CARE has today released an important new report in response to the speech made by Liberal Democrat leader Nick Clegg this morning in which he criticised the Coalition Agreement commitment to recognise marriage in the tax system.

In his speech, Mr Clegg placed great emphasis on fairness and developing a progressive politics.

As CARE’s report makes plain, however, Mr Clegg’s alternative policy of raising the personal income tax allowance to £10,000, is far less fair and far less progressive.

75% of the benefit of the £10,000 allowance policy will go to those in the top half of the income distribution, whilst 70% of the benefit of the proposed transferable allowance will go to those in the lower half of the income distribution.

Britain’s fiscal arrangements are already very individualistic such that the tax burden on one-earner married couples on average wage with two children is 73% of that placed on a single person on the same wage, whilst the comparable average across developed countries – OECD (Organisation for Economic Cooperation and Development) members – is just 52%.

Nola Leach said, ‘The policy of increasing personal tax allowances to £10,000 may sound progressive, but as our report demonstrates it disproportionately benefits the richer members of our society and actually perpetuates the individualism of our fiscal arrangements. The transferable allowance by contrast disproportionately benefits the poorer half of the population and challenges individualism by recognising family responsibility.’

The other key thing that the report highlights is that, at a time when money is tight, very significantly, a transferable allowance for married couples is cheaper than a personal tax allowance. When the cost of increasing the personal allowance to £10k was introduced it was costed at a massive £16.8 billion which works out at approximately £4.1 billion per annum. The partially transferable allowance proposal from the Conservatives meanwhile was costed at just £550 million.

To access CARE’s report click here (PDF).