Budget 1999: As a high-earning mother, I expected to feel betrayed. Instead, I'm euphoric
Wednesday 10 March 1999
I'm most delighted about the abolition of the married couples' tax allowance. Like Gordon Brown, I'm not afraid of stating unequivocally that I consider a conventional family structure to be the ideal framework for bringing up children. And, like New Labour, I don't believe that tax breaks for adults who are married or living together are of any help at all when it comes to making that ever-more-beleaguered structure work well.
Anyway, the much-propagated idea that all the financial benefits of being married are being eroded is simply not true. For example, if your spouse isn't earning you can put your savings into his or her name, and avoid paying up to about pounds 4,000 in tax on them because of your partner's unused tax allowance. Or you can make financial gifts to your spouse without paying capital gains tax. Or you can live safe in the knowledge that anything you leave to your spouse in your will is free of inheritance tax. And so on. There are still plenty of fiscal advantages to being married, without the state giving further handouts from the public purse.
I've always found it patently obvious that two can live more cheaply than one, and when two people on large incomes sell two flats, buy a house and pool their resources in matrimony, it seems to me that they're much better off anyway - especially since their pooled income might take them into a higher tax bracket if men's and women's taxation were not now calculated separately.
Giving them a couple of hundred quid a year in tax benefits because they're being in some way "upright" is insulting not only to the people who either choose or are forced to live and bring up their children in a different structure, but also to the institution it is designed to reward.
However, it is, of course, when the children come along that the finances of couples are thrown into confusion. Which is why the replacement of the married person's allowance with children's tax credit is absolutely the correct way forward. Although the pounds 416 credit will not come into operation until April 2001, it is still fantastic news and infinitely superior to the anomalous married person's allowance. The fact that it will taper away for high-earning families is again good news. While means testing should be avoided, public money should not be squandered on further treats for affluent children, either.
For different reasons, I'm relieved that there will be no tax for the time being on child benefit for families in high tax brackets. While I don't claim child benefit myself, it is true that even within wealthy families mothers can be kept cash-starved by controlling partners. That is why the benefit should remain independent of all other family earnings. I do, however, believe that it should be a matter of conscience for well- off families as to whether they in fact claim benefit. Tony and Cherie Blair don't set much of an example here, and neither do many other left- leaning affluent couples. This may be because there is no mechanism whereby unclaimed child benefit can be redirected to help poorer children. Child benefit should never be taxed, but it might be a good idea if better-off families were encouraged to covenant their benefit into one or other of the Government's ever-more dynamic schemes to target particularly needy families.
It need hardly be added that another rise in child benefit, to pounds 15 a week for the first child and pounds 10 a week for subsequent children, is also excellent news. While the childless are often heard complaining that they subsidise the welfare and education of children enough already, Gordon Brown's prediction that "while children now make up 20 per cent of our population, in the future they will make up 100 per cent of our population" should surely console them that at least this state of affairs will not continue for ever. Or maybe Mr Brown was simply suffering a moment of confusion on a day of crystal clarity.
I feel a little disappointment that Mr Brown has chosen not to offer tax benefits to couples when one of them decides to give up work, and be a parent full-time.
And again, while it is good news that benefits will continue when lone parents first start work, there is still not quite enough recognition from this Government that full-time parenting for pre-school children is also an investment in the future of the country, and a choice that is difficult for families who made their financial commitments on the basis of two incomes.
But I'm more than happy about the abolition of Miras. This is a reward for being affluent enough to get a mortgage together and make an investment for the future. There's no tax relief if you're paying an extortionate rent, and in that case you don't get to flog the property for a whacking profit when you manage to move out. So it's always seemed unfair to me that everyone who has a mortgage can claim tax relief. Again, lots of people just don't need that kind of state handout.
However, there is a difficulty here with the many people on the margins of owner-occupation. While the Government believes that this is a good time to abolish Miras because interest rates are low, the fact is that low interest rates have not made the tiniest dent in repossessions. Some mortgage lenders start repossession proceedings when as few as two mortgage payments have been missed. And while the Government is encouraging people to take out mortgage indemnity insurance, it's obvious that those who need it most are least likely to be among the one in five mortgage holders who are finding the money to afford it.
I suppose you could argue, with some moral force, that other measures in the Budget that are designed to decrease the tax burden on the poor more than compensate for the loss of Miras.
But since the problem is so huge, I'd argue that it needs separate attention anyway. The most sensible suggestion I've heard for dealing with this problem, which, of course, devastates many families, was floated by the Institute of Housing last year. It believes that there should be schemes up and down the country whereby families who find themselves unable to cope with their mortgage payments should have the option of teaming up with housing associations that can take over part-ownership of homes, thus cutting the mortgage commitment of the family and at the same time investing in the property themselves. Surely this is preferable to the current system, whereby there is little or no help for families in danger of losing their homes. This is the major gap in a Budget that is otherwise a triumph for the parents and the children of this country.
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