Armed Forces: Death-in-service Payments
1/25. If he will have discussions with the Chancellor of the Exchequer on the potential merits of removing taxation from death-in-service payments.
10. If he will have discussions with the Chancellor of the Exchequer on the potential merits of removing taxation from death-in-service payments.
I thank the right hon. Member for Tonbridge (Tom Tugendhat) for his important question. He has my absolute assurance that if anyone dies in service, from training all the way through to combat and operations, they will absolutely be exempt from inheritance tax provisions. I will continue to discuss that issue, as well as many others to do with armed forces pay, with my opposite number in the Treasury. This Government are deeply proud of the armed forces, and I am deeply proud of them. They will have my full backing as we move forward.
First of all, I place on record my full congratulations to the hon. and gallant Member for his recent award in the new year’s honours. That is a fantastic achievement for somebody for whom I have the greatest admiration, and with whom I have served in numerous fields. May I raise the problem with his answer, however? Retention in the armed forces is already suffering; numbers are already coming down and people are struggling to make the maths add up between serving today and having a future tomorrow. The problem with these arguments and the lack of clarity from the Government is that too many people are making decisions on which we all need them to think again. We need people to serve and stay, and it is his responsibility to keep them there.
I thank the right hon. and gallant Member for his response. We need to take a holistic view of this. I remind him that we have missed every recruitment and retention target for the past 14 years. We are working really hard to get after that now: we have just put in place wraparound welfare, we have done the Annington Homes deal, we have put additional resources into veterans’ homes for after service, and we have given the biggest pay rise in 20 years. We are working really hard on that, in discussions with our Treasury counterparts, and we will move it forward.
Will the Minister give an assurance that the proposed changes to the application of inheritance tax to certain armed forces death-in-service payments are compatible with the commitment in the armed forces covenant to ensuring that our brave and loyal armed forces personnel “face no disadvantage compared to other citizens in the provision of public and commercial services”— yes or no?
The covenant will come into law in the next two years or so, on the back of the armed forces Bill. That will result in a great expansion, with all Government Departments falling in line with the covenant, so that no individual who has served is disadvantaged because of that service.
I call the shadow Minister.
The Forces Pension Society has already stated that levying inheritance tax on death-in-service benefits would be wholly counter to the armed forces covenant, and we Conservatives wholly agree. The consultation by His Majesty’s Revenue and Customs on that proposal closed on 22 January. On what day did the MOD submit its response to that key consultation—presumably in defence of service families’ interests—and will the Minister place a copy of that response in the Library?
May I remind the right hon. Member of my service, and of the fact that I will in no way, shape or form take this for granted? I am putting all my effort into those discussions at the moment. My officials have discussed that with the Treasury, I have discussed it with the Treasury, and we will continue to discuss such issues with the Treasury to ensure that our armed forces personnel get the deal that they deserve.
I commend the Minister on his Distinguished Service Order—we all do—but in answer to a parliamentary question, we were told: “The Ministry of Defence has not made a formal response to HM Revenue and Customs’ technical consultation.” It really should have done. Who in their right mind would soldier for a Government who do not have their back, whether on school fees, lawfare or inheritance tax, or worse, do not have the back of their family if they die unmarried and in service?
Scoring political points on the back of armed forces families is unacceptable. This is a public consultation, and it is not the Government’s responsibility to answer it. We have discussed this Department to Department, from both an official perspective and a ministerial perspective, and we will continue to do so. We will bring this to a close.