Family taxation is the big idea on the Right.

Political mystics have all but written off the chances of a famous fifth term for the Conservative Party. One veteran pollster told me recently that it is difficult to overstate the hostility of voters directed towards the party. It is in a moribund state.

Despite the generalised mood of foreboding, a quiet revival is underway. The next election might be lost but some Conservative figures are starting to come forward with big ideas that could provide a radical, and small ‘c’ conservative edge, to a future Conservative Party manifesto. One such figure is Hampshire MP, Ranil Jayawardena. He was briefly in charge of agriculture as environment secretary under Liz Truss before returning to the backbenches when Rishi Sunak entered No.10. A loss to farming might turn out to be the Conservative Party’s gain.

Mr Jayawardena has recently teamed up with the Centre for Policy Studies to propose a new set of tax breaks for families, particularly where one parent wants to spend more time raising children than sitting in an office.

The treatment of families in the British tax and welfare system is as ideological as it is punitive. It judges couples who might want to look after their own children rather than place them in expensive nurseries from a very young age. It impoverishes families who refuse to comply with the two working parents model beloved of HM Treasury.

It’s not what families want. The majority of working mothers say they want to work less and spend more time looking after their children, and for mothers in work with pre-school age children that figure is two thirds. There are few more discriminated against groups in Westminster than stayathome mums.

Stayatwork mums are actively encouraged by the state at huge cost to the taxpayer. Government childcare reforms will help fewer than 60,000 mothers enter the workplace, at a cost of an additional £4 billion put aside for larger childcare subsidies.

As Mr Jayawardena points out, the British tax system treats couples like strangerswhich is unusual among comparable nations. A single earner on roughly twice the average salary will be hit with an £8,000 a year tax penalty compared to a family where both parents bring home the same household income, split evenly between them.

To address these ‘injustices’ the Centre for Policy Studies proposes a raft of measures it describes as not very radical.Others might disagree but observers of modern political history will recognise this impeccably connected think tank has a habit of shaping the direction of the Conservative Party.

Marriage is given a strong plug, with proposals to increase the Marriage Allowance tenfold. It is hard to see the Marriage Allowance lasting very long under a Labour government, but,as it stands, stayathome mums lose more than 90 per cent of the tax-free allowance they would be entitled to if they joined the workforce with a salary in excess of £12,500. Couples can share just 10 per cent of any unused tax-free allowance under existing rules, or a derisory £250 in cash terms. It was set up to fail and has flopped spectacularly. If it isn’t scrapped a bold new plan is needed to prop up marriage and hand back cash to single earner, married households.

One idea gaining ground in right wing circles is giving choice to parents over childcare arrangements. There is a clear and not so subtle message attached to childcare subsidies: anyone can look after you child apart from you. Under plans proposed by Mr. Jayawardena and the Centre for Policy Studies, subsidies for the nurseries would be turned into a refundable tax credit for parents, giving them choice over their childcare arrangements. Child Benefit would be rolled in too. As these plans rest on rolling existing expenditure into a single child tax rebate, it is fiscally neutral. It is increasingly discussed and a similar plan has been mooted by other rightleaning think tanks. We can therefore expect it to appear in a future prospectus.  

The boldest proposals are reserved for a complete upheaval of the tax system through the introduction of income splitting. In simple terms it means families end up paying a lot less tax than the British model of individual taxation. Inevitably, it is the most expensive of all the proposals, largely by inserting a big prejudice towards families into the tax system.

As the report points out, the current tax system is not without considerable injustices in the other direction. The report favours the French model, which factors children into the calculation, but other models are available.

The important point is that the principle of ‘family taxation’ is increasingly debated outside of government. Jeremy Hunt scrapped plans for a review of taxation on families, a decision taken to distance himself from the policies of Liz Truss and Kwasi Kwarteng, but the idea is far from dormant.

The difficulty with many of these plans is they end up it costing a lot of money. There’s no way round it, the Treasury is right, the more people work, the more they pay tax. Everything else is an irrelevance. Just paying down the national debt will become an almost intolerable burden in a few years time. This doesn’t mean we shouldn’t argue for a better system of taxation but it does mean it will likely come from a ‘big bang’ moment. It’s not impossible. It increasingly feels like a financial day of reckoning is fast approaching. When it does, we need to think carefully about the sort of country we wan to be, for some on the right of British politics this will mean supporting the sort of families that tend to deliver the best outcomes for children and, in turn, benefits us all.

Frank Young works for a Westminster think tank and is writing in a personal capacity.

Frank Young

Frank Young works for a leading Westminster think tank and is writing in a personal capacity