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Laurie Penny: this divorce tax is emotional terrorism

Persuading poor people to stay married eases the strain on housing stocks and provides a modesty slip for inequality.

The denial of compassion is big business for this government. Under the coming austerity package, which includes a de facto large tax break for bankers, single mothers will be punished more than any other group in society, save those with severe disabilities. Roll that sentence around your mouth and see how bitter it tastes.

This month, expected plans by the Tories to charge separating couples to use the Child Support Agency - essentially a divorce tax for parents - have hit the news. Put this in the context of tax credits and housing benefit cuts that will force many single mothers out of their homes and leave hundreds of thousands more in penury, the removal of legal aid services that allow women to leave abusive husbands without threatening their children's safety, and cuts to front-line public services that will leave more than a million women jobless, and it is hard not to see the scheme as an attack on women dressed up in the bad, Thatcherite drag of think-of-the-children-ism.

What the coalition has just done has made it all but illegal for women earning much under £25,000 a year to leave their husbands. Why? Because it wilfully misunderstands the purpose of the welfare state. In The Pinch, written at the height of Tory propagandising against single and working mothers, David Willetts, who is now a cabinet minister, laments: "A welfare system that was originally designed to compensate men for loss of earnings is slowly and messily redesigned to compensate women for the loss of men."

This is untrue. The welfare state was brokered at a time of high employment when many women were raising children alone because of wartime bereavement. It was there to protect women, working unpaid, from destitution, and was later expanded to allow women with children the option of independence from men. That painfully won independence has just been kneecapped.

Think of the children

The line we are usually spun is that marriage is good for kids, but anyone who grew up with parents guilt-tripped into staying together "for the sake of the children" will understand why decades of research has failed to prove any causative, rather than correlative, link between parents staying married and children growing up happy. The notion that marriage, which only ceased to be understood as a deal to protect property within the past century, magically creates loving relationships through the power of a legally binding document is just propaganda.

Furthermore, it's quite possible that couples forced to stick together because of the financial threat of this new divorce tax might not go on to create a happy little house on the prairie together.

None of this matters to the coalition. The real reason behind the government's crusade to "recognise marriage in the tax system" is breathtakingly cynical: it's about saving money. Persuading poor people to stay married eases the strain on housing stocks and provides a modesty slip for rising inequality; rich couples can still divorce as they please.

This financial intimidation of women with families has nothing to do with the welfare of children and less still to do with "family values". It is a simple cash-grab, dressed up in the language of moral manipulation. This intimate micromanagement of the personal relationships of the poor is a shameless about-face for a party that accused Labour of instituting a nanny state.

The sheer hypocrisy of withdrawing welfare only to shrink the state small enough to fit into people's bedrooms, and the cruelty of playing on women's guilty fear of being bad parents in order to force them to swallow Thatcherite benefit cuts have nothing to do with child welfare.

It's emotional terrorism, and any government should be above it.

Laurie Penny is a contributing editor to the New Statesman. She is the author of five books, most recently Unspeakable Things .

This article first appeared in the 17 January 2011 issue of the New Statesman, War on WikiLeaks

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Q&A: What are tax credits and how do they work?

All you need to know about the government's plan to cut tax credits.

What are tax credits?

Tax credits are payments made regularly by the state into bank accounts to support families with children, or those who are in low-paid jobs. There are two types of tax credit: the working tax credit and the child tax credit.

What are they for?

To redistribute income to those less able to get by, or to provide for their children, on what they earn.

Are they similar to tax relief?

No. They don’t have much to do with tax. They’re more of a welfare thing. You don’t need to be a taxpayer to receive tax credits. It’s just that, unlike other benefits, they are based on the tax year and paid via the tax office.

Who is eligible?

Anyone aged over 16 (for child tax credits) and over 25 (for working tax credits) who normally lives in the UK can apply for them, depending on their income, the hours they work, whether they have a disability, and whether they pay for childcare.

What are their circumstances?

The more you earn, the less you are likely to receive. Single claimants must work at least 16 hours a week. Let’s take a full-time worker: if you work at least 30 hours a week, you are generally eligible for working tax credits if you earn less than £13,253 a year (if you’re single and don’t have children), or less than £18,023 (jointly as part of a couple without children but working at least 30 hours a week).

And for families?

A family with children and an income below about £32,200 can claim child tax credit. It used to be that the more children you have, the more you are eligible to receive – but George Osborne in his most recent Budget has limited child tax credit to two children.

How much money do you receive?

Again, this depends on your circumstances. The basic payment for a single claimant, or a joint claim by a couple, of working tax credits is £1,940 for the tax year. You can then receive extra, depending on your circumstances. For example, single parents can receive up to an additional £2,010, on top of the basic £1,940 payment; people who work more than 30 hours a week can receive up to an extra £810; and disabled workers up to £2,970. The average award of tax credit is £6,340 per year. Child tax credit claimants get £545 per year as a flat payment, plus £2,780 per child.

How many people claim tax credits?

About 4.5m people – the vast majority of these people (around 4m) have children.

How much does it cost the taxpayer?

The estimation is that they will cost the government £30bn in April 2015/16. That’s around 14 per cent of the £220bn welfare budget, which the Tories have pledged to cut by £12bn.

Who introduced this system?

New Labour. Gordon Brown, when he was Chancellor, developed tax credits in his first term. The system as we know it was established in April 2003.

Why did they do this?

To lift working people out of poverty, and to remove the disincentives to work believed to have been inculcated by welfare. The tax credit system made it more attractive for people depending on benefits to work, and gave those in low-paid jobs a helping hand.

Did it work?

Yes. Tax credits’ biggest achievement was lifting a record number of children out of poverty since the war. The proportion of children living below the poverty line fell from 35 per cent in 1998/9 to 19 per cent in 2012/13.

So what’s the problem?

Well, it’s a bit of a weird system in that it lets companies pay wages that are too low to live on without the state supplementing them. Many also criticise tax credits for allowing the minimum wage – also brought in by New Labour – to stagnate (ie. not keep up with the rate of inflation). David Cameron has called the system of taxing low earners and then handing them some money back via tax credits a “ridiculous merry-go-round”.

Then it’s a good thing to scrap them?

It would be fine if all those low earners and families struggling to get by would be given support in place of tax credits – a living wage, for example.

And that’s why the Tories are introducing a living wage...

That’s what they call it. But it’s not. The Chancellor announced in his most recent Budget a new minimum wage of £7.20 an hour for over-25s, rising to £9 by 2020. He called this the “national living wage” – it’s not, because the current living wage (which is calculated by the Living Wage Foundation, and currently non-compulsory) is already £9.15 in London and £7.85 in the rest of the country.

Will people be better off?

No. Quite the reverse. The IFS has said this slightly higher national minimum wage will not compensate working families who will be subjected to tax credit cuts; it is arithmetically impossible. The IFS director, Paul Johnson, commented: “Unequivocally, tax credit recipients in work will be made worse off by the measures in the Budget on average.” It has been calculated that 3.2m low-paid workers will have their pay packets cut by an average of £1,350 a year.

Could the government change its policy to avoid this?

The Prime Minister and his frontbenchers have been pretty stubborn about pushing on with the plan. In spite of criticism from all angles – the IFS, campaigners, Labour, The Sun – Cameron has ruled out a review of the policy in the Autumn Statement, which is on 25 November. But there is an alternative. The chair of parliament’s Work & Pensions Select Committee and Labour MP Frank Field has proposed what he calls a “cost neutral” tweak to the tax credit cuts.

How would this alternative work?

Currently, if your income is less than £6,420, you will receive the maximum amount of tax credits. That threshold is called the gross income threshold. Field wants to introduce a second gross income threshold of £13,100 (what you earn if you work 35 hours a week on minimum wage). Those earning a salary between those two thresholds would have their tax credits reduced at a slower rate on whatever they earn above £6,420 up to £13,100. The percentage of what you earn above the basic threshold that is deducted from your tax credits is called the taper rate, and it is currently at 41 per cent. In contrast to this plan, the Tories want to halve the income threshold to £3,850 a year and increase the taper rate to 48 per cent once you hit that threshold, which basically means you lose more tax credits, faster, the more you earn.

When will the tax credit cuts come in?

They will be imposed from April next year, barring a u-turn.

Anoosh Chakelian is deputy web editor at the New Statesman.