s challenge through a friendly settlement, without a determination by the European Court of Human Rights. The Government agreed to pay Mr Crossland both an amount equivalent to what he would have been paid had the allowance been available to men at the date his wife died, and his legal costs. An element in the agreement was a recognition that the allowance would be abolished from 5 April 2000.
6. On 1 December 1999, following the Government’s decision to settle Mr Crossland’s claim, the Revenue submitted a policy document to the Paymaster General, detailing options for handling claims from widowers for the allowance. The Revenue’s position was that widowers had no entitlement to the allowance in UK law. On 8 December the Paymaster General asked for further information. On 31 January 2000 the Revenue submitted a second policy document to the Paymaster General. The Revenue considered making an extra-statutory concession to widowers; but, based on their legal advice, they concluded that they had no authority in UK law to make such payments. The Paymaster General consented to the Revenue’s proposal to refuse the allowance to widowers.
7. On 11 May 2000 the Revenue issued instruction to their staff to reject any claims from widowers for the allowance, on the basis that there was no entitlement in UK law for a man to receive it. On 12 October 2000 the Revenue advised staff not to settle claims from widowers requesting a payment equivalent to the allowance.
8. On 23 January 1995 Mr B’s wife died. On 11 September 2000 Mr B told the Revenue he wished to claim a ‘widower’s bereavement payment’, citing the Crossland case (paragraph 6). On 20 September 2000 the Revenue replied saying he had claimed a ‘widow’s bereavement allowance for the years 1994/95 to 1995/96’; despite the Crossland case (which the letter acknowledged had been resolved through a friendly settlement), the Revenue said there was no basis in law for widowers to receive the allowance – Mr B’s claim was rejected.
The Revenue’s response to Mr B’s complaint
9. The Chairman told the Ombudsman that the decision not to pay equivalent compensation to Mr B, following the friendly settlement with Mr Crossland, was a matter of law and policy and not an exercise of administrative discretion by the Revenue. He said that the primary legislation with regard to the entitlement to the allowance was unambiguous: according to section 262 of the Income and Corporation Taxes Act 1988 only widows were entitled to the allowance (paragraph 3). The Chairman said that the Revenue’s care and management powers allowed them to make relaxations so as to give taxpayers a reduction in liability to which they were not entitled under the strict letter of the law; but most of those concessions were made to deal with minor or transitory anomalies, and their powers did not allow them to contradict unambiguous primary legislation.
10. The Chairman said that Mr B had asked for a payment (paragraph 8), which was not the same as a request for the allowance. The local tax office involved should have appreciated the difference in Mr B’s request and responded with a different letter tailored more to Mr B’s circumstances.> The Chairman restated that the intentions of the legislation with regard to the allowance were clear: it was intended to help widows, not widowers. He did not therefore think it was appropriate to give a widower a bereavement payment, as the legislation clearly stated that the allowance was available only to widows.
11. With regard to Mr Crossland’s case (paragraph 6), the Chairman said that the fact that the Government had agreed a friendly settlement with him did not override UK law. Having taken legal advice, Ministers had decided that the case should not be contested. The settlement of the litigation with Mr Crossland had not been an exercise in discretion by the Revenue, but a policy decision by Ministers. It did not inevitably follow that as the Government had reached a friendly settlement with Mr Crossland it would be right to do so in every other subsequent case
12. The Chairman concluded that the Revenue could not use their discretion to override the terms of the legislation on the allowance or to override the intentions of Parliament. The only suggestion he could offer Mr B was to pursue the matter through the courts or to seek to persuade Ministers to take a different approach
The Treasury’s response to Mr B’s complaint
13. The Permanent Secretary believed that Mr B’s complaint was against the Revenue rather than the Treasury. He said that he could not see what actions of the Treasury would bring the department within the scope of Mr B’s complaint
14. In June 2001 Liberty, acting for Mr Wilkinson, applied for judicial review of the Revenue’s decision to refuse Mr Wilkinson a payment equivalent to the allowance. On 9 July Liberty were granted permission to proceed with their application. On 3 December the substantive hearing took place. On 14 February 2002 Mr Justice Moses delivered judgment. In brief, he held:
a. that the refusal to grant an income tax reduction to men in a similar situation to women was a breach of Article 14 read with Article 1 of the First Protocol
b. that the Revenue had power under section 1 of the Taxes Management Act 1970 to grant an extra-statutory concession in order to rectify breaches of Convention law and, in particular, to afford a bereavement allowance to widowers; but
c. that the Revenue was giving effect to primary legislation which could not be read in a way that was compatible with the Convention, and had not acted unlawfully by failing to introduce such an extra-statutory allowance.
Mr Justice Moses made a declaration of incompatibility between section 262 of the Income and Corporation Taxes Act 1988 and the Convention.
15. Mr Justice Moses also held that the Revenue had not acted with unfairness, or abused its power, by failing to treat Mr Wilkinson in the same manner as Mr Crossland. The fact that some widowers had litigated at the European Court of Human Rights while others had proceeded through the domestic courts established a material distinction between the two groups, making their situations not comparable: the Revenue was entitled to treat widowers who had not litigated at the European Court of Human Rights differently from those who had. Parliament had already been considering changing the law on the allowance when the Revenue had chosen to offer friendly settlements to Mr Crossland and other applicants. Neither the Government nor the Revenue had led widowers to believe that claims in the domestic courts would be settled. Widowers had not had an expectation, in the same way as widows, that they would receive the allowance or an equivalent payment.
16. Mr Justice Moses said that in this context no unlawful discrimination under Article 14 of the Convention had occurred. The absence of any personal characteristic founding the claim for discrimination under Article 14, afforded an additional ground for rejecting the contention that the two groups of litigant widowers were in an analogous situation. As a matter of domestic law, the Revenue was entitled to treat claimants who had made applications to the European Court of Human Rights differently from those who had not. The judge found that by reaching friendly settlements with the applicants to the European Court of Human Rights, the Revenue had not bound itself to accept similar claims from others. The Government was entitled to settle those claims, while maintaining a position to defend itself, in respect of major constitutional points in domestic law.
17. On 27 February 2002 Liberty and Mr Wilkinson asked for leave to appeal against the judgment, which was granted. (The hearing of the appeal took place between 7 and 10 October and judgment has been reserved.)
18. On 29 August 2002 the Chairman told the Ombudsman that he saw the issues Mr B had complained about as still under consideration through the judicial review proceedings in the domestic courts. The Chairman saw those issues as ones properly for the courts.
My decision to discontinue the investigation
19. It is not for the Ombudsman to decide who is entitled to the allowance (paragraph 4). However, Mr B’s complaint is not that the Revenue have denied him the allowance, but that they have denied him a payment equivalent to the allowance, even though they made such a payment to Mr Crossland (paragraph 6). The Revenue did not initially appreciate that distinction – their letter of 20 September 2000 referred to ‘allowance’ rather than ‘payment’ (paragraph 8). The Chairman has acknowledged that the tax office which sent that letter should have responded more appropriately. I agree; but it is plain that had the tax office recognised what Mr B was seeking the outcome would have been the same – neither the allowance nor a payment equivalent to the allowance would have been extended to those in Mr B’s position.
20. The Chairman explained the Revenue’s reasoning. They saw the intention of the legislation as plain: the allowance was for widows, not widowers; and therefore they could not give an equivalent payment to widowers (paragraph 10). That raises the question why a payment equivalent to the allowance was paid to Mr Crossland (paragraph 6). The Revenue’s answer to that is that what was agreed with him in respect of the Convention did not override UK law; Ministers had made the decision not to contest his case after having taken legal advice.
21. The Chairman said that the Revenue did not see the settlement reached with Mr Crossland as an exercise of discretion by them. They saw it as a policy decision by Ministers, following legal advice. Furthermore, the Revenue’s view was that they could not make a general concession to widowers in Mr B’s situation: they did not believe that they had that discretion under their care and management powers.
22. The decision in the Wilkinson case (paragraph 14b above), unless it is reversed on appeal, goes directly contrary to the Chairman’s argument in the preceding paragraph. However, that does not mean that the decision which Ministers and the Revenue took was maladministrative: it is perfectly normal for decisions taken on one view of the law to be overturned by a court or tribunal which takes a different view. In any event, the Ombudsman’s concern is not with the legal issues, which are for the courts to determine, but with whether the consideration not to grant widowers an extra-statutory payment equivalent to the benefit of the allowance was maladministrative. (The Chairman said that the Revenue still believe, on legal advice, they had no discretion to grant widowers an allowance or payment.) At this point I should observe that the common dictum that ‘the Ombudsman may not question the merits of Government policy’ is too simple. A policy of deliberate unfair discrimination, for example, would in my view be maladministrative and as such open to legitimate criticism from the Ombudsman.
23. It seems likely to me that if the European Court of Human Rights had heard a case brought by a taxpayer in Mr B’s circumstances it would have found in his favour and awarded him appropriate compensation: that is the clear implication of the relevant part of Mr Justice Moses’ judgment. Such a finding of the Court would have had to be honoured by the Government for that particular widower by virtue of its obligations under international law. So the effect of the Revenue’s policy – or of the law, as they see it – was to require Mr B and others in like circumstances to vindicate their rights by the lengthy and inconvenient process of making an application to the European Court, since before the coming into force of the Human Rights Act 1998 there was effectively no possibility that they could do so through the domestic courts. There are obvious grounds for criticising such a situation as unfair and unreasonable.
24. However, as against that, I do not believe that I can find that it was maladministrative of Ministers and the Revenue to decide to continue to give effect to the clear and unambiguous intentions of Parliament. They had considered appropriate legal advice before taking that decision; and, as I have observed in paragraph 22 above, the fact that one element of that advice was not sustained in the Wilkinson case does not mean that it was maladministrative to rely on it. I am satisfied that the issues were properly laid out for consideration by the Minister who decided the policy. It is also relevant that the Government decided to remove the discrimination between widows and widowers, and that this has been done by the Finance Act 1999.
25. I come to the conclusion that continuing my enquiries will not progress matters further and I propose, under authority delegated by the Ombudsman, to exercise her discretion under section 5(5) of the 1967 Act to discontinue her investigation (paragraph 4). Insofar as there is an injustice for Mr B I see it as derived from legislation rather than from maladministration. As such it is a matter for Parliament to consider. Given that the domestic legal proceedings following Mr Justice Moses’ judgment have not yet concluded (paragraph 17), I see it as appropriate for the Ombudsman to draw the attention of Parliament to matters as they stand, by way of a report (of which this letter would form an annex) under section 10(4) of the 1967 Act (paragraph 4).
1 It is the normal practice of the Ombudsman’s office not to identify persons other than the complainant. However, in this case the names of those mentioned are public knowledge as a result of the litigation mentioned in paragraphs 14 and following below.