"MARRIED COUPLES TAX ALLOWANCE - DOC"
GS Misc 824A MARRIED COUPLES’ TAX ALLOWANCE Background Note to the Private Member’s Motion from Mrs Joanna Monckton “That this Synod wishing to affirm the importance of marriage as central to the stability and health of society and the best context in which to bring up children, call upon Her Majesty’s Government to bring back the married couples allowance, explore ways of getting rid of the disincentives and to encourage more couples to affirm their commitment and love to each other in marriage”. 1. In 1998 the Government stated in its consultation document “Supporting Families” Green Paper HNSO, “Marriage is still the surest foundation for rearing children…we want to strengthen marriage”. Two years later in 2000, the Married Couples Allowance was withdrawn, except for certain pensioners over 70 years of age. The charity CARE1, The Institute for Fiscal Studies (IFS)2 and others3 have pointed out there is now a “considerable” financial penalty on couples living together as husband and wife whether as a married or an unmarried couple. 2. Tax credits have reduced the tax burden for many families. Married couples have benefited from this reduction along with the lone- parents. But the tax and benefit system has created a situation where it is financially advantageous to live apart. The Treasury has argued that support should be based on family need, not family structure. This is not what is happening. 3. Couples whether married or cohabiting get the same tax credits as lone parents, with the same number of children and the same pre-tax income. In working out whether a family is in poverty the Government takes account of the number of people in the family, adults as well as children. Neither the income tax system nor tax credits do this. 4. CARE has modelled the effect of the tax and benefit system on 74 low income families. In 64 of these cases the families would be worse off financially living together – even when the saving in housing costs are taken into account. The average cost was put at £58 per week. In 17 cases the couples would have been worse-off by more than £100 p.w. and in 6 cases by more than £170 p.w. In one case, a family with average earnings would have been worse-off by £206 p.w. The IFS has said that the cost in lost tax credits to couples with incomes between £20,000 and £35,000 from living together as husband and wife could be of the order of £5,000 a year4. 5. There is a strong case for the tax system supporting marriage. The benefits to children are many. They are more likely to do well at school and less likely to show anti-social behaviour, less likely to indulge in heavy underage drinking, try drugs, or underage sex. These were the findings in National Marriage Week in February 2006 who also said that these benefits occur much less with cohabitation, and go on to state that no other “lifestyle choice” offers these benefits. The findings go on to report that unmarried parents are five times more likely to part before a child’s 5th birthday and that 80% of all young children who experience family breakdown are from unmarried families. 6. There can surely be no case for actually discriminating against two parent families and placing a financial penalty on couples who live together. The penalty applies to all couples whether married or not, but it affects married couples more directly. People are treated as a couple if they “live together as husband and wife”. There is no unambiguous definition of this term except, of course, if the couple are legally married. The IFS say “it is a troubling aspect of the design of tax credits that this ambiguity should exist when there is a considerable financial penalty inherent in living together as husband and wife”. Synod may take the view that this is an understatement. The Church teaches that marriage is a Sacrament and the Government should not treat it as just another type of family. It should certainly not be disadvantageous to be married. 7. The bias in the system against two parent families is not only damaging to family life, it also traps in poverty a large number of children living in two parent families. In 2005 there were 3.4 million children living in families with incomes below the poverty line – 1.4 million in lone-parent families of which 1.2 million were not working, and 2 million in two-parent families of which 1.4 million were in families where one or both parents were working. A single parent with two children would need £186 per week to escape poverty, a couple with two children would need £2685. Because of the way tax credits work a couple typically would have needed to earn in 2004/5 2 four times as much (£325 p.w. gross) as the lone parent (£78 p.w. gross) in order to receive these figures net and so escape poverty. 8. Many lone parents are on their own through unhappy circumstances and do an excellent job in bringing up the children often in difficult conditions. It is not suggested that there should be any reduction in the support given to lone parent families, but that comparable support should be given to married couples and there should be no tax penalty on a lone parent marrying or re-marrying. 9. The tax and tax credit system needs to be changed to ensure that there is no tax/tax credit disadvantage for couples who are married. 1. CARE (Christian Action Research and Education) Press Release 3rd Dec 2005 “CARE call s for tax credits overhaul” 2. IFS Briefing Note No 70 March 2006 “How many lone parents are receiving tax credits” 3. Jill Kirby “The Price of Parenthood” Centre for Policy Studies, January 2005. 4. IFS Press Release 12 March 2006 5. Table 2.3 Households Below Average Income 2004/05, Department of Work and Pensions. 3