Report challenges working couple penalty

Pound coinsNew research challenges the assertion that couples who have children and are on benefits are economically better off if they split up.

The report, Does the Tax and Benefit System Create a Couple Penalty? by the Joseph Rowntree Foundation finds that families on benefits are neither better nor worse off if they separate, while working families on low incomes are as likely to lose as to gain from living apart.
Politicians from across the political divide have declared they would reform a benefits system that, in their view, rewards and encourages couples who live apart.

The report claims that even though the total benefit income of a family rises if parents split up, so do their total costs - as they have to run two households.

Unlike previous assessments, this analysis uses detailed research on household needs to look carefully at how the extra income compares to the extra costs, the foundation said. The findings show that out-of-work benefits paid to a family with children whose parents live apart cover a similar proportion of family needs to the same family living together.

Using the official government basis for comparing the needs of a single person with those of a couple, the economic effect of splitting up is negligible.

Chris Goulden, the foundation's policy and research manager, said: "Our report shows it would be misguided to base benefit reform on the idea that couples with children are being incentivised to split up. This is not borne out by careful analysis of the evidence."

Report author Donald Hirsch and director of the Centre for Research in Social Policy at the University of Loughborough, said: "These calculations show that there is at least as likely to be an economic penalty for separating as for remaining as a couple.

"The exact comparisons depend on assumptions about how much cheaper it is for two adults to live together. The official figures, which say that a couple's day to day costs are 16% lower living in one household rather than in two, were set arbitrarily in order to monitor poverty trends. It is highly risky to plan benefit reforms as if they accurately measured relative needs.

"In fact, our research estimates that the saving from living in a couple is much higher, about 26%. Even on the official figures, there is no couple penalty for out-of-work families. There are more cases where there is a separation penalty than a couple penalty."
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