• Urgent Need to Increase the Marriage Allowance

Theresa May outlined in her Brexit speech yesterday her vision of a ‘Shared Society’ for all, but May cannot hope to achieve this unless we confront the radical individualism at the heart of our tax system which champions the interests of individuals over families.

New research launched at an event in Parliament this morning – CARE’s The Taxation of Families 2015 - compares the way in which different countries divide up the tax burden between families and singles and shows that Britain’s approach to tax is unusually individualistic.

The event - which was chaired by Ranil Jayawardena MP and the Bishop of Chester - heard that while the tax burden on one-earner married couples with two children on average wage is 26% greater than the OECD average, and 17% greater than the EU average, the tax burden on singles on the same wage is 8% less than the OECD average and 19% less than the EU average.

This point was also brought home by the fact that while across the OECD on average the tax burden placed on a one earner married couple with two children on average wage is closer to half that on a single person on the same wage (57.3%), in the UK it is closer to the full tax burden placed on a single person (78.7%).

The research shows that families also lose out when it comes to the Effective Marginal Tax Rate (that is the income lost from any additional pound earned on top of current income in tax, national insurance and lost benefits), a key consideration when it comes to helping struggling families to better themselves.

A one earner couple family with two children on between 50% and 75% of average wage faces a staggering 73% Effective Marginal Tax Rate, meaning that they will only get to keep 27 pence of every additional pound earned. 73 pence will be lost in tax, national insurance and lost benefits.

Across the OECD on average, by contrast, the comparable Effective Marginal Tax Rate for these families will be just 34%, meaning that they will keep 66 pence of every additional pound earned – a much better deal.

As the report points out, the 73% Effective Marginal Tax Rate is the highest for these families anywhere in the OECD area.

CARE argues that the best way help and reduce the tax burden of one-earner married families with two children on average wage would be to increase the marriage tax allowance, which the UK public strongly supports.

Polling carried out by ComRes, and commissioned by CARE, found that nearly six in ten (58 per cent) people supported an increase in the marriage allowance, compared to just 20 per cent who were opposed.

Commenting on the findings of the polling, Conservative MP for St Ives, Derek Thomas said single earner married couples with young children are long overdue support from the tax system.

“When the marriage allowance was first proposed the implication was that it would be fully transferable and make a really significant difference. The allowance that we have, however, is failing to make an impact, being that 90 per cent of it cannot be transferred.”

Meanwhile, Fiona Bruce, Conservative Member of Parliament for Congleton, suggested that the allowance be expanded specifically for married couples with young children.

“It is particularly concerning that at present more marriage tax relief is afforded couples in their 80s and 90s, whose children will have left home long ago, than on all other marriages including those caring for young children. Whilst we should of course care for our elderly, we should give a significant married tax break to young families who also need our help.”

CARE’s Chief Executive Nola Leach on the report findings:

“There is now an urgent imperative for the Government to dramatically increase the value of the transferable allowance, moving to a fully transferable allowance as quickly as possible. This would bring a substantive qualification to the fiscal individualism that has sadly characterised Britain for far too long. It would constitute a real and concrete step towards the creation of the Shared Society that the Prime Minister has now made, very rightly, a national priority.”

Ends

Notes to the Editor

For all press inquiries please contact Rachael Adams on 020 7227 4708 / 07851 153693 or Rachael.adams@care.org.uk

CARE is a well-established mainstream Christian charity providing resources and helping to bring Christian insight and experience to matters of public policy and practical caring initiatives. CARE is represented in the UK Parliaments and Assemblies, at the EU in Brussels and the UN in Geneva and New York.

The Taxation of Families 2015, written by CARE Tax Consultant Alistair Pearson, can be accessed HERE

ComRes interviewed 2,042 GB adults aged 18+ between 18th and 20th November 2016. Data were weighted by age, gender, region and socio-economic grade to be representative of all GB adults. ComRes is a member of the British Polling Council and abides by its rules.

CARE has highlighted how the Government could do more to help out Just-About-Managing families HERE and HERE

The comment in the Bruce quote about married couples in their 80s and 90s receiving a more generous marriage tax break is explained in more detail in the following Written Parliamentary Question:

‘HM Treasury has provided the following answer to your written parliamentary question (44906):

To ask Mr Chancellor of the Exchequer, what the cost to the public purse was of providing the married couples allowance in each financial year since 2001. (44906)

Tabled on: 05 September 2016

This question was grouped with the following question(s) for answer:

1. To ask Mr Chancellor of the Exchequer, how many couples claimed the married couples allowance in each financial year since 2001. (44905)

Tabled on: 05 September 2016

Answer:

Jane Ellison:

The Married Couple’s Allowance (MCA) is an additional allowance for married couples worth between £322 and £835.50 per couple in 2016-17. Prior to 2000-01, MCA was available to all married couples irrespective of age, but on the introduction of the tax credit system it remained available to married couples where at least one of them was born before 6 April 1935.

The estimated cost and the estimated number of claimants of MCA for the financial years 2002-03 to 2015-16 are given in the table below.

Married Couple's Allowance

Cost (£millions) Number of Claimants (000s)

2002-03 450 1160

2003-04 610 1510

2004-05 590 1450

2005-06 530 1320

2006-07 520 1230

2007-08 450 1050

2008-09 * *

2009-10 440 890

2010-11 340 670

2011-12 400 760

2012-13 360 650

2013-14 320 570

2014-15 285 490

2015-16 245 420

*Data not currently available

Up to 2012-13 these estimates are based on the Survey of Personal Incomes (SPI) for the years concerned. Later years are projected from the 2012-13 SPI using the Office for Budget Responsibility’s Autumn Statement 2015 economic and fiscal outlook. Data for 2000-01, 2001-02 and 2008-09 are not currently available.

The answer was submitted on 08 Sep 2016 at 17:00.’

By contrast 1 million couples have registered for the transferable allowance which computes to a cost of £210 million