Finance (No. 3) Bill

Lord Browne of Belmont Excerpts

Monday 18th July 2011 Lords Chamber

[Lord Browne of Belmont]

My Lords, following on from the noble Lord, Lord Anderson, I, too, would like to express my concern that the Government are taking so long to honour their very important commitment to recognise marriage in the tax system. It was not that long ago that the Conservative Party, when in opposition, talked regularly about the problem of broken Britain, and they were absolutely right to do so. Of course, we do not hear that phrase on their lips very much now that they are in office. The truth is that no Government could sort out broken Britain in just over a year, and the problems of social breakdown remain as real today as ever.

One of the principal sources of that social breakdown is family breakdown, which has such devastating implications for child development. As a Minister said in a speech in February:

“The Centre for Social Justice has found that those not growing up in a two-parent family are 75 per cent more likely to fail at school, 70 per cent more likely to become addicted to drugs and 50 per cent more likely to have an alcohol problem. The Joseph Rowntree Foundation has found that children from separated families have a higher probability of living in poor housing and developing behavioural problems”.—[Official Report, 10/2/11; col. 389.]

They also suffer from a host of other damaging outcomes whose effects spill over to the rest of society.

What promotes couple stability? In engaging with this question, we must look at many factors, one of the most important of which, unsurprisingly, is the nature of the relationship between partners. In this regard, the research findings are very striking. If children are born to cohabiting parents, they have a nearly one in two chance of finding themselves in a one-parent family by the time they reach their fifth birthday, whereas those born to married parents have only a one in 12 chance of finding themselves in this situation.

I know that some will respond to this by saying that those who marry also tend to be wealthier, and that this is the real reason for their greater stability. Given that material need generates added pressure on relationships, it would be very strange if wealth were not a relevant consideration. The notion that it is the only relevant consideration, however, is rather odd. Mindful of this, it is no surprise to me that research demonstrates that the poorest 20 per cent who make a public “till death do us part” commitment in front of their families and friends are more stable than all but the 20 per cent richest cohabiting couples.

The truth is that marriage sealed by a public “till death do us part” pledge, rather than a “let’s move in together and see how it goes” commitment, is, unsurprisingly, an independent promoter of stability. In this context it is clear that, at the very least, the Government should do everything they can to develop public policy that does not make it more difficult for couples to marry in this country than in comparable countries. This is where our failure to recognise marriage in the tax system is so important.

In introducing the subject of marriage and tax, let me be clear from the outset that I do not believe that people fall in love, and then decide they want to be together for fiscal reasons. When they fall in love and decide that they want to be together, however, they face a choice: will they marry or will they cohabit? This is a very important decision, for the reasons we have considered, and it will inevitably be informed by all relevant considerations, including financial ones.

Britain used to recognise marriage in its tax system, but it has not done so since 1999-2000—unless those concerned were born before 1935, or one or both are blind. As CARE's latest international tax comparison—The Taxation of Families 2009/10—reveals, apart from Britain, just 18 per cent of citizens of OECD states live in countries that do not recognise marriage in their tax systems. The majority of these people live in just two states: Turkey and Mexico. We are completely out of line with the developed countries with which we are usually compared—for example, France, Germany, Japan, and the USA—in not recognising marriage. This inevitably makes it more difficult financially for couples in this country to choose to marry than in other developed countries. Indeed, if we look at the tax burden that they bear, it is a staggering 39 per cent greater than the OECD average. What really is concerning, however, is the fact that the latest projections suggest that the tax burden on such families will be more than 50 per cent greater than the OECD average by 2012-13—unless, of course, there is an offsetting measure such as recognition of marriage in the tax system.

One of the statistics that fascinates me is that, in the midst of all this, 90 per cent of young people say that they aspire to marry; and yet our marriage rates tell a very different story. Given that we make choosing to marry fiscally more difficult than in other OECD countries on average, the disconnection between the aspiration to marry and marriage is of no great surprise. Happily, the coalition agreement commitment provides us with the opportunity to change this and to ensure that it is no more difficult to marry in this country than in other developed countries such as France, Germany and America.

I am of course aware that recognising marriage in the tax system has cost implications, but these were considered at the time the commitment was made last year. Moreover, the very real costs associated with not recognising marriage are of great importance. The £550 million cost of the very modest partially transferable allowance proposed at the general election represents just 1.3 per cent of the direct costs of family breakdown, as calculated by the Relationships Foundation, and just 2.3 per cent of the costs of family breakdown, as calculated by the Centre for Social Justice. Moreover, it would cost just 4.4 per cent of what we are in the midst of paying to raise individual allowances to £10,000—the overall cost is estimated at approximately £12.5 billion. This is a policy that greatly benefits single people, and certainly does not benefit one-earner married families.

The Government were absolutely right to make provision for the commitment to recognise marriage in the tax system in the coalition agreement. We owe both the next generation, which would benefit from an increased chance of a two-parent home experience, and our young people who aspire to marry the opportunity to live in a country that does not make it more difficult than in comparable developed countries. In May, the Government were given a score of just two out of 10 in the Centre for Social Justice’s report card for their efforts to combat family breakdown—an extraordinarily poor result given the great emphasis the Conservatives placed on fixing the broken society before the election. I very much hope that the Minister will be able to assure us that things will be very different in the coming year, and that recognising marriage in the tax system will be a high priority.