Just 28 per cent of couples in a marriage or civil partnership will benefit from the policy.
In a pre-budget interview with the BBC’s Nick Robinson yesterday, shadow chancellor Ed Balls has recommended that George Osborne use next week’s budget to scrap the Marriage Tax allowance to fund a return to the 10p tax rate.
The announcement has received a significant amount of media coverage and yet Balls’ announcement is completely uncontentious. It is, in fact, difficult to think of a more common sense idea.
Take, first of all, the Marriage Tax Allowance.
From April 2015 up to £1,000 of the income tax personal allowance will be transferable between adults who are married or in a civil partnership at a cost of around £700 million a year to the exchequer. The policy will allow an individual not using all of their £10,230 income tax personal allowance – because their income is less than the allowance, for example – to transfer up to £1,000 of the unused allowance to their partner.
This transferred allowance will lower the spouse’s tax bill by up to £200 a year. The transferred allowance would not be available to higher rate or additional rate taxpayers.
And yet according to the IFS, only 28 per cent of couples in a marriage or civil partnership will benefit from the policy – and obviously those who are single or unmarried will get nothing from it either.
The proposal may also result in married couples which contain a basic-rate taxpayer facing a weaker incentive to having the second person in work, as two earner couples will not benefit.
The policy may also, interestingly, punish the chancellor’s much praised ‘strivers’. As the IFS put it last year:
“Since the transferred personal allowance would not be available to higher rate taxpayers, workers benefiting from a transferred allowance would have a weaker incentive to increase their taxable income above £42,450.”
Scrapping a policy that only benefits a very small number of people – and which makes a clear moral judgement about whether people choose to get married or not – and using the money to right a mistake made under the last Labour government is excellent policy. Not only is it fair and economically sound, but it will likely have broad electoral appeal.Like this article? Sign up to Left Foot Forward's weekday email for the latest progressive news and comment - and support campaigning journalism by making a donation today.