Finance (No. 2) Bill

Sheila Gilmore Excerpts

Wednesday 9th April 2014 Commons Chamber

“will depend on the rate of take-up, as people will presumably have to make an active claim to HMRC to benefit, and the extent to which individuals change their behaviour in order to qualify.”

[Sheila Gilmore (Edinburgh East) (Lab)]

My hon. Friend will have attended previous debates on this issue. Indeed, only yesterday in the Chamber, lectures were being given by Government Members about the need to simplify the tax code. Does she not find surprising the support for measures such as the one that we are debating today?

[Catherine McKinnell]

Indeed. Government Members often lament red tape and the complexity of the tax system. I am not entirely sure that they will be thanked for adding to it in this way and putting the burden of implementation on employers.

The apparent onus on taxpayers proactively to apply for this allowance is a concern that has been raised more widely. The Low Incomes Tax Reform Group has pressed the Government to ensure that a claim for the marriage tax allowance can

“be made on paper, as well as online; digital exclusion affects disproportionately people on low incomes, the very people to whom this relief is directed. It is particularly important that a paper copy is available since, in some cases, taxpayers will seek assistance from the voluntary and charitable sector with, perhaps, only one spouse being physically present at such meetings.”

LITRG goes on to urge that

“the claim/election process will be made as simple as possible—preferably a joint election rather than separate claim and election.”

I look forward to the Minister’s response to those concerns.

The complexity of the Government’s marriage tax allowance proposal has been commented on by the IFS, which stated, when the measure was first announced:

“One striking feature of the policy is that it complicates the income tax system. A transferable personal allowance for married couples capped at £1,000 and then withdrawn using a cliff-edge at the higher-rate threshold is not the simplest to understand. It is three years since another cliff-edge at the higher rate threshold was announced at the 2010 Conservative Party conference as a way of effectively means-testing Child Benefit, only to be removed and replaced with a less egregious taper at Budget 2012. The amounts involved here are less than in that case, which perhaps explains the willingness to cliff-edge again rather than implement a taper. Nevertheless, it is difficult to escape the conclusion that an income tax system which makes some people worse off after a pay rise has something wrong with it.”

One might think that, as my hon. Friend the Member for Edinburgh East (Sheila Gilmore) pointed out, a Government who have so boasted about being committed to tax simplification would want to avoid further complicating the system. At the launch of the Office of Tax Simplification, the Chancellor commented:

“A decade of meddling and intervening has made the tax affairs of millions of families and businesses across the UK extremely complicated. We need to sort out this mess.”

What does the Office of Tax Simplification make of the marriage tax allowance, which will clearly make the tax affairs of couples and employers more complex? We do not know because, in the words of the Exchequer Secretary in response to a written question I tabled:

“The Office of Tax Simplification (OTS) has not made an assessment of the proposals for a transferable tax allowance.”—[Official Report, 12 February 2014; Vol. 575, c. 642W.]

Why on earth not? What could Ministers possibly fear from the outcome of such an assessment?

It may be clear now that the Opposition oppose the Government’s marriage tax allowance and will vote against clause 11. We believe that the marriage tax allowance is perverse and unfair. It is a poorly targeted use of resources and is overly complex, and our amendment to clause 11 presses the Government to undertake a proper review of the cost, the impact and the benefits for those who will receive it and for the overwhelming majority of married couples and families who will not benefit at all.

Amendment 3 calls on the Government to ensure that any such review includes an assessment of alternative tax reliefs that would benefit a much greater number of families, because we are not just opposing the marriage tax allowance today. Indeed, we have said that a future Labour Government would scrap this policy and use the money saved, together with funding from a mansion tax on properties worth over £2 million, to reintroduce the 10p starting rate of tax, meaning a tax cut for 24 million people on low and middle incomes, by contrast with the 4.2 million couples who will benefit from the marriage tax allowance. Crucially, almost half of those benefiting from a new 10p tax rate would be women.

We know that the Liberal Democrats are apparently implacably opposed to the policy introduced by clause 11 and secured a deal in the coalition agreement to go so far as to abstain on the measure. I believe it was before the 2010 general election that the now Deputy Prime Minister described the Conservatives’ proposal for a transferable tax allowance for married couples as

“patronising drivel that belongs in the Edwardian age.”

I know that Liberal Democrats have, as some might say, an irritating habit of saying one thing before a general election, then doing precisely the opposite—university tuition fees and the VAT bombshell spring to mind—or of saying one thing at any point in the electoral cycle and doing precisely the opposite: for example, 46 Lib Dem peers voted to retain the bedroom tax just 24 hours after their party president, the hon. Member for Westmorland and Lonsdale (Tim Farron), said it was something his party could not “continue to support”. Although the Liberal Democrats may be thinking about abstaining on clause 11 as it stands, it is difficult to see how they could sit on their hands this afternoon and vote against our reasonable amendment.

We know that the Lib Dems apparently secured the policy of free school meals for every child in reception, year 1 and year 2 from September 2014, reportedly in exchange for agreeing to abstain on the marriage tax allowance. We of course back the policy, having piloted the idea in government in County Durham and Newham, with excellent results, but there are very real concerns about the way in which the policy was announced, and how it will be implemented. The initial pledge was for a “hot, nutritious meal at lunchtime”, but that is now being described as an aspiration. Ministers are now simply referring to a free, nutritious school lunch.

Many thousands of schools across the country simply do not have the facilities to ensure this provision. The Liberal Democrats have stated that around £80 million of the additional £150 million capital funding required for the project will come from an underspend in the Department for Education and an additional £70 million would be new money from the Treasury. [Interruption.]

I hear hon. Members on the Government Benches chuntering from a sedentary position. They seem very disturbed by the Liberal Democrat policy of free school meals and do not see how it is linked to the marriage tax allowance. Would they like to confirm that that was not an agreement, as has been reported?

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[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.

[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.

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[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.

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[Mr Burrowes]

My hon. Friend is quite right. We are simply talking about justice. The Government need to take a lead in this area. The culture can change in many ways, but one way we can take a lead is through the introduction of a small financial instrument to recognise marriage in the tax system. That is what we are doing today, and it will help to bring about a change of character across the whole country.

[Sheila Gilmore]

For many poorer couples who are living together, whether they are married or not, the benefits system does indeed have a couples penalty. Would the hon. Gentleman be interested in campaigning to end that?

[Mr Burrowes]

If the hon. Lady looks at the Conservative party manifesto, she will see in it a recognition of the couples penalty. Sadly, there was no money left by the previous Government, but we want to do a great deal to correct that legacy of injustice that they left us. The couples penalty is one example among many. The discrimination is increasingly happening among couples with children, and the transferrable allowance will at least start to right those wrongs.

I am keen to give the House the opinions of others as well as my own. The Institute for Fiscal Studies has clearly demonstrated that the transferrable allowance is progressive, so I invite all those who support progressive policies to join us in the Lobby when we vote on this measure. It was suggested earlier that we are taking a partial view in relation to the IFS, but I understand that about 70% of the benefit will go to those in the lower half of the income distribution. I am not sure whether anyone has yet corrected the comments from the IFS. Anyone who is concerned about family responsibilities should also recognise that this measure does something that has not been done for 15 years—namely, recognising family responsibilities in the tax system.

This is an issue of trust, certainly for the Conservatives, who put this measure in their manifesto and who want to retain the trust of the electorate. This is a vital first step, albeit moderate, towards fulfilling that manifesto commitment. We will also seek to give further recognition to marriage in an increased transferable allowance. We are fulfilling our vow to the electorate, however. At the election, people will look back at this debate and see that the Opposition were not supporting marriage. The electorate will remember that. I urge all Members to support marriage.

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[Dr Coffey]

They certainly do. This measure is a start. We do not have tons of money, and the fact that resources are scarce has been well pointed out. Nevertheless, we are doing things that reduce the income inequality for families across the country, using the long-term economic plan. It has meant that gilt rates have been able to stay relatively low, which means that mortgage rates have stayed low and that is probably doing more for people than anything else, along with our fuel duty freezes and indeed cuts in previous Budgets. Those kinds of things are helping families, be they married or not.

I appreciate that time is short and others are waiting to speak, Mr Caton. I just wish firmly to say that although I am a singleton—I thought I had met Mr Right 20 years ago, but it did not work out—I hope that every married couple benefiting from this will recognise that at least they can go and have a nice wedding anniversary with a little bit more cash from the Government.

[Sheila Gilmore]

We hear so much in this House about how little money there is and how hard it is, yet certain members of the Government support this measure. It appears that not all do—the Lib Dem part of the coalition may or may not support it; it said it did not previously. We are talking about only a small amount of money, but let us see what it is equivalent to. Many people in this country have been outraged by the Government’s bedroom tax. Even if that makes the savings the Government claim it will, which I doubt, it will save less than the amount this measure will pay out. That is the problem: the Government say that the issue that has to be addressed all the time is saving money, but clearly when it comes to some things saving money is not quite so important. There are priorities, and the Government have chosen to make this policy one of them.

I believe we should be giving particular help to families with children, and not just to couples because they happen to be married. Apart from in respect of the very poorest, I have not noticed any great appetite to do away with the couple penalty that probably does apply in terms of people in the benefits system. But if two people choose to marry, we have an independent taxation system here and they can choose to work or not work, so I do not see where any great penalty is being applied to marriage. For those who have children the situation may be different.

If the Government wanted specifically to help parents who are staying at home with children, perhaps that is what they should have done. This measure does not do that; it helps couples where one person is not working, but it has no relationship with the needs of any children they may be raising. If our main aim is to help people with children and make sure that children are brought up in stable relationships, I cannot see what this measure has to do with that. The reason many relationships break down, whether or not they are marriages, has to do with financial insecurity and the difficulties that causes. Those struggling through a cost of living crisis and those who have lost out because of many of this Government’s policies particularly include the low paid. We can all pick and mix our experts—some hon. Members have cited views of the Institute for Fiscal Studies—but if we really want to help low-paid people, we must examine things such as the proposed tapering for universal credit. We need to examine the structure in place for working people who will be in receipt of universal credit—the replacement for tax credits. Under the current structure there is a serious lack of support for second earners in the family who want to start building up their earnings. We could be looking at such things, including child care help for low-paid families.

Very briefly, let me tackle something that was mentioned by the hon. Member for Peterborough (Mr Jackson). He did not take my intervention, so I will deal with it now, and, as he raised the matter, it must be relevant to this debate. One statement that Government Members are always keen to make is that every Labour Government leave office with unemployment higher than when they arrived, but it is not true. In 1946 unemployment was 2%, and in 1951 it was 1.3%. In 1951, at the beginning of the Tory Government, unemployment was 1.3%, and in 1964 it was 1.7%, so it went up under a Tory Government. Between 1979 and 1997, which was again a Conservative Government, unemployment went up from 5.2% at the beginning to 7.4% at the end, but for 13 of those 18 years, unemployment was above 10%. Therefore, the statement is not true, and it also completely distorts the appalling unemployment record of the Government between 1979 and 1997. I will now sit down and allow others to speak.

[The Temporary Chair (Martin Caton)]

Order. I wish to call the Minister by 3.45 pm at the latest, so I ask the hon. Member for Gainsborough (Sir Edward Leigh) to ensure that he has sat down by then.