Lynne Featherstone criticises marriage tax breaks

PoliticsHome reports:

Lynne Featherstone has criticised the idea of giving married couples a tax break, saying such a move would be “extremely unfair”. In an interview with The Times(£), the Equalities Minister said a reduction in tax for couples who tie the knot was a “bizarre concept… and wrongly aimed” and warned it was unfair on those couples and single parents who were unmarried.

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  • Martin Veart 5th Mar '12 - 2:03pm

    Tax is individually-based but benefits are often directed at the family unit. Hence the current difficulty over child benefits and higher income earners.

    It is logical to base tax upon shared earnings by taxing (and benefitting) families. This may be seen as a backwards step by some but it would be a reflection of the real world.

  • Richard Dean 5th Mar '12 - 2:14pm

    I agreee, but OMG! Has Lynne counted the number of voters she is offending, and our consequent losses at upcoming elections? Can’t we fix the problem in some other way, without gettting ourselves voted out of office in the process?

  • What people like Lynne seem to miss is that it is not currently a level playing field. Couples who come together – to marry, but also to cohabit and live as a family unit – can be massively penalised under the current tax/benefits system. The IFS, no less, are clear that the ‘couple penalty’ exists. This isn’t about privileging some archaic view of the family, but about recognising that families are good for society (at least if we care about children, they are) and we should do our utmost to support them. If a low paid couple want to move in together but can’t because it would not be financially viable, that’s an issue for liberals about giving that couple a meaningful choice. So even if tax breaks are wrong, something needs to be done.

  • Richard Swales 5th Mar '12 - 5:51pm

    I’m not sure why it’s news that someone has given an interview behind a paywall. I’m left guessing at the content of the interview, but I want to repost what I wrote a week or so ago about this:

    “I agree that raising the threshold to 10K is more important to than the marriage tax breaks, but when that vote does come around, Lib Dems should vote in favour. Here’s why:
    Married Couple A both earning 20K (total 40K) pay a certain amount in tax.
    Unmarried Man and Woman B, both earning 20K (total 40K) pay the same amount as couple A.
    Married Couple C, one at home, one earning 40K (total 40K) pay more tax than couple A, as there is some higher rate taxand the woman’s tax allowance is wasted.
    Unmarried Man and Woman D, one at home, one earning 40K (total 40K) pay the same tax as couple C (so more than couple A), but on the other hand the partner at home is elligible for various benefits that the “housewife” in Couple C can’t get.

    My view is that in an ideal world, all 4 of the couples should end up with the same take home pay.

    My understanding is that the aim of the “married tax allowance” that is actually proposed is not a freebee for all married couples (so couples A and B will still be equally positioned), but simply to allow people like couple C to share their tax allowances and thereby pay the same tax rate as couples A and B.”

    I would add that if you have ideas yourself, then just assuming that the right wing of the Tory party is wrong is not a solution, as even a stopped clock is right twice a day.

    This is supposed to be “our place to talk”. Will a minister actually respond to this point instead of communicating at us through the press?

  • Malcolm Todd 6th Mar '12 - 11:57am

    It’s been a while since I was actively involved in welfare issues, but I don’t think RichardSwales is right. Benefits are of three kinds: contributions-based, needs-based and income/means-related. The first two sorts can be claimed by married people regardless of the circumstances of their spouses. The third cannot be claimed by anyone who is in a co-resident couple (such as Richard’s Couples C and D) regardless of whether they are married or not.
    There used to be tax penalties on marriage (I don’t know if the benefits system ever penalised married couples as such but if so it ceased to do so long ago); but I really don’t think there are any more. Just about the only time the tax system notices you’re married is with regard to Inheritance Tax, where being married (or in a civil partnership) gives you distinct advantages.

  • Richard Swales 6th Mar '12 - 3:49pm

    @Malcolm, just to check, you are ok with the party leadership following a strategy to distinguish ourselves from the Tories by being against equalising the position of couple C and couple A?

    Unmarried man and woman D (at least from the point of view of the government there should be no such thing as a couple only two individuals, the point about marriage is that it is when you tell the rest of society you are one unit), don’t have to be co-resident, one can live with their parents if the penalties are high enough, after how many nights spent sleeping over do we consider them a couple? Is there to a morning after form for them to fill in? I know a couple who were in this situation and it would have simply been impossible for him to take over the role of the state in looking after her and paying her hosuing benefit.

  • Malcolm Todd 6th Mar '12 - 4:37pm

    I’m really not clear what point you’re making here, but I’ll try to answer.
    I’m not particularly interested in leadership strategies — I’m more of a principles & policies guy. But I can’t see any reason why we need to “equalise the position” of two couple following quite separate paths. There are all sorts of perfectly good reasons, principled and pragmatic, for Couple A receiving what you seek to characterise as unfair advantage from the tax system: e.g. there are fixed costs (travel, clothing, eating away from home) associated with working that both partners in Couple A face but only one in Couple C does; it is administratively undesirable to seek to tax every bit of income in society, so it makes sense to have a personal allowance for each individual so that HMRC just doesn’t have to bother about those on very low incomes; Couple C are better placed to take steps to improve their financial position if it seems necessary (as the non-working partner can seek work — not too hard to find something that pays enough to make up for the slight disadvantage that the tax system imposes in comparison with Couple A).
    As to how many nights sleeping over it takes to consider two people a couple, that is indeed an issue that the benefits system has wrestled with throughout its existence, and leads to tremendously intrusive questioning, but I don’t see how it advances this argument. Are you suggesting that an unmarried couple should be treated as separate individuals in all circumstances? It’s a nice idea in principle, but will lead to an even greater transfer of wealth from the middling-poor to the rich than did the (however justifiable on other grounds) institution of independent taxation in the 1980s.

  • David Allen 6th Mar '12 - 4:58pm

    Lynne Featherstone is right. It is none of the State’s business to favour married over unmarried couples. It particularly annoys young people like my grown-up children, who are keen to make clear that they have decided either to get married or not to get married to their partners for personal reasons, and not because some politician might give them a bung!

    It is the State’s business to decide whether to favour families over individuals or childless couples. It costs money to bring up the next generation, and it is very arguable that those who are not doing it should help out those who are.

    It is the State’s business to treat couples and individuals fairly. I don’t know if the IFS’s “couple penalty” is real, but if it is, I would certainly support taking action to get rid of it and thus put individuals and couples on the same footing. That is quite different from incentivising marriage!

  • Malcolm Todd 6th Mar '12 - 6:17pm

    It’s pretty clear from the report Ben links to above that it is couples who are disadvantaged as against single people, not married as opposed to unmarried couples. And furthermore, “Couple penalties in the current UK tax and benefit system arise mostly through income support, jobseeker‟s allowance, pension credit and child tax credit.” Creating a tax “incentive” for married couples will compensate wealthier married couples for a penalty that they are not subject to (as they are unlikely to be receiving income-related benefits, or if they are they will lose some of those benefits anyway when their post-tax income goes up!), whilst doing nothing to help those poorer couples (married or not) who clearly do lose out in terms of state support.

  • Whilst I agree with David Allens points, having some sort of legal arrangement to order the affairs of couples is extremely useful (and I include any sort of pair arrangement here).

    I entirely agree that there is a strong arguement for the state to privilege bringing up children; it costs far far more both directly and in reduced earnings than not having children, and the childless benefit from the labour of other peoples children in later life.

  • Richard Swales 6th Mar '12 - 11:25pm

    @Malcolm, I mention the leadership of the party, because the married tax break is not before parliament, and it seems that they are talking about it now as some kind of differentiation strategy. That isn’t particularly important, the arguments for and against stand or fall regardless.

    The tax system currently sees it as a taxable benefit if you firm buys you a travel card to get to work. Arguably it shouldn’t, but given the costs of working are hugely variable (at one time I walked to work and wore jeans), I don’t accept that this is supposed to be the function of the fixed tax allowance.

    If we accept the argument that people who are dissatisfied with their financial position can simply get a job, then we can get rid of the whole benefits and tax allowance system. Certainly in my case (wife at home with two young children) that is not possible. The same argument could also be applied to couple A who could also increase their wages if they wanted to do overtime, a weekend job etc. But ok, say unworking partner in couple C was to earn an extra 1000 pounds, to bring their total income to 41K, it would still be the case that they would be disadvantaged relative to another couple with 41K per year, but with more even distribution.

    The tax system isn’t advantaging any of the couples, it is burdening them all, just to different extents.

    As for unmarried man & woman D – yes, it is difficult to administer the benefits system. They are not core to the argument (except that in most cases we are not unfairly advantaging C over them). The point is that if we are proposing something that keeps couples A and B on the same level, but moves couple C to be equal with them.

    Given a free hand, what I would do about this would be to have universal benefits, but start the tax system immediately and at a fairly steep but universal rate (it would have to be steep as it would take in the current income tax as well as benefit withdrawal rates, but without the cliff-edges). Therefore, who earned what and who was shagging whom would be irrelevant as the tax rate would be the same in any case (the 40K would be taxed the same in all cases, and all four men and all four women would get the universal benefit, so couples A, B, C and D would all be in the same position). I would use wealth taxation to do the “progressive” bit at the top end, although you still could have a higher rate income tax if you wanted. Of course the problem is, we have to start with the system we’ve got now.

  • Richard Swales 6th Mar '12 - 11:28pm

    -sorry, second to last paragraph should end with “then we should support it”

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