More Couples Impacted by Couple Penalty says new report – posted by the editor

Cornerstone editorLast week, social policy charity CARE releases the Third Annual Review of the Couple Penalty for the fiscal year 2008/9, demonstrating an increase in the numbers negatively affected for the third year in a row and the growing cost to the Treasury.

The couple penalty is the term given to the unwelcome fiscal incentive, resulting from the tax credit and wider benefits system, for couples with children on low to modest incomes to live apart, even after account is taken of the extra housing costs.

Today’s report – by Fiscal Policy Consultant, Don Draper – shows that there has been a small increase in the numbers affected by the couple penalty since 2007/8, where maintenance payments are not paid, and quite a considerable increase, where maintenance payments are paid.

Where maintenance is not paid, 76 out of the 98 families considered would benefit financially if the parents lived apart. This represents a small increase from 75 families in 2007/8. At £68 per week, the penalty remains the same as in 2007/8.

Where maintenance is paid, 74 out of the 98 families considered would benefit financially if the parents lived apart. This represents a significant increase from 65 families in 2007/8. Moreover, the cost of the penalty is £58, up from £48 for 2007/8.

The cost to the Treasury – where maintenance is not paid – of couples living apart is on average £8,007, compared with £7668 in 2007/8, an increase of 4%.

The cost to the Treasury – where maintenance is paid – of couples living apart is on average £7,411, compared with £6854 in 2007/8, an increase of 12%.

In a written endorsement of today’s report, former Labour social security minister Frank Field said:

“It is vital that we find a way of addressing welfare need without creating perverse incentives for the parents of children on low to modest incomes to live apart.”

Meanwhile, former Conservative leader, and chairman of the Centre for Social Justice, Iain Duncan Smith stated:

“I am pleased that CARE has produced this important research. The need to tackle the couple penalty clearly remains an important priority.”

Nola Leach, CARE’s chief executive concluded. “It is very disappointing to see that, far from being eroded, the number of families negatively impacted by the couple penalty has actually increased for the third year in a row. Rather than using tax payers’ money to create fiscal incentives that make it more likely that children will grow up in a home with only one resident parent, we should at the very least ensure that parents are not disadvantaged by living together under the same roof with their children.”

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