This piece first appeared in The Daily Telegraph on 20 March 1999
The text here may not be identical to the published text

Widows in the firing line

victims of Budget cuts

The Inland Revenue has admitted to Money-go-Round that it misinformed journalists and others about changes to tax allowances for widows announced by the Chancellor in the Budget. The Inland Revenue now agrees that half the widows currently helped by the tax system will get nothing in future following the Chancellor's Budget announcement of the abolition of the special two year tax allowance for bereaved women which currently saves them nearly £500 tax over two years.

That is in sharp contrast to the official line on Budget Day in the Inland Revenue press release issued as the Chancellor sat down that "Widows will be more than compensated for the loss of this allowance by the proposed Bereavement Payment in the Welfare Reform and Pensions Bill. This will be available to widows and widowers, and will help taxpayers and non-taxpayers alike."

Because the Chancellor cannot possibly explain all the details of his tax reforms in his Budget Speech, journalists, accountants, and the public have to rely on hundreds of pages of detailed press notices setting out the small print of his planned changes. But officials have now confirmed that more than 100,000 widows who would get the widow's tax allowance under present rules, will be too old to qualify for the proposed Bereavement Payment. The tax allowance which is being abolished is allowed to widows of any age who pay tax. Widows bereaved this year will get relief worth £285 now and £197 in 1999/2000. But the proposed Bereavement Payment, although it will be a lump-sum of payment of £2000, will normally only go to widows and widowers who are under pension age when their spouse dies.

Figures from the Inland Revenue confirm that of the 220,000 widows who benefited from the widow’s bereavement allowance in 1998/99, half were already aged 65 or more - five years beyond the normal maximum qualifying age of 60 to get the new Bereavement Payment. The Department of Social Security has also confirmed that the Bereavement Payment will not be introduced when the tax allowance for widows is abolished in 2000/01. It will only be paid to people who are widowed from April 2001. That gap will leave all the newly bereaved widows in 2000/01 with neither tax relief nor an increased cash payment.

A spokeswoman for the Inland Revenue gave Money-go-Round this official statement on the paragraph in the March 11 Press Release

"The press release is wrong in the two points you have made and is misleading. It was simply an error and a misunderstanding between DSS and ourselves. The wording about compensation should not in hindsight be there but it was a genuine error and was not done to mislead or misinform."

Earlier she had confirmed the lack of coordination between the Department of Social Security and the Inland Revenue by telling us "I do not know anything about the details of the Bereavement Payment, that’s the DSS."

There is one small comfort though for women whose husband dies in 1999/2000. Although the widow’s bereavement allowance is being abolished from April 2000, if they claim their widow’s bereavement allowance in 1999/2000 it will continue for the full two years - as long as they do not remarry before April 6, 2000.

Jo Warlow, Director of the National Association of Widows says that the Budget changes make it seem as if the Government is targeting widows. And it is not just older widows who are being left with less state help. Those with children will also face cuts in their tax reliefs.

"A newly bereaved mother will lose the widow’s bereavement allowance and the additional personal allowance for single parents with children. That is a loss of £394 in 2000/01 compared with 1999/2000. There have been reams written on the married couple’s allowance being abolished but very few people seem to have realised that the widow’s bereavement allowance is linked to that and will go too. And there will be a year's gap before the new child tax credit and the £2000 payment come in. The Government is attacking a very weak target because very few people know before they become widows what the situation is and of course if they become a widow after these changes they won’t know what they’ve lost."

Widow’s bereavement allowance currently costs the Government more than £62mn a year, which will fall to £43mn next year as its value is slashed from 15pc of the tax allowance to 10pc. When it is abolished in 2000/01 the savings of £43 million a year will help offset the extra cost of the new £2000 Bereavement Payment. Eventually, other changes to widows' benefits in the Welfare Reform and Pensions Bill - including means-testing the main widow's pension for childless widows aged 50 and over - will slash £500mn a year off the help given to widows.

20 March 1999

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