Will Scots spoil the gay party?; Gay rights campaigners in England

Gay couples in Scotland will have been left bewildered this weekend by the government's plans to give an official seal of public recognition to same sex partnerships in England and Wales, without allowing those north of the Border to enjoy the same privileges.

The government has published a consultation paper which proposes establishing a registration scheme for civil partnerships of same sex couples, which while not a marriage would allow couples to enjoy some of the rights shared by a husband and wife.

The most crucial of these, however, relate to financial matters, such as pensions, benefits and inheritance tax. If the government proceeds with its plans and introduces a law to stop current discrimination in England and Wales, gay couples north of the Border could be hit hard in the wallet and see themselves heavily penalised.

Financial adviser Ivan Massow explains: "It is very sad for couples who have lived together for say 40 years. The law as it currently stands means when one of them dies the other's life is destroyed by the financial consequences.

"We hope that the new registration will allow people to stay in their own home after their partner dies, just like any married couple."

The consultation process has not been extended to Scotland as it comprises a combination of devolved matters and responsibilities retained by Westminster.

A spokesman for the Scottish Executive said it would adopt a "wait and see" approach and decide what, if any, action should be taken once the outcome of the consultation in England and Wales is known.

But the adoption of the government's proposals would mean a revolution for many gay couples.

Where pensions are concerned it would allow a gay man or woman to claim a survivor pension after the death of their partner. They may also automatically benefit from any insurance payouts on death.

Although some private and company pensions will treat a gay partner as a dependent, public sector schemes will not. Similarly, the state will not pay a widow's pension to a same sex survivor.

However, their income may be treated jointly for a range of other benefits including the Minimum Income Guarantee in retirement.

Partnership registration may also bring renewed rights to couples when it comes to taking life-changing decisions affecting, for example, long-term care.

At present same sex couples do not have the rights of a husband or wife when it comes to taking medical decisions, such as when someone should be committed to hospital, moved to a hospice or sent home again.

Life insurance too can be a problem. The Aids risk has pushed up the price of cover for male gays, making it very expensive. However, it can be almost impossible for gay couples to buy joint life protection, as might a husband and wife. Similarly, without an "insurable interest" a dependent partner may not be able to buy cover for their breadwinner. The new registration would automatically provide gay couples with an insurable interest.

But the biggest change would be in the area of inheritance tax, which currently kicks in at (pounds) 255,000, eating up 40% of all assets above that level.

Married couples can pass all their wealth to their spouse free of any tax. There may be inheritance tax planning considerations which encourage them not to do so. But the crucial importance of this concession is that one spouse will not need to sell the family home to meet a tax bill, because of the death of the other.

This is not the case for same sex couples. The deceased's share of the property will go into his or her estate and may well produce a hefty tax bill which can only be met through the sale of the home. This can cause great hardship, coming at a time when perhaps the survivor has also lost a big chunk, if not all the income required to live on, because the pension died with their partner.

Achieving tax equality with married couples is therefore high up the gay lobby's shopping list. However, it may not be as easily forthcoming as the campaigners are hoping for.

Slashing the inheritance tax bills of gay couples in this way, could cause an outcry from men and women who live together without marrying. It may also seem grossly unfair perhaps to sisters who live together for life, where the death of one may disadvantage the survivor.

The consultation paper has not promised that inheritance tax will be mitigated for gay couples, but states instead that the tax system should where possible adapt to reflect changes in society and comments that the government will consider whether the scheme proposed should impact on the tax system.

And here Scotland could prove a major stumbling block. As the new scheme is restricted to England and Wales it would be extremely discriminatory against same sex couples in Scotland and Northern Ireland if those in England and Wales could be treated as spouses for tax purposes, whereas in Scotland and Northern Ireland they could not.

The government has stressed that there should be integrity across the UK in relation to reserved matters, such as taxation.

Nevertheless a spokesman for the Executive commented that it is not inconceivable that Scotland could have a different inheritance tax regime from England. However such a move looks unlikely, and would almost certainly trigger an exodus of gay couples heading south.

Finally the civil partnership registration would herald another first with the introduction of "gay divorces". In such an event, property and other wealth would be split down the middle, a prospect which might limit the numbers tying the knot.

Massow predicts: "The prospect of going through perhaps one or several "divorces" may make people think very carefully before embarking on registering their relationship.It can make a huge dent in your wealth.

"This is why in countries where registration already exists, such as Denmark, the take-up has been very subdued."

Same sex couples are on the threshold of achieving financial equality south of the Border Photograph: Powerstock

Copyright 2003 SMG Sunday Newspapers Ltd.
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