Transferable marriage allowance ‘a good tax policy’ if delivered fiscally responsibly, IEA Executive Director

Reacting to Reform’s announcement to back a transferable tax allowance for married couples, Tom Clougherty, tax expert and Executive Director of the Institute of Economic Affairs said:

“I wouldn’t necessarily frame this as a way to boost the birth rate (financial incentives only seem to make a difference if they are massive) but I do think it is good tax policy.

“As things stand, two households with the same overall income can pay wildly different amounts of tax based on how that income is distributed between partners. That seems unjust.

“Transferable allowances wouldn’t matter in my ideal tax system – broad base, low, flat rate – but in a very progressive income tax system like ours, they offer a useful corrective.

“Also worth saying that our tax system is not bad internationally if you’re a single average earner. But families with children (especially with an uneven income split) get a raw deal. Under some assumptions, they’d be better off in France, Germany, and the United States vs Britain. As is often the case in tax policy, there’s plenty we can learn from other countries.

“I do worry about low birth rates and their corollary, the ageing population. I don’t think we have yet come to terms with the fiscal, economic, and social impact these things are going to have.

“I don’t think it is the government’s role to tell people how many children to have. But if tax and regulatory reform (to lower the cost of living) can empower people to do things they want to do anyway, I’m all for it.

“Ultimately, I suspect that deregulating housing and childcare would do the most to make more families and larger families viable. Nevertheless, a good policy here from Reform, provided it can be done in a fiscally responsible way – hot on the heels of several announcements I hugely disagree with!”