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Five problems with the Tories' marriage tax allowance

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

David Cameron and his wife Samantha during their holiday on May 26, 2013 in Ibiza, Spain. Photograph: Getty Images.

Three years after the formation of the coalition, the Tories have finally announced plans to introduce a marriage tax allowance. In response, one might ask, what took them so long? The proposal was included in the 2010 Conservative manifesto and the coalition agreement, which provided the Lib Dems with the right to abstain. But senior Tories, most notably the socially liberal George Osborne, have long recognised that the policy is profoundly flawed. Let us count the ways.

1. Only a third of married couples will​ benefit 

Despite the broad promise to "recognise marriage" in the tax system, just a third of couples will benefit from the move. The policy will only apply to basic rate taxpayers not using all of their personal allowance (which currently stands at £9,440), allowing them to transfer up to £1,000 to their spouse or civil partner, reducing the latter's tax bill by around £200. As a result, just four million out of the 12.3 million married couples will benefit (at a cost of £600m), 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 has 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 measure 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 and widows and widowers

In a recent GQ article, Andy Coulson described the perception that the Tories frown upon single parents as "electoral halitosis", but this policy unambiguously discriminates against them. Among those who also don't gain from the policy, as the campaign group Don't Judge My Family notes, are widows and widowers, people who leave abusive relationships and working couples (discussed below). Are liberal Conservatives really comfortable with tilting the tax system against them? The philanderer on his third marriage gains, while the hard-pressed single mother is ignored.

3. It will reduce work incentives

Through policies such as reserving childcare support for dual-earner couples and increasing the personal tax allowance, the coalition 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 has 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 £1,000 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."