On Wednesday 16 January, MPs debated the ways in which the current tax system in the UK discriminates against families during a debate in Westminster Hall.

Making Work Pay report published

The debate was timed to coincide with the publication of a new report called Making Work Pay, produced by the Strengthening Families Manifesto (SFM) group.

Jeremy Lefroy, MP for Stafford opened the debate and further contributions followed from Fiona Bruce MP, Steve Double MP, Chris Green MP and others. Alison Thewliss MP replied for the SNP and Peter Dowd MP, the Shadow Chief Secretary to the Treasury spoke on behalf of the Labour Party.

During the debate, Fiona Bruce paid tribute to CARE and the work we have done in highlighting the discrimination in the tax system against families: “For many of those years, CARE has held annual meetings about this issue and published annual reports on the taxation of families. I pay tribute to CARE for its assistance in the production of “Making Work Pay for Low-Income Families”, which, as my hon. Friend the Member for Stafford says, we are publishing today.”

Absurdly high Effective Marginal Tax Rates (EMTRs)

The key point under discussion was the fact that thanks to the unique system of independent taxation currently used in the UK, many families face eye-wateringly high effective marginal tax rates EMTRs.

For example, families on 50% or 75% of the average UK wage face an EMTR of 73%. That means for every extra £1 they earn, they only keep 27p with the rest going to the Treasury.

In fact, the UK’s EMTRs are the worst of any country in the developed world and can reach as high as 96% for some families in certain situation. That means for every extra £1 they earn, they keep a mere 4p.

MPs also raised the fact that family responsibility is not properly recognised in the current UK tax system. A good number called on the Government to make sure family responsibility was recognised in both the benefits system and the tax system.

Government agree to look at issues raised

In response, Mel Stride, Financial Secretary to the Treasury and Paymaster General acknowledged the examples given during the debate of how the current tax system is treating families unfairly: “I also accept the many examples given in the debate today on the way in which the system does not work effectively. The most important has been the very high level of marginal tax rates. Several examples were chosen of particular circumstances involving individuals and children and the make-up of families to illustrate that we can, under certain circumstances, have marginal tax rates as high as 73% or even beyond. I accept that that is deeply undesirable.”

Encouragingly, he also made a clear commitment to go back and look at the concerns raised in the report and some of the suggestions made too: “I will respond directly to the overarching request made of me this morning, which is that I go back to the Treasury with the report and the comments made in this debate and look genuinely and deeply at the issues raised. I can give an unequivocal commitment to do precisely that because, despite what is going on in the House at the moment and the important vote tonight, certain things must continue uninterrupted. Our essential quest for social justice and the Conservative party’s commitment to the family and a society that is at ease and at one with itself, must not be diminished. The House has my commitment to do exactly as I have said. I will engage in the form that my hon. and right hon. Friends wish me to make sure that we push forward on the important issues raised today.”

CARE’s campaign work on family and tax

For some time, CARE has published annual tax reports, examining the tax burden on families in the UK. These reports can be read here.

Our most recent report showed the tax burden on a one-earner married couple with two children on the UK average wage is 30% higher than the rest of the OECD.

Further reading

CARE’s chief executive Nola Leach wrote an outstanding article for Conservative Woman setting out the main findings of the report. You can read Nola’s piece here.