Catholic organisations are calling on the UK government to adopt family-first tax reform.
The Catholic Union of Great Britain; the Centre for Enterprise, Markets and Ethics and the Benedict XVI Centre for Religion and Society, St Mary’s University, Twickenham have set out a plan aimed at supporting families as the economy recovers from the effects of Covid.
The three organisations announced their proposal yesterday, ahead of the government’s Budget and Spending Review, which is due to be announced on the 27 of October.
In their joint submission to the Treasury, they call on the Chancellor, Rishi Sunak, to adopt fully transferable tax allowances and bands so that all families with the same income pay the same amount of tax regardless of whether they are single-earner or dual-earner households.
At present, just 10 per cent of the current £12,570 tax free personal allowance can be transferred between couples. The three organisations have called for this to be increased at the next Budget, with the aim of making all tax allowances fully transferable replicating the effect of systems that already operate in countries such as France and Germany.
In their submission to the Treasury, they point out the inherent bias of the present system against committed couples, especially single earner households where one spouse chooses to stay home to look after children or care for elderly relatives. They argue that by moving towards fully transferable tax allowance the government will not only be making the system fairer, and giving families more choice, but that the move will ultimately save money. Family breakdown currently imposes downstream burdens on public services that are estimated to cost taxpayers as much as £50 billion every year.
Coming in the wake of a highly controversial decision by the Government to end the £20 uplift to Universal Credit, supporters of the new tax policy argue that it is a cost effective way to fight poverty and help vulnerable families during a time of economic crisis.
Professor Philip Booth, Professor of Finance, Public Policy and Ethics at St Mary’s University, Twickenham, said: “The UK is unusual in the Western world in discriminating in such a marked way against single-earner couples or couples whose earnings are not equal. We probably tax families more severely than any other comparable country. It would not only be fairer to move to a tax system where tax rates were based on family income, it would remove the penalties on family formation that exist in our current tax and benefit systems. Furthermore, it would remove the penalties faced by couples where one member takes on caring responsibilities.”
Andrei Rogobete, Associate Director of the Centre for Enterprise, Markets and Ethics, said: “Transferable tax allowances would provide a crucial lifeline to low-income and single-earner families that have been already struggling throughout the pandemic. It is an important step in making our tax system fairer and more purposeful in recognising the complex needs of families.”
Nigel Parker, Director of the Catholic Union, said: “The health and economic crisis caused by Covid has put a strain on many family budgets and relationships. As we recover from the pandemic, we need to see a plan from the Government for how they intend to support families – making the tax system fairer would be a good place to start. This is needed more than ever with the £20 uplift in support payments coming to an end and cost of living increasing. Many families will be feeling the squeeze this winter. Helping families keep more of the money they earn will not solve all of their worries, but it would be a very welcome first step.”
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