How has a government that committed to making Britain the most family friendly country in Europe ended up with tax system that’s driving the family out of existence? You may well ask.
A report published today by CARE (Taxation of Families – International Comparisons 2012) shows that single earner families are even worse off than they were in 2011. The tax penalty they are paying for their lifestyle choice – as George Osborne terms it – has become even more severe in recent years. Three years ago for the one-earner married couples with two children on average wage it was already 42 percent greater than the OECD average. Now it is 45 percent.
The depressing finding of the report is that aspiration as well as responsibility has been punished since the Coalition took office. In the UK the earning spouse on £27,000 takes home just 27 pence of every extra pound he earns. This is far far less than any other OECD country where the average is 66 pence.
This increasingly impoverished one earner couple family, thanks to independent taxation and the removal of child benefit, is also (unfairly) taxed far more than its dual earner counterpart. At £47,224 per year a UK one-earner couple with two children has a tax burden that is 36% greater than a dual earner couple on the same (total) income. At £59,925 the gap gets larger still – it is 38%. The introduction of a risory £200 transferable tax allowance, though welcome in principle, will barely dent the difference.
In his forward to the Report, The Bishop of Chester, Rt. Rev Dr Peter Forster, writes: “As someone who believes in both the importance of supporting the family and in the intrinsic God given value of work (whether it be paid or unpaid), I find it deeply troubling that families where one spouse is in full time paid employment and the other is undertaking unpaid care can be treated in such a manner.”
His concern is widely shared.
So why are these families being so cruelly targeted? George Osborne might just think stay at home mothers are a a lifestyle choice but the ‘informal’ childcare (that is how unpaid mother care at home is now perceived by the government) they provide has actually been costed.
If all parents handed over their children for 24 hours a days – a direction the government seems to be fast moving in – the cost to the exchequer in additional childcare would be £323 billion – equivalent to 23 percent of GDP (not to mention the terrible social cost). This is the recently computed value of all ‘informal’ child care in 2010 according to ONS stats (ONS 15 Feb 2013 Household Satellite Accounts, Valuing Informal Childcare).
Mr Osborne should put that in his pipe and smoke it. He should not be so indifferent to the stay at home mum. She has a huge hidden economic value as well as an overt social one.
Clearly though, this has not crossed his social liberal mind. He thinks he is being fair by raising the personal allowance. This is yet a further reflection of his misguided fiscal individualism. If means to help the poor to be ‘fairer’ he has got this wrong too. For as the report’s co-author David Binder says, “…(though) poorer people do benefit from raising the personal allowance (but) they don’t benefit to the same extent as richer people”.
In fact a full 75 percent of the benefit of raising the personal allowance goes to those in the top half of the income distribution.
Good one George.
So today he can congratulate himself on finding an expensive way not helping the very poor very much at all, while he makes responsible families poorer – in what looks like a determined effort to squeeze them out of existence.