Social Justice: Transforming Lives

Is the title of the new magnum opus from the DWP:
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53. But we also know that past government policy across a range of areas, from welfare to the legal system, has exacerbated the rising trend in family breakdown:
• The couple penalty in the welfare system: The way that benefits and tax credits are paid in the current welfare system means that many couples are better off living apart than if they choose to live together.
• Treating symptoms not causes...
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We can ignore that second bit, the underlying cause is taxing earned income not the rental value of land or other government monopolies, and focus on the couple penalty, which is a maths thing. What does the DWP suggest..?
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Supporting family formation: the couple penalty

57. Currently, there are different benefit payment rates for couples and single people because the rate set for couples assumes that they will have reduced outgoings because they can share the expense of some living costs.

58. The couple penalty exists in the current welfare system because the way that benefits and tax credits are calculated means that many couples are better off living apart than if they choose to live together.

59. The introduction of Universal Credit will reduce the couple penalty where it is likely to have the greatest impact – among low earning couples. It will do this by providing an enhanced earnings disregard which will, along with the reduced taper, allow couples to keep more of their income in work. Couples will also receive the higher personal allowance available in the current out-of-work benefits within their Universal Credit, to ensure they are not disadvantaged relative to working singles.
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57. Is true, but that is not what makes the big difference. Income Support is £67.50 per week for a single adult over 25 and £105.95 for a couple. So a couple can make themselves £29 better off by splitting up. That'd be easily fixed by making it a flat £60 per adult, in which case a single person is £7.50 per week worse off and a couple is £15 a week better off.

58. Is the big one. What makes the really big difference, and why couples can make themselves significantly better off by splitting up (or by not getting together in the first place), is when one parent is working and the other isn't. If both are working or neither are working, yes, there is an inherent bias against couples, but it is not enormous.

The calculations might be slightly different if and when the Universal Credit comes in (i.e. as soon as the DWP bureaucrats have worked out how to make it as complicated and ineffective as possible, it's their jobs on the line if it were actually simple and worked), but based on the current tax/Tax Credit system (using the TBMT for 2011-12, the last ones available, rather sadly), the maximum which a couple can gain by splitting up is about £200 per week, and that maximum is reached at wages of about £400 (which is below average wage but still equates to a full time job on nearly twice the National Minimum Wage).

Broadly speaking, a single mum, two kids gets her rent paid and £200 cash in hand benefits and about 65p of those benefits are taken away for every £1 net income her partner earns (if she officially has one).

If her partner earns £400 and they keep quiet, they bank £200 extra a week; if they are foolish enough to tell the DWP, or if the DWP find out they are £200 a week worse off. The level of means testing is so savage, that by that stage it hardly makes a difference whether the partner packs in his job, that only loses them £80 a week, and probably enables them to wangle their way out of repaying all the over claimed benefits which tips the balance in favour of not working at all.

59. Nope. The couple penalty arises largely because of the means testing - it is embedded in the whole system and the Universal Credit will do absolutely nothing to fix it. Of course, the same applies to a couple where both are out of work; if one of them finds a job, they lose nearly all their benefits so it's hardly worth bothering - unless the couple officially split up, of course - the only way to escape the poverty trap legally is if both can find a job at the same time. Only with such couples, the effect of the means testing is referred to as the "poverty trap" and not the "couple penalty".