History of the UK Thalidomide Settlements (Compensation)
Distillers (Biochemicals) Ltd marketed thalidomide under its UK brand name Distaval between 1958 and 1961.
The drug was known as a mild sedative and was to be marketed as a wonder drug. The drug was mainly given to pregnant women for morning sickness; instead, it caused damage to the foetus. Thousands of babies were born with missing limbs and internal deformities.
The first settlement aim was to benefit 62 children for whom writs against Distillers had been issued. The claimants would have to withdraw negligence claims against the company Distillers. This meant that each child would be awarded a private settlement of 40% of the legal valuation of his/ her disabilities. Distillers also announced that they would eventually provide for all the other children whom were affected by their thalidomide products.
The Thalidomide Trust
Negotiations for an increasing number of children raised questions about the proof of thalidomide injury. This led to the creation of two separate lists. The 'X' list consisted of young people with proof of thalidomide injury; people on the 'Y' list were those who had not been able to provide adequate proof.
After a number of unreasonable offers had been made by Distillers, an agreement was eventually reached in 1973 by approximately 440 children, who withdrew negligence claims against Distillers. In exchange, provided X list status could be attained, these children would receive a private settlement similar to the 1968 settlement of 40%, increased by a third to offset inflation.
1973 (10th August)
The Thalidomide Children’s Trust was founded on the 10th of August 1973, with the object of providing support to those people who had disabilities caused because their mothers had taken the drug thalidomide during pregnancy.
Additionally, all of the children who had received settlements became beneficiaries of a new charitable trust to which Distillers paid seven annual instalments of £2 million, increasing by up to 10% annually for inflation.
The Government, not wishing to profit from the thalidomide tragedy and also wishing to preclude doubt as to future settlements arising from other comparable tragic events, hit upon the device of a tax offset. It was characterised as arising from some genuine misunderstanding as to whether all distributions from the Trust to beneficiaries would be tax-free. The then Financial Secretary to the Treasury stated that its effect (and therefore broad objective) “…will be to increase the income available to the Trust in a way that should at least offset the effects of taxation.” The express intent was to create a neutral tax environment; this to all intent and purposes amounted to tax exemption of distributions by other means.
Following the ‘Y’ list inquiry by the parliamentary Ombudsman, Sir Alan Marre, Distillers settled additional monies on the Thalidomide Trust for an additional 20 children, and the Government again made use of the tax offset device. This is evidence that the earlier tax offset did not preclude subsequent ones. Had it thought otherwise, the Government would not have felt obliged to follow Sir Alan Marre’s recommendation in his report on the thalidomide children who had been placed on the “Y” list.
A new campaign group was launched Thalidomide UK (Thalidomide Action Group UK) its aims were to fight for adequate compensation for the thalidomide survivors.
By 1995, it had become clear that the money held by the Thalidomide Trust would run out by 2006. Guinness plc (having in the interim acquired Distillers) covenanted until 2009 further monies annually to the Thalidomide Trust. The Trust applied for a tax offset but the Government rather than continuing the previously established arrangement lighted on giving monies under another guise; a grant in aid. The then Secretary of Health articulated it as arising from “… the responsibilities and difficulties of adulthood, family life, and employment. These are factors which could not have been foreseen at the time of the original settlement.” This amounts to the Government confirming, though in a somewhat circuitous manner, that it had no desire to profit from the thalidomide tragedy.
Diageo plc (formed by a merger between Grand Metropolitan and Guinness plc) extended the covenant to 2022, a year later the Chancellor refused the Thalidomide Trust’s application for a tax offset on the basis of both the overall size of the Trust’s fund and though mutually exclusive, the sums being injected into the NHS. In reneging on the principle that it should not profit from the tragedy the Government in justification relied on outdated information as well as general assertions regarding the NHS which previous experience indicates as being of doubtful validity. The time that it took to come to the decision suggests not only that the Trust’s application was approached with a closed mind but also that when it was made the Treasury was at a loss as to how to present its intended refusal.
2004 (15th July)
Paymaster General Dawn Primarolo today laid new legislation to make payments from the Thalidomide Trust to victims of Thalidomide tax-free, a move which will be worth £1 million per year in lower tax and increased tax credits for recipients of the payments.
Since 1974, the Thalidomide Trust has been subject to the same rules that govern payments from all ‘discretionary trusts’. Up until now some payments from the Trust have counted towards the victims’ ‘taxable income’, increasing their tax bills and also reducing their level of entitlement to tax credits.
2005 (8th December)
Diageo plc has agreed a new financial settlement for those affected by the drug. Historic agreement had been reached between Diageo plc, Thalidomide UK, and the Thalidomide Trust’s National Advisory Council (NAC), all of whom recognised that existing resources supporting survivors of thalidomide were unlikely to be sufficient to meet their continuing needs in the coming years. All parties believe that this agreement will be full and final.
Authors Freddie Astbury & Nick Dobrik
Thalidomide survivors apology
The Government has apologised over the thalidomide scandal - almost 50 years after the drug was withdrawn in the UK - but some victims said it was too little, too late.
The formal apology by health minister Mike O'Brien was greeted with a mixed reaction by campaigners who welcomed the move but pointed out the statement fell short of saying "sorry".
Government Payout to thalidomide survivors via trust fund
£20 million support package, announced last month, which will be administered through the Thalidomide Trust to help meet the needs of survivors.
He said: "I know that a lot of thalidomiders have waited a long time for this.