When asked whether the Prime Minister was bothered that his childcare proposals discriminate against one-earner families, his spokesman replied simply by saying that he wanted to build an ‘aspiration nation’.

This is absolutely extraordinary.

The simple fact is that one-earner families on 36% (i.e. UK Minimum Wage), 50%, and 75% of the average wage face the highest marginal effective tax rates in the developed world at 73%.

The OECD average is just 34%.

What this means is that if you are a one-earner family on 36%, 50% or 75% of the average wage, you will only take home 27p from every additional £1 earned – through working overtime or taking a second job, for example – whilst the OECD average tax rate would see you take home an additional 66p from every additional £1 earned.

In other words, in this country we structure our fiscal arrangements so that those who aspire to better things are suffocated by government fiscal policy more than anywhere else in the developed world.

If we survey the developed countries of the world what we discover is that, far from being an aspiration nation, Britain is actually its polar opposite.

The principal reason for our extraordinary marginal effective tax rates is the fact that our tax system, uniquely amongst large developed economies, does not recognise family responsibility. The burden for this is placed entirely on our benefits system with the effect that our benefits have to be inflated to compensate for the lack of recognition in the tax system. The problem with this is that when those benefits are withdrawn as income increases this creates, along with income tax and national insurance, our extraordinarily high marginal effective tax rate.

This is ironic as, unlike yesterday’s childcare announcement, the actual commitments in the Conservative manifesto and Coalition Agreement pledged to recognise marriage in the tax system through a transferable allowance. This would begin to re-introduce recognition of family responsibility into the tax system and help to begin to bring down marginal rates.

In our current system of tax credits (which will exist in some form until 2017), introducing a transferable allowance would – for a one-earner couple with two children on an income of up to £19,000 – decrease their METR by 20% 1. This would mean that the household would end up keeping 47p from every extra £1 earned, as opposed to 27p, bringing them much more in line with the rest of the OECD.

The truth is that the childcare announcement not only discriminates against one-earner families, but is completely inconsistent with the Chancellor’s notion that ‘this is a Budget for an aspiration nation’. Helping one-earner families would begin to bring down our marginal effective tax rates and signal the Government’s support for the aspirations of these families as well.

1. Transferable Allowances for Married Couples - Impact on Marginal Tax Rates, CARE Briefing, March 2013