There has been a bit of a debate raging recently about the Tories’ plans to reward marriage in the tax system. Harriet Harman was scathing (shock, horror), as was an article in The Daily Mirror. The policy was defended by The Daily Telegraph and, back in July, there was an excellent justification of it by Fraser Nelson on The Spectator’s CoffeeHouse blog.
I’ll be clear where I stand: in theory, I am in favour of supporting marriage through the tax system. I think there should be some system whereby married couples are taxed at a slightly lower rate than individuals. Importantly, while I will refer to ‘marriage’ throughout the rest of my article (for ease more than anything else), I also support the same system for anyone in a civil partnership.
The evidence points to marriage as being the best environment for bringing up children. Fraser Nelson summarises the YouGov findings, but I’ll reprint them here. Children brought up in single parent households are:
- 75% more likely to fail at school
- 70% more likely to be a drug addict
- 50% more likely to have an alcohol problem
- 35% more likely to experience unemployment/welfare dependency
The study also points to cohabiting couples being far more unstable than married ones: almost half of all cohabiting couples separate before their child is one year old. Only one in twelve married couples do the same.
Surely we all want the current generation of children to grow up into educated, responsible, aspirational adults? It is therefore in the national interest to recognise and reward the social institution most likely to lead to that end result: marriage.
We already use the tax system to discourage certain behaviour that is deemed ‘bad’. Taxes on cigarettes, for example, or spirits. The precedent has already been set for using tax to alter behaviour. So why not use it to encourage ‘good’ behaviour like marriage, which brings so many social benefits?
I’m not claiming that it will be the silver bullet. There will still be single parents. Marriages will still break down, and children will still go off the rails. But it would be a start. If applied correctly, tax incentives for marriage could help to ease the financial burden on the least well-off couples, as well as acting as a powerful symbol that marriage is the best institution in which to raise children.
There are two main counter-arguments to this view, of course. One relates to the policy in principle, the other to the Tories’ specific proposals. I will deal first with the more general of the two.
Put simply, this is the argument that any policy in favour of marriage penalises single parents. Who wants to be seen to be criticising a single parent?
I certainly do not. I recognise that a huge number of single parents do an amazing job of raising their children, often in incredibly difficult circumstances. But I’m going to go out there and guess that, either upfront or deep down, most would admit that it isn’t an ideal situation.
In terms of policy, I think we can divide single parents into two groups. There are those who, through no fault of their own, lose their husband or wife through death or divorce. Personally, I would like to see a system where widows and widowers could retain the marriage tax incentives for a while. It seems morally wrong to take it away from someone who has lost their spouse. Perhaps it could be retained for a period of three or four years, to avoid an instant loss of money (and to give time for any young children to be of school age). The same can be said following a divorce. These events are traumatic enough, without suddenly facing an increase in tax also.
Then there are the people who have children without ever considering marriage. Either as a teenager, or through a one night stand, or something else. Whatever the circumstances, it happens. This is what a marriage tax policy should be a symbol against. Bringing a child into the world is an enormous commitment and, in my opinion, is one that should be attempted within a loving, stable marriage. And I don’t think governments should be afraid of saying that.
Then there is the specific criticism of Tory policy, as advocated in the Mirror. Iain Duncan Smith’s proposal for a transferable tax allowance would give couples in which one spouse worked £380 per year, whereas couples in which both worked would get only £30 of benefit. This would be a middle class tax break, giving the most benefit to couples which could afford for one person to stay at home.
I don’t often agree with the Mirror, but I do on this occasion. I’m not a fan of any tax that is regressive, and it looks like this married couples allowance would be – in a big way. So I hope Cameron and Osbourne can come up with a way of rewarding marriage in the tax system, but one that would reward those at the bottom of the income scale the most. The current proposal is unacceptable.
A third main criticism is cost. Ian Duncan Smith’s proposal would cost almost £5 billion, a huge sum. While I think some form of marriage tax allowance is desirable, careful thought must go into how it will be funded. While I think it is an important policy, my gut instinct is that it will too expensive to enact during the current fiscal crisis. It may well have to wait.
Overall, then, I do believe that marriage and civil partnerships should be supported through the tax system. Those on the Left (and libertarians on the Right) may well disagree, but it is what I believe. And it is, I would suggest, where the evidence points us. However, the current proposals are far too regressive for my taste and the Tories should have a careful think about how they want such a policy to work. It may also prove too expensive for the short- to mid-term.
Let’s see what Team Cameron come up with…
