Five problems with the Tories' married couple's tax allowance

Including, only a third of married couples will actually gain, it discriminates against single parents and it reduces work incentives.

With Tory MPs continuing to agitate for the introduction of a married couple's tax allowance, Treasury minister David Gauke has written a letter to backbenchers reassuring them that the government "will legislate for this in this Parliament". 

The policy, as outlined in the 2010 Conservative manifesto, would allow individuals not using all of their personal tax allowance (because their income is less than the current threshold of £9,440) to transfer up to £750 of this unused allowance to their spouse or civil partner, reducing the latter's tax bill by up to £150. It would apply only to couples where the higher-income member is a basic rate taxpayer, with gains tapered away from higher earners. The proposal was included in the Tory manifesto and the coalition agreement provided the Lib Dems with the right to abstain, so Tory MPs are understandably angered by the government's tardiness. But as I show below, there are at least five good reasons why George Osborne (one of the most socially liberal MPs) shows every sign of wanting to abandon it. 

1. Only a third of married couples will​ benefit 

Despite the broad promise to "recognise marriage" in the tax system, most married couples won't gain from it. In 2010, the IFS estimated that just four million out of 12.3 million married couples would benefit (at a cost of £550m), including only 2.5 million of the 8.7 million married couples with someone in work. The remaining 1.5 million gainers are mostly married pensioners. As the IFS noted, "The policy is not, therefore, a general recognition of marriage in the tax system, as it affects only 32% of married couples and 29% of non-pensioner married couples." 

The policy could, of course, be redesigned so that all or most married couples benefit but this, not least for the fiscally conservative Osborne, would be prohibitively expensive. 

2. It discriminates against single parents, widows and widowers and more

In his recent GQ article, Andy Coulson described the perception that David Cameron does not like single parents as "electoral halitosis", but this policy unambiguously discriminates against them. Among those who also don't gain from the policy, as Don't Judge My Family notes, are widows and widowers, people who leave abusive relationships and working couples (discussed below). Is Osborne comfortable with tilting the tax system against them? In addition, if, as previously suggested, those in civil partnerships benefit from the measure, it will become even harder for the government to argue against introducing them for heterosexual couples (a policy that, unlike equal marriage, really would undermine marriage). 

3. It will reduce work incentives

Through policies such as reserving childcare support for dual-earner couples, Osborne has sought to increase work incentives, but this measure will reduce them. Since only those couples with one earner with an income above the personal allowance will benefit, it will encourage actual or potential second earners to stay at home. 

4. There's no evidence that marriage improves child outcomes

One of the main justifications for the policy is that marriage is beneficial for children. As Iain Duncan Smith has argued, "You cannot mend Britain’s broken society unless you support and value the institution which is at the heart of a stable society". But while children born to married couples have better developmental outcomes than those born to cohabiting couples, there's no evidence that this is due to marriage itself. Instead, as the IFS and others have argued, it is more likely due to the fact that better educated and higher-earning couples are more likely to get married. The right has confused correlation and cause. 

5. It will further complicate the tax system

Osborne has made much of his commitment to simplifying the tax system, but this proposal will create a new layer of complexity. To summarise, it will introduce a transferable allowance restricted to a third of married couples, capped at £750 and tapered away from higher-rate taxpayers. As the IFS points out, "Simpler ways to provide support to low- to middle income married couples would include introducing a married couples’ ‘premium’ into working tax credit and pension credit." 

David Cameron speaks with scientists before opening the Li Ka Shing Centre for Health Information and Discovery at Oxford University on May 3, 2013. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Who is the EU's chief Brexit negotiator Michel Barnier?

The former French foreign minister has shown signs that he will play hardball in negotiations.

The European Commission’s chief Brexit negotiator today set an October 2018 deadline for the terms of Britain’s divorce from the European Union to be agreed. Michel Barnier gave his first press conference since being appointed to head up what will be tough talks between the EU and UK.

Speaking in Brussels, he warned that UK-EU relations had entered “uncharted waters”. He used the conference to effectively shorten the time period for negotiations under Article 50 of the Lisbon Treaty, the legal process to take Britain out of the EU. The article sets out a two year period for a country to leave the bloc.

But Barnier, 65, warned that the period of actual negotiations would be shorter than two years and there would be less than 18 months to agree Brexit.  If the terms were set in October 2018, there would be five months for the European Parliament, European Council and UK Parliament to approve the deal before a March 2019 Brexit.

But who is the urbane Frenchman who was handpicked by Commission President Jean-Claude Juncker to steer the talks?

A centre-right career politician, Barnier is a member of the pan-EU European People’s Party, like Juncker and German Chancellor Angela Merkel.

A committed European and architect of closer eurozone banking integration, Barnier rose to prominence after being elected aged just 27 to the French National Assembly.  He is notorious in Brussels for his repeated references to the 1992 Winter Olympics he organised in Albertville with triple Olympic ski champion Jean-Claude Killy.

He first joined the French cabinet in 1993 as minister of the environment. In 1995, Jacques Chirac made him Secretary of State for European Affairs, teeing up a long and close relationship with Brussels.

Barnier has twice served as France’s European Commissioner, under the administrations of Romano Prodi and José Manuel BarrosoMost recently he was serving as an unpaid special advisor on European Defence Policy to Juncker until the former prime minister of Luxembourg made him Brexit boss.“I wanted an experienced politician for this difficult job,” Juncker said at the time of Barnier, who has supported moves towards an EU army.

 

Barnier and the Brits

Barnier’s appointment was controversial. Under Barroso, he was Internal Market commissioner. Responsible for financial services legislation at the height of the crisis, he clashed with the City of London.

During this period he was memorably described as a man who, in a hall of mirrors, would stop and check his reflection in every one.

Although his battles with London’s bankers were often exaggerated, the choice of Barnier was described as an “act of war” by some British journalists and was greeted with undisguised glee by Brussels europhiles.

Barnier moved to calm those fears today. At the press conference, he said, “I was 20 years old, a very long time ago, when I voted for the first time and it was in the French referendum on the accession of the UK to the EU.

“That time I campaigned for a yes vote. And I still think today that I made right choice.”

But Barnier, seen by some as aloof and arrogant, also showed a mischievous side.  It was reported during Theresa May’s first visit to Brussels as prime minister that he was demanding that all the Brexit talks be conducted in French.

While Barnier does speak English, he is far more comfortable talking in his native French. But the story, since denied, was seen as a snub to the notoriously monolingual Brits.

The long lens photo of a British Brexit strategy note that warned the EU team was “very French” may also have been on his mind as he took the podium in Brussels today.

Barnier asked, “In French or in English?” to laughter from the press.

He switched between English and French in his opening remarks but only answered questions in French, using translation to ensure he understood the questions.

Since his appointment Barnier has posted a series of tweets which could be seen as poking fun at Brexit. On a tour of Croatia to discuss the negotiations, he posed outside Zagreb’s Museum of Broken Relationships asking, “Guess where we are today?”

 

 

He also tweeted a picture of himself drinking prosecco after Boris Johnson sparked ridicule by telling an Italian economics minister his country would have to offer the UK tariff-free trade to sell the drink in Britain.

But Barnier can also be tough. He forced through laws to regulate every financial sector, 40 pieces of legislation in four years, when he was internal market commissioner, in the face of sustained opposition from industry and some governments.

He warned today, "Being a member of the EU comes with rights and benefits. Third countries [the UK] can never have the same rights and benefits since they are not subject to same obligations.”

On the possibility of Britain curbing free movement of EU citizens and keeping access to the single market, he was unequivocal.

“The single market and four freedoms are indivisible. Cherry-picking is not an option,” he said.

He stressed that his priority in the Brexit negotiations would be the interests of the remaining 27 member states of the European Union, not Britain.

“Unity is the strength of the EU and President Juncker and I are determined to preserve the unity and interest of the EU-27 in the Brexit negotiations.”

In a thinly veiled swipe at the British, again greeted with laughter in the press room, he told reporters, “It is much better to show solidarity than stand alone. I repeat, it is much better to show solidarity than stand alone”.

Referring to the iconic British poster that urged Brits to "Keep Calm and Carry On” during World War Two, he today told reporters, “We are ready. Keep calm and negotiate.”

But Barnier’s calm in the face of the unprecedented challenge to the EU posed by Brexit masks a cold determination to defend the European project at any cost.

James Crisp is the news editor at EurActiv, an online EU news service.