The families we choose to forget

John Major has little time for low-income mums and dads, says Yvette Cooper
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The Independent Online
Families are lovely. Politicians love them anyway, and gush over them with soppy warm sentiment whenever they get the chance. John Major had a go again this week, but political representatives from all parties are prone to the same behaviour.

Curiously - given that some at least of these family-friendly politicos are supposed to be running the country - everyone also seems to agree that the nasty old state doesn't do enough to help these kindred clusters. What with the taxes taken away and the benefits and support withheld, the consensus is clear: families in Britain are getting a raw deal. Something must be done.

But much of this paternal and maternal anguishing is nonsense. Some families - and many children - are indeed badly treated by the Government and by society. But families in general have little to complain about. Moreover, changing the tax system to help them in the way that some people - including John Major - have suggested would be unfair and would do nothing to help the families who need support most.

Most of us hate to think we are horribly greedy, and are inclined to resent a politician that makes us feel so. But tell us instead that this extra cash from the state is for us to spend on our families, and we feel smug about ourselves again. For who could blame us for wanting to do the best for our bright-eyed little bubbly ones, even if it is at the expense of some other individual somewhere else?

So what is it that these families supposedly need from their tax and benefit system that they are currently so unfairly denied?

Mr Major's answer is laughable. It seems that for the Prime Minister, the most pressing problem families face is not poverty, child care or marriage break-up, but the frustration of being unable to pass assets from one generation to another. Because rich old people can't give luxurious nest-eggs to their (usually well off) middle-aged son or daughter, the family is being undermined. Ridiculous.

Others offer more superficially plausible policies to improve the family lot - but again, they do little to help those who really need it. Church leaders suggest that marriage itself, rather than children, should get a bigger subsidy. The married couple's allowance could be increased, not whittled away.

What a waste of money. The financial incentives to share family life are already considerable. It is cheaper to stay together, as any divorcee will readily testify, and why should we transfer any more money from lonely singles to happy lovers?

Some go further still, arguing that the present tax system discriminates against families where one parent (of whatever sex) chooses to stay at home to look after children. After all, the husband on pounds 40,000 a year with a wife and children at home will pay more in tax than the couple earning pounds 20,000 each, although their gross household income is the same.

Whether the idea is to subsidise the married, or to subsidise the home- maker, the underlying principle that justifies these ideas is the same: tax the family unit, not the individual. That, after all, is the way we calculate benefits for those who don't work - by household, not per person. So we pay benefits for the woman whose husband is out of work, but not to the non-working wife of a rich barrister.

But appealing as this principle may seem to our cohesion-hungry country, the consequences would be counter- productive. Independent taxation for men and women was achieved after centuries in which the tax system treated married women as in effect the property of their husbands. The IMF economist Janet Stotsky points out in a recent working paper that the Inland Revenue, even as recently as the mid-Seventies, refused to answer letters from married women. If the Missus was overdue a tax refund because she had paid too much one year, the cheque was sent to her husband. Not until 1990 did the "married man's" tax allowance become a transferable allowance for either spouse, and did fair, independent taxation of men and women really begin.

But the biggest objection to a house-spouse subsidy is not history, but waste, once more. Giving tax breaks to rich families where one parent works will do nothing to help the families who are really in trouble - the ones where no one works at all.

The real fiscal fiascos for families take place at the bottom end of income distribution. For a start, an appalling one-in-three children are being brought up in poverty. Single parents bringing up the kids alone struggle to find affordable child care to let them go out to work. The Government's nursery vouchers aren't much use to families like these, serving instead to subsidise the families who are doing very nicely already thank you.

And what about the couples who are trapped in unemployment. As work by Paul Gregg and Jonathan Wadsworth reveals, households in Britain have polarised over the past 20 years into those with two earners and those with none. The traditional nuclear family where dad goes out to work and mum stays at home with the kids barely exists any more.

The real problem is the no-earner families. As new research (from the Gregg stable again) released on Friday demonstrates, many of these families are trapped into cycles of unemployment and low-paid work. And when one partner loses a job, the other has little incentive to get work either given the savage withdrawal rate of benefits for the low paid. These are the families who are really getting a bad deal. The effective marginal tax rate (the rate at which taxes are imposed and benefits withdrawn) for low-paid single people isn't too bad, but for couples with children it is abysmal, rising up to 100 per cent at certain rates of pay. In other words, every extra pound a parent earns is gobbled up entirely by the state.

These are the families who really need help. These are the families who the state is currently doing a lot to undermine. If only the Prime Minister could spare just a little attention for them, next time he feels the need to caress families in public again.