Brown faces call to end thalidomide payout 'tax'

SNP social security spokeswoman Annabelle Ewing accused the Treasury of making a profit out of compensation payments.

Ms Ewing said chancellors of the Exchequer going back to the 70s had traditionally topped up the fund run by the Thalidomide Trust to offset the tax paid.

But earlier this year, Mr Brown refused to hand over a 6 million tax offset payment.

The SNP has held meetings with representatives of campaign group Thalidomide UK and Ms Ewing tabled a Commons motion calling for income tax to be removed from payments from the Thalidomide Trust.

She said: "It is wrong for the Treasury to make a profit out of compensation payments to thalidomide sufferers. The money is meant for those with disabilities, and that is what it should be used for - it should not go into Gordon Brown’s coffers.

"It is appalling Gordon Brown can find 1 billion as a down payment for war in Iraq - but he cannot give Thalidomide UK 6m to offset his ill-gotten tax gain."

She added: "Around 450 people are affected throughout the UK. The average payout is just 11,000, but recipients are being taxed as if they are high earners. Other European countries do not tax such payments, so people in the UK are effectively being discriminated against.

"Fairness and natural justice dictate the Chancellor should reconsider his decision and stop fleecing thalidomide sufferers."