Transferable Tax Allowances

Wednesday 28th November 2012 Westminster Hall

Motion made, and Question proposed, That the sitting be now adjourned.—(Mr Gauke.)

09:30

[Mr Stewart Jackson (Peterborough) (Con)]

It is a pleasure, Mr Turner, to speak under your chairmanship for the first time, and it is a great honour to have the opportunity to put these important issues before the Chamber.

One of the key policy focuses in the run-up to the general election, and one of our key election manifesto commitments, was the introduction of a transferable allowance to recognise marriage in the tax system. The commitment to introduce the necessary legislation was included in the coalition agreement—for the avoidance of doubt it was on page 30—with provision also made for the Liberal Democrats to abstain.

The transferable allowance proposal was the main headline-grabbing recommendation among many other recommendations arising from the Conservative party’s social justice policy group and its two reports “Breakdown” and “Breakdown Britain”. Both reports highlighted the centrality of family breakdown to many of the social problems facing Britain today, which are a real issue, as I see in my constituency and as my hon. Friends will see in theirs. The reports recognised that the lack of policy support for marriage—the relationship at the heart of a stable family life—was not helping.

Britain is unusual in having a tax system that does not include any spousal allowance or credit. The group was very clear that addressing that shortcoming and recognising marriage in the tax system through a transferable tax allowance would help to bring us back into line with international best practice, and define the best way forward.

Before going into a more detailed presentation of the rationale for the transferable allowance policy, it is important to be clear from the outset about its importance to my party, as is reflected by the Prime Minister’s frequent references to it. When speaking as the Leader of the Opposition in response to the publication of “Broken Britain” in 2007, he said:

“I welcome this report’s emphasis on the family, and on marriage, as the basis for the social progress we all want to see…Britain is almost the only country in Europe that doesn’t recognise marriage in the tax system”.

He continued:

“Our support for families and for marriage puts us on the side of the mainstream majority, on the side of a progressive politics, on the side of change that says we can stop social decline, we can fix our broken society, we can and will make this a better place to live for everyone.”

In July 2008, in Glasgow, the Prime Minister continued to affirm that stance by saying that

“when it comes to perhaps the most important area of all, families, we will take action not just to support marriage and family stability”.

He told parents:

“your responsibility and your commitment matters, so we will give a tax break for marriage and end the couple penalty.”

Furthermore, in 2010, during the run-up to the general election, during a speech in Doncaster, my right hon. Friend seemed to become even more vociferous in his support for marriage, saying:

“I absolutely feel at my very core that recognising that relationships matter, that commitment matters and, yes, that marriage matters is something we should not say quietly but something we should say loudly and proudly.”

He continued:

“What is so backward looking in a country where we have social breakdown and social problems of saying that committed relationships, encouraging people to come together and stay together is a bad thing? Of course it isn’t, it’s not outdated”—

I hope that the Deputy Prime Minister is listening—

“if you look around the European Union, if you look around the OECD, we’re almost alone in not recognising marriage in the tax system. And why do we…think that with our appalling record of family breakdown that somehow we are in the right position and everyone else is in the wrong position; we’re not, they’ve got it right and we have got it wrong.”

[Mr David Burrowes (Enfield, Southgate) (Con)]

The Conservative party is standing up for marriage in the House. With the exception of the representative from the Democratic Unionist party, the hon. Member for Strangford (Jim Shannon), 14 Conservative Members account for all the Back Benchers in the Chamber, so we are clearly showing that the only party on the side of marriage is the Conservative party.

[Mr Jackson]

As usual, my hon. Friend makes an excellent point. It will be noted that family policy is low on the agenda for Her Majesty’s Loyal Opposition.

The Prime Minister has said during Prime Minister’s questions:

“I believe that we should bring forward proposals to recognise marriage in the tax system. Those in our happy coalition will have the right to abstain on them, I am happy to say, but I support marriage. We support so many other things in the tax system, including Christmas parties and parking bicycles at work, so why do we not recognise marriage?”—[Official Report, 2 June 2010; Vol. 510, c. 428.]

That was a seasonal reference. I could go on, but I hope that I have made the point that delivering transferable allowances, about which we have talked so much, is now of central importance if we are to be deemed to be reliable and trustworthy.

[Mark Field (Cities of London and Westminster) (Con)]

I thank my hon. Friend for leading this debate. Does he recognise the concern that many of us have—we will no doubt be feeling it in the months to come—that the changes to child benefit are another example of where the rhetoric about marriage will be undermined? A stay- at-home parent in a household earning only £60,000 will be deprived of all their child benefit if those proposals go through, yet two working parents earning £45,000 each, so with 50% more income, will not lose a single penny of their child benefit. That is one of the unforeseen circumstances of this ill-thought policy.

[Mr Jackson]

My hon. Friend makes an astute point and I hope that the Chancellor is listening. We will hear his autumn statement a week today. In fairness to the Government, they have sought to ameliorate the cliff-edge effect of the changes that were announced in October 2010, but uprating benefits by 5.2% while seeming to punish people who are aspirational and have done well for themselves sends a confused message, and the Chancellor should seriously think again about that policy. With respect to the Minister, I am not convinced that the infrastructure is even in place to enact that policy change to the maximum degree, but I must not meander on to child benefit.

Back in February 2007, the fact that Britain came bottom of the UNICEF league table for child well-being hit the headlines and rightly caused a stir. On 16 February 2007, that was picked up in an important speech by the then Leader of the Opposition entitled “Nothing matters more than children”. He gave a strong affirmation of the importance of marriage for child development and said,

“I want to see more couples stay together, and we know that the best way to ensure this is to support marriage. Not because it matters how adult men and women conduct their relationships. But because it matters how children are brought up. Nothing matters more than children.”

Who in this Chamber could disagree with that?

Why is marriage so central to child well-being? As “Breakthrough Britain” demonstrated, fewer than one in 10 married parents have split by the time a child is five, compared with more than one in three couples who were not married. That is hugely important because although most single parents do a fantastic job in very difficult circumstances, the evidence is clear that, on average, children brought up in married families do better than those brought up in single-parent families on every significant measure: educational attainment, health, likelihood of getting into trouble with the law, and alcohol and drug abuse.

As the Secretary of State for Work and Pensions said in February 2011:

“The Centre for Social Justice has found that those not growing up in a two-parent family are: 75% more likely to fail at school; 70% more likely to become addicted to drugs; and 50% more likely to have an alcohol problem…And the Joseph Rowntree Foundation has found that children from separated families have a higher probability of: living in poor housing; developing behavioural problems; and suffering from a host of other damaging outcomes, whose effects spill over to the rest of society.”

Some might be tempted to respond to that by suggesting that the principal cause for those different outcomes is not marriage, but wealth, and it just so happens that wealthier people are more likely to get married. However, that analysis does not add up. No one is trying to argue that marriage is the only important consideration or that wealth is not relevant. However, as the Under-Secretary of State for Education, Lord Hill of Oareford, has noted, research from the millennium cohort study suggests that the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples.

In that context, the least we should do is to ensure that getting married in this country is no more difficult than in other developed countries. Given that Britain is unique among large, developed OECD economies in failing to provide any kind of spousal allowance or credit, the fact that it is relatively insensitive to couple and family responsibility must come as no surprise. In making that point, I am aware that when the recognition of marriage in the tax system is mentioned, it provokes in some quarters embarrassed smiles and sarcastic comments such as, “I got married for love.” I hope that we all did—those of us who are married—but such comments demonstrate a complete failure to understand the situation in which we find ourselves.

Let me be clear that people do not fall in love for fiscal reasons. However, when they fall in love and decide that they want to be together, they face a choice. Do they marry or cohabit? Do they make a public lifelong commitment to each other in front of families and friends that is recognised in law, or do they just move in together relatively casually and see how things go? The suggestion that that judgment is in no way impacted by financial considerations can be made only by people whose wealth is such that they are entirely insulated from the real-world considerations that impinge on the lives of most, and they are in danger of seeming very out of touch—I hope, again, that the Deputy Prime Minister is listening.

What of the pertinent financial considerations? The latest international comparison figures demonstrate that one-earner married couples on an average wage with two children face a tax burden that is 42% greater than the OECD average. Why should we make it so much more difficult for people to marry in the UK than in other OECD countries? That is a pressing question, especially when considered in the context of polling.

[Tim Loughton (East Worthing and Shoreham) (Con)]

My hon. Friend makes a powerful case. Let me emphasise that what he is asking for is not a preserve of the middle classes, and nor would it undermine other forms of cohabitation that people are in, in many cases through no choice of their own—particularly when a husband has abandoned a wife. The reason why people go into marriage in the first place is also not based on money, but the empirical evidence that he has started to reel off absolutely shows that marriage is the most sturdy and stable form of bringing up children.

Does my hon. Friend agree that next week’s autumn statement by the Chancellor is absolutely the last opportunity for the Government to make clear the importance that they place on marriage? A commitment was made in the coalition agreement, but we need a full-blooded commitment, not one that only tinkers around the edges with a half-hearted endorsement of what we all believe in.

[Mr Jackson]

I could not have put it better myself. My hon. Friend’s intervention allows me to pay warm tribute to his fantastic work as children’s Minister. I look forward to the day that he is back in government, sharing his plethora of talents with the nation, but I know that he will do a fantastic job on the Back Benches for his constituents and the country.

I return to my argument about polling. My right hon. Friend the Secretary of State for Work and Pensions said during marriage week in February 2011:

“When asked about their aspirations, young people are very clear: three quarters of those under 35 who are currently in cohabiting relationships want to get married, and some 90% of young people aspire to marriage. So perhaps the question we should be asking ourselves is this: if people from the youngest age aspire to make such a commitment in their lives, what stops them doing so? Government cannot and should not try to lecture people or push them on this matter, but it is quite legitimate to ensure people have the opportunity to achieve their aspirations.”

I must, in addressing this point, congratulate the Secretary of State on bringing in the long-overdue reform that our benefits system requires and on introducing universal credit, which takes important steps to erode the couple penalty. However, the couple penalty remains such that, even with a fully transferable allowance, it would still be in place for all couples, apart from those without children. In other words, where one is dealing with one-earner married couples with children, the provision of a fully transferable allowance would not even create a level playing field, let alone any incentive to marry. It would simply erode the disincentive not to marry.

In the current context, where we make it harder for people to marry in this country than it is across the EU on average, the lack of support for marriage gives rise to family breakdown, not primarily through the breakdown of existing marriages, but by making marriage no more fiscally attractive than cohabitation, despite requiring a much higher and much more costly level of commitment than cohabitation. In such a context, cohabiting, which, as we have seen, is far less stable, inevitably becomes more attractive.

“Family breakdown in the UK”, a publication from December 2010, made the point that

“the problem is not divorce. While marriage accounts for 54% of births, the failure of marriages—i.e. divorce—accounts for only 20% of break-ups and 14% of the costs of family breakdown, amongst all families with children under five. Unmarried families account for 80% of the break-ups and 86% of the costs.”

It subsequently stated:

“These new statistics demonstrate dramatically that family breakdown is a huge and growing problem and that the main driver of family breakdown is the collapse of unmarried families. A failure to acknowledge these key points will lead to the inevitable failure of any government policy aimed at strengthening families. Witness the continued rise of lone parenthood since the 1980s at a time while divorce rates remained stable or declined.”

The arguments for a transferable allowance for married couples, defined narrowly in terms of the benefits of marriage, are more than enough to justify the change, but there are other compelling arguments for introducing transferable allowances: first, to make the tax system fairer by reducing the tax burden on one-earner families with modest incomes; and secondly, to make work pay, which is even more important.

In the first instance, it is not fair to place a tax burden on the income of one-earner families that is 42% greater than the OECD average. Crucially, most one-earner families who would benefit from a transferable allowance are in the poorer half of the population. The Institute for Fiscal Studies published figures shortly before the election showing that the transferable allowance proposals in our manifesto would have overwhelmingly benefited families in the poorer half of the population. In contrast, the IFS said that raising the tax threshold—the implementation of which has been prioritised to date in order to please the Liberal Democrats—would benefit mainly taxpayers in the top half of the population.

When independent taxation was introduced in 1990, it was realised that, unless special provision was made for families, they would lose out. As Nigel Lawson recognised at the time, the logical solution was to give a non-earner in a one-earner household the right to transfer their unused personal allowance to their spouse. He was not able to do that and as a compromise, the married couples allowance and the additional personal allowance were introduced. It is now clear that, without those allowances or transferable allowances, one-income married couples, most of whom are relatively poor, were bound to end up bearing an increasing share of the tax burden. That is what has happened, generating a completely unfair situation.

A few years ago, the Treasury published figures showing that, in 2009-10, a single taxpayer on three quarters of the median wage—approximately £20,000—was paying 21% less tax than in 1990. A single-earner married couple were paying 11% more tax. Under the coalition agreement, we are putting considerable resources into raising the tax threshold. For a single person under 65, the tax threshold this year is 170% higher than it was in 1990. However, the tax threshold for a one-earner married couple has risen by only 71%, so in real terms it is lower than it was in 1990. I urge the Minister to examine those figures carefully and to draw them to the Chancellor’s attention.

[Mr David Davis (Haltemprice and Howden) (Con)]

I commend my hon. Friend on his compelling analysis. Listening to him reminded me of something that my mother—my single mother—said about 40 years ago. She used an old phrase, “When money troubles come in the door, love goes out the window”, which is a good measure of the stresses that are put on families by financial pressures. Does he agree that there is no more important time than now for this issue, when the least well-off in our society are facing job and cost pressures as never before, which will put pressures on marriage as never before?

[Mr Jackson]

My right hon. Friend is bang on the money. Although such tax changes would be costly in the short term, the benefits for society would be incalculable, were we to enact them, which I hope we will in the Budget next March.

In considering the fairness arguments, it is also important to deal with the misguided claim made by some that, rather than helping one-earner families, the answer is to make them two-earner families. That logic is the occasion of great unfairness, because more often than not that option is not available. The latest DWP figures demonstrate that in 2.2 million households one member is in full-time work and the other is not earning; that 1.2 million, or 53%, of those households contain children; that in 700,000, or 58%, of those households with children there is a youngest child who is under five; and that a further 300,000, or 21%, have a youngest child between the ages of five and 10. Some 61% of all one-earner couple families have a young child under five, someone who is disabled or someone with caring responsibilities. Many of the remainder are likely to be doing voluntary work. It is clear that the majority of one-earner families are one-earners out of necessity rather than choice.

[Mr Marcus Jones (Nuneaton) (Con)]

I congratulate my hon. Friend on securing this important debate. He is making an important point about low-income families and the second person in the family having to obtain work. Does he agree that one of the biggest problems is that, for a second earner on a low wage, there is the massive impediment of child care costs, which usually take up most of that second income?

[Mr Jackson]

My hon. Friend makes a good point. We are fortunate that the ministerial teams in the Treasury and the Department for Education are thinking carefully about how important child care is. Balance is important. We must not send a message through the tax system that child rearing, caring for children and bringing up a family are less important than going out to work, but at the same time we must, as Conservatives, take a liberal approach, so we should not put disincentives in the tax system for those who want to work. One of the abiding negative legacies of the previous Government is the appalling, mismanaged tax credit system, which tied so many people up in knots and was a disincentive for them even to consider any form of work.

I will not detain hon. Members too much longer, because other colleagues wish to speak. In addition to the marriage and fairness argument, there is also the important “making work pay” argument. In his Conservative party conference speech this year, the Prime Minister placed great emphasis on the goal of building an aspiration nation. Realising that goal necessitates addressing the principal obstacle, namely that our marginal effective tax rate is currently a staggering 73% for many people in receipt of tax credits. This is hugely out of line with international best practice. The comparable OECD average is just 33%. I am afraid that the elusive right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) must bear that huge burden. Clearly, he has better things to do today than attend this debate and listen to descriptions of the mess he made of the tax credit system.

We have got ourselves into such a situation because we moved from placing the burden of recognising family responsibilities on both the tax and benefits systems, as in most large, developed economies, to placing it entirely on the benefits system. That necessarily inflates benefits and, in so doing, creates an inflated marginal effective tax rate and a huge disincentive to work one’s way out of poverty, wherein the person concerned only gains 27p in every additional pound earned. Across the OECD, comparable employees take home on average 67p for every additional pound earned. The introduction of a transferable tax allowance will restore to the tax system some responsibility for recognising family responsibility and thereby float some poorer families off benefits, releasing them from high marginal effective tax rates.

The transferable allowance policy is timely for those wanting the UK economy to grow, such that those trapped under the burden of crippling marginal effective tax rates are released—liberated into productive, constructive employment, wherein they can deliver the aspiration nation goal.

To date, Ministers pressed on the transferable allowance point have always reaffirmed the Government’s commitment to the policy and said that they will introduce it at the appropriate time. However, the truth is that if they do not act at the next Budget in March 2013 the appropriate time will have passed, because it will take at least 12 months from the passage of the legislation till the law can be implemented, because of information technology and other preparatory changes that Her Majesty’s Revenue and Customs will have to implement. We have now reached the crunch point, which is why I call on the Chancellor to announce in the autumn statement, a week today, that the 2013 Budget will introduce transferable allowances.

I am told that the cost of a transferable allowance restricted to married couples with a child under three would be less than £1 billion. If it were restricted to married couples with a child under six, the cost would be £1.4 billion. The cost would be £2.4 billion if it were restricted to married couples with dependent children or in receipt of carers’ allowance. These are not insignificant amounts, but they must be seen in context. At 2010 prices, £13 billion is being found to raise the threshold for everyone to £10,000, and some £3.3 billion is being found to increase the basic personal allowance by £1,100 next year.

[Mark Field]

For context, my hon. Friend will know that £2.4 billion is roughly eight days’ borrowing for this Government.

[Mr Jackson]

I am sure that the wise point made by my hon. Friend will be heard by the Minister, the Front-Bench spokesman for the Treasury.

In presenting these options, I hope that the Government do not opt to introduce the limited partially transferable allowance mooted in The Sunday Telegraph just published, which would be worth only £150, or £3 a week. If the limited funds available are such that we have to start with a limited transferable allowance proposal, it would be much better to focus a transferable allowance on those with young children, providing such families with a meaningful transferable allowance, rather than something minimal spread over all one-earner families.

[Jeremy Lefroy (Stafford) (Con)]

My hon. Friend is making a powerful argument. I agree with everything he said. Does he agree that tax allowances should be given by introduction of a transferable marriage allowance, rather than by substantial tax allowance given to higher-rate taxpayers on their pension contributions, even if they are earning six-figure salaries?

[Mr Jackson]

Exactly. My hon. Friend makes a good, important point. This is an opportunity to make real our commitment to fairness and equity.

It is worth noting that the Prime Minister himself seemed a bit bothered by the nature of the partial allowance proposal. On 10 April 2010, he told Sky News:

“Of course, I want to go further”

than just a partially transferable allowance

“and I’m sure over a Parliament we would be able to go further, but this is a good first step that says commitment is important, marriage is important. I want us to be the most family friendly country in Europe and this is one step along that road.”

For the reasons I have elucidated in the past 20-odd minutes, the transferable allowance policy is a win-win policy for this Government that will help us make our fiscal arrangement less hostile to marriage, deal with some current unfairnesses in our tax system and help to make work pay. I hope that the Chancellor does the right thing next Wednesday and brings in a transferable tax allowance, which will be good for our constituents and for the country.

09:58

[Jim Shannon (Strangford) (DUP)]

I am glad to have the opportunity to contribute to the debate on transferable tax allowances. I commend the hon. Member for Peterborough (Mr Jackson) for securing time for hon. Members to consider this important subject, on which, as the Member of Parliament for Strangford and a member of the Democratic Unionist party, I have received considerable correspondence. It is an important issue.

At Westminster, the DUP has been pushing the Chancellor to introduce recognition of marriage in the system. We are keen to support the Government on that policy, which the Conservative party advocated in opposition. That party’s proposal envisaged a system whereby married couples would be able to transfer part of their personal tax allowance to their spouse. An individual in the UK could earn £8,105 per year tax free under the Conservative party proposals, and if someone did not use their full personal allowances, up to £750 could be transferred to their spouse, which would amount to a tax cut of £150 for that family. Reports in the media have led us to believe that that might be on the way. The Minister will perhaps respond; he may not have Pandora’s box or all the answers today, but if the proposals are in the Budget or the autumn statement, we will give them our full support on the Floor of the House.

Until relatively recently, the UK recognised marriage in the tax system, but that changed as a consequence of decisions taken by the Labour Government. There is only one Labour Member here, and I usually support Labour on many issues in the House, but I am very much opposed to its position on this. The absence of Liberal Democrats from the debate tells a story in itself.

We find ourselves in the minority in the OECD. Only 20.1% of people in the OECD live in countries that do not recognise marriage or have a spousal allowance. In that context, it is not surprising that married couples get a bad deal. In “The Taxation of Families”, Pearson and Binder, using the latest figures from the OECD, illustrate that in 2011 a one-earner married couple on an average wage with two children faced a tax burden 42% greater than the OECD average. The hon. Member for Peterborough mentioned that in his contribution.

The UK tax system currently is intensely individualistic. Taxation gives single people with no family responsibilities a relatively easy ride, by comparison with married couples. That can be clearly seen in the fact that in 2011 the tax burden on a one-earner married couple on an average wage with two children was 73% as a percentage of that placed on a single person on the same wage, while the OECD average was just 5%.

The statistics illustrate that the UK makes things more financially difficult for married couples than our compatriots in the OECD do. To my mind, and the minds of most of us here, that is deeply concerning. I have always believed that marriage is a hugely important social institution, which provides significant benefits to the couple involved, the children born to the couple and society at large. We certainly should not make it more difficult for couples to marry in this country than it is in other developed countries, such as France, Germany and the USA. Why would we not want to recognise the importance of marriage and show our support for children being brought up by parents in the stable environment of marriage?

For the couple, marriage produces significant benefits, including public benefits that are not without consequence for the Exchequer. The figures have already been outlined. Research indicates that even the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples. Marriage has a positive impact on the mental well-being of the couple. The health gain of marriage could be as large as the benefits of giving up smoking, for example. Such examples are only a small portion of the benefits that marriage can often bring to couples who enter into it.

The social science evidence on the impact of marriage on children demonstrates significant public benefit. The scale of the benefits to children raised in married families is striking. The hon. Member for Peterborough outlined the differences between the outcomes of children of married parents and of unmarried parents. I will not go over that again, owing to the lack of time, but the need for a change has been clearly illustrated.

It is important to stress that I am not so naive as to suggest that Governments have the capacity to make marriages happy and strong—they are not marriage guidance counsellors or Relate. The Government do however have a role in not making it more difficult for couples, who fall in love and want to be together, to marry in this country than in it would be in another country. The current policy position is misguided and we urgently need to change direction.

[Andrew Bingham (High Peak) (Con)]

As the hon. Gentleman said, it is not the Government’s role to be marriage guidance counsellors, but does he agree that introducing transferable allowances, as my hon. Friend the Member for Peterborough (Mr Jackson) outlined, would send a strong and clear message to the whole population that we support marriage? I have been married for 26 years—I hope I have got that right! It is a fantastic institution and has been for many years.

[Jim Shannon]

As someone who has been married for 25 years—just a year less than the hon. Gentleman—I wholeheartedly endorse what he says. Marriage is important for a great many of us.

The problem can be remedied in a positive way by introducing a transferable allowance for married couples, as the hon. Member for Peterborough suggested. The Prime Minister and the Conservative party have promoted the idea, but the main barrier has been the Liberal Democrats. The Deputy Prime Minister has said that

“we should not take a particular version of the family institution, such as the 1950s model of suit-wearing, breadwinning dad and aproned, homemaking mother, and try and preserve it in aspic.”

That statement clearly demonstrates immaturity and inconsistency on his part. The proposal is not about keeping women away from work and forcing them to stay at home, but about allowing the flexibility that we should have in the tax system, so that if either one of the couple does not use their full tax allowance, a portion of it can be passed to the other. At the same time, the Deputy Prime Minister has called for paternity leave to be increased from two to six weeks, but he does not want to make it easier for parents who already stay at home and do not use their full personal allowance. I suggest that that shows double standards.

Such an allowance would make the tax burden more sensitive to family responsibilities. It would also disproportionately benefit families in the poorer half of the income distribution. The Institute for Fiscal Studies, commonly referred to by all parties in the House, says that 70% of the benefit from a transferable allowance would go to those in the lower half of the income distribution. In other words, it would benefit those who need it most in a fair and balanced way, as it should.

We are all interested in reducing child poverty. The introduction of a transferable allowance would particularly help to address it by reducing the number of children living in households with an income below 60% of the median. In considering that point, it is important to remember that how materially wealthy individuals are depends not simply on income but on the size of their family.

A couple on £35,000 with two children is likely to be better off than only 37% of the population, even when tax credits and child benefit are taken into account, whereas a single person on £35,000 is in the top 20% of the population. We can blind people with figures, but they illustrate a clear trend—those in a marriage are disadvantaged under the current system. A two-earner couple with an income of £35,000—one working full-time and one part-time—is also in the poorer half of the population, but better off than the one-earner family. If the income were split equally, they would probably be in the fifth sector—better off than 44% of the population.

Some 2 million children are in one-earner couple households. Around 900,000 of them are in households with an income below 70% of the median. Of those, between 600,000 and 700,000 live in households with incomes below 60% of the median. A transferable allowance would reduce the number of households with incomes that fall below 60% of the median. It makes sense to make changes and to make them soon. A transferable allowance would reduce the number of households currently facing a 73% marginal tax rate. In so doing, it would particularly help the poorest one-earner families, whose efforts to earn their way out of poverty are jeopardised by the extraordinarily high tax rate.

The 73% marginal effective tax rate is a direct consequence of the UK tax system’s failure to recognise family responsibilities in any way. It places the burden entirely with the benefits system, rendering the withdrawal of benefits a more significant event for marginal effective tax rates. In the current tax year, a quarter of all families have an effective marginal tax rate of 73% or more: income tax accounts for 20%; national insurance contributions for another 12%; and the tax credits taper accounts for a further 41%. A family with two children and an income below £31,356 will pay 73% on any additional income. A family with four children will pay 73% on incomes below £43,838.

The figures do not take account of pension payments, so in many cases the 73% tax rate reaches even higher up the income scale. When pension contributions are taken into account, that 73% could apply to families earning £45,000. Around 2 million families are in that position, so one in four of all families in the United Kingdom of Great Britain and Northern Ireland faces a marginal rate of 73% or higher. That is deeply concerning and is an important reason for change.

Things will get even worse with the introduction of universal credit. The marginal effective tax rate of such families will actually increase from 73% to 76%—another three percentage points. Only 300,000 people have been affected by the top 50% rate, but, by contrast, 2 million will be locked into a system in which the Treasury will take back more than 76p of every extra pound earned. They are not “welfare spongers” but hard-working families, whom we are here to represent, which is why we are discussing this proposal today. I commend the hon. Member for Peterborough for securing the debate.

The economic and social costs of such a high marginal rate on such an important section of the community might be difficult to calculate, but they are considerable. The only way to reduce the number of families trapped by high marginal tax rates is to reduce the number who need to receive credits. The way to do that is to change income tax rates so that they become more sensitive to family responsibilities and place less of a burden on families, who will therefore not need to be compensated through credits. Transferable allowances are an obvious way of doing that.

The Government are right to place the economy at the top of their agenda—I support that—and to try to cut the deficit to reduce our debt burden. However, underlying problems in our country are contributing to the financial burden on the state. Strong marriage and strong families are key to fixing what the Prime Minister has called “broken Britain”, which is why I support them.

In parliamentary debates and questions, I have put it on the record that, as others have stated, it will take 12 months from the passing of legislation to make changes and implement them. If the Government introduce such changes in March 2014, they will be too late; it needs to be done in this autumn statement to come into effect next year.

Supporting the transferable tax allowance and addressing the double penalty of tax credits and the benefit system would send a significant message and signal the importance that this Government—our Government—are placing on marriage. The proposal will have the full support of the Democratic Unionist party. Today’s debate is exactly a week from the autumn statement, so I call on the Minister and the Chancellor to prioritise the announcement next week that the transferable tax allowance will be in the 2013 Budget. That is the best way forward.

[Several hon. Members]

rose—

[Mr Andrew Turner (in the Chair)]

Order. I think that Members wishing to speak will have about seven minutes each.

10:09

[Fiona Bruce (Congleton) (Con)]

I pay tribute to my hon. Friend the Member for Peterborough (Mr Jackson) not only for delivering an excellent speech, but for his dogged pursuance of the issue during this Parliament.

Supporting marriage in the tax system, certainly where children are involved, is a social justice issue. It is about supporting children to flourish, and helping them to get the best start in life and fulfil their potential. The Government support children, especially disadvantaged children, in many ways—providing nursery places, the pupil premium, school dinners and university funding—so why do they not support children in one of the best ways we can, by supporting a stable, secure environment in which they can grow up? We focus so much on ensuring that children have the best education within the school day, but a crucial factor in enabling them to take advantage of that education is if, at the end of the school day, they can go home not to a chaotic environment but to a stable and secure one, not least so as to do their home work, rest and prepare for the next school day.

My hon. Friend cited some excellent statistics from the Joseph Rowntree Foundation and the Centre for Social Justice on the better development outcomes of children from stable families. I do not want to repeat those, but I will mention others. The Centre for Social Justice, to which I pay tribute for its work, has informed me that children in families with transitional relationships are eight times more likely to be on a child protection register, and 50 times more likely to die of a deliberate injury in the home. There is no doubt that children living in families with transitional—indeed, sometimes chaotic relationships—suffer acutely; the converse is also true.

As the Joseph Rowntree Foundation has said, the effects of children suffering behavioural problems spill out to the rest of society. Relationship breakdown for children means that they suffer grief—often far into adulthood—and so fail to fulfil their aspirations. Therefore, not only for children during childhood but for wider society, we should support marriage in the tax system, which is about sending out a message that it is good for children, but it is also good for society, and about saying that we value the commitment, care and self-sacrifice of parents. Children are a blessing, but they are also a responsibility—they involve hard work—and many parents, when one is a non-earner, give up their earning capacity to help bring up the next generation in a positive way, from which we will all benefit as the years go by.

Marriage is a more secure environment, which is why we should support those who are married and not only those who cohabit. The Department for Work and Pensions recently announced that only 55% of children still live with both parents by the age of 15, but 97% of those families are headed by married couples. Another advantage is that a married couple’s tax allowance would effectively target the poorest with that benefit. The Institute for Fiscal Studies has said that such an allowance would have a disproportionately positive effect on those in the lower half of the income distribution, because 70% of the benefit would go to them. We all support an increase in the personal allowance. I would like that to be increased further, but an increase to £10,000 will benefit even those in the highest tax brackets. A married tax allowance is simply more targeted and therefore more effective for benefiting children in the poorest and least advantaged homes.

I therefore join my hon. Friend in calling for the Chancellor to bring in, as early as possible, a transferable tax allowance for married couples: yes, because it was in our manifesto; yes, because it was a coalition agreement commitment; yes, because it will recognise marriage in the tax system and, in so doing, bring us more closely into line with other OECD countries; yes, because it will rebalance the tax burden on married couples compared with single people; yes, because it will send out a signal from Government that they value marriage, and recognise and appreciate the contribution that married couples make to wider society—with elderly relatives or voluntary work—as so many non-earner married people do; yes, because the greatest benefit will accrue to the least well-off; yes, because it is worth making such an investment that will reap its benefits and rewards for society not only in the next few years and while today’s children are growing up, but potentially for generations to come as those children grow up to be responsible, positively contributing citizens; yes, because it will contribute to social mobility, helping children from the poorest households to achieve a better outcome in life and to achieve their aspirations; and yes, as I said at the outset, because it is a matter of social justice. It is simply the right thing to do.

10:09

[Andrew Selous (South West Bedfordshire) (Con)]

It is a pleasure to follow my hon. Friend the Member for Congleton (Fiona Bruce), and I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on securing this important debate.

My contention is that marriage is too important an issue for us to be neutral about. We need to be unashamedly positive about its benefits. In doing so, we are not in any way being negative about people who have any other lifestyle. As has already been said, the tax system sends a multitude of messages about things that we approve of and disapprove of. We send positive signals about bicycling to work and Christmas parties—this morning, there is talk about putting up the unit cost of alcohol—and that is all done through the tax system. It is perfectly logical and sensible to do the same on an issue as important as marriage, which has such profound effects on family life, on outcomes for children and on social justice in this country.

I shall briefly repeat the benefits of marriage. When parents split up, their children are 75% more likely to fail at school, 50% more likely to have alcohol problems and 40% more likely to have serious debt problems. It is a shocking fact that by the age of 15, a child is more likely to have a television in their bedroom than a father who still lives at home. As my hon. Friend the Member for Congleton said, for children aged 15 who still live with both parents, 97% of the couples in question are married.

In 1972, there were 426,000 marriages in England and Wales. By 2010, that number had declined by 43% to 241,000. We should not brush that aside, because it is a matter of great concern. We need to try to reverse the trend in order to achieve positive outcomes for children. If we look at other developed countries, we find that Britain is unusual in not having some form of transferable allowance. We have had a lot of statistics already, but the one that stands out for me is that single-earner couples in the United Kingdom are paying over a third more in tax than those in any other major developed country. It is Britain that is the odd one out. If we were to bring in the transferable tax allowance, which is in the coalition agreement, we would be getting the United Kingdom back in line with almost all of our major international competitors.

The Heritage Foundation in the United States has published some interesting data, based on US Census Bureau figures, which show that married school leavers have a lower poverty rate than that of single university graduates. That is a powerful figure. We rightly tell children in this country that it is good for their future to finish school; we would think it extraordinary if people said anything else. We know that people will have better life chances and higher incomes if they complete their schooling, but, as I said earlier, we need to be unashamedly positive about marriage and we need to send out the signal about the beneficial effects of marrying before having children. Bringing in the transferable tax allowance is just one part of sending that message to society.

I have already given the figures for the decline in marriages, which is steep and alarming and needs to be reversed. However, we need to measure such matters more carefully. I contacted Central Bedfordshire council before this debate to get the marriage figures in the two registry offices in my constituency. In 2011-12, in Leighton Buzzard and Dunstable, there were 183 marriages, which was slightly more than the year before and fewer than the figure in 2009-10. Those are the sort of figures that Members of Parliament should be aware of, because it is very true that we value what we measure and we measure what we value. I am proud to be here supporting my hon. Friend the Minister, and asking him to fulfil what was in our election manifesto, which he and I stood on, and which is in the coalition agreement. Publicly, the Government have said that they will do this; it is the right thing to do, and I am pleased that so many colleagues are here this morning to make this important case.

10:23

[Guto Bebb (Aberconwy) (Con)]

It is a pleasure to serve under your chairmanship, Mr Turner. I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on instigating this excellent debate. Most of the statistics and comments that I was planning to make have already been made by other Members, so I will not repeat them. It is important that we, as Members of Parliament, try to be true to the manifesto commitments upon which we stood. Certainly during the numerous campaign meetings that I had in my constituency, the transferable tax allowance was discussed, as was the Liberal Democrats’ policy of increasing the personal allowance. As a Government, we have invested hugely in increasing the personal allowance, but as yet there has been no move towards a transferable allowance. It is important that we get a signal, either next week or certainly before the next Budget, about such allowances.

The historical situation shows quite clearly that the situation for marriage within the tax system has changed quite dramatically over 40 years. We have gone from a situation in which the marital status of an individual was acknowledged by the tax system to a situation in which we have an individualistic tax system. We cannot complain that we have an individualistic society if we have a tax system that basically says that a stable family life has no value, and that is something that we must deal with. Historically, the figures show that the increase in taxation for a single person from the mid-1960s to 2011 has been very slight, moving from 23% to 25% of tax. Very low-income and high-income families have seen their tax burden fall, while the squeezed middle—one-earner families in particular—are penalised by the tax system, with their tax contribution doubling over a period of 40 years.

The signal being sent out by the tax system has been that stable families, or the old-fashioned 1950s family, as the Deputy Prime Minister described them, are the ones who are being penalised. Effectively, their choice is being penalised by the tax system, whereas every other choice seems to be applauded.

I wonder about the position of our Liberal Democrat colleagues, whom I defend on a regular basis because they have been very good at supporting the Conservative party on important changes on welfare reform and on dealing with the deficit. However, I have been surprised by their response to the issue of recognising marriage within the tax system. Of all parties, the Liberal Democrats look to Europe for a lead in so many areas. They should look at all the other countries in the European Union and ask themselves, “Why do they recognise marriage within the tax system and we do not?” We are alone with only Mexico in the OECD in not recognising marriage within the tax system, and I do wonder, even from the Conservative Benches, whether we should, on this occasion, take a lesson from our European partners. If they can recognise marriage within the tax system, we should try to do the same.

Again, on an international basis, it is the average-income family that is penalised in this country in comparison with other countries, and that is a message that is coming through strongly when we read the newspapers and the letters from constituents who are now seriously complaining about the impact of increased prices in the shops and the increased costs of family life. That frustration is increased by the fact that they also feel they are not being supported by the Government in any way, shape or form. Explanations for that will be given by the Treasury, but it is important to recognise that the pressures being faced by families also reflect the fact that they are not, in their view, being supported in the decisions they have made in trying to provide their families with a stable environment.

We should consider a transferable allowance. As for the costs involved, I recognise the fact that even a small contribution towards making a change would be comparatively low cost compared with the cost of increasing the personal allowance. I have supported an increase in the personal allowance, but some of the analysis that has been made of the costs involved indicates that a lot of the benefits being derived from that increase have actually gone towards those in the higher percentages of the income distribution scale. Those in the top half of the income distribution scale have benefited pro rata to a higher extent from the increase in the personal allowance than those in the lower part. Interestingly, the research being done by organisations such as CARE shows quite clearly that if we target a transferable allowance, most of the benefits would go to those in the bottom half of the income distribution scale, which is something that we should take into account. As my hon. Friend the Member for Congleton (Fiona Bruce) stated, this is a social justice issue; it is trying to ensure that if the Government are supporting people within society, then that support should be targeted at those most in need.

CARE has highlighted one big problem with our tax system, which is that we seem to view individuals in relation to their income without taking into account the costs that they face, which come from their responsibilities —whether they have dependants and whether they are a single-earner families. Again, while a transferable allowance would be a small step, it would show quite clearly that the Government value some of the choices that people make in society to ensure that their children have the best start in life. Certainly, there is some merit in the comments made by my hon. Friend the Member for Peterborough about targeting a transferable allowance initially at those with children under the age of three or those with children under the age of six. In that way, we could perhaps start the process of having a transferable tax allowance once again.

As I said, the case that has been made today is very strong. There is certainly agreement within Westminster Hall this morning that marriage is an institution that we value and that we, as a society, should put a premium on. That is in no way a condemnation of any other choice that people make, but the tax system that we have at this point in time is actually stating that it places less value on marriage than it does on other options. That is the key point. We are not asking here for marriage to have a special status; we are simply asking for marriage to be treated in a way that is appropriate and in keeping with the way that the tax system treats other options. That would send a very strong signal to society and to our constituents.

I will close by saying that I fully endorse the comments made by all the speakers so far, and I look forward to hearing the comments of the Treasury Minister.

10:30

[Mr David Burrowes (Enfield, Southgate) (Con)]

I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on securing this important and timely debate as we lead up to the 2013 Budget. It is timely in the sense that the clock is ticking in terms of our fulfilling our clear promise on this issue, which was made both in our manifesto and in the coalition agreement.

I am proud to champion marriage, as we all are. In addition, I am proud of the fact that the Prime Minister has also been a clear champion of marriage—consistently so—both before the election and as Prime Minister. His words in the run-up to the 2010 election were very clear. He said:

“I absolutely feel at my very core that recognising that…marriage matters is something we should not say quietly but something we should say loudly and proudly.”

What my hon. Friends have said loudly and clearly today is that marriage matters and that we need to show in the tax system that it matters. It matters not only because we say so but because it is a social institution that provides many benefits to the whole of society, although today we are particularly focusing on the poorest, who we consider will benefit from marriage being supported by the state.

Given the commitment in our manifesto and, indeed, in the coalition agreement, I recognise that I do not need to convince my hon. Friend the Minister of the principle of recognising marriage in the tax system. We will leave it to the Opposition—indeed, to the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), who is the lone Opposition Member here today and whom we will hear from shortly—to try to justify why we should continue where the previous Government left off, which is not only failing to recognise marriage but discriminating against married couples in the tax system. The issue facing the Government today is not “if” but “when and how”.

Given the opt-out for the Liberal Democrats under the coalition agreement, the Deputy Prime Minister—as he has always been referred to—last year decided freely to express his opposition to supporting marriage in the tax system. He is free to do so. We are a coalition. I am not sure that we would describe ourselves as a “marriage”, or a cohabitation. It is a relationship that certainly was not formed on the basis of love but on the basis of fiscal reasons, to tackle the huge deficit and the legacy left by the previous Government.

[Mr Stewart Jackson]

The sad thing is that we are heading for divorce. [Laughter.]

[Mr Burrowes]

I am grateful to my hon. Friend for that intervention. It is a time-limited contract, unlike other marriages, but the issue is that there are also good fiscal reasons why this partnership, or relationship, should seek to have as a priority the implementation of this promise, despite the differing views in the coalition.

We need to tackle the Deputy Prime Minister’s argument; he freely expressed his views in one way, so we are free to express our views in another. As has already been mentioned, he said in December 2011:

“we should not take a particular version of the family institution, such as the 1950s model of suit-wearing, breadwinning dad and aproned, homemaking mother, and try and preserve it in aspic.”

It is important for us to make the point very clearly and to emphasise, as hon. Friends do, that the Deputy Prime Minister and others, such as the Opposition, are wrong about the two-parent family and wrong about the motives of others. Indeed, their arguments are old and very much out of touch with the British public, and they are themselves increasingly preserved in aspic. We are not harking back to the outdated 1950s model, and it is very condescending to caricature not only our views in that way but the married people up and down the country and those who want very much to support marriage. Marriage is a popular institution—increasingly so—and it is one that the public welcome.

We simply believe that marriage is best for children and for society, and the evidence supports us. A review by the Institute for Fiscal Studies of the research in this area, which has already been mentioned, shows unequivocally that

“children raised by two happily and continuously married parents have the best chance of developing into competent and successful adults.”

The evidence provides clear support for implementing policies that encourage couples to stay together, and shows that married couples with children are far more likely to stay together than their unmarried counterparts.

It has already been quoted, but it is important to keep repeating the evidence of the “Breakthrough Britain” report, which was published by the Centre for Social Justice. It demonstrated that children born to unmarried parents have a nearly one in two chance of seeing their parents split up by the age of five, whereas for children whose parents are married the figure is only one in 12. That is a huge difference that the state cannot ignore; indeed, the state needs to recognise it properly.

We all recognise that stability clearly matters. Most single parents undoubtedly do a fantastic job raising their children in difficult circumstances. We are not here to judge or to make moral judgments on people’s relationships, but the evidence is very clear that on every significant measure children who are brought up in married families do better on average than those brought up in other relationships.

[Andrew Selous]

Does my hon. Friend agree that this is particularly an issue of social justice for poorer people? Wealthier people—if they are able to do so—can of course transfer their unearned income to their spouse in the form of dividends, rents, interest and income, and make use of a transferable allowance, whereas poor people cannot. This is therefore about doing the right thing by poor people, because wealthier people can already take advantage of what we want for everyone.

[Mr Burrowes]

I agree, and it is very important that we recognise the clear data that make that point. The Centre for Social Justice has said that the difference in family breakdown risk between married and cohabiting couples is such that even the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples. It is very important to recognise that this issue is one of social justice.

We recognise that most of the serious social problems that face us have their roots in the breakdown of the family. It is important for Conservatives to recognise and to make the point clearly that we support marriage. Far from making the case for the 1950s model of supporting marriage that I referred to earlier, we want a thoroughly modern and progressive measure that is underpinned by social justice.

As my hon. Friends have said, we are out of step with the majority of other developed countries. Most of the individuals living in OECD countries who are in a system that does not recognise spousal obligations are in either the United Kingdom or Mexico—and that cannot be right. Among highly developed economies, the UK is on its own in operating a tax system that ignores spousal obligations.

As my hon. Friends and I have said, this is an issue of social justice. The Institute for Fiscal Studies and others have made it very clear that, if a transferable allowance were implemented, 70% of the benefit accrued would go to those who are currently in the lower half of the income distribution level. The introduction of a transferable allowance would also reduce the number of children living in households below 60% of the median income, and that is where we want to be.

It is important that we properly urge the Chancellor—my hon. Friends and I have clearly done that this morning—to make good our collective promise and introduce a transferable allowance for married couples with young children. That is where the focus is. We recognise that it is not adequate simply—in a minimalist way—to have a partial transferable allowance that would be worth—what?—£150 a year, or £3 a week. That would also open us up to some criticism. We need to focus on and target married couples with young children.

[Fiona Bruce]

Perhaps I could mention that some polling from the Centre for Social Justice has found that more than 80% of adults agree that more should be done to help parents who wish to stay at home to bring up their children in the early years. Does my hon. Friend agree that support for child care does not always mean that child care needs to be outsourced, and that some of the best support can be to help parents to stay at home to bring up their own children?

[Mr Burrowes]

I heartily agree with my hon. Friend. We need to look in the round at the benefits of child care—the social and economic benefits. Many of us know the value of well-supported care at home, which we sometimes do not properly quantify. That is a message that we need to amplify.

In conclusion, we are on the side of some of the poorest families in Britain, and we can help them by fulfilling the promise in our manifesto and in our coalition agreement. An unimplemented promise would not be a promise kept. We need to implement our promise properly and fully in the Budget of 2013.

10:39

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Turner.

I congratulate the hon. Member for Peterborough (Mr Jackson) on securing this debate. We have heard many sincere contributions. The previous speaker—the hon. Member for Enfield, Southgate (Mr Burrowes)—said that he was looking forward to hearing my response, but I think he should be looking forward instead to hearing the Minister’s response, because that is where the lack of clarity lies about what is actually going to be happening with this policy proposal that hon. Members have so vociferously supported this morning.

This is an important debate, given the lack of clarity and detail from the Government on what kind of scheme—if any—they plan to introduce. Conservative Members have repeated—I agree with their comments—that they intend to introduce some kind of recognition for marriage in the tax system; indeed, the Prime Minister himself repeated his commitment to such a plan at one of his first Prime Minister’s Question Times. Since that day, however, we have had no confirmation of what the policy might look like.

I want to tackle head on the allegation that families are a low priority for Labour Members. Quite the contrary: the Labour party stands up daily for hard-pressed families, who are feeling the squeeze in these tough economic times. However, we look to stand up for all families, not just couples who are married where one spouse stays at home and the other earns at the 20% rate of tax. It is those couples that the hon. Member for Peterborough and the Members supporting him propose to support.

It has been quite interesting to hear the number of comparisons made with our European neighbours and to hear them spoken of with such great admiration, with Members wanting to follow their lead. That is refreshing in many ways.

I understand the importance of marriage, but I am not convinced that recognising it through the tax system as proposed is the right way to go about this, and I will set out clearly the reasons why.

[Mr Stewart Jackson]

Perhaps the hon. Lady is feeling her way towards informing us of what the Labour party would do if this issue were brought to a Division in an indicative vote on the Floor of the House. However, I should remind her that the previous Labour Government established the precedent of recognising marriage in the tax system in 2007, through transferable allowances in respect of inheritance tax, so it is not as though the Labour party has never considered transferable tax allowances to support the family.

[Catherine McKinnell]

As I said, I am going to set out clearly why we do not agree that this policy is the right way to go about supporting the families Members believe it will support.

When the Minister without Portfolio told The Daily Telegraph that married couples should not count on getting a tax break before 2015, the party machine swung into action to correct it. A retraction was issued within 24 hours, and the Minister without Portfolio now completely accepts that a tax break will be introduced and that tax is a matter for the Chancellor. It is therefore good that we have the Exchequer Secretary with us to clarify what the Government plan to do, because it has been two and a half years, and Members on both sides of the House are waiting to hear the Government’s proposals. As Members have said, the Conservative party set out in its election manifesto its view of what a tax break for married couples might look like, but times have changed significantly. I therefore look forward to the Minister telling us what the policy might look like and whether it will be implemented, and I am sure other hon. Members look forward to his remarks in the same way.

The strength of feeling on this subject is clear from the number of Conservative Members who have contributed, and that is entirely appropriate. There are, however, serious concerns about the proposal, and Members have referred to the Liberal Democrat party.

[Jim Shannon]

I should say that the Democratic Unionist party is also on record as supporting the transferable tax allowance.

[Catherine McKinnell]

I apologise to the hon. Gentleman; I was going to pay tribute to his comments a little later. I am facing the Conservative Benches, and I take his point.

Many Members have mentioned the Liberal Democrat party, which was very ready to abandon its principles on tuition fees and the VAT bombshell, which it campaigned so hard against. However, Liberal Democrat Members have said clearly that they refuse to support this policy in principle, although no concrete proposals have come forward, so we still do not entirely know what they will do or whether they will support the proposal in its final form. We await clarification on that too.

At a time when families up and down the country are being hit hard by cuts to tax credits, a squeeze on their living standards, rising prices and frozen wages, with pensioners losing their tapered relief, and young people finding it harder than ever to get into work, many people will find it regrettable that Conservative Members’ focus today is on securing a tax break for a limited number of married couples. The previous Labour Government based their help for families on need and on a clear and targeted approach to alleviating child poverty, rather than on distinguishing between particular family structures.

If the policy the Government announce is the same as that set out in the Conservative party’s manifesto, it will, as Members have acknowledged, be worth just £2.88 a week. Furthermore, it has been targeted at an extremely narrow group: the only people who will be able to claim this tax benefit will be married couples where one partner earns above the income tax threshold and the other does not; whether the couple has children will be entirely irrelevant.

[Andrew Selous]

rose—

[Catherine McKinnell]

I know the hon. Gentleman has raised concerns about that matter.

[Andrew Selous]

The previous Labour Government recognised family breakdown as a cause of child poverty; indeed, the Treasury Minister and I were shadow Ministers when the Child Poverty Act 2010 went through the House. Would the hon. Lady like to confirm that now? Will she acknowledge that family breakdown is a significant cause of child poverty?

[Catherine McKinnell]

What is rather counter-intuitive about the arguments being put forward today is that this tax incentive, small though it is, would be targeted at the very families that are not in dire straits. Members seem to be turning their backs on children in families that are facing the difficulties they have described. Unmarried couples, including those with children, have lost out on tax credits—many have had their tax credits cut because they cannot find more hours of work—or have been hit with housing benefit cuts, but they will not benefit from these changes. If a marriage ends for circumstances entirely out of somebody’s control, or if they are widowed or have to flee the marriage because of violence, they will lose the proposed benefit, but it could still be available to the perpetrator of the domestic violence, who could get married again. Nor would this benefit be available to married couples where both partners are working, unemployed or low earners.

Hon. Members have mentioned analysis by the Institute for Fiscal Studies, but that analysis shows that this benefit will be available to only 32% of married couples. This policy is meant to recognise marriage in the tax system and to send an important signal that we value couples and the commitment people make when they are married. Do Members believe that only 32% of marriages should be valued, while the other 68% are of less value and less worthy?

[Guto Bebb]

Will the hon. Lady give way?

[Catherine McKinnell]

Unfortunately, I do not have much time. I appreciate this is an important subject, and I would like to give Members more time, but I want to finish my comments.

I strongly disagree with the hon. Member for Enfield, Southgate, who attempted to dismiss out of hand any notion that this policy recognises not marriage in general but just one type of marriage, where one partner is the breadwinner and the other stays at home. He dismissed the Deputy Prime Minister’s comments that such things are a throwback to the Edwardian era, but that is a sincere concern for many people.

I appreciate the comments of the hon. Member for Strangford (Jim Shannon) and the sincere manner in which he made them, but I disagree with him. Designing the system in a way that penalises all couples and families that do not fit in with one specific model, regardless of need, sends out a strong signal—intentionally, it would seem—that one type of family is worth more than another and that one type of parent is worth less than another. That is a very dangerous signal to send to children. It is unfair and out of touch, and is not the best way to support families in the tough times of 2012.

[Andrew Selous]

Will the hon. Lady give way?

[Catherine McKinnell]

I do not have much time, and I wanted to make a final point. The hon. Member for Cities of London and Westminster (Mark Field) made a powerful point, which I would make too: the Government, while talking about promoting or supporting marriage in the tax system, are removing valuable child benefit for many families and children.

Unfortunately I have run out of time, but I will be interested to hear what the Minister has to say in response to my concerns and those of other hon. Members.

10:50

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

It is a pleasure to serve under your chairmanship, Mr Turner.

I congratulate my hon. Friend the Member for Peterborough (Mr Jackson) on securing the debate, on making such a forceful, passionate and well-informed speech and on ensuring that there would be significant participation—at least among my hon. Friends. I congratulate all those who made speeches: the hon. Member for Strangford (Jim Shannon), and my hon. Friends the Members for Congleton (Fiona Bruce), for South West Bedfordshire (Andrew Selous), for Aberconwy (Guto Bebb) and for Enfield, Southgate (Mr Burrowes).

The debate has demonstrated the degree to which members of my party value commitment and how important we believe the institution of marriage to be to society. That point came across clearly, and, as has been pointed out on several occasions, the Conservative party said, in our 2010 manifesto, that we would recognise marriage and civil partnerships through the tax system. We want to send a clear message that marriage is important and commitment is valued, and that we want to encourage and support hard-working families.

In the past two and a half years, the Government have taken a lot of action to help hard-pressed families in difficult economic times, and I want to say a word or two about some of the steps we have taken before returning to the specific issue of marriage. The Chancellor has said, in his principles for good taxation, that our tax system should be fair, rewarding work and supporting aspiration, and that it should ask most from those who can most afford it. In the context that the Government inherited a difficult financial position in 2010, we have taken steps to bring Britain’s tax system into line with those principles. First and foremost, we chose to focus on tackling the deficit and promoting growth. Among other things, we have focused our efforts on reforms that are intended to ensure that work pays—that point was raised by several hon. Members—including through the introduction of universal credit and our successive increases in the personal allowance.

Given the current economic climate, it is more important than ever that we recognise the wide variety of pressures faced by working families, and we have taken action to help them. For a start, our policy on the personal allowance has helped low and middle earners by improving rewards for work and putting money in their pockets. We have said that raising the personal allowance to £10,000 is our priority for the income tax system, and we stand by that. In the June 2010 Budget, we announced a £1,000 increase in the personal allowance for those aged under 65. We talked about making real-terms steps through the rest of the Parliament to achieve our goal, and those were not idle words, because a further increase of £630 followed at the 2011 Budget. This time, the benefits were passed on to higher rate taxpayers, which meant that there was a real-terms increase of £42 for every taxpayer earning up to £115,970. We promised that we would raise the personal allowance by at least the equivalent of the retail prices index until our objective of £10,000 was reached, but both those increases were significantly above inflation, thus making a real-terms difference to hard-working people.

Those two announcements have taken the personal tax allowance from £6,475 in 2010-11 to £8,105 in 2012-13, and basic rate taxpayers have gained £210 a year in real terms. In the 2012 Budget, we went further and announced an increase of £1,100 from April 2013. That is both the largest real-terms increase in the past 30 years and the largest ever cash increase in the personal allowance. The increase will take the allowance to £9,205 from April 2013, which will provide a real-terms gain of £170 for most basic rate taxpayers in 2013-14. The £10,000 goal is now within touching distance.

Other policies, such as on cutting fuel duty, on council tax, and on keeping interest rates low, have of course helped hard-pressed families. We have provided extra funding to support family support services. The Department for Education set up a relationship support division worth £30 million over four years, which will encourage stability—the very thing that several hon. Members have raised in the debate—and provide support for couples who are experiencing difficulty in their relationship. We hope that that will help some couples to stay together, and that when that is not possible, for whatever reason, it will lessen the impact that the breakdown of parents’ relationships can have on children.

We have touched during the debate on child care. The Government have taken steps to help families with three and four-year-olds by increasing the child care support that they get in a week, as well as to extend support to 260,000 disadvantaged two-year-olds. Indeed, we are looking at what we can do to improve the affordability and accessibility of quality child care.

Universal credit has been touched on in the debate. We are reforming the benefit system to ensure that work pays. Entitlement to universal credit will be based on household income and a single payment will be made to the whole household. That will support family budgeting and ensure that there is no penalty for families, whether one parent chooses to stay at home or both choose to work. Families will be able to keep their benefits for longer before withdrawal at a single rate, which is a much needed improvement on the current system of multiple earnings disregards, as multiple withdrawal rates can leave families confused and trapped out of work.

[Mr Stewart Jackson]

Will the Minister disabuse the Opposition of the notion that the policy is about giving married couples an unfair tax break? It is about nudge behaviour, so that they can make a proper choice between cohabitation and marriage, which is a different thing.

[Mr Gauke]

My hon. Friend was right to point out that the previous Government recognised marriage in the context of inheritance tax, which is generally applicable to wealthier households, yet seemed resistant to any recognition of marriage in the tax and benefits system that would help poorer households.

Marriage and civil partnerships are about commitment and stability. They represent a firm promise to stick to something and keep working at it. We want to rectify the way our tax and benefits system relates to that. Studies have shown that married couples are less likely to split up than cohabiting couples, and stability is vital to children. An unstable home life can have a detrimental effect on their happiness and development, and that has been shown by numerous studies, some of which have been quoted today. A recent example is the “Understanding Society” survey by the Institute for Social and Economic Research, which found that parents’ happiness in their relationships had a quantifiable effect on the happiness and well-being of their children. Family is one of the most important influences on a child’s development. The family is where one learns a sense of responsibility. It is where people learn how to behave and how to treat others, and about the things that are important in life.

We are committed to finding ways to support marriage in the tax and benefits system. My hon. Friends will be aware that at the general election we set out a policy of allowing married couples and civil partners to transfer up to £750 of unused tax-free personal allowance when the recipient is a basic rate taxpayer. There is, as we have heard, a reference to that in the coalition agreement, with a statement that the Liberal Democrats can abstain on transferable allowances. None the less, the Government—from the Prime Minister downwards—have made it clear that we remain committed to recognising marriage in the tax and benefits system. I reassure hon. Members that considerable work has been done to examine ways of doing that, and we have heard various ideas about where we should focus our attention during the debate.

During difficult economic times, we want to provide real, tangible support to families. We remain committed to recognising marriage in the tax and benefits system, the case for which was powerfully made by several of my hon. Friends. Our policies have helped hard-working families. It is true that we are prioritising increasing the personal allowance, which increases the rewards for work for those on low and middle incomes, but we remain committed in the way that I have set out.