CARE is very pleased that the Government has committed to recognise marriage in the tax system through a transferable allowance. The commitment was made in the Conservative manifesto and then embraced by the Coalition Agreement. Although the Coalition Agreement pertains to the period 2010 to 2015, and transferable allowances could be implemented at any time during that time frame, given the importance of the issue, we are disappointed that the Government still has not made the necessary changes.
In an important speech on Tuesday night during the Finance Bill Second Reading debate in the House of Lords, Lord Browne of Belmont drew attention to the fact that no progress has been made in relation to this key election commitment since 2010.
Marriage is important. For example, we know that marriage provides a much more stable environment for child development than cohabitation. A child born to cohabiting couples has a one in three chance of finding themselves in a single parent family by the time they reach their fifth birthday, whilst a child born to married parents only faces a one into ten chance of finding themselves in such a position.
Given the key role played by marriage in relation to child development, and indeed adult wellbeing, it is quite wrong that government policy should persist in making it significantly harder for people to make a lifelong commitment to each other in the UK than is the case across the developed OECD world on average. In this context the fact that 90% of young people aspire to marry and yet the marriage rate is at an all-time low and the cohabitation rate is at an all-time high is perhaps not surprising. Although not the only factor to impact the marriage rate, fiscal considerations play an important role in the choice to get married in particular if you are on an average wage.
Lord Browne told the House of Lords: ‘When the commitment to recognise marriage in the tax system through a transferable allowance was made in 2010, the latest available figures demonstrated that the tax burden on a one-earner married couple with two children and on average wage was 33% greater than the OECD average. Consequently, UK residents faced a greater disincentive to marriage than did most people living in the developed OECD world.’
‘… I contend that the case for recognising marriage in the tax system is even stronger today than it was in 2010. Analysis of the latest OECD figures carried out by CARE and presented in Taxation of Families 2010/11 reveals that a one-earner married couple with two children and an average wage now face a tax burden that is 52% greater than the OECD average, a significant increase on the 33% figure for 2010.’
‘Among highly developed large economies, the UK is alone in operating a tax system that ignores spousal obligations.’
As we approach the half-way point of this five-year parliament CARE calls on the government to make the introduction of the transferable allowance a key priority for the coming year.