Having a parent at home to take care of the family is a choice most families feel they can’t make.
The purpose of this booklet is to shed light on the economic conditions bearing down on families to better understand the pressures they are under and the choices available to them.
We have seen an increasing rise in the numbers of mothers returning to the workplace when their children are very young. Not such a long time ago 70% families had a mother at home, now only 28% do and that figure is falling fast. Crucially more stay at home mothers have gone back to employment in the past two years than in the previous 15 years combined.
I am not saying that mothers should not go out to work or that mothers at home should be regarded as better but I am questioning whether this is really what all these mothers want and whether they have a choice in the matter.
It would appear from a number of surveys that mothers do not have a choice.
By the government’s own statistics released last January 2014, 37% of working mothers said they would prefer to stay at home and look after their children if they could afford it, while 57% said they would like to work fewer hours and spend more time looking after the children if they could afford it.
- A similar survey by the Centre for Social Justice 2011 showed that 88% mothers with very young children said that the main reason for them returning to work was financial pressure.
- Only 7% of those at home cited unaffordable childcare as the reason.
A survey by Britain Thinks also reported:
“Families today are tired, stressed and under pressure. 80% believe in an ideal world one parent would be able to stay at home.” Britain Thinks 2011
We put the statistics from Netmums ‘Great Work Debate’ survey (2006) into a pie chart to give an image of what mothers wanted. The debate interviewed 4000 mothers of young children (72% children under 3). These were the findings.
There are 8 million mothers
25% are at home
25% are at work full time
almost half 48% work part time
2% maternity leave
Of those working full time 19% would like to be at home
68% would prefer part time work
Only 12% were happy with full time work
Of those working part time 33% wanted to be at home full time
Of those at home only 7% were there because they couldn’t afford childcare.
So nearly half of mothers with young children would like to be at home raising their children
Nearly a half would like part time work
Only a small percentage want to be working full time
“The holy grail of choice remains far beyond the reach of most mums in this country,”
Mothers believe “choice has been virtually eradicated” when it comes to deciding whether to return to work or stay home.
So what has changed to make it so difficult today for a parent to be at home, particularly over the last few years.
The way families are taxed is one of the most important causes of this change. One of the most significant shifts in tax policy over 50 years has been from treating the family as a household unit with allowances for a dependent spouse and children, to taxing it as individuals disregarding whether they have family responsibilities or not. “For many single- income couples, (where one parent is the sole income provider) and the other the has the primary caring role, the tax burden has more than doubled.
Our current taxation system favours the double income family (where both parents work) over the ‘single income model’. The Double income family benefits from 2 personal allowances, they can earn double the amount tax free and also can earn twice as much as a household before becoming liable for the higher 40% tax rate.
The Coalition government’s policies have further disadvantaged the single income family (SIF). Increasing the Personal Tax Allowance lifts the poorest out of the tax net and encourages employment but without Transferable Allowances or Income Splitting, the SIF is further disadvantaged. Removing child benefit from some families will hit single income families the hardest while this Autumn a new TAX Free Childcare Allowance will be made available to families where both parents work and working lone parents. Parents with an income up to £150k each will be entitled to a tax free sum of up to £2k per year, per child, towards childcare by registered providers. In short everyone apart from parents at home are being helped.
This slide shows the extra tax paid yearly by the SIF compared with the DIF on the same household income, split equally between partners. So for example the DIF both partners may be on £10k each. These figures pre-date the new Tax Free Childcare Allowance coming in Autumn 2015, These figures take account of Income tax and National Insurance but not Tax credits or the new Childcare Tax Allowance.
Single income families are getting poorer. A JRF report published last week states:
“Single breadwinner families have seen a large increase in the risk of inadequate income. In 2008, 38% of families with children where someone works full time and their partner does not work were struggling to get by; this figure has risen to 51%.”
Another recent report notes: The number of children in relative poverty1 where one parent is working has grown fast since 2002.“Sole-earner families account for nearly a third (30%) of all poor families with children.”
The cause they report is because “male employment has fallen and earnings among low- to mid-skilled men have grown relatively weakly.” The solution given for the family to avoid poverty is for the mother to work as well. “Given the uncertain prospects for future wage growth, women’s employment will continue to be vital for lifting families out of poverty.”3
What the report does not do is to enquire into the causes that stop men’s earnings grow. I would like to give you an illustration which may explain why.
Take a family with two children on the median wage, about £26k. The father is an electrician and the mother is at home looking after their two young children. The family need a car and they work out that he needs to bring in an extra £3k a year (£58 week) to meet the purchase, running and maintenance costs.
The father is able to do this by taking on extra hours. However they will discover that to earn £3k more ‘gross’ will make very little improvement to the family’s disposable income. He would have to earn an extra £12,500 a year more to make £3k net!
This is because for every extra pound he earns the Treasury takes back 76p – income tax accounts for 20p, national insurance 12p and reduction in Universal Credit 44p. This in economic terms is referred to as the Marginal Effective Tax Rate, and it is 76%.
This graph is another way of showing this tax trap.
The graph shows what happens to a single income family with 3 children as gross income increases. The family rent a 2 bed place in Greater London.
The red line is earned gross income, the blue block is earned income after tax. The black line is disposable income after universal credit has been added.
As the primary gross income increases so tax contributions increase and Universal credit tapers off . Earning more gross makes little difference to the money the family can bring home.
If the same family lived in the East Midlands the graph would look the same but start at 19k as the housing allowance is smaller.
Four million families, nearly half of all families are caught in this tax trap. Tax credits subsidise income and although the subsidy may be a generous one its effect is to take away the pressure on employers to pay decent wages (as wages are subsidized by the taxpayer), it undermines the father’s ability to provide for his family and forces the mother (or second earner) into the workplace if the family need to bring home extra income.
This tax trap affects lone parents in the same way: working harder does not result in an increase of income.
No other country in the world has so high a tax rate. 25yrs ago before independent taxation was introduced the tax rate was 34%.
This graph shows the METR for single income families at 75% of average wages for OECD countries 2011, at about £26k gross wage in the UK. The UK has by far the highest tax rate.
The EU and OECD tax rate are about 35%.
Raising the minimum wage, new starting tax rates, or increasing tax free thresholds fail to tackle the real problem. As income increases with these measures so Universal credit will decrease. Families will hardly be better off by any of these measures until we tackle these high rates. We need to look at the family as a whole in our taxation system.
Treating the family as a unit should be the first principle of taxation. Not doing so causes unfairness and anomalies. And the latest most significant example of this is the removal of child benefit for higher earners.
I quote from the Conservative Party Press Release in 2012
“We have always been clear that those with the broadest shoulders should carry the greatest burden. …Some people – the richest 15 per cent of households with children – will lose out from January next year but … it is very difficult to justify continuing to pay for the Child Benefit of the wealthiest 15 per cent of families in society.”1
This claim has been repeated by the Prime Minister, the Chancellor George Osborne and by various MPs. Removing child benefit in this way would be fair if these statements were true, but they are not. They are misleading and divisive. Removal of Child Benefit will hit some families in the lower half of the income distribution while some families who are in the wealthiest 15% will be able to keep their child benefit.
How well off a family is can not be calculated by the gross income of an individual. It is the family income that matters. To work out where a family falls in the income distribution the government adjusts net household income for the number of people in the house and the ages of any children. In economic terms this process is called ‘equivalisation’.
Equivalisation calculates ‘household’, not individual income. It calculates income after tax (net), not gross income. And it allows for the number of dependents.
This graph shows where households fall at various points of the income distribution after tax, tax credits and benefits and dependents are taken into account. The red triangle is the single income family with 2 children.
At 50k a single earner family with 2 children fall just above the middle of the income distribution. If a single income family had 4 children it would fall in the lower half of the income distribution.
The other point which is worth bringing out is that at almost every point on the income scale the single income family is worst off of the different forms of family.
The effect of removing Child Benefit from these families will be to make them poorer than many other families who earn less than them.
Let me illustrate.
This graph shows 3 families on different incomes living in London. All families have 3 children. The first family is a single income family on the minimum wage, the second family is a double income family on £45k (husband earns 25k, wife 20k). The yellow block shows tax paid by each family, the next row shows monthly income after tax. This row shows entitlement under Universal credit. Child benefit allowance and finally monthly disposable income after all these factors have been accounted for.
The single earner family on 60k is scarcely better off than the family on the minimum wage and worse off than the family on £45k.
Location plays a major factor. Rent is £1k more expensive per month in London than in the East Midlands, so that a family on 60k will be significantly better off in EM compared to London.
However the graph illustrates that the single income family on £60k is not in the richest 15% families. Is it fair that families which are able to command the top 15% incomes are being brought into the poorer half of the income distribution because of government policies?
The removal of child benefit has one other major effect for single income families which is to bring them into a new tax trap forcing mothers out to work.
Take a family with three children, living in London. The father is a Head of Department at a secondary school earning £50k salary. The mother cares for their children at home.
He has been offered promotion as Deputy Head at another school a bit further away. He will have extra responsibility, his will hours be longer, and he will have to travel further but he will be rewarded with an increase to his wage of an extra £10k. In practice however he will find that he brings home only £3,300 of that increase.
For every extra £1earned he loses 65p in tax, NI and loss of child benefit. He keeps only a third of the extra value he is adding for the school.
Should his wife return to work instead she can earn the full £10k without paying tax, and they keep their child benefit. They will be significantly better off.
So this is what is happening. The taxation system is making it difficult for the main provider to earn more. What options do these families have but for the mother to return to the workplace to fill the income gap.
All political parties are clamouring for ‘affordable childcare’ to help mothers back to work to plug this income gap, also citing the emancipation of women from the home and their fulfilment in the workplace.Indeed Lucy Powell at the Labour party conference in Sep said “We are almost seeing a bit of an arms race going on between the three main parties coming forward with policies on childcare.”
But no political party is talking about the injustices that force the mother away from the family in the first place. Or the enslavement to a wage and timetables set by work. Or whether it meets the needs of very young children. This factor is almost entirely absent from debate.
Nor is any party highlighting the fact that mothers will be working very hard to bring home very little income because she too will be caught in the same tax trap. It will not be sufficient for her to earn only £3k gross to bring home the money needed to purchase the car (in the example given earlier). Her METR will be 65%. Even if childcare was fully subsidised she will have to earn at least £8.5k to bring home the £3k net. This is before travel costs.
In an IFS briefing on the budget 2014 it said:
“We still lack a proper rationale and evidence base for the more than £7 billion a year public money that is now spent on childcare. Beware areas of spending with quite such unanimous cross-party support. It does not always lead to the best policy.”
The mother gains little financial benefit from working long hours. What she loses is the ability to care for her own children. What the children lose is their mother. Affordable childcare is not the answer all families are looking for. They already have ‘good quality childcare’ in the form of a parent that could be affordable if families were supported in the tax system.
But the Treasury do not see this as a loss. They celebrate the fact that more mothers than ever before are in the workplace. They have even set a target for half a million more mothers to be in employment by 2016. This would “would allow the UK to match the female employment rate in Germany and the second-highest overall employment rate in the G7 grouping of major economic powers.” It would help the Treasury meet the European target employment rate of 75% overall for women and men by 2020. 3
The 2nd reason is that working mothers look good on Treasury books. Working mothers, along with paid nursery workers, and additional commuting expenses, can be shown as an increase GDP. This is not a measurement of ‘real growth’. GDP registers an increase where something that was previously not bought and sold (such as care in the family for love) becomes a traded commodity (cared by agencies for money), and is measured as growth. Transfering care from the unpaid to paid is not an increase in output. And What GDP also can not count is the quality and continuity of care and the emotional well-being and the strength of the family unit.
Thirdly the Treasury can collect the tax contributions, employers contributions from this new workforce. But given that the cost of supporting working mothers through subsidised childcare is estimated at £7billion we challenge the Treasury to show the evidence it is better off by the contribution made by those juggling work and care responsibilities as a result of receiving childcare support and tax credits.
It is credible that the Government would save by making it possible for parents to choose to care for their children themselves. Can we not offer parents the choice to use an allowance to either care themselves or spend it on third party childcare?
Instead the Treasury promises more help with childcare: a new Tax Free childcare allowance for all working families with an income up to £150,000 per parent. And they have promised to spend an extra £2million on creating 50,000 new childcare places. The stay at home parent is not regarded as deserving enough for an allowance.
Nicky Morgan, the Minister for Women says: “No woman should have to choose between their career and their family.” The irony is that the government, in supporting double earning families with tax allowances and subsidised childcare while at the same time disadavantaging single earner families is urging women to choose their career above their family.
So this is what is happening. The State is effectively telling families how they should live their lives, and in the process they have demeaned the role of mother at home.
Various Labour figureheads from Cherie Blair to Patricia Hewitt have referred to mothers at home as ‘wasting their education’ and not contributing to the economy. The Deputy Prime Minister has often referred to the ideal of the mother at home as Edwardian or sepia tinted while the Prime Minister and Chancellor have implied that parents who stay at home are not hard working and lack aspiration.
The Conservatives, in David Cameron’s speech at the Autumn conference have openly stated that they prefer and represent only families where the mother is working.
“If you work hard and do the right thing we say you should keep more of your own money to spend as you choose.
The Conservative party is the union for the mother who works all the hours God sends to give her children the best start. …These are the people we represent…the people who want to make something of their lives. These are the people we are fighting for.”
But this is obviously an unjust situation where the main breadwinner is unable to bring home extra income by working harder. It is not a virtue in these cases that the mother is driven out to work when for some children the best start is a mother at home. Many mothers do want to be at home. And children want their mothers to be around more. And the community, elderly neighbours and relatives, schools, churches all benefit from the input given by mothers who stay at home.
It is not right for the State to interfere in this way and discriminate against certain types of families. It denies aspiration. It denies some mothers the chance of fulfillment and the simple enjoyment of being with their children and nurturing them. It denies children their mothers. It denies families the right of following their own conscience to live their lives according to what they believe is ‘the right thing to do’, not what the State dictates is the ‘right thing’.
Moreover to imply that those parents who stay at home to raise their children are not aspirational or hard working undermines the very real sacrifice that mothers or fathers make when they decide to give up a career, and make the economic sacrifice of living on one income. Families are making huge financial sacrifices to stay at home.
All political parties know that women are the most disenchanted group. I have given you a few reasons why.
Political parties would make a mistake to think that stay at home mothers are just a small band of a few middle class women.
This is a much bigger issue affecting many more mothers. What we represent is the desire to be able to care for our own family members within the family set up, and this includes the old as well as the young. We want real ‘family friendly’ policies that value the role of care.
We can only begin to do this if we recognize the family as the fundamental unit for economic consideration.
Individual earnings are not a good indicator of the prosperity of families.
Families need to be given the option of being taxed jointly.
Taxation and benefits should not be the cause that separates a mother from her children, or a husband from his wife. If a family would have been viable before tax on a single income, tax should not render it unviable.
Mothers at Home Matter call on all parties to:
- end the discrimination against parents who stay at home • recognise family responsibilities within the taxation and benefit system • treat child benefit in a way which is fair for all families • include the desire of parents to care for their own children in the debates on ‘affordable childcare’ • change the divisive language used which disregards stay at home parents as ‘lazy’ and ‘unaspirational’
The aspiration we represent is the aspiration of care. Mothers at Home Matter campaign against the odds because we do not wish the ability to care for our own family members to be denied either to this or to the next generation.