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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 be 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.
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.
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".
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,
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.
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.
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 but 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.,
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.
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:
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
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
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.
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
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
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
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.
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
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.
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.
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
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
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
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.
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.