3 days ago
Why punish mothers for staying with children?
Everyone loves babies, don't they? Not enough, it seems. Or at least not across the developed world, where reproduction is well below the so-called replacement rate of 2.1. In the UK the rate is 1.4 children per woman (sorry to be basic). That is about the European average. In South Korea and Taiwan it has fallen well below 1, a population implosion driven by individual choice rather than the historic causes of famine or war.
For coves like Sir David Attenborough, who see human population growth as a planetary catastrophe, this is wonderful; for governments facing the consequences of an ever smaller proportion of people of working age, it is terrifying.
Enter, stage right, Nigel Farage. Last week the Reform UK leader said he wanted to encourage 'young, working British people … to have more children'. To that end he proposed an end to the cap that limits universal credit to covering two children per household. And he promised (if he became PM) to allow married couples to transfer between each other up to £5,000 of their annual tax-free personal allowance. Farage was not clear about how a Reform administration would fund these latest proposals, on top of his earlier commitments, which The Economist worked out would add £200 billion a year to the public sector borrowing requirement, but, as I wrote last month, his approach makes Liz Truss seem a fiscal puritan.
So-called natalist policies have already been tried across the world, as governments have confronted the 'baby bust'. They have been almost entirely ineffectual. The Japanese quadrupled state expenditure on encouraging family formation through childcare provisions and tax credits; the fertility rate fell further. Similarly in South Korea, which spent more than $200 billion on its own version. Even in Hungary, whose government has, in its own boast, 'structured its entire state and economy around family', the birth rate has fallen since 2019, from 1.55 to 1.38.
The forces driving down fertility — above all, individual choice by women, who understandably want to defer motherhood while their work career is being established — are greater than any government can counter. And in the UK the cost, including that of the additional housing space required, of bringing up a child to the age of 18 has been estimated at almost a quarter of a million pounds. Even Farage is not promising that as a handout.
However, the British system is actually antinatalist. That is, we have had a tax system which, in contrast to those of other European countries, actively penalises families in which one of the parents wants to stay at home and look after the children. This was something my father, Nigel Lawson, tried to deal with as chancellor, but he was thwarted by Margaret Thatcher (as she had every right to do, being, she would remind him, 'first lord of the Treasury').
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A bit of history. In 1986 my father published a green paper, 'The Reform of Personal Taxation'. Until then, married women were essentially treated as chattels in fiscal terms — all allowances were in law given against the husband's income, which in tax returns included any income contributed by his wife. My father set up a new system of independent taxation, which he saw as providing a better deal for families. This was because he also proposed that a spouse who did not have sufficient income to use up his or her own tax allowance could transfer the balance to the marital partner.
As the think tank Tax and the Family put it, the idea was that 'the tax system should not discriminate against families where one spouse wished to remain at home to care for young children'. But Mrs T consistently blocked this element, which led to the situation in which today, when a household's income is £70,000, if it is earned entirely by one of the couple, that family will pay over £10,000 more in income tax than one in which the two partners are earning £35,000 each. This even gives couples an incentive to live apart, which is hardly ideal for children.
As my father remarked many years later: 'I was only able to get half the job done. Margaret jibbed at the transferable allowances … her sympathies were always with women 'who go out to work'. But I never considered married women who stayed at home to look after their children as not working. They were working much harder, very often, than their husbands who went out to work.'
In fact he succeeded in setting up a married couples allowance, but it was gradually whittled down under the coalition government, to his great disappointment, not least because David Cameron had promised a 'family test' under which 'every single domestic policy that the government comes up with will be examined for its impact on the family … Nothing matters more than family.' But then, on calculations by Tax and the Family, it would cost the exchequer about £6 billion a year to have fully transferable tax allowances between couples; the Cameron government had taken over when, in the words of the note to his successor from the outgoing Labour chief secretary to the Treasury, Liam Byrne, 'There is no money.'
The true extent of — and reason for — Margaret Thatcher's opposition to transferable tax allowances within marriage came out most clearly in the wonderfully written memoir, Cold Cream, by her former head of the No 10 policy unit, Ferdinand Mount.
At that time Geoffrey Howe was chancellor. He too had tried to persuade the PM of the merits of making the tax allowance fully transferable, as it is in most other countries. Mount recalled the extraordinary exchange between his boss and Howe, which he personally witnessed.
'It's much too expensive, Geoffrey. I simply can't let the mill girls of Bolton down.'
'I don't quite follow you, Margaret.'
'Well, there are these girls getting up at dawn and working all the hours God gives, and then they see these women in the home counties playing bridge and getting the same tax allowance. I can't have it.'
Mount then records, as Mrs T became 'unrelentingly rude' to the dolefully persistent Howe: 'It was too late to point out that there weren't any mill girls in Bolton because there weren't any mills. I began to feel the depths not only of Mrs Thatcher's loathing of sloth and privilege but of her indifference to family life.'
Anyway, when my father made a similarly doomed attempt to persuade Thatcher, it was not in the spirit of the modern-day natalists determined to increase the size of families. This was not the state intruding into the bedroom. It was just meant to be fair, rather than discriminate against households in which only one of the couple is working.
Not such a bad idea, really.
