SOCIAL FABRIC
The single most important unit of society is the family, yet many families feel under financial strain on a daily basis. The proposal for a family allowance would recognise - like most other European nations do - that having strong families is essential for a strong social fabric, and give parents more options for how to arrange family life.
The Government should introduce generous tax breaks for single-earner couples and families with caring responsibilities in order to reward families who want to spend more time looking after loved ones.
Our new report, Family Fortunes, shows that single earner families experience a particularly high tax burden compared to those in similar countries. In the UK, single earner couples face a tax burden of 18% on earnings, the 9th highest tax burden among Organisation for Economic Co-operation and Development (OECD) countries and well above the developed world average of 13%.
Addressing this tax penalty would give more families the financial freedom to structure their commitments however they wish, helping those parents who want to spend more time at home caring for their children to be able to do so.
While the Coalition Government introduced the Marriage Allowance to allow married couples to transfer up to 10% of their unused personal allowance on income tax to their spouse in 2015, the relief suffers from very low take-up, with just 43% of those eligible making use of the scheme. Furthermore, the amount a spouse can transfer is small, reducing a couple’s tax bill by just £252 at most.
Ministers should strengthen the current allowance to reduce cost of living pressures on families, broaden the base of beneficiaries and further strengthen the institution of the family.
There are three key arguments for reforming marriage allowance.
A more generous relief applied to a broader range of families would be more effective at strengthening family life in Britain and helping families to care for their loved ones. To achieve this, we recommend three key reforms:
There are three key arguments for reforming marriage allowance.
A more generous relief applied to a broader range of families would be more effective at strengthening family life in Britain and helping families to care for their loved ones. To achieve this, we recommend three key reforms:
Families play a central role within our society. Their benefits extend well beyond economic materiality to physical and mental welfare, social stability, and resilience. In addition to countless academic studies, these benefits have been shown recently by our analysis in The State of our Social Fabric.
The reforms outlined in our new paper would radically strengthen families, helping couples struggling to juggle care for their children and parents, and be relatively affordable, depending on how far the full allowance flexibility is extended.
Our analysis also shows that advantaging single earner households in the tax system does not necessarily mean undoing the gains in female employment in recent years. Germany and Canada offer more generous family tax breaks than the UK but have similar rates of female participation in the labour market (73% and 71%, compared to the UK’s 72%). Iceland, meanwhile, provides fully transferable tax allowances between married couples while maintaining the highest level of women’s employment in the OECD (82%).
The report is backed by Miriam Cates MP, Conservative MP for Penistone and Stocksbridge, as well as the campaigning research organisation, Tax and the Family.
Luke Stanley, Senior Researcher at Onward and report author, said:
“Family life is expensive, but it is even more so for single-earner parental couples in the UK, hit by a tax burden far higher than the average for developed countries in each of the last twenty years.
“Extending the existing marriage allowance to cohabiting couples with children and deepening its generosity for those with young children and caring responsibilities would help address this injustice and give families greater financial security.”
Miriam Cates MP, the Member of Parliament for Penistone and Stocksbridge, said:
“This report is a fantastic addition to the conversation around how we best support families in all parts of public policy.
“Families really do sit at the very heart of our society, and it’s important that the state recognises this across all the different aspects of government. We have seen some welcome progress recently in terms of early years and the funding announced for the family hubs programme.
“Making sure that the tax system also gives families the support and – most importantly – the flexibility that they need is the next big step. Every family is different, but we have to trust parents and couples to know what is right for them and their children. Giving them the support to do this through reforms to the tax system would be a very positive change for the better.”
Don Draper, co-founder of Tax and the Family, said:
“The income tax system takes almost no account of how well off taxpayers are, with the result that taxpayers with children have a much lower standard of living than taxpayers without children and yet they pay the same or almost the same tax. Onward has shone some much needed light into a dark corner of our tax system.”
Lord O’Shaughnessy, former Government Minister and Chair of the Onward “Social Fabric” programme, said:
“The single most important unit of society is the family, yet many families feel under financial strain on a daily basis.
“The proposal for a family allowance would recognise – like most other European nations do – that having strong families is essential for a strong social fabric, and give parents more options for how to arrange family life.
“Most importantly, it would give them more time to care: for their children, their parents or their communities.”
Will Tanner, Director of Onward, said:
“Politicians routinely compete to be the most pro-family but successive governments have presided over a tax system that discourages people from taking time off work to look after their loved ones.
“It is time to put that right – following in the footsteps of many other developed countries – and to recognise the importance of the family in the tax system. Our proposals are affordable and practical – and would mean that thousands of parents could look after their children without being penalised for it financially.”
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