Transferable Tax Allowances

Catherine McKinnell Excerpts

Wednesday 28th November 2012 Westminster Hall

[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.