The transferable tax allowance for married couples: another blow for women?

My article on behalf of the Women’s Budget Group for Society Central. First published here. Photo – hands with wedding rings by Greg Kendall-Ball shared under a creative commons license.

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On announcing the Transferable Tax Allowance, David Cameron said: I believe in marriage, I believe marriage should be recognised in the tax system. I see this as….a start of something I would like to extend further.” 

wedding ringsThe TTA (or Marriage Tax Allowance) is a scheme that allows the high-earning partner of married couples (or those in a civil partnership) to use some of their low/non-earning partners’ tax-free allowance.

The move promises to reward couples that have taken a vow of commitment to each other but on closer inspection the policy is deeply flawed. Leaving aside the morality of using fiscal policy to shape interpersonal relationships and the radical departure this represents from the Conservative policy of independent taxation, the benefits of this scheme are frankly, unequal.

New analysis from the Women’s Budget Group using data provided by the Institute of Fiscal Studies shows that, far from helping families, the beneficiaries of the TTA are actually 85% male. Women are more likely to be the low-earning partner in couples for reasons including (but not limited to) the fact they tend to work part-time or not at all to care for children or relatives. It is mostly men who are the high-earning partner in couples and, therefore, men who will benefit from this tax break.

Proponents have argued that a tax break for one partner is saving for all the family. But the idea that an individual’s income is split equally with their partner is questionable.

Financial power dynamics between couples are complex and often unequal. There is little evidence to suggest that men split their income equally with their spouses. In fact available evidence suggests that men are more likely than women to use their income for personal spending. This gendered tax relief is therefore unlikely to benefit the rest of the household.

It is important not to overstate the impact of this policy, as the rewards are relatively meagre. High earners will be able to transfer £1000 of their annual personal allowance of tax-free income between themselves, as long as neither pays income tax at more than the basic rate. This will mean the high earner in eligible couples will pay up to £200 less tax a year or around £4 a week.

Given Cameron’s commitment to extending the tax allowance in the future, this announcement is only the thin end of the wedge. Yet increasing this type of tax allowance will only create further economic disparity between men and women and put increasing pressure on low earners, namely women, to remain unemployed or in part-time work.

The limitations also mean that very few married couples will actually benefit. If both partners earn over the income tax threshold it won’t apply. The poorest families (where both partners don’t earn enough to pay tax) also won’t benefit, even though they are most in need of support.

Moreover, only 18 per cent of families with children will be eligible, calling into question the Conservative pledge to do “everything [they] can to support families during tough times”. This is because of the eligibility criteria outlined above, but also because many couples with children are not married including the 2 million single parents in Britain today.

Finally as couples will need to apply to receive the their tax allowance, this automatically reduces uptake for the sizeable proportion of those who don’t know or don’t know how, to claim.

Stranger still, this policy represents a radical departure from Conservative party ideology.

Prior to the 1980s, a married woman’s income was treated as her husband’s. Following a consultation on the matter, the Conservatives (along with all the other major parties) rejected a transferable tax allowance, opting for independent taxation instead. The move made sense.

Marriage has no financial need in and of itself and independent taxation is better for women’s economic autonomy. So why this sudden shift? Few couples will actually benefit from the TTA and those who do, will receive only a token amount.

The £700 million that it will cost to fund the TTA could be used instead to tackle some more urgent social needs. For example, this figure could be used to make up for two of the four years for which child benefit has been frozen or raised by less than inflation.

Alternatively, the money could be used to reinstate child benefit as a universal benefit for all children. The higher income charge was projected to take £690 million from parents in 2013/14, almost exactly the same amount as would be paid out to married couples through TTAs from 2015/16.

Rather than further reducing the incentive for women to return to work, the money could also be spent on improving childcare, the cost and availability of which remains one of the biggest hurdles for women returning to the workforce after childbirth.

Only £200 million – about one third of the amount being spent on TTAs – would be needed to extend the proposed additional childcare help in Universal Credit to all, rather than restricting it to those earning above the tax threshold, as currently proposed.

Sue Himmelweit of the Women’s Budget Group said that it was:

both morally suspect and almost certainly counterproductive to bribe people into marriage.”

And given how few married couples will actually benefit from the programme, this can only be seen as Cameron’s attempt to appeal the social conservatives of his party.

Yet the announcement of the Transferable Tax Allowance in the Autumn Financial Statement passed with little remark from either public or press. Perhaps it was seen as small fry compared to the other headline-grabbing commitments of continued austerity or perhaps the public doesn’t see it as a threat.

Either way, if this really is the thin end of the wedge, we should be concerned. The government would be better off helping the most vulnerable in our society rather than using tax to reward one type of living arrangement over another.

Is it time for a new debate about gender equality?

I’m delighted to have my piece on this issue published on the Society Women at the topCentral blog at the University of Essex. It is reproduced here:

‘Check your privilege’ is a phrase that increasingly crops up in equality debates and no more so than in feminism. It aims to hold to account the white, educated middle class women who spearhead the feminist movement, asking them to consider their narrow breadth of experience before speaking on behalf of ‘all women’. It has been a divisive concept, but the idea that feminism is only for the elite is nothing new.

A report from Institute for Public Policy Research  (IPPR) suggests that recent feminist campaigns are on the wrong track and the movement should, in essence, ‘check its privilege’ in order to change things for the many rather than the few.

The report, Great Expectations – Exploring the Promise of Gender Equality argues that a focus on ‘women at the top’ – that is to improve female representation in politics and on corporate boards – will not produce the changes needed to empower all women. Campaigns such as the Fawcett Society’s ‘Women and Power’ focus on getting already educated and privileged women into powerful positions rather than transforming the economic and social landscape that keeps most other women lagging behind.

Flexibility should occur at the bottom as well at the top of the labour market and we should aim to raise the status and pay of the jobs that women do, especially care work.

The report combines statistical analysis of the National Child Development Study, the British Cohort Study and Understanding Society with interviews of women in 50 families to examine progress on women’s equality across three generations.

Through this, the researchers examine the barriers to equality that women in the UK still face and conclude that legislation can only go so far. Women have gained legal equality in most areas and whilst this has helped reduce discrimination in the workplace, for example, there are other hurdles it won’t address.

Research released in July from the Economic and Social Research Council concluded that despite the increase in female breadwinners, women still do most of the housework and IPPR’s own research discovered that the burden of children and the elderly is still very much the female domain.

How fairly care work is organised is heavily correlated with women and men’s educational and class background. The more educated a woman is, the longer she waits to have children, which tends to result in a more equitable split of housework and childcare. Fathers too are increasingly spending more time with their children but these fathers are also more highly educated.

Listen to a podcast about the research with Glenn Gottfried, IPPR

Little has changed for women with no higher education or who work in unskilled or semi-skilled jobs. These women tend to have children earlier, in their teens and twenties, but the impact this has on their potential earnings is actually worse than for the previous generation of women. Those born in 1958 who had children early would expect to earn 17% less than women without children. For those born in 1970. the figure is 20%. Read more