Minister apologises for pension blunder

The Inland Revenue faces a £30 million bill after a Ministry of Defence blunder deprived more than a thousand war veterans of a full pension.

The mistake came to light after a former army major claimef that many injured soldiers pensioned out of the Army over the past 50 years had tax wrongly deducted from their payments. The Commons was told yesterday that over 1,000 veterans had now been compensated,

Tony Blair's official spokesman said: "There is nothing we can say that will in any way make up for this. This is clearly a deeply regrettable mistake, which has gone back over a long period of time. It should not have happened but it did happen and now we have discovered it we are doing everything we can to rectify the situation." He appealed for others who suspected they were in the same situation to contact the Inland Revenue.

The mistake was spotted by John Perry, a retired Royal Artillery major from Bushey, Hertfordshire, who was discharged on medical grounds in 1971. He said: "This decision will make an enormous difference to hundreds of ex-servicemen, their widows or their relatives. I received dozens of replies from civil servants saying that everything was in order, but I was determined to prove them wrong. I warned them that I would carry on my protest until either I died or they came to their senses. The total amount that needs to be reimbursed will run to millions of pounds. There are about 100 widows alone who are owed £100,000 each.

"The little grey suits at the Ministry of Defence just wanted to save money. They didn't want to damage their promotion prospects by admitting something was wrong."

The 1952 Income and Corporation Taxes Act made pensions tax-free if they were granted on account of medical unfitness "attributable" to naval, military or air force service. But civil servants administering the Army pensions did not follow the legislation and continued to deduct tax. There was no such mistake with the RAF or Navy schemes.

Lewis Moonie, a Defence minister, said: "I can't really justify it in any way. It was a terrible mistake to make and we have done our very best over recent years to put it right. I am not trying to justify it in any way whatsoever. This was a bad mistake and one for which I am quite happy to apologise once again to those affected."

An MoD spokeswoman said the files of 25,000 people receiving pensions had been examined and in 1,003 cases tax had been deducted wrongly.

These cases have been passed to the Inland Revenue for the veterans or their widows or relatives to be reimbursed. Some have already had the money paid back.

Paul Keetch, the Liberal Democrat defence spokesman, called for a full-scale government inquiry. He said: "The country has no greater duty than to look after those who have fought for it on the battlefield. The persistence of Major Perry has proved that at the very least the MoD has a case to answer."