How the government screws married couples

Today (10th April 2010) the Tories proposed a £150 tax break for married couples for couples with a total income from a single earner of less than £44000pa (see

Apart from being totally underwhelming in its scope, and accused of undermining "other" types of families, it would completely fail to address any of the unfairness in the current tax regime. What no one ever explains is just how much a traditional single earner + spouse loses out compared to another couple that have the same total gross earnings, but who both work and each pull in half of the household total earnings.

Furthermore, people would say that any change in this arrangement would only benefit wealthy families. This is absolute rubbish as the following spreadsheet illustrates :-

As you can see, this policy against marriage actually targets the lowest income families the most. The percentage take by the government actually falls as income increases until the joint income starts to exceed £45K

Of course, this isn't the only way a traditional family unit loses out; if you have children, things aren't too bad because a parent who stays at home to look after them will accrue some state pension benefits as long as they are claiming child benefit. However, if you don't have children, you have no NI contributions contributing to a pension. Even if you do have children, you miss out on the state additional pension.

The government is also very inconsistent in the way it treats married couples:
If the husband works and the wife stays at home to look after the family, then technically the wife has no income. However, if she commits a traffic offence or crime with a means-tested fine, the government are quite happy to consider the husband's income in considering her ability to pay the fine. Similarly, any legal claim against the housewife would consider the total family assets as available for any settlement. Basically the government is only consistent in its ability to keep its cake and eat it !

This is only the tip of the iceberg.

Not all countries treat families in this manner. Thirteen OECD countries allow income splitting between spouses: the United States, France, Germany, Belgium, Greece, Luxembourg, Portugal, Switzerland, Iceland, Ireland, Norway, Poland and Spain. Also the Netherlands has a more flexible version of the joint tax declaration allowing for optimal family tax efficiency. It wouldn't be possible to switch to this system overnight in the UK, especially in the current economic situation. However, I think the spreadsheet illustrates just how unfair the UK system is to families. It's amazing how we've all got so used to this injustice.

All I can say to David Cameron is this:-

"Terribly lame gesture, though at least a step in the right direction. Very disappointing that the Conservatives can't seem to defend this policy properly against attacks by the other parties. Anyone with half a brain can see it's just a case of starting to right an abysmal wrong"

Update 24th April 2010

I had a very comprehensive reply to an email I sent to David Cameron regarding this matter :-

Dear Mr Millican,

I am writing on behalf of David Cameron to thank you for contacting us about recognising marriage in the tax system.  

We take on board the points you raise, and I will certainly make sure your comments are passed on to our team. I would also like to set out our approach to this issue in more detail.

Our proposal will recognise marriage in the tax system by creating a partially transferable personal allowance for all married couples and civil partnerships. This allowance will be limited to basic rate taxpayers, and will be worth up to £150 a year per couple at the 20% rate of tax.

 We will make this change to send a clear and positive message about the importance of commitment. Most countries in the OECD already do this, including France, Germany, Italy, Spain and the USA. We believe it would benefit Britain to do the same. Of course, we understand each family is different, and some marriages and civil partnerships fail. But as institutions, marriage and civil partnerships promote responsibility, commitment and family solidity; backing them sends an important signal that as a society, we value the commitment people make when they get married or form a civil partnership.

I hope that explains the reason behind this policy, but it is important to make two further points. 

First, recognising marriage in the tax system is only one part of our broader plan to support people when they make a commitment to one another. We have also proposed getting rid of the couple penalty in the tax credits system, which means people are paid more benefits if they split up than if they stay together. Removing this penalty would help all cohabiting couples, including those in civil partnerships, who qualify for Working Tax Credit, not just married couples.

Second, this policy does not discriminate against single people. It does not remove any benefit, and we believe that those who are single should continue to receive all the help and support to which they are entitled. In addition to this, the allowance will be funded using some of the revenues from a levy on banks, not by raising people’s taxes. 

More broadly, we all know that with Labour in charge our country is heading in completely the wrong direction. That is why there is a clear choice at this election between five more years of Gordon Brown’s tired government making things worse, or David Cameron and the Conservatives with the energy, leadership and values to get the country moving. I hope you will feel able to join us as we seek to change our country for the better.

Yours sincerely,

David Cameron’s Correspondence Unit
Conservative Campaign Headquarters 

I am encouraged by these additional two points - thank you !