Press Release
15 May 2012

New Anti-Trafficking Bill introduced in Parliament today

 In the wake of the recent Rochdale trafficking ring convictions, new legislation to protect child victims of trafficking

Campaigning Tory Peer, Lord McColl of Dulwich will today introduce an important Anti-Trafficking Bill in the House of Lords. Amidst growing concerns about the trafficking of girls in the UK after last week’s convictions of nine men in Rochdale, it comes not a moment too soon.

Lord McColl has been tenaciously making the case for enhancing British trafficking laws for some time now. Throughout the last year he has repeatedly drawn attention to the fact that between 2007 and 2010, of the 942 child victims of trafficking in the UK, a staggering 301 were lost.[1] We are currently failing child victims of trafficking in the UK, both in identifying them as trafficked – as evidenced  by the recent case in Rochdale – and in protecting those who have been identified.

In February, Lord McColl secured a commitment from Home Office minister, Lord Henley, that the Children’s Commissioner would conduct a review of the care currently afforded rescued child victims of trafficking in order to make recommendations about how it could be enhanced.[2] This is a step in the right direction. The new McColl Bill makes provision for Britain to emulate international best practice and appoint each rescued child victim of trafficking with a legal advocate from the moment a child is identified as a victim.

Other elements in the Bill include: a much more robust definition of trafficking offences; the non-prosecution of victims of trafficking for crimes committed when under duress; and the proper provision of assistance and support for trafficking victims, including appropriate and safe accommodation and translation services and the right to apply for compensation. The Bill also proposes that Britain falls into line with best practice with respect to the provision of a ‘Human Trafficking National Rapporteur’, the internationally recognised means of assessing the trafficking situation within the UK. Current mechanisms fail the crucial test of independence from government.

Commenting on his Bill, Lord McColl said, ‘It is a matter of great national pride that in 1807 and 1833 Britain took the lead in combating slavery. We do so no longer. That Britain is the number one destination for sex trafficking in Europe and that we should have lost 301 rescued child victims of trafficking between 2007-10 beggars belief. It is time to take action. My Bill proposes the way ahead.’

For more information, and the opportunity to interview Lord McColl, please contact Dan Boucher on 07768 165543 or Genevieve Galvin on 07795 332620.

Notes:

1. A Scoping Project on Child Trafficking in the UK, 2007, p. 5 and p. 8., Child Exploitation and Online Protection Centre (CEOP);  Strategic Threat Assessment Child Trafficking in the UK, 2009, p. 9 and p. 12, CEOP; and Strategic Threat Assessment Child Trafficking in the UK, 20010,  p. 5 and p. 21, CEOP.
2. Lord Henley, Minister of State for Crime Prevention and Anti-Social Behaviour Reduction, in the debate on The Protection of Freedoms Bill, Amendment 57A, 15 February 2012, Hansard 861. http://www.publications.parliament.uk/pa/ld201212/ldhansrd/text/120215-0002.htm#12021585000186
3. The full title of the McColl Bill is Human Trafficking and Exploitation (Further Provisions and Support for Victims) Bill. It contains 15 Clauses and will be published on the Parliament web site tomorrow. http://services.parliament.uk/bills/
4. Lord McColl CBE is a British surgeon, professor, and Conservative member of the House of Lords. Made a Life Peer for his work for disabled people in 1989, he was Parliamentary Private Secretary to John Major from 1994-97 and Shadow Minister for Health 1997-2000. He is also a trustee and surgeon to the international charity, Mercy Ships. Through his work as a surgeon, Lord McColl came across cases of abuse which lead him to become a passionate advocate against human trafficking and modern day slavery.

In short, no, poverty is not just about income, but do read on! In much of today’s popular discourse, it is quite understandably assumed that the way to improve poverty rates is to improve the ‘take home’ (or post tax) incomes of those who are poorest, both in relative and absolute terms. Although under the previous administration poverty did fall between 1997-1998 and 2005-06, it began to rise again over the following three years[1] and, as a result, the much lauded child poverty targets were missed by some margin.[2]Taking this and the figures below into consideration, it is clear that any possible solution to reducing poverty in the UK will need to take into account a whole range of factors, just one of which income.

The figures above are compelling in that they show the UK to be comparatively generous with regard to the treatment of low earner households by the tax system.[3] These family types have a negative tax burden which means, in effect, that they receive more in benefits and tax credits than they pay in income tax and national insurance. This is primarily due to how the tax credit system (soon to be overhauled by the new Universal Credit) operates. It is interesting to note that households on the same proportionate income (50% of the average wage)[4] in some other developed countries do not enjoy such generous tax rates, although in many nations they are still below zero.

Herein lies the rub: despite the generosity of the UK tax credit system, child poverty has continued to rear its ugly head, both domestically over the past 10 years, and internationally (see graph below).[5] In other words, some other OECD nations, despite having tax and benefits systems which are relatively less generous, achieve significantly lower poverty rates. As the table below shows,[6] of the 20 countries with lower child poverty rates[7]than the UK, only three have more generous tax arrangements for one earner and lone parent two child households at this wage level. By way of explanation, the table below gives one rank for child poverty and one for tax burden. The higher the tax burden rank, the more negative the tax burden is for families on 50% average wage. With regard to child poverty, the higher the rank, the lower the poverty rate.

Why might this be the case? There are many reasons why poverty remains a significant issue for the UK, many of which need to be addressed: housing, education, tax and welfare to name but a few.

Let’s take a brief look at tax and welfare. The Joseph Rowntree Foundation (JRF), in their excellent and comprehensive publication, Monitoring Poverty and Social Exclusion 2011, note that being in poverty is not just about income and that household size matters too.[8] Thus, whilst the UK might be relatively generous with regard to tax and welfare, it is by no means the end of the story. The report confirms that increases in tax credits – particularly in 2008 and 2009 – have resulted in many families needing tax credits in order to avoid poverty.[9] Here we have a key problem: what happens when tax credits are withdrawn? The evidence available shows us that the high withdrawal rates of both tax credits and the Universal Credit will adversely affect work incentives for many people, not to mention the actual take home income for many households.

Don’t take it from me though, below is an excerpt from the aforementioned JRF report:

‘One factor influencing in-work poverty that is the direct responsibility of the DWP is the ‘taper’ on benefits. The combination of income tax, National Insurance and the benefit taper means that someone in work and getting tax credits faces an effective tax rate on any extra earnings of 73 per cent, way above the so-called ‘top’ rate of 50 per cent. With such a rate, extra work brings scant reward: someone in this situation on the minimum wage has to put in six hours overtime in order to make themselves £10 better off overall. Universal Credit is going to make this worse, putting the rate up to 76 per cent. Until 2010, the rate was ‘only’ 69 per cent.’[10]

So, how do we deal with this issue? I believe the solution lies in reducing the taper on the soon to be introduced Universal Credit. The Coalition will say that this is too expensive but I question this. If the Government can spare billions for other tax and welfare measures, such as increasing the personal income tax threshold (which is not a progressive measure that will help the poorest in society)[11]then why shouldn’t it commit to reducing the Universal Credit taper? By doing this, the Coalition would make significant inroads toward tackling the high withdrawal rates that are present with the current Universal Credit plans, meaning that those entering the workplace or increasing their hours are not threatened with losing their benefit. As a result, work can actually begin to be rewarding, lifting many households out of poverty.

CARE warmly welcomes the Report from the Independent Parliamentary Inquiry into Online Child Protection, published today.

Conducted by Claire Perry and a cross-party group of MPs, the Inquiry’s Report tackles the issue of protecting children online – a cause CARE has worked on for a number of years, most recently with Baroness Howe of Idlicote whose Online Safety Private Members’ Bill was recently introduced in the House of Lords.

The Howe Bill, which builds upon work begun by Mrs Perry, represents the first serious legislative attempt to introduce an opt-in system for accessing pornography.  In an internet-enabled age where children are increasingly technology-savvy, the Bill seeks to help parents bring up their children without them being able to access, whether purposefully or by accident, inappropriate content.

As the Inquiry’s Report makes clear, children accessing pornography online is not a baseless concern.  Indeed, according to the Report, six out of ten children download adult material due to insufficient filters on their computers.  Of equal concern is the finding that the use of filtering software in homes has fallen from 49% to 39% in the last three years.

The fact that children are able to access inappropriate content online is not a new revelation, but the findings of the Inquiry serve as a sobering and timely reminder of the need to equip parents to ensure children are protected as they access the internet.

CARE’s Chief Executive, Nola Leach, welcomed the Inquiry’s Report, saying: “I think we can all agree that the internet and mobile technology are wonderful tools but, as with all tools, they must be used with proper safety measures in place.  Both the Inquiry and Lady Howe’s Bill are encouraging developments which provide a wonderful opportunity for the Government and particularly Internet Service Providers to step up and help parents meet the ever-present challenge of protecting their children online.”

Notes:

1. The full Report from the Independent Parliamentary Inquiry into Online Child Protection can be found here: http://www.claireperry.org.uk/downloads/independent-parliamentary-inquiry-into-online-child-protection.pdf

2. Information on Baroness Howe’s Online Safety Bill can be found here: http://services.parliament.uk/bills/2010-12/onlinesafety.html

Much has been made by both the current and previous Government about how to tackle child poverty (note the much talked about child poverty targets for example). Broadly speaking there are two ways in which this can be done. Both methods predictably centre on increasing the post tax income of a family, the first being through making changes to the benefits and tax credits system and the second being through doing more to incentivise work. In focusing on the latter, CARE has pointed out for a number of years that the Marginal Effective Tax Rates faced by working families (particularly married couples with one earner) is an issue which must be addressed. Indeed, as the graph below shows, this issue is particularly pertinent in the UK, where the problem is particularly pronounced for the very poorest in society.  As such, in 2010 (the latest year for which data is available) UK households were on average facing METRs that were only beaten by Slovakia[1].

For the first time, this new research combines the average METR faced by four different families at 50% average wage; single people without dependants, one earner married couples with two children, lone parents with two children and married couples without dependants. Whilst there is obvious value in doing this, it is worth pointing out that due to differing size of the respective households, where each of these households lie in the income distribution would vary significantly.

For now however, it is important to put these findings into some sort of context. Based on these figures, the UK worker either entering work or increasing their working hours would only take home about 35 pence of every 1 pound earned due to  a reduction in received benefits and an increase in income tax and national insurance. Both the Government and anti-poverty campaigners need to think long and hard about how to effectively combine a system where work is both financially rewarding for the very poorest in society and where benefits are not stripped away so quickly as to make the prospect of work daunting.

Yet this isn’t quite the full story. What about when we add child poverty rates[2] and income inequality into the mix, how does this affect the overall picture? Correlation doesn’t always mean causation, and a lack of correlation doesn’t necessarily mean an absence of causation, but it is interesting to note that the countries with the lowest METRs do not necessarily have the lowest child poverty rates. Indeed, as the graph below shows, there appears to be little correlation between the two.

What are we to conclude then? That the METR has no impact on the child poverty rate of a nation whatsoever? Not exactly. As an intriguing 2006 Joseph Rowntree foundation report has pointed out, incentives to work may well have a bearing on reducing child poverty[3]. Furthermore, work done by the OECD tells us that efforts to boost work incentives for the poorest families would be particularly effective in the UK.[4] Yet both pieces of research mentioned above argue that other things as well as a METR faced by a particular group of the population also have a part to play in a nation’s child poverty rate – the benefits and tax credits system for example. Hence, it is arguably not sufficient for the Government to concentrate all their attention on the METRs faced by the poorest in society, although this is clearly a factor that needs to be addressed.

Interestingly, something that does have a greater (although by no means perfect) correlation with child poverty is income inequality[5] (expressed by the Gini coefficient).  See the graph below.[6]

So, where does this leave us?
First, there will always have to be a trade off between work incentives and benefits, both of which must exist in some form in any national economy. The real dilemma comes in deciding where to draw this line.
Second, although METRs are not the be all and end all in tackling child poverty, they certainly play a part and this is why the UK’s incredibly high METRs faced by those on very low incomes should concern policy makers.
This goes hand in hand with the third and final big issue, namely that if the UK Government is serious about getting to grips with child poverty then it should investigate ways in which the gap between the richest and the poorest can be reduced.

CARE’s latest report, ‘the taxation of families 2010/11′, can be accessed here (PDF)

[1] Based on calculations made from Taxing Wages, 2011, OECD, p.109-142 (see more here: http://www.oecd.org/document/34/0,3746,en_2649_34533_44993442_1_1_1_1,00.html)

·        One in three children has seen hardcore internet pornography
·        Software to protect children absent from half of computers

New laws which will make it more difficult for children to access hardcore pornography were introduced in Parliament on Wednesday.

The legislation will introduce new controls to halt the rising numbers of children who have accessed hard core pornography on the internet.

The Bill was introduced in the House of Lords by Baroness Howe of Idlicote and has been warmly endorsed by Devizes MP, Claire Perry, who recently convened a cross-party enquiry into the subject of on-line child safety.

Lady Howe said, “My Bill will help parents protect their children from  access pornography by requiring internet Service Providers and Mobile Phone Operators to block pornography at the network level unless the customer buying access to the internet or mobile network is 18 or over and asks them to remove the block through an opt-in mechanism.”

Campaigners argue that this change would mean children surfing the internet could not visit ‘disturbing, harrowing and graphic’ websites.

Lady Howe continued, “Historically, most internet content has escaped regulation.  A laudable industry-wide effort in the UK resulted in the Clean Feed system that blocks illegal child abuse imagery, but there has always been a reluctance to block, or limit access to other forms of adult material due to the international nature of internet content.”

“We don’t accept this situation with any other form of media.  Our TV viewing is guided by clear Ofcom advice, our cinema screens are subject to British Film Board classifications and High Street hoardings and general print advertising are regulated by the Advertising Standards Agency.  And growing internet enabling of household devices and technological convergence – a quarter of TVs sold in the US are now internet enabled – means that the difference in regulation is going to come crashing into our living rooms,” Claire Perry added.

The campaign to change the law gained new momentum following a study that found one in three children had seen hard core pornography on the internet by the age of 10 and that four in every five children aged 14 to 16 ‘regularly’ accessed explicit photographs and movies on their home computers.

And evidence suggests that the problems are getting worse. Half of British computers are currently unprotected and one survey found that many parents felt intimidated by the ‘apparent complexities’ of setting up their own filter.

A YouGov poll found that the new generation of mobile phones was making accessing pornography easier with two-thirds of children admitting that they had accessed explicit material on their handsets. Worryingly most parents are oblivious to how easy it is for children to download images of the most extreme nature.

The Bill coincides with the new Safety Net campaign petition which states ‘To protect children I call on the Government to force Internet Service Providers to make accessing pornography an adult only opt-in service.’ It has gathered 40,000 signatures in just a few weeks.

Mrs Perry concluded:  “The Howe Bill addresses very effectively one of the greatest challenges for UK parents today, protecting children on-line. It is a timely and important piece of legislation that I hope will have a big impact.”

For media enquiries, please contact Alistair Thompson of Media Intelligence Partners on 07970 162 225, or 0203 008 8145.

Notes

1.You can find the bill on the Parliament website here: http://services.parliament.uk/bills/2010-12/onlinesafety.html

2. The Safety Net Petition backed by CARE, Premier and Safer Media can be accessed at www.safetynet.org.uk

Baroness Howe of Idlicote (pictured, right) introduced her ‘Online Safety’ Private Members Bill to the House of Lords today. It requires those companies that supply internet services – whether at home or on a mobile device – to filter pornographic content, unless an adult user specifically asks for access to such content. This mechanism is called an ‘opt-in’ system. The measure is intended to help parents bring up their children in an internet-enabled age without them being able to access, whether purposefully or by accident, such content. It would also allow those adults who do not want to access pornography, to surf the net more safely.

Because the internet is notoriously hard to police, due in part to issues related to where legislative boundaries begin and end, CARE believes that, at the very least, Internet Service Providers (ISPs) and Mobile Phone Operators (MPOs) should provide a service which empowers their adult customers to make decisions about what sort of content they don’t want on their home broadband or their children’s mobile phones. It should be offered to all adults, whether or not they are new customers or existing customers and should be promoted as a responsible mechanism to help children grow to maturity while enjoying the good that the internet can bring.

There is no reason why two separate approaches should exist for when children are walking down a high street, or when they are surfing the net. We do not allow children to buy films or computer games which are classified 18. We do this by verifying their age if it seems a person younger than 18 is attempting to purchase something they should not have. We should do it online as well. The technology exists. Talk Talk have implemented something which comes close to what we want to see, so other ISPs and MPOs should do the same.

Lady Howe’s Private Members Bill is the first legislative attempt to introduce an opt-in system for accessing pornography. It follows from the work of Claire Perry MP, who in 2010 introduced the idea to parliamentarians and was welcomed by Government Ministers. The Bill is a key milestone in the battle to secure a safe online environment for our children. The Government have so far said they are in favour of the proposals put forward by Mrs Perry, but would like the industry to self-regulate and bring about these changes without amending primary legislation.

Lady Howe made proposals that did not go as far during the passage of the Digital Economy Bill in 2009. Her suggestions then were to ensure ISPs and MPOs inform their clients, at the point of purchase and for the duration of the contract, about how they can help keep their children safe. These ideas were taken up by the Bailey Review of the Commercialisation and Sexualisation of Childhood. Reporting to the Prime Minister later last year, the Review’s author – Reg Bailey, Chief Executive of the Mothers’ Union – also said ISPs could do more to give parents tools to help protect their children online though he did not specify how this should be done.

The industry, responding to the review, made the pledge to bring forward self regulatory measures, but did not go as far as endorsing the requirement to have an opt-in to access pornography through a filter at network level.

That is why CARE is glad that Baroness Howe has brought forward this Private Members Bill, to encourage Government to require more from the industry to help parents bring their children up in the 21^st century.

A copy of the Bill can be found here.

Social policy charity CARE has today expressed its disappointment in yesterday’s Budget.

The Budget provided the Government with the opportunity to recognise marriage in the tax system, to make our fiscal arrangements more sensitive to family responsibility and help those on low to modest incomes.

The transferable allowance for married couples promised in the 2010 Conservative Manifesto and confirmed in the 2010 Coalition Agreement will achieve all three of these objectives.

Instead, however, the Government chose to further increase the personal tax allowance and by more than they had initially suggested.

This is very unfortunate.

Increasing the personal allowance to £10,000 will disproportionately benefit those in the top half of the income distribution and make our fiscal arrangements more individualistic, whilst introducing a transferable allowance for married couples will disproportionately benefit those in the bottom half of the income distribution and make our fiscal arrangements more sensitive to family responsibility.

Happily the Coalition Agreement to recognise marriage through a transferable allowance still stands. We would urge the Government to now make its implementation an absolute priority.

Notes

1. To find out more about the relative merits of the transferable allowance policy compared with raising the personal allowance see CARE’s Pre-Budget Briefing: http://www.care.org.uk/wp-content/uploads/2012/03/Progressive-Fiscal-Policy_CARE-Pre-Budget-Briefing.pdf

CARE welcomes the Chancellor’s announcements in the Budget today that he will first raise the threshold for the withdrawal of child benefit to £50,000 and subsequently withdraw the benefit gradually between £50,000 and £60,000 to avoid a “cliff edge”. Serious problems remain however. The proposals are still not “fair”, as the Chancellor claimed they would be.

One-earner families, both couple and lone-parent families, benefit much less than two-earner couple families. Simply raising the threshold for withdrawal does not remove this anomaly.

‘Even with a £50,000 threshold, many of the families who will be losing their child benefit are not rich and certainly not in the top 15% of the income distribution’, said Don Draper consultant to CARE and joint author of the review of family taxation published by CARE last week.

On 6^th March, the Chancellor said, “I think it is fair to ask those in the top 15% of the income distribution to make a contribution to the fiscal consolidation.” (Hansard 6^th March 2012 col. 708)

The following day at Prime Minister’s Questions, in reply to the Leader of the Opposition, David Cameron spoke of “not giving child benefit to the wealthiest 15% of families”. (Hansard 7^th Mar 2012: col. 841)

Don Draper, independent fiscal policy consultant to CARE, said, ‘If the Chancellor wants to restrict the withdrawal of child benefit to families who are in the top 15% of the income distribution, the threshold for the withdrawal of child benefit will have to apply at an income level which is much higher than £50,000.’

The income a family would need to be in the top 15% will vary according to the number of adults in the family and the number of children. CARE understands that for a family to be in the top 15% for the income distribution it would need to earn approximately:

As the Chancellor’s proposals stand it appears that middle income families will lose child benefit. A one-earner family with three children and an income of £50,000 is likely to be in the 6th decile – i.e. they are less well-of than 46% of the population. No families in this situation should have any part of their child benefit withdrawn (which is what begins at £50k) when other much better-off families are keeping theirs.

Dan Boucher, Director of Parliamentary Affairs at CARE, said, ‘The child benefit proposals still are very unfair to one-earner families. The Chancellor needs to think again.’

Today’s Budget provides a wonderful opportunity for the Government to give effect to their commitment to marriage, emphasised as recently as last week, by supporting marriage through the tax system.

Recognising the benefits which marriage has for society, a commitment to do this through the provision of a transferable allowance was included in the 2010 Conservative Party Manifesto and, later, in the Coalition Agreement.  The Liberal Democrat proposal to raise the individual tax threshold to £10,000 was also included in the Coalition Agreement.

Whilst the implementation of the £10,000 tax allowance policy has begun, the promise to introduce a transferable allowance for married couples remains unfulfilled.  In fact the process has not even been started.

CARE’s Pre-Budget Briefing makes plain that the decision to prioritise increasing the tax threshold over a transferable allowance for married couples does nothing to make Britain ‘the most family-friendly country in Europe’ as the Prime Minister intended.

The policy of raising the individual tax threshold to £10,000 primarily helps those in the top half of the income distribution, making our fiscal arrangements even more individualistic and less sensitive to family responsibility than is already the case.  By contrast, the transferable allowance would primarily help those in the bottom half of the income distribution and ensure our fiscal arrangements are less individualistic and more sensitive to family responsibility.

Some figures from the taxation of families 2010/11 report, published by CARE last week:

-  The tax burden in the UK on a one-earner married couple with two children is 52 per cent greater than the OECD (Organisation for Economic Co-operation and Development) average – up from 39 per cent in 2009 (p.10).

-   The figures are even worse for those on 75 per cent average wage who face a tax burden 85 per cent higher than the OECD average (p.10).

-   In this context, it is no surprise that the tax burden on a one-earner married couple with two children on an average wage is 74.5 per cent of that placed on a single person on the same wage, whilst the comparable OECD figure is just 51.4 per cent (p.11).

So what now?

We cannot hope to fix Broken Britain when we give those families where one parent stays at home to look after the children such a rough ride.

Introducing a transferable allowance requires a budget resolution following the Budget.  If the Government does not take action this year it is imperative that they do so following the 2013 Budget if they are to keep their promise of introducing transferable allowances within the current Parliament.  Moreover, preparatory changes to IT infrastructure will be needed which could begin now.

Let’s wait and see what Mr Osborne has to say in a few hours time…

UK tax system tightens the screw on ‘squeezed middle’, warns major new report from social policy charity

CARE is publishing its fifth annual review by independent consultants of the taxation of families – The taxation of families 2010/11. This is one of the most comprehensive reviews of the tax burden on families that anyone has yet made.

Like its predecessors, it examines the tax burdens on various households, and compares the position of families with that of taxpayers without family responsibilities. It includes comparisons with families in other OECD countries. Whereas previous reviews have focused mainly on families with an ‘average’ wage, this year’s looks at incomes ranging from 50% to 150% of an average wage.

The report’s key conclusions are:

• Politicians who have warned of the additional burdens faced by the “squeezed middle” have a point. Commonly taken to mean families with children on incomes between £20,000 and £45,000 a year, this new analysis suggests they are right to be feeling the pinch. It says there has been a gradual shift in the tax burden from single people and others without children to middle income families with children.
• Tax as a percentage of income paid by a one-earner married couple with children on an average income has doubled since the mid-1960s as part of a gradual trend in which tax reliefs such as the married couples allowances and child tax allowances have been phased out. But low income families have seen their tax bills fall.
• Increasing the tax threshold is not a cost efficient way of helping the least well off middle income families, many of whom will be basic rate one-earner couple families. Most of the benefit of a threshold increase goes to taxpayers in the top half of the income distribution, many of whom will be in two income families and/or without family responsibilities.
• A transferable allowance, as envisaged in the Coalition Agreement, would be a good way of reducing the tax burden of those families whose budgets are under the greatest pressure. It would not involve abandoning independent taxation. It would be a cheaper option than threshold increases, and would result in a more equal sharing of the national tax burden. 70% of the benefit of transferable allowance would go to families in the poorer half of the population. It should be confined to married couples.
• There has been a lack of consultation about the withdrawal of child benefit from households with a higher rate taxpayer. The report demonstrates that, because of the failure of the tax system to have regard for family responsibility, the withdrawal of child benefit from those just inside the higher rate threshold will actually have the effect of pushing some families already in the lower half of the income distribution further inside and take others into the lower half of the income distribution for the first time.  In the House of Commons on 6 March 2012 the Chancellor of the Exchequer said: “I think it is fair to ask those in the top 15 per cent of the income distribution to make a contribution to the fiscal consolidation.” If that is his intention, then a measure which will adversely affect families in the bottom half of the income distribution is exceptionally badly targeted. The report also points out that the proposal is likely to discriminate against marriage because of the administrative difficulties of withdrawing benefit from many cohabiting couples.
• The switch from tax credits to Universal Credit should reduce child poverty and the couple penalty for low income couples, but many families will still find the return from paid work very low. A quarter of all families seem likely to face an effective marginal rate of over 76%, much higher than in any other OECD country. The loss of passported benefits and reductions in Council Tax Benefit could make that rate even higher. If a transferable allowance were introduced, it would reduce the marginal rate for middle income families and improve the return from work. Some families would see their marginal rate reduced from 76.2% to 32%.

In a comment on the report, Nola Leach, chief executive of CARE, said: “This report demonstrates clearly that the United Kingdom is out of step with its international counterparts in the way it taxes families.

“Concern about the plight of the “squeezed middle” is entirely valid. The detailed analysis in the report shows that single-earner middle income families with children, earning around the median national household income of £34,ooo a year are facing a gradually growing tax burden compared with single people and two-earner families.

“This is because the UK taxes people on an individual rather than a household basis and because tax reliefs such as the married couples allowance have been phased out.  Our tax system takes no account of having many dependants (such as spouses and children) rely on a single wage.

“The most recent proposal for an increase in the income tax threshold to £10,000 would not, as is commonly supposed, help hard-pressed middle income families. Most of the benefit would go to taxpayers in the top half of the income distribution and widen the growing gap between two-earner families and their one-earner neighbours.”

These conclusions are based on the report’s key findings:

• The burden on UK taxpayers without family responsibilities is not out of line with that in other countries, or with what it was in the 1960s. Nor does the tax burden on two income families seem to differ much from that in other countries. The tax burden on very low income families compares favourably with the OECD average.
• However, one-earner families on a middle income pay much more. In 2010 (the latest year for which figures are available) a one-earner married couple with two children and an income of £35,000 had a tax burden that was 52% more than the OECD average. At £26,000 (close to the median wage), the family paid 85% more than the OECD average.
• The tax burden on that family was twice what it would have been in the 1960s. This is because in those years there was a married tax allowance and child tax allowances on top of the (comparatively low) threshold.
• As well as paying more tax, these middle income families face an effective marginal tax rate of over 70%. No other comparable country has a marginal rate on middle income families as high as this. Canada (58%), Australia (55%) and Italy (53%) are the only other OECD countries with rates above 45%. The OECD average for this type of family is 39%.
• The unfair treatment of some families is evident from the position of different households in the distribution of income. Pre-tax income is a poor guide to how well off taxpayers are, because it takes no account of the number of adults or children in the household.
• The failure by successive governments to take the number of people in a household into account when making tax changes explains why the tax burden on some families has been allowed to rise much faster than that on other households, why the tax burden on these families is often much higher than that in other countries, and why some families on low and middle incomes are now so hard pressed.
• Except at the lowest incomes, one-earner families are much lower in the income distribution than singles and couples without children. A single person without dependents earning around £34,000 is in the ninth decile (i.e. he or she would be better off than between 80% and 90% of the population), whereas a single one-earner married couple with two children and the same pre-tax income is in the fourth decile (i.e. between 30% and 40% in the distribution).

Download a PDF version of the report.