PRESS RELEASE- Margaret Thatcher’s former Chancellor, Nigel Lawson has strongly backed David Cameron’s plans to introduce tax breaks for some married couples before the next election, but warned they must be embedded before the next election.

Speaking at the Parliamentary launch of a major review of the tax system, he welcomed the introduction of the help for struggling families, saying that the Conservative proposal was a “step in the right direction” adding “we have got our foot in the door”. Looking to the future he made it clear that the goal must be a fully transferable allowance.

Lord Lawson, also criticised the Liberal Democrats obsession with raising personal allowances, saying that a transferable tax allowance, TTA was a “more effective and less expensive”, something he had strongly argued for when he introduced independent taxation 25 years ago.

And he warned the group of Parliamentarians and policy experts that unless the changes were “up and running”, before the 2015 general election they could be axed if the government changed.

Lord Lawson’s comments echo those he wrote in the foreword of the report produced by Charity Care, which examined the effects of the move to independent taxation. In the report he concluded that the case for transferable allowances remained as “strong as ever” and describes them as “family friendly”.

“…The case for transferable allowances remains as strong as ever… it is not only family friendly but provides a far more cost-effective means of reducing the tax burden on low-income households than can be achieved by an across-the-board increase in personal allowances.”

The report, Independent Taxation – 25 years on, Does it meet today’s needs? assesses the impact of independent taxation, a quarter of a century after Nigel Lawson first overhauled the UK’s outdated and discriminatory tax system. It found that the benefits of independent taxation had been undermined by the failure to include transferable allowances.

“The reformers wanted to make the tax system fairer for married women,” it says “to allow married women to keep their tax affairs private, and to reduce the discrimination against one-earner married couple families”, but failure to introduce transferable allowances has meant families bearing a greater share if the income burden than before the changes.

“Since 1990 income tax rates have come down. In 1990 the basic rate was 25 per cent; in 2013 it is 20 per cent. The tax threshold for single people has risen significantly, with the result that the tax burden on single people has fallen. In 1990 a single person on 50 per cent median income paid 12.9 per cent; a comparable person now pays 5.9 per cent. At median income the figures are 18.9 per cent and 12.9 per cent respectively.

“By contrast, the tax threshold for families is scarcely higher in real terms than it was in 1990, with the result that, even though the basic rate is lower, the income tax burden on some families is much the same as it was then.”

The report concludes by saying that, “Measured against the aims set in the 1985 Green Paper, the reform of the tax system had been a failure.

“Independent taxation was intended to give married women privacy over their tax affairs but the two million couples with children who have to claim tax credits (or in future, Universal Credit) or the equivalent have no privacy, and others have lost privacy as a result of the HICBC.”

“…One-earner families face more fiscal discrimination in 2013 than they did in 1990 and marginal rates that apply to families are much higher than they were in 1990.”

Nola Leach, Chief Executive of Care, commented:

“Lord Lawson the architect of our current system recognises that the failure to introduce a transferable tax allowance has left many one earner families struggling and, along with changes made by subsequent governments, has seen a significant increase in the tax burden they face. While the report considers a number of potential policy solutions, it comes back to the recommendation that Lord Lawson made 25 year ago, a transferable allowance.

“As he says, it was a mistake not to have introduced this at the time and the government recognises this, although their proposal is very modest and fails to help a large number of families who are not rich and are in the bottom 50 per cent of household incomes."

CARE highlights two significant problems with the transferable allowance announcement made by the Government the day before the Conservative Party conference.

First, legal provision will not be made until the financial year 2015-16, meaning that people will only be able to claim against transferable allowances from April 2016, a year into the next Parliament. On the basis of the Government’s proposed timetable it cannot be said that transferable allowances will be up and running and delivered in this Parliament.

Second, although the amount to be transferred has increased from the £750 promised in April 2010 to £1000, because of the increase in the personal allowance the proportion of a transferable allowance that people will be permitted to transfer has actually been cut since the April 2010 commitment. The 2010 proposals were to transfer nearly 12% of the personal allowance. The new proposals are only to transfer 10%.

Leach, however, is keen to point out that not all is lost:

"Most importantly the Government must adjust its transferable allowance proposal so that it is in the 2014 Finance Bill for the financial year 2014-15 so that couples can claim against it from April 2015, and its commitment is delivered in this Parliament, as it promised."

Leach continued:

"They should also ensure that the initial amount that can be transferred is not less than 12% of the personal allowance and commit to significantly increasing the amount that can be transferred in the next Parliament. We should move towards, as Lord Lawson has argued, a fully transferable allowance."

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Notes to Editors:

For media inquiries, please contact Alistair Thompson of Media Intelligence Partners Ltd on 07970 162225 or 0203 008 8145, or CARE’s Press Office on 020 7227 4731 or 07581 153693