How the tax system drives families apart

Frank Field MP, in a report for the think tank Reform, reveals not only that the Government will miss its key target of halving child poverty by 2010-11, but that the centrepiece of the Government's efforts in this area, the tax credit and benefits strategy, has a devastating discriminatory effect on the children of two-parent families:

A single mother working 16 hours a week, after tax credits, gains a total income of £487 a week. A two parent family earning the minimum wage has to work 116 hours to gain the same income. This discrimination helps to explain why children in working two parent families now make up the single most important group of poor children.

In addition, government policy:

§ has missed its 2004-05 target of a reduction of a quarter in child poverty and fallen further behind last year;

§ has seen no change in the numbers of children in severe poverty; and

§ leaves one in five of poor children in persistently poor households.

Because the Government’s policies so heavily discriminate against families with two parents:

§ the risk of poverty has hardly changed for children in two-parent families;

§ half of all poor children are in working families despite the Government’s belief that working is the best route out of poverty; and

§ the numbers of children in working poor households is back at the level it was in 1995.

In the circumstances the widespread breakdown in family life is hardly surprising, and points urgently to the need to a thoroughgoing reappraisal of government strategy. Not only does the current policy discriminate against two parent working families, it also acts as a powerful disincentive against single parents choosing to re-enter a permanent relationship, or to declare their existing partners.

The trend towards exiling fathers from families represents a further, profoundly damaging social change, the effects of which are now being manifested in a feral culture, where work and discipline are increasingly absent, and criminality and violence increasingly a way of life for many. Ways and means must be found to discourage such developments rather than to entrench them via the welfare system. In place of the essentially fraudulent tax credit (fraudulent because it is not a tax credit at all, but just another welfare handout), those on lower incomes should be removed from income tax altogether by massively increasing the personal tax threshold. This would incentivise work but not penalise low-paid workers. A tax and benefits system must be devised which will not drive families apart, and which will not reward people for remaining outside the labour market. Social cohesion requires both that family life is supported, and that citizens provide for themselves, their families and the common good through work. There is no question of whether such a system can be afforded. The fact is that we cannot afford to be without one.