Finance (No. 2) Bill

Lord Jackson of Peterborough Excerpts

Wednesday 9th April 2014 Commons Chamber

[Catherine McKinnell]

We know what the Chancellor thinks about this marriage tax allowance. He thinks that the idea is a turkey, both politically and economically. Indeed, an article in The Daily Telegraph went so far as to say—[Interruption.] I hear groans from those on the Government Benches. The article went so far as to say that the Chancellor

“loathes the idea. He is not a social conservative and hates the notion of bribing anyone down the aisle. He has made sure the marriage tax break will not come into effect until the very last weeks of this government—and it will be so small as to be unnoticeable. To resolve the impasse, Treasury officials were asked to see whether they could dump the agenda on to Iain Duncan Smith, so the Chancellor could wash his hands of it. But a tax cut has to come from the Treasury.”

[Mr Stewart Jackson (Peterborough) (Con)]

I am sure my right hon. Friend the Chancellor is touched by the hon. Lady’s warm support. Will she share with the House her thoughts on, and specifically answer, the question asked by my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton)? Why did the Labour Government do nothing to support the institution of marriage in 13 years?

[Catherine McKinnell]

The answer lies in what I have already said; the Labour Government did a huge amount to support all families up and down this country, particularly families with children. Even the Chancellor seems to agree that £3.85 a week is not going to bribe anybody down the aisle or persuade anyone to stay in a marriage if they decide they are going to leave it. The question asked by the hon. Member for East Worthing and Shoreham (Tim Loughton) does not seem to acknowledge the fundamental issues with the Government’s proposal.

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[Catherine McKinnell]

The tax system works on an individual basis and this proposal introduces incredible complexity to the tax system. I shall cover that in more detail and explain the cost implications. Government Members obviously think that the costs are worth it, but I would be very careful about the concept that all married couples will happily share all their money and any tax gain—although, admittedly, we are talking about £3.85 a week. That seems to be rolling the clock back somewhat and assuming a level of communication within households that I do not think it is the Government’s place to assume.

Women are more than £26 a week—a week—worse off in real terms since 2010, and after significant progress under Labour, when the gender pay gap fell by more than 7%, it is now rising again for the first time in five years. The gap between women’s median weekly earnings in the private sector and the public sector has increased between 2009-10 and 2012-13 from 28% to 31%. The same gap for men has decreased from 17% to 14%. At the same time, the cost of child care places, which we debated at length yesterday, has risen by an average of 30% on this Government’s watch, five times faster than pay.

Analysis by the House of Commons Library shows that the Chancellor’s tax and benefits strategy since 2010 has raised a net £3.047 billion, or 21%, from men and 79%, or just under £12 billion, from women. That includes the Budget 2010 tax credit cuts, which took £2.7 billion from women and only £750 million from men, the 2010 spending review, under which reductions in child care support through tax credits took £343 million from women but just £47 million from men, and the three-year child benefit freeze, which has taken £1.26 billion from women and £26 million from men. That, of course, contrasts with the £3 billion tax cut that was given to the top 1% of earners in this country, under which 85% of the gainers are men, and this marriage tax allowance, under which 84% of the gainers will be men. This issue goes to the heart of the clause and of why we are tabling our amendment.

[Mr Stewart Jackson]

The hon. Lady is being most generous in giving way. Why does she imagine that 80% of the population covered by the OECD have a tax system that rewards marriage, including countries such as France, Germany and the United States?

[Catherine McKinnell]

We must consider this clause in the context of the current situation. We know that families up and down the country—in fact, all households—are facing a cost of living crisis. We have had three years of a flatlining, stagnating economy and households up and down the country have been paying the price for that. We have a Government who are introducing measures that will benefit a small proportion of married couples—only one in six households with children—and under which 84% of the gainers will be men, when we know that those who have paid the bulk of the price so far for the deficit reduction strategy that the Government have been pursuing have been women. It is a question of priorities, and this Government seem to have them completely wrong.

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I will be interested to hear what the Minister and Government Back Benchers have to say about the total inadequacy of this policy in terms of its outreach, implementation, cost to Her Majesty’s Revenue and Customs, and cost to employers to implement. I urge all hon. Members, particularly the Liberal Democrats, although they are severely under-represented today, to support us. We are grateful to the hon. Member for Redcar (Ian Swales) for being here. I hope that he will not sit on his hands and will back our amendment.

[Mr Stewart Jackson]

For the avoidance of doubt, I will be voting against Labour’s amendment. Although the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) is a very engaging spokesman for her party, her speech was mischievous, disingenuous, mealy-mouthed, patronising, leftie drivel—typical middle-class, tofu-munching, Guardian-reading Labour nonsense that said, “We know best what’s good for working people, not you.”

The hon. Lady referred to our friends the Liberal Democrats. I am disappointed that more of them are not here. It is awfully hard to dislike the Liberal Democrats, but it is well worth the effort.

I am delighted that in clause 11 the Government have brought forward this very important change in the tax system, for which I have consistently campaigned since the last general election. We retain the bond of trust with the electors by introducing a proposal that we promised at that time to introduce by the 2015 general election.

[Catherine McKinnell]

I assure the hon. Gentleman that I do not eat tofu, although I do not think that those who do need to be quite so insulted. Are we to assume from his comments that he is wedded to this policy regardless of how inadequate its reach and implementation will be?

[Mr Jackson]

The hon. Lady’s comic timing is exemplary. I will develop my more detailed arguments, if she will allow me, given that she had the thick end of 46 minutes to develop her own. That is probably the record for an Opposition spokesman—or spokesperson—although I accept that it was on the Opposition’s amendment.

This has been a long time coming—

[Tim Loughton]

Forty-seven minutes.

[Mr Jackson]

Indeed—47 minutes, as my hon. Friend says. However, it has definitely been worth waiting for.

In presenting a 10% partly transferable allowance, clause 11 may not yet be worth a huge amount, but it is of seminal importance in supporting marriage in the tax system. For the past 15 years, our tax system has been unusual in not recognising marriage, or indeed any other aspect of family responsibility. Our fiscal policy has been extraordinarily individualistic. Clause 11 changes that by inserting into our system of independent taxation the transferable allowance that former Chancellor Nigel Lawson, the architect of independent taxation, has argued it always should have had. I genuinely believe that qualifying the individualism of our current fiscal policy should be something we can all agree on, and that should appeal to Labour Members. The Opposition spokesperson failed on two occasions to answer the specific question of why, in 13 years in office, her party failed to support the institution of marriage in the tax system in any meaningful way. That is regrettable on her part, because it is disingenuous to say, “We disagree with the policy but, incidentally, this is how you can improve it.” It is churlish and mean-spirited from a party that claims to support the family in the tax system, and children as well.

[Ian Swales]

I can understand the hon. Gentleman’s passion on this issue, but what would he say to a couple in his constituency who are both earning the minimum wage and will not benefit from this policy?

[Mr Jackson]

I will come to the specifics later. However, my hon. Friend—I am pleased to call him that because we serve on the Public Accounts Committee together—will know that many of his constituents in Redcar on low wages have benefited from our personal allowance changes. Indeed, many of them have been taken out of tax altogether, as have people across the north-east of England. He will know, too, as will the Opposition spokesperson, that unemployment has significantly fallen in the north-east and there are now more jobs available than in 2010. [Interruption.] We will not take any lectures from Labour, which doubled youth unemployment between 1997 and 2010.

I would have hoped that Labour Members supported these proposals, particularly this clause, because they are progressive. The Institute for Fiscal Studies has produced a very helpful chart demonstrating how the provision will disproportionately benefit those in the lower half of the income distribution—a point astutely made by my hon. Friend the Member for East Worthing and Shoreham (Tim Loughton). This is not a provision for the middle classes, as Labour critics sometimes suggest. The truth is that the failure of our income tax system to have regard for marriage in recent years has been very odd, as the Prime Minister said in response to a question from the right hon. and learned Member for Camberwell and Peckham (Ms Harman) in June 2010:

“I simply do not understand why, when so many other European countries—I remember often being lectured when I was on the other side of the House about how we should follow European examples—recognise marriage in the tax system, we do not. I believe that we should bring forward proposals to recognise marriage in the tax system…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.]

[Steve McCabe]

The difference is that the tax provisions on Christmas parties and parking bicycles are extended to all. This provision is for a very narrow segment of married people and those in civil partnerships; it is hardly an example of a general principle of marriage.

[Mr Jackson]

I do not think we all attend Christmas parties or cycle. [Interruption.] The more serious point, which I will elucidate further if the hon. Gentleman will generously allow me, is that there is demonstrable evidence that the institution of marriage has a positive net impact on society, cumulatively, particularly on children. There is nothing ignoble about using the tax system in a mature democracy to support behaviour that is good for society overall.

[Sheila Gilmore]

Will the hon. Gentleman give way?

[Mr Jackson]

Not at the moment. I know the hon. Lady is very keen, and I am sure she will try to get in later.

Given the scale of the public benefits associated with marriage, it is not at all surprising that most people in the developed world live in countries that recognise marriage, as I said earlier in an intervention. There are numerous examples of this benefit that I could highlight, but given the constraints on time I will mention just a few. Regardless of socio-economic status and education, cohabiting couples are between two and two and a half times more likely to break up than equivalent married couples. Women and children are significantly more vulnerable to violence and neglect in cohabiting, rather than married, families. Three quarters of family breakdown in families with children under five comes from the separation of non-married parents. Children are 60% more likely to have contact with separated fathers if the parents were married. Separated fathers are more likely to contribute to their child’s maintenance if the parents were married. Growing up with married parents is associated with better physical health in adulthood and increased longevity. Children from broken homes are nine times more likely to become young offenders, accounting for 70% of all young offenders.

[Kate Green]

I respect the fact that the hon. Gentleman is being very careful with his use of words in saying that there is an association between marriage and some of the outcomes he describes. What he cannot demonstrate, however, is whether there is cause and effect, because we do not know whether there are other personal characteristics that make those couples more likely to be married and whether they also result in those beneficial outcomes.

[Mr Jackson]

I will not take issue with the hon. Lady’s intervention, because it is quite sensible. Nevertheless, the evidence-based data in support of marriage in the tax system have been accumulated over a very long period and are very clear. It is incumbent on the Government not to disregard that evidence, but to take account of it in formulating their fiscal policies.

The list goes on and the findings are put in context by the fact that the Relationships Foundation calculates that the costs of family breakdown amount to £44 billion per annum and that family breakdown outside marriage is the real driver. As the Centre for Social Justice has demonstrated, of every £7 spent as a result of the breakdown of young families, £1 is spent on divorce, £4 on unmarried dual-registered parents who separate, and £2 on sole-registered parents. That is why the Prime Minister was absolutely right to say in response to a question about how the policy could reduce the deficit:

“If we are going to get control of public spending in the long term in this country, we should target the causes of higher spending, one of which is family breakdown. We should do far more to recognise the importance of families, commitment and marriage”.—[Official Report, 2 June 2010; Vol. 510, c. 429.]

I am aware of the arguments that the relationship between marriage and better policy outcomes is merely a coincidence and that the real driver for those better outcomes has nothing to do with marriage and is based on other considerations, especially income. Those arguments simply do not make sense. Apart from anything else, the fact that the millennium cohort study demonstrates that the poorest 20% of married couples are more stable than all but the richest 20% of cohabiting couples makes it plain that marriage is a significant, independent determinant of stability.

[Sheila Gilmore]

Will the hon. Gentleman consider the involvement of other variables? For example, those who are married are likely to be together for longer than those who are not and who split up, and the length of the relationship is likely to contribute to the stability of the children and their relationship with their parents.

[Mr Jackson]

I accept that, which is why I think it is unbecoming to focus on £3.85. We are not arguing that this is merely an issue of monetary transaction. It is about accepting that the inherent benefits of marriage are good for the individuals involved and, principally, their children, as well as for families, communities and society as a whole. We have the evidence.

[Fiona Bruce (Congleton) (Con)]

Is my hon. Friend aware of the work of Harry Benson of the Bristol Community Family Trust, who has found that during early parenthood the single biggest predictor of stability is whether parents are married, even when age, income, education, benefits and ethnic group are taken into account?

[Mr Jackson]

My hon. Friend makes a very strong point. I pay tribute to her for the work she has done in this area and I hope she will continue to do it. I look forward to hearing her contribution later.

[Catherine McKinnell]

Does not the hon. Gentleman’s argument highlight the inadequacy of the Government’s proposals, in that they benefit only a third of married couples and only one in six households with children? If they want to recognise marriage in the tax system, they should recognise marriage, not a certain type of marriage and a certain few married couples.

[Mr Jackson]

The hon. Lady is engaging in a certain degree of amnesia. When her party was in government, it took 7% out of this country’s gross domestic product during the financial crisis. It left us with a disastrous legacy of debt and a huge deficit, which meant that we had to take very difficult decisions. We have to lay the blame for that at her party’s door. That is why we cannot be more innovative in how we approach the tax system. We are, as always, constrained by the legacy of a disastrous Labour Government. Labour always leaves office with more people jobless and the country in trouble.

[Sheila Gilmore]

Will the hon. Gentleman give way?

[Mr Jackson]

I will give way later, because I am sure the hon. Lady will not forget my comments.

The purpose of clause 11 is not to try to make people get married, but to remove the obstacles to those who wish to marry, which is different. Marriage should at the absolute minimum be a credible, accessible option for all eligible couples. However, the failure of our income tax system—unlike that accessed by the majority of people living in Europe—to recognise marriage means that the fiscal obstacle to marriage is a real concern. The size of the couple penalty in this country, as outlined by the Institute for Fiscal Studies, is deeply worrying.

[Alison Seabeck]

Will the hon. Gentleman give way?

[Mr Jackson]

No, I will not give way—not even to the hon. Lady.

As others have noted, the social policy charity Christian Action Research and Education conducted an annual international tax comparison for 2012—the latest year for which we have comparative data—which demonstrated that the burden on a one-earner married couple on an average wage was a significant 45% greater than the OECD average.

It is not acceptable that we should make the option of marriage inaccessible in this country, and so much more so than the OECD average. Clause 11 will take a vital first step in the direction of addressing that problem, but the limited nature of the partially transferrable allowance means that it will only begin to erode the incentive not to marry. We must go much further in the next Parliament to create a genuinely level playing field. Given the huge public policy benefits of marriage, there is a compelling case for a nudge to marry, although a level playing field would be a massive step forward.

[Alison Seabeck]

I am sorry, but how many people in this Chamber thought, “Oops! I can’t get married because I’ve got a fiscal obstacle in the way,” given that the average cost of a wedding is about £10,000?

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[Mr Jackson]

I know that this debate is apposite because the hon. Lady recently tripped along the path of happy matrimony, on which I congratulate her, albeit belatedly. I am not sure whether the issue of £3.85 came into it for the right hon. Member for Greenwich and Woolwich (Mr Raynsford).

If I could move on before we dwell too long on the hon. Lady’s love life, I have read in many places that the provision discriminates against widows and widowers, people who leave abusive relationships and working couples. The hon. Member for Newcastle upon Tyne North regurgitated that argument earlier, but it completely misunderstands the policy.

First, if the widow or the widower was the homemaking spouse, their personal allowance would not die with their working spouse; it would automatically return to them so they could benefit if they re-entered the job market. Secondly, dual-earner couples already benefit from individual personal allowances, so they are already benefiting from both allowances. Thirdly, on those leaving abusive relationships—this is a very important issue and it would be remiss of the hon. Lady not to raise it—if a marriage ends, the homemaking spouse, who had previously transferred the tax allowance to their spouse in paid employment, would be required to take back their allowance because the marriage had ended. It would not be stolen from them by their former spouse.

If the argument is that this policy does nothing for widows and widowers, my response is that that is true of many policies. Most policies have a sharp focus: if we responded to every policy solution by saying, “What about those who won’t benefit?” the implication would be that we should introduce only polices that affect everyone equally. However, in the real world, where we often need specialist and focused policies, that is simply not possible. There is nothing to stop us bringing forward another policy specifically to help widows and widowers—I am sure that Treasury Ministers are listening on that issue—and public policy makes provision for them in other ways. Many widows and widowers were once in one-earner families and will therefore welcome clause 11 for family members who are now in such a position. In short, I warmly welcome clause 11.

On the current drafting, the failure to make provision for a tapered withdrawal of the 10% transferable allowance is an oversight that should be corrected for fairly obvious reasons. I very much hope that the Exchequer Secretary will put that right through a Government amendment on Report.

I congratulate the Prime Minister and Chancellor on introducing this seminal provision. I very much hope that the whole House will recognise its significance in qualifying the individualism of our tax system and reinserting some recognition of the importance of family responsibility. It is a first step that will help to make the option of marriage less inaccessible to those on average and below-average incomes, because it is about social equity as well. We must build on it in the next Parliament; and with a majority Conservative Government, we will.

[Alison Seabeck]

It is always interesting to follow the hon. Member for Peterborough (Mr Jackson). He and I have recently campaigned jointly on the future of our Land Registry offices, but I am afraid that we will be in different Lobbies this afternoon. I cannot agree with his assessment of the value of this tax change for a range of reasons.

Like many measures introduced by this Government, this one is disingenuous at best. It was brought forward to a fanfare of trumpets, after a great deal of pressure from Conservative Back Benchers, but it is basically unfair. I pick up a sense of that unfairness, which is driven through the tax system, when I do a street surgery every Saturday and in my postbag. That unfairness is what the public have the greatest problem with, whether in relation to the tax system or to other Government changes. It is also indicative of the problems we have seen in the House this week. We in this place do not read the public mood as well as we ought to at times, and this measure is yet another example of that problem.

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[Tim Loughton]

My hon. Friend has done a great amount of work on this issue and there is a much bigger picture.

This policy is popular among the public. It is popular with a majority of Labour voters. It is even popular with an awful lot of Liberal Democrat voters, despite that party’s policy being against it. Last May, the Liberal Democrat Secretary of State for Business, Innovation and Skills attacked the “prejudice” directed at stay-at-home mothers. I am sure that he would have included stay-at-home fathers to be inclusive. It is deeply insulting to the many millions of married couples who have decided to make a lifelong commitment to each other that is recognised in law in front of their family and friends to suggest that we are discriminating in some way against other people.

Some 90% of young people aspire to get married. Some 75% of cohabiting couples under the age of 35 also aspire to get married. There are many forms of family in the 21st century and many people do a fantastic job of keeping their families together and bringing up children, often in difficult circumstances. However, as many of my hon. Friends have said, almost uniquely among the large OECD economies, the UK does not recognise the commitment and stability of marriage in the tax system until one partner dies. Worse still, one-earner married couples on an average wage with two children face a tax burden that is 45% greater than the OECD average, and that gap continues to widen.

To introduce such a recognition of marriage, particularly in the modest form suggested in the Bill, is not to disparage parents who find themselves single through no fault of their own, nor to undermine couples with two hard-working parents, all of whom rightly get help and support from the state in other forms and for whom we might need to do more. Uniquely, married couples, civil partners and same-sex marriage partners are discriminated against in our tax system.

[Mr Stewart Jackson]

My hon. Friend is making a powerful and fluent case. He spoke about the popularity of the policy with Labour voters. Is it not also the case that significant polling evidence shows that young people across all classes, ethnicities and races support the institution of marriage and hope one day to be part of it?