PRESS RELEASE - CARE Speaks Out As Marriage Forgotten Yet Again

The social policy charity CARE has today expressed great disappointment that the commitments to recognise marriage in the Conservative Manifesto and Coalition Agreement remain unfulfilled after the fourth Osborne Budget.

CARE’s Chief Executive Nola Leach said:

"The lack of progress on transferable allowances is particularly shocking because of the many passionate and bold pledges made by David Cameron on this point both as Leader of the Opposition and as Prime Minister." 1

"Indeed such has been the fervour of the Prime Minister’s many statements on recognising marriage in the tax system that it has been described as a commitment of his ‘more long-standing than any other." 2

The shock caused by the complete inaction on this point has been compounded on two bases, says CARE.

First, salt has been rubbed into the wound for one-earner families by the fact that the Government has instead decided to introduce substantial new childcare tax relief for all families apart from those with one parent staying at home.

Second, last year’s Budget had exactly the same effect. It failed to help one-earner married couples by avoiding the introduction of transferable allowances, whilst announcing a huge tax increase for one-earner couples and single parents through the High Income Child Benefit Charge.3

Nola Leach continued:

"It would be one thing to have made these changes if Government figures had not committed themselves so publicly, so vigorously and over so many years to the cause of one-earner married couples, but to do so in the context of having made that pledge to act again and again and again, is completely bewildering for the electorate."

On this occasion, however, CARE points out that the bewilderment has also translated into complete irony as the Chancellor sought to describe the Budget as one for an ‘aspiration nation.’

Dan Boucher, Director of Parliamentary Affairs at CARE, said:

"The truth is that of all the developed countries in the developed world, British policy suffocates aspiration more than anywhere else."

"If you are on 35%, 50% or 75% average wage and increase your hours of work you will only take home 27 pence in every additional pound earned, whilst the comparable figure across the OECD as a whole is 66 pence! Moreover, under the future Universal Credit system things will get worse so much so that people will only take home 24 pence in the pound."

"The truth is that over a wide range of incomes, Britain has the highest Marginal Effective Tax Rate in the world at 73% rising to 76% under the Universal Credit system. The OECD average is 34%." 4

Boucher continued, "Nothing in the Budget will change this, but it could have done."

"The reason why our Marginal Effective Tax Rate is so much greater than that than the rest of the OECD is because our tax system is very unusual in not recognising family responsibility. This burden is instead placed entirely on the benefits system which consequently has to be inflated to make up for the lack of recognition of marriage in the tax system. This arrangement means that when our inflated benefits are withdrawn they create a much higher marginal effective tax rate than is the case in any other developed country in the world."

"Finding a solution to this problem is far from straight forward, but redistributing some of the burden for recognising family responsibility back to the tax system would help. There is one policy in the Coalition Agreement that would make an important start in rising to this challenge for some families: introducing transferable allowances. Under the present system this would result in a 20% reduction in the Marginal Effective Tax Rate and constitute an opportunity to make a real start towards creating an aspiration nation."

Leach concluded:

"The failure of the 2013 Budget to recognise marriage in the tax system is not only extraordinary because of the Prime Minister’s many pledges. It is also extraordinary because it would have helped make work pay and begin to deliver on this commitment to an aspiration nation."

For further information contact James Mildred, Public Affairs Media and Communications Officer on tel: 020 7227 4731 or 07581 153693 or email: james.mildred@care.org.uk

Notes:

1. A selection of public commitments to recognise marriage in the tax system by the Prime Minister, David Cameron:

The Prime Minister David Cameron speaking on the aforementioned ‘Broken Britain’ report in 2007:

" welcome this report’s emphasis on the family, and on marriage, as the basis for the social progress we all want to see."

"Britain is almost the only country in Europe that doesn’t recognise marriage in the tax system."

"Our support for families and for marriage puts us on the side of the mainstream majority, on the side of a progressive politics, on the side of change that says we can stop social decline, we can fix our broken society, we can and will make this a better place to live for everyone."

http://www.conservatives.com/News/News_stories/2007/07/Fixing_our_broken_society.aspx

In July 2008 in Glasgow, Mr Cameron continued to affirm this stance by saying:

"And when it comes to perhaps the most important area of all, families we will take action not just to support marriage and family stability."

"Saying to parents, your responsibility and your commitment matters, so we will give a tax break for marriage and end the couple penalty."

http://www.conservatives.com/News/Speeches/2008/07/David_Cameron_Fixing_our_Broken_Society.aspx

In 2010, in the run up to the general election at a speech in Doncaster, Mr Cameron appeared to become even more vociferous in his support for marriage:

"But I absolutely feel at my very core that recognising that relationships matter, that commitment matters and, yes, that marriage matters is something we should not say quietly but something we should say loudly and proudly."

"What is so backward looking in a country where we have social breakdown and social problems of saying that committed relationships, encouraging people to come together and stay together is a bad thing? Of course it isn’t, it’s not outdated if you look around the European Union, if you look around the OECD, we’re almost alone in not recognising marriage in the tax system. And why do we think, why do we think that with our appalling record of family breakdown that somehow we are in the right position and everyone else is in the wrong position; we’re not, they’ve got it right and we have got it wrong."

At Prime Ministers Question Time on 2 June 2010, he said:

"I believe that we should bring forward proposals to recognise marriage in the tax system. Those in our happy coalition will have the right to abstain on them, I am happy to say, but I support marriage. We support so many other things in the tax system, including Christmas parties and parking bicycles at work, so why do we not recognise marriage?"

"If we are going to get control of public spending in the long term in this country, we should target the causes of higher spending, one of which is family breakdown. We should do far more to recognise the importance of families, commitment and marriage …"

2. http://www.telegraph.co.uk/news/politics/conservative/9843845/The-time-has-come-to-put-families-first.html

3. The New High Income Child Benefit Charge (HICB) came into force in January 2013 and places a great burden on one earner couples. Before the Higher Income Child Benefit Charge one-earner couples already paid far more tax than two-earner couples with the same income, largely because they accessed only one tax allowance rather than two. A one-earner couple with two children with an income of £60,000 paid income tax of £13,950. A comparable two child, two-earner couple family, each earning £30,000, paid just £8,768! With the Higher Income Child Benefit Charge added, the one-earner couple’s tax bill rises to £15,667. This is £6,899 more than that of the two-earner couple. Put another way, a one-earner family with two children and on an income of £60,000 already paid 59% more tax than a comparable two-earner couple, each earning £30,000. With the introduction of the HICBC, the one-earner couple pays 79% more tax. The charge increases the one-earner two-child family’s annual tax bill by £1,717. Over the lifetime of the children, if child benefit is claimed for each child up to the age of 18, this represents a £30,000 increase in the family’s tax bills. The problems with HICBC have been compounded by the fact that, contrary to the suggestion that HICBC will only impact the top 15%, many families in the middle and just below the middle of the income distribution will be negatively effected.

4.

Table 1 - Effect of a Transferable Personal Allowance (TPA) on METRs under Universal Credit

	Without TPA (%)	With TPA (%)
Income	100	100
Income Tax	20	0
National Insurance	12	12
UC withdrawal at 65% of increase in net income	44.2	57.2
METR	76.2	69.2
Reduction in METR		20%

Table 2 – Effect of a TPA on METRs under Tax Credit System

	Without TPA (%)	With TPA (%)
Income	100	100
Income Tax	20	0
National Insurance Contributions	12	12
UC withdrawal at 65% of increase in net income	41	41
METR	73	53
Reduction in METR		20%