The Institute of Economic Affairs (IEA) in the United Kingdom has just published an interesting study entitled The War between the State and the Family: How Government Divides and Impoverishes that looks at how 25 years of policy, by both Conservative and Labour governments, has reportedly had a deleterious effect on the family unit in Great Britain.
The findings include:
The study shows how the tax and benefits systems are particularly harsh on single-earner couples who have to earn over £50,000 before there is no loss from declaring their relationship to the authorities. This situation encourages couples not to marry and, if they are living together, to lie to the authorities about their family situation. In 2004/05, the government paid credits and benefits to 200,000 more lone parents than actually live in the UK – fraud is widespread. The tax and benefits system encourages such fraud. In the most extreme case, a couple can gain nearly £10,000 a year by not declaring their relationship.
Family life has been discouraged over 25 years by both Conservative and Labour governments. In the Thatcher years, the Conservative government gave lone parents special financial benefits and priority entitlement to council housing. In the Labour years, the state increasingly became the child-care provider. As Patricia Morgan comments, “Under Thatcher, the state became the bread-winner for lone parents; under Brown the state became the child carer. The consequences are obvious – couples are strongly encouraged not to commit to each other because, by doing so, they will lose out financially. Both Conservative and Labour governments also removed any offsetting compensation in the tax system that had previously helped two-parent families.”
Government policy penalising two-parent families has had a disastrous economic and social effect. Couples who describe themselves as “closely involved” are twelve times more likely than married couples to split up in the first three years of a child’s life. There are also higher levels of worklessness and benefit dependency – lone parent families receiving an average of 66% of their income in benefits and tax credits.
The complete report can be downloaded from here [pdf].
5 comments ↓
Although it is interesting and incentives do, of course, matter, it is perhaps an over-simplification to assume monetary considerations are the primary motivation here. That is, that a couple would decide not to marry or would separate simply because they have performed a mathematical calculation and come to the conclusion they might net an extra 2,000 or so if they do so. I suspect there are other issues involved, such as social acceptance of single parent families, divorce and dependence on social security, which also play a role.
The same thing is happening in Australia. If you get married you are much better off not declaring it (registering it) and sending your wife to Centrelink to claim a single parent’s pension and housing commission apartment when she has the first kid.
Yes and that is exactly what one would expect a rational person to do; to operate in their own self-interests. If a person can earn more from benefits than they have the capability of earning in the workforce, then it’s not surprising many will do it. It’s really not the fault of the people who take advantage of these schemes, it’s ultimately the fault of the schemes themselves.
Amir -
Saying that its not the fault of people who take advantage of these schemes but the fault of the schemes themselves; is like saying that its not the fault of someone who took money that’s just sitting on a table, its the fault of the person who left it there so carelessly.
Bottomline is, the responsibility is shared.
The distinction is that stealing is illegal, but receiving the dole and other benefits is legal. The people who make decisions to maximise their financial reward (within the parameters that are themselves set by the welfare authorities) are only acting in their rational self-interest. What do you tell a man with no skills who can earn, for the sake of argument, $20k working in some menial job or, also for the sake of argument, $80k by simply producing kids and ‘working the system’ to do? There is a very strong incentive for people to take the easier and more lucrative option, and that is what I meant when I said that if this is a problem, it is only because the system allows it.
Leave a Comment