“To be clear, a ‘couple penalty’ would exist if two people are significantly better off (economically) living apart than living together as a direct result of government tax and benefit policy”

I’m not convinced – the graph you use essentially relies on the idea that it is more expensive to live apart, and under both scenarios the system fails to give you what you need.

If you focus on the actual amount given, then the graph shows that together the couple get just under £150 (although the text states this is £177 – so there is an error there somewhere) but apart they get £201/wk. This alone disproves the central point – the couple gets more money from being apart. So the issue is essentially by how much more do living costs increase by living apart. Your entire premise relies on the increased costs of living from seperation rising more than the benefits rise.

The other main problem with this type of analysis is that the amount under all scenarios varies considerably accross the country with differing rates of housing benefit, council tax benefit etc. Add various individual circumstances to this and it is almost impossble to make generalisations. So we are left with annecdotal examples.

An actual example – if me or mrs planeshift lost our job then both of us would be better off living apart. This is because benefits are hevaily means tested to such an extent that neither of us would qualify for any income based benefits due to the other’s income. Live apart and the full whack applies. If both of us lose our jobs then we get whatever we get as an unemployed couple. (You don’t have to be Worstall to notice what the incentive here is do you?). I’m also talking here from actual experience – if my spell of unemployment had lasted longer than 3 weeks a few years ago then we would have been evicted. Apart and both of us would have had enough….

The main issue for me is that a partner’s income is taken into account – and in many cases this leads to a massive taper rate. And when income varies – whether through self-employment, agency work or whatever, the bureacratic nightmare is immense. Look at the impact means testing also has on people on ESA – Sue Marsh is on record as noting that her husband may as well leave her. I have come accross numerous cases where the couple concerned may as well split up due to this – and it is ruining people’s lives.

To demonstrate how absurd this is consider that parental income is not taken into account. It is possible for a millionnaire’s child to have housing costs plus the dole paid regardless of how much they get from their parents. But if your partner even works min wage, then he/she will be considered as taking care of you and be considered responsible for 90% of housing and council tax costs in vast areas of the UK.

Frankly I’d rather move towards a system where your relationship status does not matter – there is already scope within the system for calculating fair housing costs in HMOs and a similar process should apply. (Childcare responsibilities – fair enough should count)

Whilst the coalition’s cuts are dangerous and should be opposed (though not the principle of universal credit which is an improvement on the current system), we do ourselves no favours by pretending the current system has any redeeming features at all. It’s a complex bureacratic nightmare with little transparency, it frequently produces perverse and unjust results that leave some people destitute whilst others have a good lifestyle, and provides some really bad incentives.

Thanks for the comment.

You are right, the argument does rest on that premise, and the premise is consistent with the evidence! I don’t see how that is a problem.

The basis for the costs is from research with members of the public based on a consensus view of what the minimum cost of living is. So it is not a set of arbitrary figures.

You’re also right the chart has got the bars swapped. Sorry. The correct figure is in the text.

Chris.

” premise is consistent with the evidence!”

Ok, here is an annecdotal example of why this might not be the case;

Couple:

Rent £500/mth
Council Tax £120/month
Electricity/Gas: £90/month
Water: £30/month
Total: £740/month – plus they get to use recipes for ‘serves 2′.

Apart:

Rent in HMO – £340/month including all bills. Combined cost: £680 plus the couple are more likely to live closer to place of work etc.

It really isn’t as simple as assuming costs are lower when they are combined.

“The basis for the costs is from research with members of the public based on a consensus view of what the minimum cost of living is. So it is not a set of arbitrary figures.”

I’m aware of that. The real issue you need to focus on here is how the benefits system fails to meet the min cost of living by a substantial amount in both scenarios. After all the means testing, numerous benefits and bureacracy etc, we still fail to have a system that meets the basic needs of people (which is one reason why some people defend the complexity). We’ve also wasted numeorus resources on process, abandoned any pretence at transparency, and created perverse incentives.

Thanks.

The numbers used from the MIS research are all costed on the same basis unlike your example. That’s the only realistic way to assess if there is a systematic penalty in benefits. We do also look at different scenarios in the report, eg according to number of children and whether people work or not.

And we are of course concerned with the problem of people being a long way below adequacy. The 2012 main report on MIS is out in a few weeks, which will update this.

Chris.

I’m not convinced there is no couple penalty at all. It varies between individual cases somewhat.

I’m glad this 2008 line from Cameron has been raised though – it shows how there is no clear or rational policy intention behind anything.

Just about every welfare reform so far since 2010 has, to the extent there is one, increased the couple penalty: time limited contributory ESA, tax credits hours increase [for couples only], total benefit cap [not unjustifiable but certainly encourages separation], and coming soon: partner conditionality in universal credit so if your partner screws up you BOTH get sanctioned, unless you split up.

Now that disabled people in the ESA WRAG lose their income after 365 days if they live with a partner earning more that £7.5k pa there IS a couples penalty, at least for ill/impaired people.

But this research relates to 2008/09, before Cameron introduced the penalty on disabled people having relationships which came into effect 2 months ago.

Give it another year and this Tory Led Coalition will change the rules yet again. They will not be happy until the unemployed, sick, disabled, vulnerable and poorest in society are all begging on the streets for food.

You can of course make up examples where there is a substantial penalty one way or the other

The point of the research was to test it systematically

But it does only relate to the non disabled parts of the benefit system and MIS is not calculated for disabled people

Chris

What about the benefits cap? Obviously this doesn’t affect most households, but isn’t there an incentive for those large London households it *does* affect to split into two smaller households in order to double their maximum entitlement?

(Or to put it the other way round: surely there’s no way, with the benefits cap in place, that two single parents of three or four (say), living in London, could end up better off if they moved in together?)

“You can of course make up examples where there is a substantial penalty one way or the other”

Frankly I’m dissapointed that you regard the points made by Tom and Lisa as ‘making up examples’ – it’s the politics I expect from the libertarian right. Tom and Lisa have not made up examples, but illustrated how rule changes have meant there is a substantial couple’s penalty – and this has been made worse through the coalition’s policies. To me this would be the obvious starting point for the story, as it goes against everything they are saying in public….

Instead you just dismiss the examples and refer to your test whether there is a ‘systematic penalty’. I’m not entire sure what you mean here anyway – there is such substantial complexity and variation in the system that it’s not really helpful to find a ‘typical’ example. Furthermore, even in the examples you give the couple recieve more money through splitting up than remaining together – which suggests there is indeed a couple penalty. Your argument is that the financial benefits of living together outweigh the couple penalty, not that there isn’t one. And I’ve given you an example why this might not be the case – using actual figures from a real life example – which you simply dismiss by writing that your numbers are ‘costed on the same basis unlike your example’ – something which I’m having difficulty in understanding what that means btw – perhaps the full report will make your methodology clear. Either way it comes accross very much like the argument your research supports should really be “there is a couple penalty in the benefits system, but this penalty is financially smaller than the financial benefits you get from being in a couple, provided you assume living costs are costed on the same basis and test it systematically”

“But it does only relate to the non disabled parts of the benefit system and MIS is not calculated for disabled people”

And to me, this makes the entire article invalid. You know full well that one of the major areas of controversy within the system is over benefits for disabled people, ESA reforms, work capability assesments, abolition of DLA etc. You’ve even been told that the ESA changes to time limited support before means testing constitute a substantial couples penalty. I would have thought if you want to analyse whether there is a couples penalty you should at least be considering scenarios where there is one part (or both) of a couple recieving some form of disability related benefits.

I’m sorry to say but this strikes me as very much the kind of research that starts out with a set conclusion in mind (embaress David Cameron) and works backwards from that.

@ Planeshift

“even in the examples you give the couple recieve more money through splitting up than remaining together – which suggests there is indeed a couple penalty. Your argument is that the financial benefits of living together outweigh the couple penalty, not that there isn’t one.”

But by this logic, there’d be a ‘couple’s penalty’ inherent in the housing benefit system if a couple that was entitled to £600 a month towards rent on a flat would each be entitled to £325 towards rent on a room in a shared house if they split up. But clearly the couple are getting the better deal there; far from penalising people for living together, that system is rewarding them by supporting a better standard of living for couples than for single people. Conclusion: the whole concept of a ‘couple’s penalty’ is useless if you define it in terms of raw figures rather than in terms of living standards/costs.

@11 – that scenario would only occur if both were not working. The main part of the ‘couple’ penalty usually comes from means testing of benefits where partner’s income is taken into account. In the scenario above, rent is £600, but if one person loses their job they will not be entitled to any housing benefit whilst the other remains in work (and the threshold is very low). If the couple split up, then the unemployed person in the relationship immediately sees his/her income rise significantly (even if they lie, and claim to be flatmates…)

You’re right that using raw figures doesn’t tell the whole story – clearly moving from a HMO to a flat in your example also represents a step up in terms of lifestyle. But what I was challenging was the idea that we should assume couples have lower living costs due to being in a couple.

Planeshift: Thanks for your further comments. I wasn’t referring to Tom & Lisa, only you

Issues to do with disability benefits are very important, but we haven’t yet been able to cover them adequately in our MIS research; that is all I was apologetically pointing out.

Reality is complex, yes, which is why you need stylised but systematic analysis to reach a conclusion. The research shows a lot but not all of this variation. You imply you haven’t read the report – perhaps you should before commenting further? Using MIS means that we are talking about what people need as a minimum, not necessarily what their actual expenditure is.

And Lib Con added that title, not me. You’ll see that I quote Cameron and Frank Field in the introduction. We would never set out to reach a conclusion in advance – the research is objectively conducted, based on the MIS data. Anyone else doing the same analysis would produce the same results.

Thanks, Chris.

On the other hand, the cost to the taxpayer is higher. Should people on NMW pay more tax to support this? I don’t think so.

” I wasn’t referring to Tom & Lisa, only you ”

Thanks Chris, I can assure you that the examples I gave were not made up, and having worked in the field for several years I could list many of them. You also have not addressed the points being made specifically on means testing, which is where the couple penalty largely stems from.

“The 2012 main report on MIS is out in a few weeks, which will update this”

I cannot of course read a report which is not out yet!! – but I have read the JRF report on minimum income standards linked to in the OP.

I’ve done an example of the difference in the couple penalty since some of Cameron’s/Duncan-Smith’s reforms.

If you take a couple with one child where one partner works 20 hours and earns £180 a week, and the other is on long term contributory ESA, you get this:-

Together, before 2010: £180 earnings, £18 CB, £90 ESA, £69 tax credits, £85 HB, £6 CTB, rent and council tax £-150. Net income: £298

Separated, before 2010: £180 earnings, £18 CB, £90 ESA, £103 tax credits, £230 HB, £35 CTB, rent and council tax £-265. Net income: £391

(£93 difference, which admittedly will be used up in full or part by other higher costs of living apart)

Together, after 2010: £180 earnings, £20 CB, no ESA after 12 months, £62 tax credits, £115 HB, £20 CTB, £-150 rent and council tax. Net income: £247

Separated, after 2010: £180 earnings, £20 CB, £92 ESA, £116 tax credits, £205 HB, £35 CTB, £-265 rent and council tax. Net income: £383

(£136 difference if they separate)

Again, some of that will be used up by extra costs of two households, but those extra costs will not have increased much since the pre-2010 example.

So the Tories’ reforms have increased the weekly income difference from £93 to £136 if the couple separate. The key reasons are the loss of non-meanstested ESA after one year, and the new requirement that those in couples must work 24 hours to keep working tax credit while single parents nee donly 16 hours. Great job on ‘eliminating’ the couple penalty there.

Sorry, the direct link to the report on the Couple Penalty is:
http://www.jrf.org.uk/publications/tax-and-benefit-couple-penalty

This report uses 2011 figures and the basis (the Minimum Income Standards research) will be updated for 2012 in July.

Chris.

This is all bollocks from the Tories and socially conservative Labour MPs such as the patronising FField.

If people wan to live apart let them, if they want to live together let them.
Keep the moralising Tory state out of peoples’ lives.

Attack the Tories for interfering in the bedroom and in private lives. After all that is what the finger wagging hypocrites di for years under Tory NL.

Good post.

Cameron complains that the benefit system gives couples with children more money if they live apart.

As far as I can see, your analysis shows that this is actually true.

However, you also show why couples *need* more money when they live apart – for the simple reason that it *costs* more.

It might be more accurate to say that the couple penalty as defined by Mr Cameron does exist – but that it’s a good thing. Contrary to what Mr Cameron argues, people living apart should get a bit more, because they need a bit more.

hobson: thanks. yes, that’s all true. I guess we assumed that people would generally understand economies of scale but we should have been more explicit about that.

@JC #14:

On the other hand, the cost to the taxpayer is higher. Should people on NMW pay more tax to support this? I don’t think so.

You’re not entirely speicific on what you mean by “this”; but guessing that you mean benefits, would it suprise you to learn that someone on NMW probably receives them? And that an increase in benefit would probably be a net benefit to them?

There is an elephant in the room. Some people have jobs
If one individual is earning a reasonable wage and the other is not, then they get no benefits (or very little, depending on your definition of “reasonable”) while together but if the earner moves out, leaving the non-earner (with kids, if any) then the joint income rises by more than the cost of a flat-share for the earner.
Secondly, an unemployed individual who splits up with his/her partner is more likely to move in with his/her parents than rent a flat for more than a single individual’s unemployment benefit. Any landlord who expects to get more than his/her tenant’s gross income in rent needs his/her head examined. So you are assuming that it costs £86 a week to feed, and periodically clothe, an unemployed individual. Well, it doesn’t cost that much to feed and clothe me.

@john77

Thanks for the comment.

Yes, the situation when people are working rather than on out-of-work benefits is more complicated. That’s why the blog refers to the main rhetoric on the couple penatly as to do with the benefits system.

But we did look at this in the report too and even then there is only a serious couple penatly (>5% of family need) if the partner moving out (commonly the father) is able to get a council flat, which is unlikely in reality.

Details of the budgets and how they are worked out – based on what the public think – are here:
http://www.jrf.org.uk/sites/files/jrf/minimum-income-standard-2011-full.pdf

Thanks, Chris.

Dear Chris,
I find it difficult to envisage a scenario where a father moving out would get a council flat unless he had been the victim of domestic violence, but moving back to parents or sharing a flat is much more likely than taking on a house or flat on his own, especially if his earnings were small enough to permit him to claim benefits. In this case the joint income goes up by a lot more than joint costs.