§ 6.25 p.m.
§ Lord Skidelsky rose to call attention to the effectiveness of the current tax and benefit system in supporting the family structure; and to move for Papers.
§ The noble Lord said: My Lords, I believe that the debate which I have the honour to open comes at a turning point in the fortunes of the family. For two decades opinion makers have been proclaiming the family to be economically obsolete and politically incorrect. But suddenly politicians on all sides have at least started to pay lip service to the value of the family. I believe that the time has now come to translate those words into action.
§ People do not all agree about what the family is. There are many kinds of families and we are told that we must not be judgmental about different lifestyles. I make no apology for saying that the family structure most in need of support today is the traditional, mainly one-earner family. That is not because other forms of family life do not deserve respect, but because it is the traditional family which is and has been under the greatest threat and whose disappearance, or even further weakening, would inflict the greatest losses on society. Putting it simply, 1754 well-functioning labour markets and strong families are the best guarantee of a free society and a limited government, as the East Asian economies show us.
§ If family networks are weakened, expenditure on social security will become uncontrollable and the increased taxes needed to pay for it will undermine families still further. We would then not have a welfare state of the familiar kind but a state on which a large fraction of the population would depend from cradle to grave. Such a state would be far more repressive than the most oppressive of traditional families.
§ I also believe that supporters of the traditional family have public opinion on their side. Attitude surveys show that most young people want and expect to get married and to have children. Indeed, 64 per cent. of women believe that being a housewife is just as fulfilling as working for pay. Over 60 per cent. of men and women believe that the mother should stay at home when there is a child under school age.
§ Despite that support, evidence of family breakdown is striking and alarming. Fewer people are getting married and more are getting divorced; fewer children are being born to married couples, more to unmarried mothers. More and more children are being brought up in lone-parent households. The trend in all those areas has become dramatic in the past 25 years.
I shall not bombard your Lordships with figures, but one set of statistics is particularly striking. In Henry VIII's time, church registers recorded that 4.4 per cent. of births were to single mothers. When our present Queen Elizabeth came to the throne in 1953 the percentage was almost identical—namely, 4.8 per cent. In the intervening 400 years the percentage had moved within a very narrow range. Even in 1976, only 9 per cent. of children were born out of wedlock. By 1993 one birth in every three—over 30 per cent.—was outside marriage. In absolute numbers, 217,000 of the 674,000 births registered that year were out of wedlock, the vast majority to never-married mothers—children for whom the father, as Charles Murray put it,
will be a fleeting presence in their lives or missing altogether".
§ With a 13 per cent. increase a year in births to unmarried mothers, the majority of our children will be born out of wedlock in 20 years' time. A feminist Utopia or a social nightmare?
§ I suggest it will be the latter, for three reasons. First, lone-parent households are poorer than most two-parent households. Seventy per cent. of lone parents obtain all or most of their income from public assistance, whereas only 12.5 per cent. of families headed by a couple are on income support. Lone parenthood has become the chief cause of poverty.
§ Secondly, illegitimate children and children from broken homes get a much poorer start in life than children of married couples except at the highest income levels. They have higher mortality and sickness rates, are more likely to be abused, do less well in schools and are more likely to turn to crime. One-half to two-thirds of prison inmates come from broken homes or never-married parents. Illegitimacy is the best predictor of childhood and adult failure, the single most important cause of a self-perpetuating and expanding underclass.1755
§ A high proportion of these children become wards of the state, supported by public funds from cradle to grave, in and out of custody. Again, research confirms what common sense has long known: children flourish best in loving, stable and committed families; a father, especially, is an indispensable role model for young males.
§ Finally, there is the budgetary cost of all this. The cost to the social security budget of lone parents comes to £9.4 billion a year, an increase of 200 per cent. in real terms since 1978–79, and equivalent to £1,500 in tax for every working family. That does not include the indirect costs of lifelong care and surveillance, the wasted human capital, the physical and moral degradation which show up in the law and order budget, the health budget, the education budget and so on.
§ In considering how to try to retrieve this situation, it is important to ask what has caused it. Some causes of family breakdown reflect general changes in society. Of these, the foremost is the increased earning opportunities for women, which both raise the opportunity cost to them of having children and reduce the gains from co-operation. The less specialised the roles of men and women become the less sense does the family make as an economic institution, a partnership to rear children. Two-earner families have fewer children and are more likely to divorce than one-earner families. This trend, of course, is likely to continue, and it would be foolish to deny the gains it has brought to many women.
§ Another cause of this breakdown which is, perhaps, more special to the last 20 years, goes under the gradiose title of "depletion of the marriageable male pool". This chiefly affects the family structure at the lower end of the income scale. The basic idea here is that males become superfluous except as casual lovers unless they can provide women with the resources they require for rearing children. However, the employability as well as earning power of brawn has been steadily declining relative to brain. Since the 1960s Britain has lost 3 million relatively well paid full-time jobs for semi-skilled and unskilled male factory workers, with a corresponding decline in the labour force participation rate of men. There has also been a large increase in the inequality of male earnings, leaving many unskilled men with wages below the level of income support. Women are faced with a reduced pool of useful husbands; not surprisingly, an increasing number of them choose to marry the state.
§ Getting young unskilled males back into work must be a priority for any government seriously concerned to protect the family, not least because it will relieve the pressure on women to take wretchedly paid part-time jobs as an alternative to child rearing. I am not at all sure how this can be done. It is a very difficult problem because, in many cases, we are dealing not just with economic casualties, but with social casualties—young people who lack not only skills but also motivation. We need to consider very seriously the use of the state as an employer of last resort. Might it not be reasonable to incur the short-term economic costs of creating or 1756 subsidising jobs which, strictly speaking, do not pay in order to prevent the much greater costs of complete family breakdown at the lower end of the income scale?
§ Faced with these general trends to family breakdown, the least we can ask of government is that they do not give them a helping hand. However, in two respects, I suggest, government have done just that.
§ The first is by what Patricia Morgan has aptly called the "legal disestablishment of marriage". As a result of changes in the divorce laws, marriage has been transformed from a binding contract into one which can be terminated at will, a fact which is reflected in the explosion in the divorce rate. Do we really believe that what both the Prime Minister and the Leader of the Opposition have called "the bedrock of society" is not entitled to legal protection against the pressures of modern life and against the selfishness of human behaviour?
§ I shall not say anything tonight about the Family Law Bill, except to regret that it was felt necessary to have a Bill at all at this moment. It would have been much better to wait for five or 10 years to allow the growing pro-family sentiment to crystallise.
§ Secondly—and here I come to the heart and conclusion of my speech—the tax and benefit system operated by governments since the 1970s has progressively reduced the fiscal advantages of having children in traditional families, while enhancing the attraction of single parenthood to women with poor earning opportunities. It gives two-earner families a higher net income than one-earner families, even when both types of families earn the same before tax. It gives a married couple with two children less take-home pay than a lone parent with two children earning the same before tax. It makes a lone parent with two small children who works part time better off than a family in which the father works full time but at a low wage.
§ A lone mother who works 20 hours a week at £5 an hour ends up with a net income, when family credit is added, of £188 a week; a married father of two small children who works 30 hours a week at the same wage takes home £142. If you raise the gains from lone parenting relative to the gains of marriage, it is hardly surprising that you get an increase in the number of lone parents and a decrease in the number of marriages.
§ The details of all this are fiendishly complicated, but the outline is clear enough. Although tax rates have gone down since 1979, taxes have started to bite much lower down the income scale for families with children, largely because of the withering away of dependants' allowances, coupled with increases in national insurance and local taxes, while the Government at the same time have been improving the means-tested benefits package available to lone mothers. The net result of these changes has been to leave low-waged traditional families too rich to gain from means-tested benefits, but too poor to gain from general tax cuts; it has left most lone mothers too poor to escape poverty, but too rich to marry low-waged men. Support for lone parent families increases their number, while the supply of intact families falls as resources are transferred away from them.1757
The only remedy favoured by all political parties is to force more and more lone mothers into the labour market, where they drive down the wages, or increase the unemployment, of low-skilled men, thus making them even less eligible as marriage partners. This in turn increases the pressure to provide subsidised child care. As Martin Woolf has written:
The state would then provide the child-care, which is what women offered in traditional families, while the working mother would play the traditional male role".
Is this what we want?
§ How can we break this chain of perverse effects? As a first step governments should ensure that all changes in taxes and benefits should be explicitly considered from the point of view of their impact on families and should be accompanied by a family impact statement. Within this framework we should begin to shift tax and social security benefits towards the family, and particularly towards the father within the family.
I return to my starting point. We stand at a fork in the road. We can either do nothing and watch the social life of large parts of our society replicate that of the black ghettos of the United States, or we can start to translate words in favour of families into deeds in favour of families. If we have the courage to do the second, I believe public opinion will be overwhelmingly on our side. I also believe we shall be occupying the moral high ground. After years of welcoming every symptom of family breakdown as a sign of progress, we return to the basic realisation enshrined in Article 16 of the Universal Declaration of Human Rights that,
Everyone has the right to marry and found a family. The family is the natural and fundamental unit of society and is entitled to protection by society and by the state".
I beg to move for Papers.
§ 6.41 p.m.
§ Lord Haskel
My Lords, on this occasion I am doubly grateful to the noble Lord, Lord Skidelsky, first, for introducing this important debate about tax and the family and, secondly, for giving me the opportunity of reminding your Lordships that since April 1993 there have been 22 tax changes affecting a typical family, all but one of which have been tax increases. These have resulted in a total increase in the family's tax bill of £668.25 a year, and that from a Government that promised no tax increases, and claim to be committed to helping the family.
I should like to consider how these tax rises have affected the family. In doing so, I do not wish in any way to criticise single parents. Single parents are equally valuable as members of society as married parents, but the Motion on the Order Paper refers to "the family" and therefore I shall stick to using that term.
In April 1993 there was the first of five alterations to the married couple's allowance. It has not been uprated in line with inflation in any of the three Budgets since then, and has been restricted first to 20 per cent., and then to 15 per cent. That means that since April 1993 our average family has been £202.50 worse off per year.
1758 The interesting thing about the married couple's allowance is that since the previous Budget the allowance has in fact become a tax credit. Noble Lords will have seen it as a new item on their tax codes; namely, "allowance restriction". During the time that the married couple's allowance has been frozen and then restricted, by contrast the single person's allowance has been marginally increased. Perhaps this is what drew Patricia Morgan, who published a paper in January last year about the family and tax, to say,The state is making it abundantly clear that it is not prepared to support a man's efforts to provide for a family and does not recognise his costs when his wife cares for his children".According to Monday's Daily Express, next Saturday the Prime Minister is to introduce a scheme described as,a plan to bolster the family. It will offer tax incentives to encourage mothers to stay at home and look after the children instead of going out to work…In his Budget Speech in March 1990 when Chancellor, Mr Major said … 'we have always made it clear that it is not for the Government to encourage or discourage women with children to go out to work'".Is this going to be another U-turn?
I shall quickly pass over the tax increases on vehicle excise duty and fuel duties, which of course affect our average family. I come to the reduction in mortgage interest relief in April 1994 to 20 per cent., with a further reduction to 15 per cent. a year later. That adds £240 to our typical family's tax bill.
I do not need to explain to your Lordships that the most important element in supporting the family structure is a home in which to live. This is another U-turn in government policy, from using the tax system to encourage home ownership to discouraging it by reducing mortgage interest relief. It has resulted in making home buying more expensive and has helped the slump in the housing market. Apart from contributing to insecurity, this has also resulted in a powerful disincentive to move. That has always seemed to me a curious policy for a Government which are constantly telling us how important it is to have a flexible labour market. Surely an important element of a flexible labour market would be to enable families to move easily in order to find work, or to move with their employers. Yet the tax system now puts difficulties in their way.
The next tax change to hit the family structure was in April 1994 with VAT on domestic fuel. That added £65.99 to the costs of our typical family. In the past the Government argued that VAT was made less regressive because the essentials of family life were zero-rated. That is why food, children's clothing, public transport, books and education, and domestic fuel were all zero-rated. The Prime Minister himself promised on several occasions that that would remain so. Indeed, when the European Commission asked for VAT to be charged on some fringe items of food, to their credit the Government objected vigorously. Then, in complete contrast, they imposed VAT on domestic fuel. I remind your Lordships that without Labour's opposition the tax would have been levied at 17.5 per cent. instead of 8 per cent. This is not only contrary to the Government's promises but is directly aimed at the family. It is indiscriminate and hits the poorest families hardest.
1759 The next tax rise to hit our typical family arrived in October 1994 when the Government introduced a tax on insuring the contents and structure of our homes. That added £5.14 to the tax paid by our typical family. That is hardly a factor which contributes to the support of families.
Car insurance tax then went up, and the following month so did fuel duties. Then we had the airport tax. All these taxes have affected family mobility.
Then last October we had a new tax on mortgage protection insurance policies. It is either a demonstration of extreme cynicism or of the fact that the Treasury or the Inland Revenue just do not talk to the Social Security Department that the Minister's department can remove mortgage protection from the benefits system and exhort people to protect their mortgages themselves by taking out an insurance policy, and at the same time cheerfully see a tax imposed on that insurance policy.
In November 1995 we had fuel duties increased by 2.3p above inflation, which added another £35 to our typical family. But as the election approaches there is a tax reduction on the horizon. From next month we should have a 1p basic rate cut in tax which would benefit our typical family by £179.95. However, I should add that prescription charges and school meals have gone up. Council tax is also going up, and all these will affect our average family.
What has been the effect of all this on children? In recent years the benefits system has certainly tried to target children but, as the noble Lord, Lord Skidelsky, told us, little has been clone by the tax system to take into account the costs of bringing up children. As Patricia Morgan said, the tax system now penalises married couples with children. Is that why more children than ever are now living in poverty? According to the Child Poverty Action Group, one in three children were living in poverty in 1992–93, compared with one in 10 in 1979. It is couples with children who account for the largest group in poverty and not, as the noble Lord, Lord Skidelsky, said, single parents, with 37 per cent. of those in poverty falling into that group in 1992–93. To help them escape from this poverty, families need child care. At present the only tax incentive for child care is tax relief when an employer provides workplace nurseries. This tax relief was announced by John Major when he was Chancellor in March 1990 and he said that he had introduced it to,help the labour market to work better".If this tax allowance is designed to help the labour market to work better, why is it only limited to nurseries or play schemes at the workplace? Employees may find it hard to transport their children to a nursery at their own workplace, especially if the parent commutes into a city centre. Also, very few employers are in a position to provide that benefit. Small businesses certainly would find it difficult to set up nurseries.
This litany of increasing tax burdens on the family clearly demonstrates that the Government's words supporting the family have not been carried out. I welcome the call by the noble Lord, Lord Skidelsky, to put those words into action; otherwise, in practice we shall have a clear case of saying one thing and doing another.
§ 6.51 p.m.
§ The Lord Bishop of St. Edmundsbury and Ipswich
My Lords, I too am grateful to the noble Lord, Lord Skidelsky, for providing the opportunity for this debate. The family and family life are the bedrock of society. Anything that undermines the family undermines society itself. I am sure that every Member of the House would agree with that.
The General Synod Board for Social Responsibility produced a report recently called Something to Celebrate. The media attention focused on some perhaps rather unwise comments in it on cohabitation, which led to the rest of the report being totally overlooked. However, in answer to the question: "What do families need in social and economic terms in order to thrive and fulfil their caring roles?", one requirement which the report highlighted related to the essential material needs of families: a secure and reliable income, secure housing, access to education and health care, and special help which may be needed at extraordinary times such as chronic illness or family conflict.
I do not believe that total security and upholding and support of family life in this country can simply depend upon legislation. They depend on a great many other factors which include the Church, the culture in which we live, public perceptions and many other matters. I recognise that legislation—the law—has a substantial part to play.
We need to see whether we can define what we are talking about. The noble Lord, Lord Skidelsky, referred to the traditional family. I wish to articulate that a little further. The traditional family is the tradition of the Judaeo-Christian history, which is our past. I am sure that noble Lords will expect me to say this. The traditional family is that which consists of a man and a woman, husband and wife, who are committed to each other for life in love and who, as part of their loving of each other, are committed also to bringing up children within their family.
The roles played by both the father and the mother are vital. I believe that their roles, even in the traditional family, are changing and I have no quarrel with the change. Greater father involvement in upbringing and greater mother involvement in wage earning seem to me to be the way that life is now, until the children are brought up, leave home and found families of their own, within the context of an extended family which consists of aunts, uncles, grandparents and so forth. When it works, that is the best model that we can conceivably have. Though there are times when it certainly does not, when it does work it is the most secure bedrock that society can require.
I say that that is in the Judaeo-Christian tradition, because it is. I believe it is also God-given and is the best response to the deepest needs of our human nature. The fact that it exists very much within those terms in other major faith traditions than our own is an indication that that is true.
But—and there is a but—the noble Lord, Lord Skidelsky, focused on the family structure and at the beginning he referred to other alternatives and other models. I do not believe that we can simply ignore the 1761 other alternatives and models, whatever we might think about them in terms of moral judgments. We live in a mixed society today. All family structures where parents or parent and children live together are families. Some of the family structures are consequential on the breakdown of the traditional model in their own circumstances; some are experimental. Cohabitation has become a much greater factor in our social life, sometimes cohabitation with total commitment of the couple to each other. I suppose one could say that it is common law marriage. Some family structures are experimental, some are serial. I do not wish to uphold those as a model in any sense. Some are the result of breakdown or death.
The Church of England Children's Society sought in a paper last year to define what there might be in common to all examples, to see whether, as a society, we could go forward. The society came up with five points which I will list: disruption and insecurity are always unhelpful; inadequate living standards are damaging to families; extended family links should be fostered and encouraged; men's parental responsibility should be given greater emphasis; families should be enabled to help themselves. Noble Lords might feel that the list is thin, but it has been worked out and all would have it in common. If legislation enabled that to occur across the whole spectrum, society would be better off than it is.
My concern is that, although I uphold vehemently and vigorously the Judaeo-Christian tradition of marriage, I am well aware that what we are talking about at root is the well-being and welfare of children. Large numbers of children are now born outside marriage, as the noble Lord, Lord Skidelsky, said. Thirty two per cent. of births take place outside marriage; 1.8 million children live in single parent families. Many of those women—and 90 per cent. are women—are not in that situation because they wish to be, but because circumstances have forced it upon them. Whatever one might think about the morality of the mother's position—and each individual case must be considered in its own right—the children are never responsible for it.
Anxieties have been expressed to me which will come out further in the course of the debate about the legislation as it stands or as it is proposed, and its effects upon the children outside the traditional standards of marriage. Concern is expressed about the Social Fund mechanism and its current inadequacies, about married couple's allowances and housing benefit proposals. The particular concern expressed to me is about the proposals to freeze the levels of lone parent and one parent premiums. If they are frozen and if there is any inflation at all, there will be a reduction in benefits. I know that the House is sensitive to the subtleties of what faces us. I believe that we need legislation that supports the traditional structure, and if anything undermines that traditional structure or fails to support it or encourage it to grow, it needs close examination, but not at the cost, I plead, of support for children who are brought up outside that structure.
1762 One of the greatest Archbishops of Canterbury this century, William Temple, talking at the end of the Second World War about social arrangements, suggested that the society we then needed to build was one that suggested fellowship rather than rivalry. I suggest that that is still true today.
§ 7 p.m.
§ Baroness Young
My Lords, I, too, add my thanks to my noble friend Lord Skidelsky for introducing this very important debate. I might almost say that it is one of the most important debates that we have had for a very long time. I believe that central to our society today is a real concern about the breakdown of marriage and the family, to which the tax/benefit system has in itself made a contribution. My noble friend made that very clear indeed.
This debate follows logically from our many discussions on the Family Law Bill. My views on that Bill are well known. Certainly they have not changed in the course of the debates. Whatever our differences, there is broad agreement right across the political spectrum that the breakdown of marriage and the traditional family—the high divorce rate, now running at some 42 per cent. of marriages and the number of births out of wedlock, now over 30 per cent.ߞhas had disastrous effects on the whole fabric of society. Having listened to the remarks of the noble Lord, Lord Haskel, I hope that he shares that general view, although I was not clear whether he felt quite as strongly as I do.
During the course of our debates on the Family Law Bill, I said that I considered most unhelpful the statement by the Law Commission that the high rate of divorce and births out of marriage was not having any effect on the fabric of society. The evidence is quite to the contrary. It is there for everybody to see who cares to look at it. My noble friend Lord Skidelsky gave examples. Anyone who teaches knows perfectly well that the high divorce rate, the high number of single-parent families, does have, and has had, a very marked effect in the education system. To put it absolutely at its lowest, the cost of counselling services required to help the children is money out of the education budget. It is not being spent directly on education at all.
My noble friend Lady Elles quoted on at least two occasions during the course of debates on the Family Law Bill the evidence from the Home Office that the large numbers of (as it usually is) young men aged between about 16 and 22 who commit crimes are nearly all from broken homes. A great deal of research evidence shows that it is the children of divorced and separated parents, of single mothers, who have worse health, do less well at school, are less likely to be able to get a job, take to crime and, finally, repeat the pattern of a broken marriage. Very few people dispute those facts. As a society, we are paying an immensely high price—some £9 billion—supporting this state of affairs. If we pause to think of other desirable objectives in our society on which we might spend just a portion of that money, we see what a terrible situation we have brought ourselves to. As we know, all this has happened within a generation, stemming from the 1960s. No one knows 1763 where it will end unless this trend is halted and reversed. We are in uncharted waters. Quite a number of people think that the number of divorces will equal the number of marriages in a very short time.
I believe that one of the purposes of law on social matters should be to buttress marriage. I have said so on many occasions. In preparation for this debate I looked again at the book by Patricia Morgan, Farewell to the Family? It is quite clear from what she says that the tax/benefit system has helped lone mothers and their children, and has disadvantaged married couples with children. Indeed, the majority of lone parents depend on welfare help of one sort or another and are usually considered to be the poorest families.
However, I believe it is true—the noble Lord, Lord Haskel, made this point—that couples with children outnumber lone parent families in the lowest income groups. At the same time, the burden of taxation has increasingly been shifted onto married parents to support, through the tax system, single parents. The traditional concept of the family wage has to a large extent been abandoned, together with the recognition that taxation should be related to the number of dependants on a particular income. The very elaborate means-tested and selective benefits that have taken its place are almost entirely for the benefit of lone parents.
I believe that that trend should be halted and reversed. I cannot believe that it was ever the intention of Parliament, however this may have come about, that so much legislation in the tax/benefit world seems to have failed to draw a distinction between marriage and cohabitation; that married families should in fact be disadvantaged vis-à-vis those of single parents, and that this has continued for some time. Can my noble friend who is to reply to the debate tell us whether the interdepartmental working party on marriage has had anything to say about the way in which the tax/benefit system has operated in this way?
We have had much talk of reconciliation. It would be helpful to know whether there has been any research into the effects of the lack of money on married couples, particularly at the birth of the first child, and whether that has been a contributory cause of divorce. The pattern of women's lives is that they work until they have their first child and then take a career break. Curiously, the effect of the tax/benefit system has not necessarily been to enhance the opportunities for women. It has made it much more difficult for the woman who wishes to stay at home and bring up her child to do so.
I do not want in any way to be seen as someone who is trying to punish one-parent families. There are single parents who, against all the odds, do very well. But all law sends out a signal, and the signal of tax law is very clear: you are financially better off if you are not married than if you are married. And it appears to be a message that is being listened to. A lot of young people simply say: why marry at all?
I was pleased that the last Budget made an attempt to redress what has been a trend for a very long time. We have lower income tax. The married couple's allowance has been increased. We had the removal, referred to by 1764 the right reverend Prelate, of the discrimination in favour of lone parents that has come from the one-parent benefit and the lone parent premium. Whatever may be said about that, is it right that lone parents should have more money than the married couple? That is the question that we need to address. I was pleased to see that that, too, is being put right, as well as such matters as the doubling of the level of capital disregard from £8,000 to £16,000 for those who have to go into long-term care.
I very much hope that that trend will be continued in future Budgets. I say that because I believe we are on the verge of an unprecedented social experiment. So far as I know, there has never been an open, democratic society that has not been based on the family. There has never been a society of any sort that has not been based on the family.
We are creating now a society in which, as my noble friend Lord Skidelsky pointed out, men are becoming peripheral. That is creating daunting problems for us. Quite apart from the complications of the labour market, there are fewer male role models for boys and less adult supervision of children, particularly by men, which leads to more indiscipline. Most dangerous of all, through the tax/benefit system, the state is moving in as the provider of the missing parent's functions. The traditional father is rapidly being replaced by the state. The state takes on the functions of the father, particularly as the provider of the income, and then moves on to take over the nurturing functions of families.
What conclusions can be drawn? I believe that the state should treat married parents as well as it treats single parents. That should be the first objective of the tax system in that regard. That ought to be a top priority for a future Budget. I hope very much that my noble friend the Minister can assure us on that point when he comes to wind up.
§ 7.11 p.m.
§ Lord Simon of Glaisdale
My Lords, we are deeply indebted to the noble Lord, Lord Skidelsky, for this debate, which is in every way a suitable adjunct to our deliberations on the Family Law Bill. We are also indebted to him for the moving and informative speech with which he introduced the debate, though I am bound to say that, as he developed his argument, I heard it with increasing concern for the welfare of our society.
It is a great privilege to follow the noble Baroness, Lady Young, who gave so valiant a lead on the Family Law Bill, in which the tide of parliamentary opinion on the whole was against the integrity of the family, notwithstanding that lip service was paid to it. The noble Lord, Lord Skidelsky, made it clear that he was talking about the traditional family; that is to say, as I understand it, a husband and wife joining together with promises to live together exclusively during their joint lives, with the object in general of raising a family. As such it is also a primary agent for sociologists considering the welfare of society.
I suppose that most Members of your Lordships' House attach some importance to tradition. The reason is that tradition is generally the fruit of a process of 1765 reasoning, part of which may have disappeared from society's memory; it is the result of a series of experiences which may have vanished from the communal sense. But they can be recovered. So far as traditional marriage is concerned, a great deal was recovered on the Family Law Bill and more has already been recovered this evening.
Of course, the right reverend Prelate was right to say that legislation cannot do everything. Indeed, it cannot operate by itself. Other things are required, if we are to restore the faith and cohesion of our society.
I speak with diffidence in the presence of a historian of the eminence of the noble Lord who introduced the debate. But there is the striking example in history of the Emperor Augustus, who inherited a completely demoralised society and, by patient and detailed adjustments, much legislative and some not, reconstituted and affirmed it, so that it lasted to the general benefit for another 400 years and, indeed, bequeathed its spirit to the Papacy, the Holy Roman Empire and, more recently to the Concert of Europe.
There is a good deal that can be done by legislation, some of it outside the scope of this debate. Three Law Commission Bills are outstanding, dealing with matrimonial property. They translate into legislative terms the promise that was made at marriage to share worldly goods. It seems a matter of profound shame that the Government, during the past four or five years, have devoted themselves to a measure relating to the dissolution of marriage, while leaving those Law Commission proposals waiting—it is 15 years now and we are told that it will be another three years before they can be taken on.
There is also devolution of property on death. The Scottish system is much more user-friendly—I am sure that the noble Lord will bear me out—and much more family-friendly than our own, but nothing has been done there.
This debate valuably concentrates our minds on the fiscal and social security systems. Before venturing to make one or two specific proposals, perhaps I may make two general points. The first is that discrimination in favour of the family can always be made to look as though it is discrimination against those outside it. Discrimination in favour of married people living together can be made out to be discrimination against cohabitants without marriage.
The second point is that there is no doubt, and we must face the fact, that fiscal purists—I see that the noble Lord, Lord Lawson, is present—dislike the system of allowances because it operates particularly to the advantage of those who least need it, perhaps because it operates on marginal rates of tax. Similarly with social security, the purists will say that social security is designed to relieve need. Once one goes outside that to relieve those whose needs are not immediate, one is wasting the taxpayers' money.
1766 We must recognise the force of those arguments. The answer to them is the one that is being given in this debate: that the family is a fundamental unit of society and society is entitled, even at the cost of fiscal purity, to discriminate in favour of the family.
Having said that, perhaps I may mention one or two other matters. I know that the married couples' allowance is not popular with the Inland Revenue, for the reasons that I gave. Nevertheless, also for the reasons that I ventured to give, it is justifiable that we improve it further. It went back for some years; it was improved at the last Budget but not so as to restore its former value.
The second fiscal measure I wish to mention is the substitution of a succession duty in place of an inheritance tax—a succession duty which favours the family specifically in comparison with those outside. The third measure is capital transfer tax. At present that favours the family in that transfer to a spouse is excluded from capital transfer tax. Remembering that the family is not just two persons, but those two and their children, should we not also make the same tax concessions on the capital transfer tax to transfers in favour of children?
I have completed my time. What I would have said about social security has already been said better than I could possibly put it, by the noble Baroness, Lady Young. Therefore I shall merely end as I began. We are justified in discriminating in favour of the family even at the cost of fiscal purity.
§ 7.21 p.m.
§ Baroness Elles
My Lords, I too thank my noble friend Lord Skidelsky, not only for introducing this debate, but also for choosing this specific subject and the way in which he introduced it. After so many weeks of debate in this House on the Family Law Bill, and after hearing so many different views, it was a great pleasure to hear what he had to say about the family and his concept of the family in society today. I am sure that he evoked many feelings of support from what he said.
We are well aware that the cost of benefits to the taxpayer is increasing annually, from around £30 billion in 1971 to over £90 billion recently or, as it is often described, £15 per day from every person in work. The Secretary of State's initiatives in considering methods of controlling expenditure while retaining the fundamental purpose of welfare—this was repeated by various noble Lords—to alleviate poverty and assist those who need financial support are to be welcomed. It is paradoxical that, as the country's standard of living and wealth increases, poverty also seems to increase relatively so that around half the population live in households dependent on one of the means-tested benefits. That surely cannot be right.
There are a great many issues involved—whether benefits are or should be means tested; at what levels they should be introduced and to whom; the great difficulty of discontinuing one form of assistance without being sure of genuine suitable alternatives; above all, how to move from dependency to self-support or to avoid the poverty trap; the changes in life expectancy and the question of income support.
1767 In recent weeks we have had the opportunity to debate at some length the position of the family in today's society and I do not intend to cover that ground again. Problems of family structure cannot be isolated from the question of the range of benefits and taxes that we are considering this evening. For example, it has been said that it is not unemployment which is the biggest burden on the benefit system, which is often assumed; it is single parenthood whose annual claims amount to £8 billion a year and are the major cause of family poverty. The same author of those words, the honourable Member for Birkenhead, Mr. Frank Field—who I am sure is widely respected in this House and in another place for the work he has done for many years—in his book Making Welfare Work, said,No system of welfare can be independent of values. Is it right for example that young never married mothers should gain additional income support premiums when few if any voters hold that such behaviour is acceptable, let alone rewardable?It should be emphasised that this is not a party matter; it is the way we view the way in which poverty can be relieved and how we can best help those who need that relief. Yet the figures in his book show an escalation. In 1971 there were 571,000 single parents, of whom 90,000 never married; and in 1993 there were 1.4 million single mothers, of whom 490,000 never married; and, in all, they were responsible for 2.3 million children. It is not the parent or deserted parent that we are discussing; it is the effect on the children. Many noble Lords have emphasised that that is what we are considering—how we can help the children of disadvantaged parents.
Is there any difference in the tax treatment of married couples which might act as encouragement to the young to get married and establish a home together? My noble friend Lord Skidelsky gave some examples. The House of Commons Third Report, Review of Expenditure on Social Security, Session 1994–95 Annex A, does not give much encouragement. It says that a married couple with one child of three years old, with a gross weekly income of £100, after rent and council tax are left with £112.92; a lone parent with one child aged three, with the same relevant reductions, has a net income of £115.40. Again, with a gross weekly income of £140, a married couple is left with £114.14 and a single parent is left with £118.26.
That surely does not make sense. Although there is only one adult to be fed and clothed, in the latter case there is a one-parent benefit paid to lone parents as well as child benefit. That can add up to £6.15 a week extra. The lone parent also has, tax advantages in that he or she is entitled to the additional personal allowance, rendering the tax position equal to that of a one-earner couple. The lone parent has further benefit compared with the married couple, paying 75 per cent. of the council tax, whereas the married couple pays 100 per cent.
From that comparison between the tax and benefit treatment of lone parents and married couples, there is little incentive, at any rate on financial grounds, to marry. This year's increase in the tax allowance for married couples, raised from £1,720 for 1995–96 to £1,790 for 1996–97—which is to be welcomed, of 1768 course—applies equally to the lone parent in the form of additional personal allowance. The discrepancies in the figures therefore remain.
My noble friend Lord Skidelsky quoted from a study by Dr. Patricia Morgan, of the Institute of Economic Affairs, who kindly allowed me to quote from some of the things she has written. The conclusion to which she came from the figures quoted by my noble friend was that,At every wage level a lone parent has more than two adults and two children even if she is not claiming child care costs, and far more when she does. There is nothing for the support of a second parent providing the child care in the two parent family. Instead, the family earner has less for more people!She continued,When a lone parent claims for child care costs, she gets more for part time work than a family breadwinner gets for full time work … All the father's income goes against the family's entitlements, but everything the lone parent's boyfriends provide is extra".That is a clear indictment of the balance between tax and benefits relating to single parents and also with regard to married couples. The tax regime clearly does not help married couples. If we want support for the family, regardless of measures being applied to benefits, the tax system must be more positive. In saying that, I am not decrying the benefits that the single parent receives; I am trying to emphasise the need for married couples to have better tax treatment.
Can anything be learnt from other European Union countries where the divorce rate is lower and the number of illegitimate children is also lower? If we look at some of the figures, some comparisons may stimulate my noble friend the Minister into taking some positive action. Income tax and social security as a percentage of gross salary (£17,000 or equivalent) taking global figures, in the US is 12 per cent.; Japan, 15 per cent.; and Switzerland, 16 per cent.; yet the income tax and social security as a percentage of gross salary in the UK for married couples is 26 per cent.
In each of those three countries, unemployment is considerably lower than in the United. Kingdom, and while not being able to pin down the cause, it could well be a greater incentive to come out of the dependency syndrome if tax burdens were lighter and thresholds for the imposition of tax were raised. In France income tax is geared to help the family. Deductions for health insurance and other social security contributions are allowed. Although on a different system, the quotient is two for a married couple, regardless of whether the wife earns, and one unit for a child.
We had a debate recently on the elderly, so I will not repeat what was then said except to draw attention to the question of inheritance tax, to which the noble and learned Lord, Lord Simon of Glaisdale, rightly referred. It causes so much despair to the elderly who have put their life savings into a house and then have to sell it to be able to pay for residential care. After all, grandparents and parents are still part of the family, whatever age they may be. One has to consider the whole range of ages of the family. It is suggested that the seven-year rule should not apply in those cases where the family home is left to the descendants of the owner, so that he or she can enjoy remaining at home 1769 without having to enter a residential home. There are more than a quarter of a million people in residential homes. They could stay in their own homes with the comfort of their spouses and with home help.
I should like to set out two or three measures which I should like to see considered in order to alter the tax burden on married couples. The personal allowance should be double that of a single person, where the wife does not earn. This could also encourage her to stay at home while her children are below school age. The family allowance for children should be reinstated, increasing according to age, as expenditure increases. How I agree with the statement of the noble and learned Lord, Lord Simon of Glaisdale, that tax purity is not always the best reason for changing and helping families. There should also be changes in inheritance tax, either by abolition or by exemption on passing the family home to direct descendants. There should be encouragement for personal tax exempt savings schemes—possibly a lump sum exemption on marriage, with limitation on size and on date of withdrawal of the contributor. Finally, to help those who have become dependent on benefits, the tax threshold should be raised on taking up work. The margin of gain at present does not seem to encourage the taking up of work. This syndrome must be broken and would be possible with a tax threshold higher than the personal allowance for the first year in work, or some other equal period.
It is appreciated that each country has its own traditions and problems, and it is to the credit of this Government that unemployment is lower than most western European industrialised countries, as well as people in Britain having put aside nearly £600 million for their retirement. If the distant future for the national debt, according to the OECD, is encouraging, there is nevertheless urgent need for encouragement to be given to families in the immediate future.
§ 7.33 p.m.
§ Lord Harris of High Cross
My Lords, I am grateful to the noble Lord, Lord Skidelsky, for introducing this Motion and I have learnt much from the other speeches made so far. I have one quibble with the Motion. It refers to,the effectiveness of the current tax and benefit system in supporting the family structure".It should refer to the "ineffectiveness". There is no dispute about that. I understand that the noble Lord, apart from natural courtesy and gentleness, has to be better behaved on the Tory Benches than I can allow myself to be from the Cross Benches.
In the short time available to me I do not wish to qualify all I have to say. I wish to declare some missionary truths as they have struck me not only recently but in watching the developing situation of the welfare state since I taught this subject back in the Scottish university of St. Andrews 40 years ago. Then there were high hopes in the wake of Beveridge that we could solve all the pre-war problems of want, hunger, idleness and so forth. With social benefits now roaring towards £100 billion, those high hopes of post-war reformers have been totally shattered. Multiplying 1770 benefits have not only failed to usher in the millennium or satisfy the general social aspirations; they have had unmistakeably a perverse effect: they have aggravated the problem by attracting ever more claimants.
This perversity of outcome is no accident. Indeed, market economists used to distinguish between what they called the income effect and the price effect of a subsidy. Thus when the Government offer cash or free services to help particular groups of people judged to be deserving, the direct, immediate and intended effect is to raise the real incomes of the recipients. Alas, inevitably, at the same time the indirect longer term unintended effect is to offer an inducement for other people to put themselves in the position of beneficiaries enjoying these new subsidies. If sceptics doubt that, the noble Lord, Lord Skidelsky, might confirm from his great knowledge that such a sensitive observer as Lord Keynes acknowledged that even the inadequate and derisory dole of the 1930s had some effect in diminishing the incentive to work. In a radio discussion reproduced in the Listener in 1930 Keynes, talking to Lord Stamp, acknowledges that,the existence of the dole undoubtedly diminishes the pressure on the individual man to accept a rate of wages or a kind of employment which is not just what he wants or what he is used to".These effects at the margin of decision, of people going for jobs or not going for jobs, switch people into totally the wrong direction and those marginal changes build up to massive redirections in lifestyles and employment.
In economic terms, if you offer a higher price for the unemployed, you will get a larger amount of unemployment. That is what Keynes taught. He called it voluntary unemployment. He did not wish to stand in judgment. That was just an effect that these subsidies had. If you offer a higher price for single parent families, you will get more single parent families. That is a matter of ordinary common sense. I do not regard the cost of £9.4 billion a year as the major cost to our society of this development. I regard the main cost to our society as the effect on children. The noble Baroness, Lady Young, has told us about presenting young children, the victims of this system, with the prospect on average of much worse life chances in employment and education and of future delinquency and so on. It is on the children that the handicaps are visited.
A number of speakers have quoted from a study, Farewell to the Family? by Patricia Morgan of the Institute of Economic Affairs. Some statistics have already been deployed so I shall add just two or three others from this splendid volume, priced £9 while stocks last. Of all families with dependent children, lone mothers and fathers, excluding widows, increased two-and-a-half fold, from 7 per cent. in 1971 to 18 per cent. in 1991; while the proportion of the total population living in single parent families increased fourfold, from 2.5 per cent. in 1961 to 10 per cent. in 1991.
The noble Lord, Lord Skidelsky, said that single parent families also suffer disproportionately from poverty. According to Patricia Morgan, that is not exactly the position. In the bottom decile of income distribution in 1991, pensioners accounted for 11 per cent., single and married persons without 1771 children accounted for 30 per cent. and single parent families with children accounted for only 11 per cent. Couples with children—theirs is the burden and the handicap—accounted for 49 per cent.
§ Baroness Hollis of Heigham
My Lords, would it not be more helpful for the noble Lord to remind the House of the proportion of households that each of those types of family represent and then see what proportion they contribute to poverty? As a result, I believe that the noble Lord will find that the number of lone parents is about 6 per cent. of the population but 11 per cent. of those in poverty. That is the key statistic of which the noble Lord needs to remind us.
§ Lord Harris of High Cross
My Lords, that not does disturb the facts that I have laid before the House; namely, that couples with children represent 49 per cent. of the lower decile, whereas single parents with children represent only 11 per cent.
There is not sufficient time to deploy one of the major forces that operates here, as in so many other sectors of our economic and social policy. Professors Tullock and Buchanan in America developed a marvellous analysis of what they call "public choice" or the economic analysis of politics, in which they show the way in which our famed democracy can be so easily corrupted by the influence of pressure groups. They show how single-issue lobbies have a disproportionate weight in influencing government because they are concentrating single-mindedly their effort on particular demands that they wish to have satisfied. Against that concerted, orchestrated and persistent pressure, there is no counter-pressure from the general body of taxpayers and citizens who are in the end going to pay the price, so one has all the time pressure towards expanding government in the benefits that explicitly suit minorities.
In the long run there is no solution unless we restore the public philosophy of limited government and a presumption against the automatic enlargement of government to meet every problem. Buchanan and Tullock in America have shown how that presumption would have to be entrenched in some kind of constitutional deal to stop politicians constantly yielding to the temptation to buy votes by offering taxpayers' money to these persistent pressure groups.
I turn briefly to remedies. I make no apology for saying that we should shift the tax/benefit bias back at least to neutrality, if not in favour of married couples with families. It is wholly preposterous that my preferred family choice and that of many other noble Lords who have spoken so eloquently is handicapped and disadvantaged through the tax system. In the earlier debate the noble Lord, Lord Cockfield, urged that we should reduce income tax and the loopholes and, I am adding, raise the starting point to allow gross income to he reflected in higher take-home pay. Another figure from Patricia Morgan shows that in 1950 a married man with a wife and two children had to earn average manual earnings before starting to pay income tax. Today, tax begins to be deducted from earnings at one-third of average manual earnings.
1772 If there were time I would argue that even the restoration of child adoption would make some contribution to rescuing children from some of the disadvantages which they suffer in these families. We should tackle the entitlement mentality that has grown. I recall my noble friend Lord Jakobovits, when we were debating the Family Law Bill, arguing that in Jewish families divorce was less common, although all the social pressures were the same as on the rest of the community, but he said that the stigma prevented Jewish families yielding to that pressure. Stigma is only the other side of pride in independence. That becomes caricatured as a stigma if we prefer independence to dependency on government.
The last refuge of a noble mind is to propose a Royal Commission. I very much supported the noble Baroness, Lady Thatcher, in her time in office, turning her face against Royal Commissions. They have been too easily resorted to by government for passing the buck to others. But I urge that we have a Royal Commission on the subject of the respective roles of the state and voluntary agencies in the future of the family. One of the most neglected publications in my lifetime has been Lord Beveridge's third volume on voluntary action. The other two volumes were on social insurance and full employment. The right reverend Prelate said that if we could stress the role that the Church and other voluntary organisations could play in helping to redress the position of the family, that would be a great advantage.
§ 7.45 p.m.
§ Lord Griffiths of Fforestfach
My Lords, like other Members of your Lordships' House, I too would like to thank the noble Lord, Lord Skidelsky, for giving us the opportunity to discuss this issue and also for giving such a comprehensive review of what is actually quite a narrow and technical subject. He gave a wonderfully comprehensive introduction to it.
I believe that what we are discussing tonight—and the noble Baroness, Lady Young, mentioned it—is an extremely important subject. Yet I believe that all too often, because of the sheer complexity of our tax and benefits systems, that complexity serves to disguise what is really happening and what incentives are created, and discourages those like myself who are amateurs in this field, from seriously looking at the matter. So we are really indebted to the noble Lord, Lord Skidelsky.
I also believe that one cannot approach this subject from the point of view of neutrality; one must have some starting point. I would like to make explicit my starting point, which is that I believe we have to recognise the benefits which are conferred on our society by the traditional family; that is, husband and wife who accept responsibility in marriage for bringing up their children. We should no longer be indifferent as to whether the norm for family life in this country is the traditional family or what has come to be called "the mother-child unit".
I say that because a growing body of research evidence is using different methods, such as longitudinal studies, cohort studies and clinical studies, which are 1773 drawn from samples of children of different ages, and from research work in different countries, but which reach similar conclusions. The relationships involved in these research studies are complex, and I acknowledge that. What I find extraordinary is that the conclusions are clear and have a great deal in common. They are that divorce has a serious and a long-lasting impact on children and that lone parenthood, regardless of the socio-economic status of the mother—and I in no way want to criticise any lone parent in any way this evening—has a damaging effect on the wellbeing of children.
To put the same point positively, children of parents who follow the traditional norm are significantly advantaged with respect to self-esteem, health, educational performance in school, employment and long-lasting personal relationships, and are less likely to commit crime or to become deviant.
I was very impressed by the foreword to an excellent study on this subject—and not by Patricia Morgan this time. It was published by the Institute of Economic Affairs. The foreword is by Professor Halsey of the University of Oxford, a great authority in this area as well as someone who has been a life-long socialist. In assessing the evidence he said,The children of parents who do not follow the traditional norm, (i.e., personal, active and long term responsibility for the children they generate) are thereby disadvantaged in many major aspects of living a successful life. The evidence all points in the same direction, is formidable and tallies with common sense".Therefore, my starting point for asking the question in terms of this Motion, as to the effectiveness of the current tax and benefits system, is this research evidence which comes out conclusively in defence of the traditional family.
Despite the growing body of evidence, the tax and benefits system fails to support the traditional family structure. I believe that it creates the wrong incentives. I give two examples. First, the tax and benefits system encourages fatherless families. For a given level of earnings, a married couple with children receive less income than a lone parent with the same number of children. That cannot be right. We do not have a level playing field in that respect. If one takes into account the research evidence, one may well conclude that the playing field should be tilted through fiscal and benefits policy in favour of the traditional family.
Secondly, our tax and benefits system discriminates against those mothers who, for whatever reason, wish to stay at home and have a particular relationship with their children. A one-earner couple with two children pay more in tax and national insurance than a two-earner couple with two children on the same gross income. The numbers are impressive. Forty-eight per cent. of all mothers of children under the age of five, 29 per cent. of all mothers with children aged between five and 10 and 22 per cent. of all mothers with children aged between 11 and 15 stay at home. That is a total of two and a half million mothers.
We discriminate against people who believe in the traditional family and want to develop the relationships and give up work for however short or long a period of 1774 time. I do not suggest that taxes and benefits are the most important factor that is taken into account in making decisions in this area, but they are one factor that impacts most seriously on low-paid, hard-working married men with families.
The tax and benefits system is also a powerful symbol in our society. It embodies our values and sense of fairness. I believe that the present system sends out negative messages. Over recent decades the family has been treated, not as a unit in which people are dependent on each other, but as a set of people with individual needs who just happen to live under the same roof. This started with the introduction of family allowance which was paid to the mother because the father could not be trusted. He might simply fritter it away in the pub. Next, the child tax allowance was withdrawn. Major support for children was then provided through child benefit, income support and family credit. At the same time, the married couple's allowance was frozen until the last Budget. We then moved to a system of separate and independent taxation of husband and wife.
What messages do we give our society as a result of all these changes to the tax and benefits system? I suggest three. First, fathers are totally marginalised in the family. Irresponsible fathers are hounded by the CSA, but responsible fathers who work hard to look after their families receive no recognition whatever either through tax allowances or benefits. Secondly, those who earn income are not helped to support the family; rather, the benefits come from the state. Our tax and benefits system has made children the responsibility of the state, not the family. If there is a problem the Government will deal with it, not help the family itself to deal with it. Thirdly, there is an individualism that pervades this approach which is particularly reflected in the reform of personal taxation which I believe is destructive of community.
My noble friend Lord Skidelsky said that we had to put words into action. The problem that the family faces today is not simply that of changing values but that the tax and benefits system drives the trend that we see. We can do something about that. We must be prepared to change structures. If the existing inequities continue I cannot see why the trend will not continue. Children in single parent families must not be made to suffer. The noble Baroness, Lady Young, is right to say that they must not be punished. But if we simply address short-term poverty, we will never create a long-term structure to solve the problem. Therefore, we must be prepared to change the structures.
In conclusion, I make two proposals: first, the reintroduction of child tax allowances; and, secondly, the adoption of the proposal, contained in an eloquent Government White Paper in 1986, for personal transferable tax allowances. I believe that both would strengthen the family.
§ 7.56 p.m.
§ Lord Ashbourne
My Lords, I also thank the noble Lord, Lord Skidelsky, for initiating this debate and giving the House an opportunity to discuss these important matters.
1775 Central to government's understanding of how an individual relates to his community are the virtues that that individual develops, the values he learns and the relationships which he builds within the family. The traditional family develops an individual identity and teaches self-reliance and personal responsibility for oneself and others. Today, the family is not, as Neil Kinnock claimed, "changing" but it is in danger of disintegrating.
Some families never start properly because mothers and fathers do not make a commitment to one another before they have children. Increasingly, it is recognised that children are safer and more likely to develop and flourish within the traditional family. Some talk in an ill-defined way about "community", yet if we look for a major cause of crime, a key reason for educational failings and an explanation as to why the social security budget grows so quickly, we should consider the decay of family life and particularly the marriage bond.
Cultural forces power the decaying pattern of family life. Nonetheless, let us not be guilty of abetting these malign cultural forces hut turn to every corner of public policy to ensure that the traditional family, centred on marriage, is not disadvantaged. At the very least, the Government should call for fair treatment for marriage. Some argue that there should be incentives for those who get married and remain married. After all, marriage is a public commitment as well as a private relationship. The Government should support marriage in every reasonable way, remembering that frequently it is the taxpayer who bears the cost when marriage fails.
Despite claims to the contrary, the Government's policies tend to undermine the family, as rising numbers of one-parent families, divorces, out-of-wedlock births and the increasing popularity of cohabitation testify. At any given level of earnings, the lone parent will derive a higher income than a married man with the same number of children. As a result of the child care allowance, which was introduced in October 1994, a lone parent with two small children can work for 20 hours at £4 per hour and end up with a net income of just under £164 after rent and tax. A married father of two small children who works for 40 hours at the same hourly rate takes home just under £131.
The situation has been aggravated by the destabilisation of male employment. Joblessness correlates with an unmarried status for men, and becoming unemployed increases the chance of divorce. For all practical purposes, the mother/child unit is the family type for which family policy is designed. The two-parent family is discriminated against. Being brought up in broken, incomplete, or reconstituted families has serious detrimental effects upon the health, education and delinquency of children.
I turn now to the married couples' allowance. The indexation provision for that allowance is to be welcomed. At the time of the introduction of independent taxation in 1990, the married couples' allowance was set at £1,720. It was given at the taxpayer's marginal rate of tax—either 25 per cent. or 40 per cent. Since then, the rate at which it is given has been cut: first to 20 per cent., and then to 15 per cent., 1776 as was explained to the House by the noble Lord, Lord Haskel. That amount has been frozen. It has taken £2 billion out of family budgets—on average, £3.30 a week for each family. The indexation increase this year is the first change. Meanwhile, for comparison, the personal allowance has been raised from £3,005 in 1990 to a proposed £3,765 for the coming year—an increase of over 25 per cent. It is still allowed at the taxpayer's marginal rate.
That shift in allowances has had a marked effect upon the relative tax burden of families and single people. As a result of the changes in allowances since 1990, including those proposed in the Finance Bill, the annual tax bill of a married couple with one earner will have gone down by £42 since 1990, while that of a cohabiting couple with two earners and no children, will have gone down by £365 a year. That follows a continuous shift of the tax burden on to families since 1964. For example, a single earner married couple with two children under 11 on average earnings was then paying 8 per cent. of its income in tax. Today, after allowing for the shift from child tax allowance to child benefit, the figure is 22 per cent. Most other taxpayers have seen their tax bills rise, but by far less.
Hitherto, governments have recognised that the tax system should take account of the special relationship which exists within marriage; for example, the 1986 Green Paper on personal taxation stated:The Government reject the view that the tax system should pay no regard to the special relationship which exist within marriage".Before the Budget, the Prime Minister said:The Government believe that married couples should receive recognition in the tax system".—[Official Report, Commons, 6/11/95; col. 547.]Marriage requires men and women to make a long-term commitment to each other and to their children. It provides the best means for children to have a loving, stable, and committed environment within which to grow. That is not to suggest that marriages are without their problems or that many cohabitees and lone parents do not bring up their children excellently; but research shows that children whose parents separate are more likely overall to have adverse education, health, and behaviour problems than children whose parents stay together.
Even with a high divorce rate, cohabitational arrangements last a far shorter time than marriages. There is also research evidence to show that children who live in a lone-parent family do less well in educational terms, and that married couples live longer, have healthier lives, and suffer less stress and mental illness than single, widowed or divorced parents.
The looser ties of co-habitation may well provide less support for caring for elderly parents than the shared responsibilities and commitments provided through marriage. In short, marriage is the foundation for a stable and cohesive society. As Cardinal Basil Hume, the Archbishop of Westminster, at the Philip Lawrence Memorial Mass said:if we lament, and rightly so, violence in our streets and much else that is wrong, then let our society look to the quality of family life in the nation and to the serious commitment which the marriage bond should be".1777 I end by saying how important it is to ensure that the tax and benefit system supports the family and buttresses marriage in our society.
§ 8.6 p.m.
§ Lord Zouche of Haryngworth
My Lords, I, too, am grateful to my noble friend Lord Skidelsky for moving for Papers on this important issue, thus giving me the opportunity to participate in the debate. The Motion calls attention to the effectiveness of the current tax and benefit system in supporting the family structure.
It is a fact of life that charities are being called upon increasingly to provide support facilities for disabled people and their families. That important aspect of the charities' work is being undertaken following a recession which has not merely increased need but has substantially reduced the giving to charitable causes.
As government move away from the statutory provision of services, assistance for disabled people is being provided increasingly by charitable organisations. Charities can charge central and local government for the services which they undertake, but in many cases the fees paid do not match the costs of services being provided.
The Government recognise the importance of the charitable sector, and have introduced various measures to increase giving to charities, including payroll giving and gift aid. The Government have moved in the right direction, but sadly what has been given with one hand has been taken away by the other. For instance, a reduction of one penny in the pound means that charities have less tax to reclaim. That may seem a trifling amount, but it has been estimated that it could cost Oxfam as much as £150,000 a year. The previous Budget cost charities, including those helping disabled people, in excess of £5 million overall.
What is the answer? How can we help the people in our community who most need assistance? What more can be done to support a family whose breadwinner is disabled and is currently being assisted by one of the many charities which together raise many billions of pounds each year? One of the most significant ways to help, particularly the service-providing charities, would be to introduce relief from irrecoverable VAT. Charities are hit severely by irrecoverable VAT. Recent research has demonstrated that charities are losing over £350 million a year in VAT.
The imposition of VAT is governed by EU law (the sixth directive). Because charities provide mainly exempt services or services (at below cost, at no cost, or at no charge) which are outside the scope of VAT, they are unable to recover the VAT associated with the purchases needed to provide those services.
The problem is unique to charities. Local authorities providing the same services do not have to pay any VAT on their expenditure, and commercial organisations are allowed to recover the associated VAT. They are not as seriously affected by VAT as are charities. The most badly affected groups are those providing services—the very charities upon which the Government are now depending. Charities which raise money and do not 1778 spend it benefit from concessions on giving and do not have the same problem with VAT. It is precisely those most useful in the community which are penalised.
What is the solution to the VAT problem? With the introduction of a simple grant-in-aid scheme by which charities could reclaim VAT incurred on their non-business expenditure, the level of grant could be varied by the Government in recognition of economic constraints, but any percentage—let us say 25 per cent.—would most significantly reduce VAT and mean that an additional £75 million was available for charitable spending. Such a scheme operates most successfully in Canada, where charities are automatically eligible for a refund of 50 per cent. of general sales tax at the end of the financial year.
It is not as though any grants would be taken as profit; they would be ploughed back into providing existing services. By limiting any scheme to non-business expenditure, any concerns about fraud are overcome. The European Commission has only recently reiterated its view that such a scheme is perfectly permissible under EU law. The introduction of grant-in-aid mechanisms would not, in overall public expenditure terms, cost the Government a great deal and the return in terms of additional targeted and cost-effective services would be considerable.
The Government have argued that it is preferable to encourage giving rather than offering indiscriminate VAT relief and have introduced a number of concessions accordingly. However, that fails to take account of the current environment in which charities operate. As the reduction in the basic tax rate continues, measures to encourage charitable giving are no longer sufficient. The Treasury estimated that the measures introduced in the March 1993 Budget would benefit charities by £30 million. However, that did not compensate charities for the total loss in income of £130 million as a result of other Budget measures. Unfortunately, the trend has continued and each of the recent Budgets has eroded the position of charities still further.
The recent recession has resulted in a falling off in voluntary giving. Charities are therefore facing significantly higher demands for their services at the same time as coping with a reduction in income. Furthermore, measures to encourage giving do not benefit all charities because some services, albeit vital for their recipients, are not as easily "sold" to the public as others.
Despite the concessions, there is a significant imbalance in the way in which the current tax regime impacts on the sector. Those organisation which do not provide services do not have a significant VAT burden but those which are service providers are penalised because the amount they receive in tax reliefs is often far outweighed in the amount they pay in irrecoverable VAT.
In conclusion, I wish to say a few words about Europe. Charities have been fearful that the imposition of VAT on fuel and power could be seen as the start of the gradual dismantling of zero rates. That would have disastrous effects on charities. Previous research 1779 indicates that a complete loss of zero rates would result in the trebling of VAT bills paid by charities. The Government must stand firm on the retention of existing zero rates in forthcoming EU negotiations on the permanent VAT system. They must not give away what they have achieved in previous negotiations with their European partners, which they have spent many years negotiating.
It would also be helpful if the Government could seek a solution to this problem at a European level, possibly through encouraging the Commission and other member states to review the position of charities under the sixth directive, which is in any event being redrafted as part of the work towards a permanent VAT regime.
§ 8.14 p.m.
§ Baroness Hollis of Heigham
My Lords, it has been a most interesting debate and I believe that I speak for all Members in thanking the noble Lord, Lord Skidelsky, for introducing it tonight.
Essentially, it has been a debate about the effectiveness of the welfare state and I believe that, therefore, it has been a deeply uncomfortable debate for all of us, wherever we sit in the House. Why? First, social security expenditure has risen remorselessly. It is now one-third of all public expenditure. However, I believe that we all accept that DSS expenditure is largely a response to problems generated outside the social security system—for instance, high unemployment, the lack of decent childcare and the deregulated housing market—and that therefore a solution to those problems also lies elsewhere. But far from the tax and benefits structure mitigating those problems, since 1979 we have seen inequality widen and poverty deepen. Today one child in three under the age of five in Britain is in a family on income support. One-quarter of Europe's poor live in Britain. I do not know which is the more shaming statistic.
However, whereas in the past poverty was the unwelcome property of sickness or old age it is now increasingly the fate of families. The noble Lord, Lord Harris of High Cross, gave some figures. For example, pensioners make up about one-fifth of the population but only about one-tenth of those defined as poor. The same is true of couples without children. Those people who make up about three-fifths of the population represent only about two-fifths of those who are poor.
However, the reverse is true for those with children, whether they are in two or one parent families. Those families are disproportionately poor. They represent about two-fifths of our households and about three-fifths of our poor. As the new CPAC guide, Poverty, the Facts, shows, children make a family and families with children are disproportionately poor. Our welfare state, our tax and benefits system, has failed those families.
As the right reverend Prelate the Bishop of St. Edmundsbury reminded us, families come in many shapes and sizes. Today the two parent family is still the case for approximately seven out of 10 children but increasingly the number of children come from families in which the parents cohabit, are separated or divorced, have remarried or re-partnered or have remained lone 1780 parents. They are all families. The noble Baroness, Lady Young, was right in saying that children are much better off in families with their two natural parents. However, from these Benches I vigorously resist the arguments by implication or explicitly from the noble Lords, Lord Skidelsky and Lord Harris, that we should seek to strengthen so-called traditional families by making the children in non-traditional families poorer. It is the combination of single parenthood and poverty which gives many of those children the bad start which the noble Baroness, Lady Young, rightly and dramatically described to us.
Why have we failed those families? Whether they are two or one parent families, why increasingly are they in poverty? First, we have failed them in the labour market. I was surprised that so little was made of that point tonight. Only one British worker in three now works the nine-to-five day five days a week on which the secure mortgage, the secure income, the secure pension and the secure family rests. Outside that group of workers are those in part-time work, contract work, temporary hours work, zero hours work, weekend work and shift work. They are the new casual army of reserve labour, in and out of the labour market as the employer determines, carrying all the economic risks and uncertainties on their shoulders. One cannot build a secure family on insecure work. In addition, there are the unemployed. During the past five years 40 per cent. of people have been unemployed. Today, one million children are in families without a breadwinner.
We all accept that much of what I have described is global. However, the consequences for our society have been made worse by the policies deliberately adopted by the Government. The Government have deregulated the labour market, scrapped wages councils, withdrawn employment protection and seen wages fall. They are then surprised when the lean, mean, insecure, competitive individuals of the labour market do not become the responsible family men caring for others that we all wish to see.
The noble Lord, Lord Griffiths, is right that if there is individualism in the labour economy it is difficult to expect social responsibility in the domestic economy. Divorce damages, but so does the divorce that the Government have helped to preside over; namely, the divorce between individualistic behaviour to make a living and the behaviour that we all recognise is necessary to live a family life.
Just as the Government encourage a labour market made up of self-seeking individuals but want society somehow to be made up of responsible families, so we see the same moral schizophrenia when it comes to tax and benefit structures. My noble friend Lord Haskel made the point very well that the Government have raised taxes but have raised them in such a way that they fall most heavily on the poor and on families and, as I have tried to suggest, increasingly, they are the same people.
As regards direct taxes, we have seen a cut in the top rate of tax. Half of all the tax cuts enjoyed since 1979 have been enjoyed by just the top 10 per cent. of the population. But by cutting the top rates of tax and 1781 reducing the rates within the bands but not increasing personal allowances to keep the poorest out of tax and by freezing the married man's allowance, those measures have all hurt families and in particular, poor families.
Add to that a child benefit which has not even kept pace with prices let alone earnings, together with national insurance which is capped at just over £20,000, which is therefore regressive in its effect on families; and add beyond that a taxation burden which is felt increasingly through indirect taxes such as VAT on fuel, which cannot be discretionary for families because they have to spend to survive; and we can see how the tax burden has damaged families and increasingly helped to put them into poverty.
If we look at the tax structure over the past 10 years, who has gained and who has lost? Those who have gained are people with above average earnings. It is those who are single and employed, those without children and those in work. They have done quite nicely. But those who have lost out under our tax structure in the past 10 or 15 years are those with below average earnings, married couples, people with children and especially the unemployed. If you are married with children and unemployed, you have footed the biggest bill of all.
That list of winners and losers is not accidental. It has been constructed by the Government and the price has been paid by families who are poor. In other words, the tax system is increasingly wiping the concept of the family out of the Inland Revenue computer. To avoid taxing a two-earner family as though it is a one-earner family, the Government have ended up with a far worse anomaly: a one-earner family is treated as though it is a single person. That is absurd.
The inequities of the tax system, as many noble Lords have said this evening, have been reinforced by the perversities of the benefit system. Means-testing is increasingly replacing insured benefits. For example, JSA has replaced unemployment benefit and has cut the contributory insured period. The result of that is to damage families. If any member of the family tries to help himself, he is penalised. Let us take family credit as an example. If a family man with two children earns £3.75 per hour, whether he works 16 or 40 hours per week, he is only £5 better off. If any member of the family—for example, the wife—obtains a part-time job, her husband loses benefit pound for pound. There is a marginal tax rate of 100 per cent. if you are poor while for the best off it is reduced to 40 per cent. Means-testing damages families, increases poverty, extends dependency, reduces family savings, discourages families from working and probably encourages fraud.
Cruellest of all has been what has happened to the housing market and the role that the Government have played in that. As my noble friend Lord Haskel rightly said, mortgage payers who lose their jobs will no longer receive income support. Therefore, those who are most likely to lose their jobs and who are least likely to have 1782 insurance face repossession. There are 1,000 repossessions per week with devastating consequences for the family.
As regards rented housing, the Government first deregulated rents and extended the dependency of families on housing benefit and then capped housing benefit in a landlords' market, thus ensuring that the poorest families will be evicted for arrears. Having made them dependent, they then make them homeless. Add to that the new Housing Bill which your Lordships will soon be debating and we shall find that families unable to pay mortgages and unable to pay rents will suffer an itinerant life of temporary tenancies. Many a family will not survive.
Can we not do better than that? The Government utter platitudes about family life while their labour market policies, tax structure and benefit system batter those very same families. The state cannot make families strong or happy but it can do the opposite. It can increase their insecurity and put them under stress. I believe that that is what the state has done.
Families need a fairer tax system than we have, stronger employment policies and a statutory minimum wage. They need also a welfare-to-work strategy which emphasises training and child care together with an intelligent and not perverse benefit system. Such an agenda for families is not beyond the wit of government to devise. That is what the next Labour Government will offer.
§ 8.27 p.m.
§ Lord Mackay of Ardbrecknish
My Lords, by and large this debate has followed the course of the last debate until, perhaps, it came to the speech of the noble Baroness, Lady Hollis; namely, a certain amount of cross-party general agreement. The two debates are not unrelated and I may refer some of your Lordships to the previous debate when I answer some of the points raised in this debate.
I think that nobody disagrees with the proposition that the family is of crucial social significance. For the majority of people, the family is the focus of their emotions and aspirations. It is where they learn to distinguish between right and wrong. It is where they learn to experience and give love and to grow up, we hope, in a happy and loving relationship.
Families pass on the experiences of previous generations to new generations. In doing so, they equip the new generation to live in society. It is the main channel through which the cultural, religious and moral values of society are transmitted from one generation to the next, and it provides the fundamental building block for our society. I do not think that anybody who took part in the debate disagrees at all with that.
My noble friend Lady Young asked me specifically about the inter-departmental committee on marriage and what it is doing. That group has been carrying out a review of the support services available to married couples. It is a major piece of work to identify which services are required by married couples and to map out the services currently available. That will allow us to ensure that we are making the best use of resources by 1783 providing the right support to married couples experiencing difficulties or, indeed, the right advice and preparation for young couples considering marriage. I am sure that my noble friend and other noble Lords will agree that that is an important piece of work.
The past few decades have seen major changes in the structure and stability of family life. Those rightly concern your Lordships and they concern the Government too. There have been increases in the rate of divorce and increases in the number of children born out of wedlock. More than 2 million children are brought up in lone-parent families and many more as members of step families. Those are worrying developments. But do not let us become too involved with our worry beads because there are two points that we should bear in mind.
First, the majority of parents raise their children in unified families and two out of three marriages stay united. Secondly, the changes seen here are not unique to the United Kingdom. Similar changes are occurring worldwide in countries with very different tax and benefit systems and very different social and economic policies.
I suspect that the suggestion that the tax and benefit system is very much the cause of the trend that we have seen is perhaps not true. Indeed, that memorable phase of the 1960s which some noble Lords will remember—namely, that the civilised society is a permissive society—has a great deal more to do with the problems that we have been discussing this evening.
I thought that I would look at the most recent statistics on lone-parent families. They show divorce in 35 per cent. of cases; separated from marriage in 22 per cent. of cases; and 42 per cent. never married. But of that 42 per cent., 24 per cent. are separated from cohabitation and 18 per cent. have never lived as a couple. My noble friend Lord Skidelsky when opening the debate and, indeed, my noble friend Lady Elles, referred to the relative stability of births over a very long period. I do not think that the example of Henry VIII was a good one. My recollection is that his view of the sanctity of marriage was loose even by today's standards. While the statistics are interesting—and I have quoted some which show the same trend—one has to be a little careful when judging statistics from today (when we collect them rather carefully) with those from previous years.
After all, when we match the statistics for conceptions out of wedlock, we may well bring into our consideration the rather more old-fashioned view than today of the so-called shotgun marriage when the subsequent birth after marriage disguised the fact that it was actually conception out of wedlock. I started with Henry VIII; perhaps I may commend to your Lordships as night-time reading a book by the great Scottish poet, Robert Burns, as an example of how such things were organised not just in rural Scotland but also in rural Britain in the 18th century. I suspect that we get a little upset by the figures that we see today when we compare them with what we believe was an idyllic position previously. It was perhaps not quite as idyllic as we would like to think. But that does not get us away from the fact that it causes problems.
1784 I believe that those problems were well defined by my noble friend Lord Griffiths of Fforestfach when he said that children of parents following traditional norms are significantly advantaged over a range of factors in comparison with other children. There is absolutely no doubt about it. If one were to give a child advice before it was born, one would advise it to be born into a stable, married family relationship. While I am not saying that it is all disaster the other way, the odds are very much more in favour of that child than they are as regards all the alternatives.
I turn away now from that issue, although I may wish to return to it later. I move on to the position of the tax/benefit system which is the bedrock of tonight's debate. Although I have already said that I do not believe that people marry or do not marry because of the tax system, or that people get divorced or do not get divorced because of the tax system—indeed, read for tax: benefit system—I appreciate that there are some strange anomalies which make it look as if the state is either neutral or not actually giving marriage the tick of approval that some noble Lords believe it ought to have.
As a Government, we believe firmly that the tax burden is too high for all types of families. We are committed to reducing it as my right honourable friend the Chancellor of the Exchequer, Kenneth Clarke, has made absolutely clear. Indeed, I should like to challenge the noble Baroness, Lady Hollis, in that respect. I do not want to spend my speech arguing with her, but I should like to remind the noble Baroness, as she rails against the top 10 per cent. of taxpayers, that the latter paid 35 per cent. of all tax paid in 1978–79. If one listens to the noble Baroness, one might think that that group was actually paying less tax today. However, that is not so. Those people are actually paying 45 per cent. of all tax paid today. Therefore, we have the interesting phenomenon, which is worldwide, that as you reduce the burden of taxes on the better off, they actually produce more tax for the Exchequer and more tax for the spending departments in Whitehall, such as the Department of Social Security.
The noble Baroness should be more careful about following that line of argument. Equally, as regards the noble Baroness's suggestion that an unemployed married man with children has lost out most of all in the changes over the past 15 or 16 years, perhaps I may point out to her that the average income of such a man with two children has increased by around 20 per cent. since 1979, after allowing for inflation. I believe that that counters the view of the noble Baroness that we have particularly penalised that group of men by the tax and benefit system.
As I said, I do not believe that manipulating the tax system will prevent those social consequences. I believe that they have much more to do with the way that society has changed. I referred to the civilised society and the permissive society. I believe that that kind of view has meant that one's responsibilities are just those which one chooses to take and that if one has made that choice one can lay it down quite happily if one wishes to do so. Those factors are much more important as regards the social problems that we are seeing.
1785 At this point I should like to mention the speech made by my noble friend Lord Zouche of Haryngworth. He has taken me a little away from the normal part of my response but it is only fair to respond to him. I note what my noble friend said about charities. I accept that a reduction of 25 per cent. to 24 per cent. means a decrease in what charities receive as regards the advantages in tax giving. However, I am afraid that that is not a terribly good argument against, for example, not reducing the tax; and I could say that, when tax was increased, the opposite happened.
As far as concerns VAT, I should simply commend my noble friend to read the report of the last debate on tax simplification. I believe that his suggestion would make the system more complex. The general view of the last debate was that we should be trying to go in the opposite direction.
I do not necessarily believe that the Government are in a pivotal position when it comes to encouraging the continuation of marriage and the responsibilities of family. I wonder whether I dare say to the right reverend Prelate that I believe there are a number of other organisations, including the Church, which have a major responsibility to signal to the public, and to the world at large, in a clear way what their position is in—as the right reverend Prelate correctly said—the Judeo-Christian tradition. I sometimes think, not just in his Church but in all the Churches, including my own Church, the Church of Scotland, that I do not hear the signal as clearly as I would like. However, I welcome it when I do hear it. I believe that it should be said loudly and clearly.
The Government must deal with family life as it is when we come to supporting families rather than as we would like it to be. We should then look at how we can support the family. We can make it clear that the major responsibility for children rests on their parents, not on the taxpayer. We believe that parents are responsible—that is, both parents—and that taxpayers should only be involved if the parents do not have the means to support their own children. That responsibility continues even if, sadly, the parents no longer live together. The Child Support Agency was established to implement that principle. Interestingly enough, the difficulties facing the agency have come about because many parents—by and large, I am ashamed to say, men—are not willing to accept the responsibility of family life. As a Government we should try to create the economic and social conditions in which families can grow and develop.
I believe that we have done the latter, although there is always plenty more that we can do. For example, my noble friend Lady Young said to me accusingly that the tax system no longer takes account of the number of dependants. That is true, but we have changed the tax system to the child benefit system. The child benefit system gives support to families regardless of whether or not they pay tax. It gives it directly to the mother. I do not want to continue in that respect, but I feel quite strongly that the advantages of the child benefit system 1786 are quite considerable as against the tax system where the benefit went to the father and was not always, I regret to say, passed on to the mother.
My noble friend's other point was about the first child and, of course, we recognise that the first child is the more or the most expensive, depending on how many children you end up having. We recognise that because child benefit is higher for the first child than it is for the subsequent children. We have helped in that way and, indeed, average incomes have increased in real terms for all family types since 1979. Married couples with children enjoy an average increase in income of some 39 per cent. over inflation.
It is true, and some of your Lordships have pointed it out, as did the noble Baroness, that high unemployment and high rates of lone parenthood certainly co-exist in the same geographical area. It is important that we tackle the problems of joblessness and welfare dependency for their own sakes and not just because of the impact they have on families. If we have improvements in family stability as a result, that will be an added bonus. My noble friend Lord Skidelsky as well as the noble Baroness, Lady Hollis, drew my attention to this aspect of Government policy. We have announced over the last two or three Budgets a comprehensive package of work incentives. We have made further improvements to in-work benefits so that people can have an even greater return from working—£10 extra in family credit if you work for more than 30 hours. We are attempting to smooth the transition from benefit to work by easing the gaps in income and speeding up the payment of benefits, such as housing benefit and family credit. We are encouraging employers to provide more jobs, particularly for people with few skills and those who have been unemployed for two years or more. We are piloting new ways of helping low-paid people in work who do not qualify for family credit because they do not actually have children. We are doing all that.
My noble friends Lord Skidelsky and Lady Elles, and indeed the noble Lord, Lord Harris of High Cross all quoted extensively from Patricia Morgan's book, which I read with concern, I must say, but one has to be a little cautious about it because the figures quoted by my noble friends were constructed on the assumption that the lone parent receives assistance with child care costs of £40 per week which, of course, the married man does not incur. My noble friend Lord Ashburton made that point, but I am afraid that I do not think he carried it to its logical conclusion. When the child care costs she has to pay are knocked off her net income so that the disposal income of the lone parent and the couple are truly comparable, I believe my noble friends would find that the gain from working is similar for both types of household.
My right honourable friend Peter Lilley announced last November that changes in social security benefits would be implemented which would narrow any residual gap. We accept that it is wrong for a lone parent to take home a greater income from the same gross earnings than a couple with an extra adult to support—three mouths against two mouths. However, we have to accept that child care costs need to be met if we are to 1787 encourage lone parents to go to work, which is the one very clear way in which they can improve their standard of living and their children's standard of living. We will continue to support families to work if they are able to do so and we have particular measures in place—family credit, for example—which encourage couples with children to work and, if their earnings are low, do not allow them to fall into the unemployment trap or the benefit trap and simply make it not worth their while to go back to work. I believe that we have done that.
It is an interesting fact that the majority of couples who need family credit need it for only one six-month spell to help them over temporary problems. Two-thirds of the couples leave family credit for markedly improved financial circumstance reasons—i.e. higher earnings. That is an important point to underline to your Lordships.
Of course we recognise the difficulties of lone parents and we believe that we have to help them. We want to see an improved incentive to work, as I have mentioned; secondly, we want to ensure that they receive regular maintenance from the absent parent, as I have mentioned; thirdly, we do want to ensure that the benefits system is even-handed. The right approach is, therefore, neither to penalise them nor to promote them. That is why we announced last November a restructuring of the benefits system to emphasise that point. Of course we have now frozen one-parent benefit and lone parent benefit. In actual fact, in all the calculations I have seen on the Patricia Morgan point, it is one-parent benefit and lone parent benefit which causes the diversion. That is the actual arithmetical reason for the diversion. Therefore, by deciding to freeze it, we will erode the differential and we will take away what my noble friend Baroness Young indicated was a signal in some way that we value lone parents' children higher in the benefits system than we value married couples' children. That certainly is not the Government's intention and that is certainly one inference that people can draw.
We are very much committed to helping and encouraging married couples. I say to my noble friend Lord Ashburton and others: married couples have considerable advantages in the tax system. My noble friends may want them to have more. A married couple would pay around £5 a week less in tax than most single people on similar incomes. Married couples, of course, are treated more favourably for inheritance tax, transfer tax and capital gains tax reasons. A married couple can shift money from the husband to the wife so that she can use her personal allowances and her lower tax bands, and she can do that without taxation.
Of course, I will draw these points and all the others to the attention of my friends in the Treasury and my other friends in the Department of Social Security. I take on board the point about passing on to one's children, but I certainly believe that there are considerable advantages to marriage. Indeed, one key advantage that I came across recently in my study of pensions is that in the case of a cohabiting couple or, as they are called in the north east, a "bidey-in" couple, if something happens to the man—the man dies—then the woman is not considered to be his widow and does not receive a pension, whereas the married lady does, rightly, receive a pension. That is a 1788 distinction which perhaps is lost on a lot of people until the awful event happens, but it is something we should underline.
We are committed to ensuring that the tax/benefit system supports family life and encourages and sustains the two-parent traditional families. I believe that that is important. The noble and learned Lord, Lord Simon of Glaisdale, said that you do not need to discriminate against the one in order to discriminate in favour of the other.
We have had an interesting and useful debate. All the debates on a Wednesday afternoon in which I am involved start off by seeming to be another chore, but end up by being extremely useful. They add to my knowledge and add to the admiration I have for your Lordships for the width and breadth of experience which you bring to all these debates. This one this afternoon was no exception.
§ 8.48 p.m.
§ Lord Skidelsky
My Lords, it only remains for me to thank all those who have taken part in an interesting and thoughtful debate. I draw a lot of comfort from what was said because I do not think that we could have had a debate in these terms five years ago. I believe that we have made progress. All noble Lords who took part recognise that the decline of the family is a serious problem and threatens social disaster if it is allowed to continue without something being done about it.
Everyone has agreed that the tax/benefit system as it now operates has contributed to the decline by sending out the wrong incentives, although noble Lords disagree about how central a part it has played in that decline, as compared to more general economic and social forces. All noble Lords have agreed that we can do something to make the tax/benefit system more family friendly.
Some interesting suggestions emerged which I hope will not be lost. I note in particular the importance of higher tax thresholds; the introduction of transferable tax allowances; and equal fiscal treatment for married and unmarried parents. One not mentioned, incidentally, which I think is worth considering, is income splitting, which would give equality between one-earner and two-earner families which does not exist at the moment.
There was a little disagreement, as was to be expected, about what we mean by the family. I agree with the right reverend Prelate that there is a variety of family styles. He believed, I think, that the Judaeo-Christian concept of the family was in retreat. I do not know whether he thought it was in permanent retreat. I wonder whether he took sufficient account of the possibility that policy legislation, including the tax/benefit system and the way we work it, might alter the balance as it now exists and reverse the trend.
I wish to thank the Minister in particular for his participation. He was generous enough to say that he enjoys these debates. He has been doubly worked today. I wonder how he was able to disentangle himself so successfully from one tax debate and make a completely different speech on the second tax debate. I beg leave to withdraw the Motion.
Motion for Papers, by leave, withdrawn.