The Conservatives again support marriage in the tax system. Any proposal will penalise a number of groups, be regressive, and fail to provide more stable homes.
After much to-ing and fro-ing yesterday, the Conservative party has once again committed to supporting marriage in the tax system. But any proposal will penalise a number of groups, is likely to be regressive, and will fail to provide more stable homes.
As widely reported in this morning’s papers, David Cameron yesterday flip-flopped on his marriage tax plans, first saying “It is something … I’ll definitely hope to do” before later saying “we will definitely do [it] in the next parliament.” On Today this morning, Conservative Home’s Tim Montgomerie confirmed: “What we have is a definite commitment to recognise marriage in the tax system” although it won’t be the expensive £4.9 billion policy originally proposed by Iain Duncan Smith in 2007.
But whichever policy the Conservatives finally adopt will favour old over young. In 1991, 74 per cent of 30-44 year olds were married but the Office of National Statistics projects that only 43 per cent of the age group will be married by 2021 (Table 3a). For the overall population aged over 16, the proportion of married couples is projected to fall from 58 per cent in 1991 to 41 per cent by 2031, as the Chart below shows.
Tim Horton of the Fabian Society told Left Foot Forward,
“When we last had a married couples allowance under the Tories during the 1980s and 1990s there was actually a drop off in marriage. There is little evidence that tax breaks would make much difference. And even if some couples did get together for a tax break it is unlikely their relationships would be as robust as those motivated by love and commitment, which is what actually explains positive outcomes for many married couples.
“What’s more, the Tories’ proposed tax break would unfairly ignore many families, including cohabiting couples, single parents and the low paid. It would also fail to support many younger couples, who often use cohabitation as a ‘practice run’ for marriage.”
The number of cohabiting couples are projected to rise from 2.25 million in 2007 to 3.70 million in 2031. This blog has previously shown that the proportion of households with single parents has risen from 3 per cent in 1971 to 7 per cent in 2008. Marriage is also more common further up the income scale as this analysis of IDS’ proposals has shown.
UPDATE 14.58:
Giles Wilkes also has an excellent piece on his Freethinking Economist blog outlining why the Tories are “on the back foot on marriage”
UPDATE 15.16:
And Chris Giles of the FT has just posted on how “transferable tax allowances are a terrible idea” and that “It wasn’t nutty progressives who got rid of the married man’s allowance and undermined the married couples’ allowance in the tax system. It was a combination of those awful lefties (Nigel Lawson, John Major, Norman Lamont and Kenneth Clarke)”.
16 Responses to “Young and poor among losers of Conservative marriage policy”
Ben Cooper
@DeclanLyons Excellent piece on why tax system recognition of marriage is regressive & won't work: http://bit.ly/7iWsd2 via @MTPT
Tom Callow
RT @MTPT: Excellent piece from @leftfootfwd: why tax system recognising marriage is regressive and won't work: http://bit.ly/7iWsd2 #ge2010
Bill Kristol-Balls
“it’s about negating the tax-incentive for people breaking up”
Stop me before my sides split. So the benefits system offers incentives for people to break up does it?
“Hey Mr & Mrs Happily Married, come here, let me whisper in your shell like. If you split up, the government will give you a few quid a week as an incentive.
Now I now what you’re going to say. How will a few £££ in benefits even come close to compensating for the fact that when a couple split up they have to pay for –
2 lots of rent / mortgage payments and not 1
2 homes to furnish instead of 1 (c’mon MP’s you know how expensive this can be)
2 lots of council tax and not 1
2 lots of phone line / broadband rental not 1
2 lots of electricity bills and not 1
2 lots of gas bills and not 1
2 lots of water bills and not 1
2 tv license fees and not 1
2 car tax / insurance bills and running costs instead of 1
2 trips to the supermarket each weak instead of 1
Not to mention the emotional stress on the parents and kids that separation brings.
All this will be covered by a few quid here and there from those evil socialists in government who HATE marriage so much that almost all of them are married themselves.”
Michael my friend, ridicule is too good for you.
John McGregor
[Left Foot Forward] http://bit.ly/8IqYEx <- Nice graph. Maybe, if we'd kept Married Couples Allowance everybody would be hitched by now! 😎
Michael
Bill,
You didn’t read my post very carefully did you? You have managed to completely miss the point. A couple of quick ones;
– Your ‘2 lots…’ of everything list is just wrong-headed, because in the event of a breakdown each individual will be eligible to claim state assistance to help cover most of these things – council tax, rates, housing, and welfare will all be offered to each individual on account of need. So it’s not a case of the original pot being split in two and therefore each individual having less, as your reply is premised upon, but two individuals now becoming claimant and maximising individual economic benefits. Of course, this applies more toward the bottom of the socio-economic scale than, for example the middle, where the halving of possessions (house, car) and savings etc may well give the impression that the original pot is being halved and both are economically worse off (this middle-class paradigm seems to be the one you’re speaking from). But for those toward the bottom of the scale, already dependent on some form of welfare assistance, this is simply not the case, and the collusion of state assistance as it stands can in fact, bizarrely, leave people better off by not being together.
As for your Mr + Mrs Happily Married jibe, you again miss the point. For Mr + Mrs Happily Married wouldn’t be on the edge of breaking up would they? And so financial incentive would play no part in their future relationship whatsoever. However, for those in the midst of difficult times, the case is entirely different, and so potential tax and welfare considerations (which might only be ‘a few quid’ to you, but which can in fact be largely significant when you don’t have much money), will undoubtedly have an impact impact upon what a couple choose to do. There is plenty of evidence that this situation occurs, and not merely as a quirk of the system – see for example CSJ’s Dynamic Benefits report (p.113-115) or indeed, for a ‘real life’ example, Michael Young’s the New East End touches on it here and there.
‘Not to mention the emotional stress on the parents and kids that separation brings.’
On this we agree, and that is my starting position. For which reason I repeat my initial point – the government should stop incentivising break-up.