Couples lose out as single mums reap benefits rewards

A new report has found that co-habiting couples stand to lose out in the benefits system by up to £200 a week.

Young couple stressed about finances
  1. Benefits
  2. Tax credits
  3. Child tax credits
  4. Single parents
  5. Married Couples Allowance
  6. Tax
  7. Child benefits
  8. Couples
  9. Claiming benefits
  10. Benefits advice

The study by the Institute for Fiscal Studies revealed that single mums are better off staying single if they are to get the most out of the system as 19 out of 20 couples with children would be worse off living together.

And with the general election looming, the IFS warned that Labour and Liberal Democrat policies would widen the gap. The Tories have been banging on about the importance of giving married couples tax breaks but even their proposals would narrow it only slightly.

The report revealed that a couple with one earner on £40,000 a year would receive £10.48 in Child Tax Credits. But if that same couple lived apart, the non-working partner would get £65.45 in Income Support as well as £54.71 in Child Tax Credit.

In the best case scenario, a single mother who decides to move in with their partner would lose £15.89 each week. But half would lose more than £100 and an unlucky 10 per cent stand to lose £214.07 a week.

For the taxpayer, though, the system means paying out and estimated £650 million a year to couples pretending to live apart.

"The current tax and benefit system is inconsistent in its approach, paying out benefits and tax credits according to family circumstances," the report said.

"Couple penalties and premiums are undesirable if they distort behaviour, unless government are deliberately trying to encourage people to live as couples or single adults, or if they are unfair."

Labour abolished the Married Couples Allowance and the report concluded the "couple penalties" had doubled since Labour came to power in 1997.

However, taxpayers will likely have to foot a considerable bill should the penalties be eradicated - somewhere in the region of £24 billion a year.

But is it more important to encourage stable family life by offering incentives for married couples and can we afford to do so?