In David Willetts’s The Pinch, there is a lucid description of how families have changed in Britain, and what has followed. The author begins by describing what they looked like post-war – more often than now, at any rate. A male breadwinner is married to a non-working wife, and they have two young children who live with them. The wife’s elderly widowed mother is thrown in for good measure. Since the father distributes his income to these other four people, Willetts describes this family as “a kind of mini-welfare state”. (Talking of welfare, the main purpose of the benefit system is to compensate men for loss of earnings through unemployment, disability or retirement.) Government recognises that because of his family commitments the man has less taxable capacity than a single person with the same earnings, and has allowances to reduce his income tax.
Willetts then rolls this imaginary family forward in time to the 1970s or 1980s, when the divorce rate surged. The marriage breaks up. The wife becomes a lone parent. The man moves out and the elderly mother moves into care. There are now three households instead of one, two of which are new workless households. “Since it is more expensive to run three households than one, people will feel poorer even if there is the same amount of money to go around as before.” As the pattern is repeated elsewhere, the demand for more housing and new benefits rises ( since the lone mother starts to claim benefits, the elderly widow needs a top-up means-tested benefit on top of her pension). To pay for all these benefits, the man’s income tax bill goes up. The allowances for marriage begin to feel out of date, so they are taken away – and the bill rises even for couples who stick together.
Willetts suggests that the post-war model made for more contentment (“the research comes in showing that the very arrangements from which we are fleeing seem to offer more happiness for most people”) but was less just (“before we get too misty-eyed…we should recognise that it was women who did most of the work whilst men earned most of the money”). But, either way, we cannot wrestle the hands of the clock back 50 years, and re-create the Britain of the past with its working pattern of male breadwinners and shared assumptions about traditional morality – any more than we can send Petula Clark to the top of the charts or conjure Stanley Matthews back into the England squad. However, what we can do is focus, as Willetts does, on the most direct means by which government can help or harm families: money – in other words, what it does with tax and benefits.
David Cameron’s speech today on families covers troubled families, adoption and relationship counselling – at least according to the advance briefing. This is doubtless because he has some successes to broadcast. The troubled families scheme is turning some families round, as Eric Pickles reported on this site last September. The number of adoptions is up by a quarter over the last year. But the Prime Minister seems to be saying nothing very much about the Government’s approach to families and tax. Perhaps this is because he has no plan to unpick the tangles which it has thrown up. On the one hand, George Osborne has thrown a bone to the right by bringing in a small transferable tax allowance. On the other, he has restricted child benefit for higher rate taxpayers. Interestingly, nothing on childcare appears to have been briefed out at all.
In so far as there is one, the Government’s families policy seems to be create a system whereby families will only get tax help if they are small – and if both parents work in the labour market. I would add that they will need to be poorer, too, but the childcare allowance policy is apparently trying to speed what the child benefit policy is trying to stop, since the break extends to working people earning up to £150,000. The Treasury has never liked family allowances, and austerity gave it a reason to scale back the one that child benefit really is. The Department for Work and Pensions now favours restricting it to the first two children only. The transferable allowance is an exception to this trend – in existence because of pressure from Conservative backbenchers and Cameron’s own pro-marriage instincts. It is unlikely to match childcare support for working parents over the medium term.
Reducing the deficit must remain the Government’s priority – which is why, reluctantly, we supported the child benefit changes. But, in the longer term, there must be some serious thinking about family policy – which has been largely absent to date. Do we want a continental-style tax system that supports families, whether they work in the labour market or not – together with their higher rates of fulfilment for children? Or do we want a means-tested system geared simply at supporting poorer parents who work outside home, the rise of which has been paralleled by British children being labelled “the unhappiest in the world”? We must decide. But in the very short-term, there is action that Number 10 could decide to take.
First, since means-testing is the fashion, it should cap childcare allowances as it does child benefit, to ensure neutrality between different kinds of families. Second, it should ensure that, going forward, the transferable allowance keeps up with the childcare allowances as far as possible. And third, it should – revolutionary though the suggestion may be – actually have a family policy in the first place, which having means putting a department in charge of it. The least unsuitable candidate is Work and Pensions.