How married couples have been hardest-hit by Labour's tax hikes

13 April 2012

Alistair Darling: The OECD concludes that Labour's tax and benefit policies are helping to fuel social breakdown

Married couples in Britain are being hammered by some of the biggest tax rises in the developed world, a report will say today.

A husband and wife with two children who both work are typically handing over £1,777 more than five years ago.

A similar couple with just one wage earner has seen a £919 increase.

The findings will pile pressure on Alistair Darling ahead of what is already being labelled the "Bad News Budget" today.

The Chancellor is expected to raise taxes, downgrade his growth forecasts and increase borrowing to fill a black hole in the public finances.

The package is also being seen as a raid on the middle classes with tax rises expected on alcohol, tobacco and "gas-guzzling" cars.

The latest figures on the increasing burden faced by married couples come from the Organisation for Economic Cooperation and Development, a respected body which compares life in 30 Western countries.

Its report today suggests that middle-class couples are being squeezed the hardest.

The OECD looked at a married couple with two children on typical family earnings of £55,275 a year.

Its experts worked out how much the Government takes in income tax and social security contributions, minus any benefits on offer.

It found there was an effective £1,777 increase over the five-year period, taking into account the cost of living and wage inflation.

Chris Grayling: 'It's time to recognise marriage in the tax system'

Single people on the average earnings of £33,165 have seen a 1.8 per cent increase in their tax burden over the last five years.

This equates to a £661 increase.

The rise has been fuelled by the Treasury's insistence on keeping the threshold at which workers pay the top rate of income tax in line with prices rather than salaries.

Although headline tax rates have remained the same, millions of teachers, police officers and senior nurses have found that pay rises have dragged them into the top tax bracket.

The OECD's conclusion that married couples with children have been worst-hit will increase concerns that Labour's tax and benefit policies are helping to fuel social breakdown.

Britain is now almost alone in failing to reward couples with children who stay together, according to international studies.

David Cameron has promised that a Tory government would change the tax and benefit system to counteract this.

The Conservatives also say they would end the "couple penalty" in the benefit system, which gives single parents the same amount as is offered to couples.

Tory work and pensions spokesman Chris Grayling said: "It just makes no sense at all, when Britain is increasingly blighted by family breakdown, to have a tax and benefits system that is biased against couples living together and bringing up their children.

Trouble and strife: By not recognising that couples can be dependent on each other, Labour is adding to 'the dissolution oof society'

"We desperately need to do more to help keep families together but the current Government seems determined to press ahead with policies that have exactly the opposite effect.

"Conservatives think the kind of step that's urgently needed is to eliminate the couple penalty in the tax credit system that actually encourages people to split up for financial reasons.

"We also say it's time to recognise marriage in the tax system."

Professor Robert Rowthorn, an economist and expert on family finances at Cambridge University, said: "Britain is increasingly out of step.

"At one time, marriage and family obligations were extensively acknowledged in the British tax system through special arrangements for married couples and tax allowances for dependent children.

"These have been almost entirely abolished.

"Most countries allow couples to share their allowance if one person works. If you earn £50,000 and your wife is at home earning nothing, you are taxed as if you earn £25,000 each and pay a lot less.

"But Labour just doesn't recognise that a man and a woman can be dependent on one another.

"The social impact of all this is to undermine any notion that couples should support each other.

"It is really an extraordinary situation. It's the dissolution of society."

A Treasury spokesman said: "Our total tax burden continues to be well below both the OECD and G7 averages, with tax burdens for low income families falling significantly in recent years.

"As a result of tax and benefit measures introduced by the Government, this year all households will be on average £1,500 a year better off in real terms, and families with children will be on average £1,800 a year better off in real terms compared to 1997."

• Nearly half a million more families are living in extreme poverty than when Labour came to power, the Conservatives claimed yesterday.

Some 1.8million households were living on less than 40 per cent of the average national income in 2005 - 400,000 more than in 1998, according to the Department for Work and Pensions.

The findings are a blow for the Government, which pledged to halve child poverty this decade.

Labour uses a different measure to record poverty, monitoring how many households live on less than 60 per cent of the national average income.

By this reckoning, the figures have fallen from 3.4million in 1998 to 2.8million in 2005.

Alistair Darling is today expected to announce rises in tax credits intended to help poor families.

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