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Boosting the married couples' tax allowance is a bad idea. It's described by its proponents as if it's good for women. It's bad for women. It's bad for growth, too. 1/?
For decades, a huge component of UK growth has been new people entering the labour market: most notably women and new migrants.
It has always surprised me how cavalier many Conservatives have been about turning their back on migration as a source of growth.
It has always surprised me how cavalier many Conservatives have been about turning their back on migration as a source of growth.
But at least they seemed committed to continuing the growth in the number of women working. Before the pandemic (where women have been more likely to reduce hours or stop working because of family caring) we had more women working than ever before.
We usually hear about the "gender pay gap" - the gap between the £ per hour of an average working man and woman. But I like to talk instead about the gender earnings gap - the gap between the total £ earned by women, and by men.
Spoiler: it's much bigger
Spoiler: it's much bigger
Women earn half what men earn.
In other words, in every £ of wages earned in the UK, 66p goes to men, and 33p goes to women.
In other words, in every £ of wages earned in the UK, 66p goes to men, and 33p goes to women.
Women don't just earn less per hour, they spend fewer hours working, and fewer years working.
And as a result they end up with only a third of the wages in the economy.
And as a result they end up with only a third of the wages in the economy.
Oh well, then, if they're poor, let's give them a marriage tax allowance to get them some more money.
No. Because doing so radically shifts the incentives to work at all. If you have transferred your tax allowance to your partner then you don't have a tax allowance.
No. Because doing so radically shifts the incentives to work at all. If you have transferred your tax allowance to your partner then you don't have a tax allowance.
So unlike literally everyone else you pay tax from the very first £ you earn. I helped to raise the tax allowance to £12.5k. We did so because work matters - it matters for economic freedom, it matters for wellbeing. It matters for growth.
Everybody should have their own tax allowance - their own, personal, inalienable right, to earn a small amount of their own money without being taxed.
Yes: this means that take-home pay for two people earning £20k each is MUCH higher than take-home pay for one person earning £40k.
That is a Good Thing.
That is a Good Thing.
It creates a real incentive for married couples to split the joys and burdens of work, and the joys and burdens of home life between them.
And that's good for the economy, too, because women who stay attached to the labour market earn far more.
And that's good for the economy, too, because women who stay attached to the labour market earn far more.
So many talented women go back to rubbish jobs after parental leave. So many talented women take low paid shift work because it's the only thing they can fit around their caring responsibilities.
You will make this worse if you encourage them to stay home.
You will make this worse if you encourage them to stay home.
Social conservatives may accuse me of social engineering, trying to tell families how to run their lives. I'm not. People who want to stay at home should be absolutely allowed to do so.
But the state cannot be neutral. It has to put incentives somewhere.
But the state cannot be neutral. It has to put incentives somewhere.
A personal tax allowance is an incentive to all to do some paid work.
A couples tax allowance is an incentive for some to stop work.
The economy is better off in the long term if we do the former. And women are better off if they earn their own money, and hold their own power.
A couples tax allowance is an incentive for some to stop work.
The economy is better off in the long term if we do the former. And women are better off if they earn their own money, and hold their own power.
We've given up on growing the labour force through migration. If Conservatives give up on growing the labour force with women, too, we will really have no hope of getting back to sustained growth.
