The Case for Marriage Tax Allowances in a Cohabitation Culture | Jade Payne
Currently, basic rate taxpayers are allowed to transfer £1260 of their personal tax allowance to their spouse, allowing them to save up to £252 per year. This Marriage Tax Allowance (MTA) was introduced in September 2013 by David Cameron. Before that, there was the more generous Married Couple’s Allowance which is now restricted to couples in their 80s, and allows a tax saving of £760. Before that, there was the Married Man’s Tax Allowance.
All of these schemes were designed to attempt to offset the tax burden of single-earner married couples. The average tax rate for a single-earner married couple with two children in the UK is 18.3% of gross wage earnings, and single-earner families (SEF) are more likely to have less disposable income than lone parent families (35% of SEF compared to 24% of lone parent families are in the lowest fifth for disposable income).
Just under £1 billion annually has been budgeted for MTA, however the uptake has been quite poor. Currently, the government spends £580 million on it each year. Considering the economic and social benefits of marriage, they should go a lot further in encouraging marriage.
In this day and age it is taboo to suggest that one family model is inherently better than another for children and for society, but this is not a topic that should be shied away from, especially since the majority of children born in the UK are now born to unmarried parents. Research consistently shows that children who live with two married biological parents are safest and less likely to be abused than children who live with one biological parent and their partner. Children with cohabiting parents are at greater risk of delinquency. If the parents are married it makes a split much less likely to happen, across all social classes. 28% of cohabiting parents and 32% of unmarried parents not living together split before their child turns 5, compared to just 10% of married parents. This high-risk period in the early years of a child’s life should be targeted by policies incentivising couples to transition into marriage.
The government and society as a whole should value marriage, and should make it easily accessible. To attempt to undo the damage that has been done, marriage tax allowance should be used as an incentive, it communicates the desirability of marriage. Social anthropologist J. D. Unwin notes that when a society goes from strict monogamy to widespread familial breakdown, it will stagnate within a couple of generations due to a lack of cohesion. We need only look around us at the economic state of the UK to see that stagnation. According to the Resolution Foundation, median non-pensioner household real disposable incomes rose 12% between 2004 and 2019 compared to 37% between 1980 and 1995 and 41% between 1992 and 2007. Productivity has fallen, and relative GDP per head has fallen.
The consequences of family breakdown reach across all areas of life. Iain Duncan Smith conservatively estimates that family breakdown costs the government £51 billion a year. However, with the current economic situation, it would be difficult to justify a very hefty tax break for all married couples. Congleton MP Fiona Bruce and former MP David Burrowes suggest: ‘A better proposal would be to target it by limiting eligibility to basic rate taxpayers with preschool children. This would help make the option of marriage more accessible to poorer households where marriage rates are lowest, and where the presence of the positive public policy benefits of marriage (which are independent of income) for both children (especially during their crucial early years) and adults would be particularly helpful for strengthening family life.’ This targets that high-risk period where unmarried parents are most likely to split, and increases the accessibility of marriage to them and provides added incentive. It may also help one of the parents to stay at home with their children longer.
I propose that we allow the transfer of the full tax allowance from one spouse to another, leading to a total savings of up to £2500 per year, if they have children under 4. It is an expensive proposal but could save the state a lot of money in the long term. Stable families save money in the long term on social care, foster care, and the cost of crime and incarceration. If we managed to turn around current trends and increase marriage, the government would make enormous savings on Universal Credit as 72% of families receiving it are lone parent households.
Alternatively, we could allow married couples the option of filing their taxes jointly, as they can in Germany and the USA. This would mean they have the double tax free allowance to be allocated where the greatest savings can be made. This used to be the norm in the UK but it was scrapped to encourage workforce participation among married women. Now that workforce participation is the default for most women, there is no reason not to offer this as an option.
As well as encouraging marriage, this policy also gives the government an opportunity to recognise and reward the unpaid labour of parents looking after children in the early years. It is a hit financially to go from two full time incomes to one for the majority of families. However, children who have a stay at home parent perform better academically, have fewer behavioural problems, and lower stress.
Electorally, addressing family breakdown would be popular. These are the results of a survey carried out by the Centre for Social Justice:
83% of British adults say that stronger families are important in addressing Britain’s social problems.
60% of single parents say it is important for children to grow up with both parents.
56% of British adults who say that one or more of their children were born out of marriage agree that marriage is the most stable environment in which to raise children.
67% of those who are divorced agree that family breakdown is a serious problem in Britain today and more should be done to prevent families from breaking up.
89% of British adults who are in their second marriage or more agree that the government is right to say the stability of a family matters for children.
63% of British adults who are in their second marriage or more agree it is too easy to get a divorce today.
Politicians are reluctant to address the importance of strong families, fearing they will be accused of being illiberal, old fashioned, and ideological, but most British people want them to address this vital social issue that affects every person in this country so deeply. It is irresponsible for politicians to pretend that it’s fine for people to be traumatised, thrust into poverty and abuse. Children who experience family breakdown are worse off by almost every metric. Marriage benefits everyone; the couple, their children, and wider society.
If we want to be a prosperous, high-trust society, we must begin with prioritising the most stable form of family unit, starting with the married couple.
