Brown rejects rebate for thalidomide trust

Thalidomide victims accused Gordon Brown of cynicism yesterday after he refused to pay a £6m tax rebate to the trust that was set up to care for sufferers.

The Thalidomide Trust is seeking talks with Treasury officials to attempt to reverse the decision. The request for extra funding was sent to the Chancellor in February last year, when the former prime minister John Major wrote to Mr Brown pressing its case.

But Mr Brown waited until 30 July this year before rejecting the request.

The founders of the trust, set up in 1973 to channel compensation to victims, believed that payments would be tax-free. But officials later ruled that the nature of the trust meant some payments were liable for tax at 34 per cent. Substantial payments were made by the Government in 1974, 1979 and 1996 to top up the trust and offset the tax bills each time the compensation fund has been increased.

But when trust managers asked for a new Treasury payment to top up the fund after a new settlement with the drug's distributors, Mr Brown insisted that the £7m paid by the Tory government eight years ago was a "once and for all" settlement and no more would be paid.

Martin Johnson, the fund's director, said: "[The decision] is cynical and it fails to take account of the implications of the tax system."