No ‘couple penalty’ in tax and benefit system

Families on benefits are neither better nor worse off if they separate, finds a new research report. This finding is contrary to the frequently heard view that the benefits system encourages and rewards couples who live apart. Working families on low incomes are just as likely to lose as to gain from living apart, once extra costs are taken into account.

The Joseph Rowntree Foundation study uses detailed research on household needs to look at how the extra income compares with the extra costs when couples split up.

Key points

  • 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.
  • Government figures, however, are not based on an actual comparison of needs and underestimate the additional cost of living alone. Using a more reliable basis for comparison, families on benefits are actually slightly better off if parents stay together: they can cover between 4 and 6 per cent more of their minimum needs than if they separate.

Source: Donald Hirsch, Does the Tax and Benefit System Create a ‘Couple Penalty’?, Joseph Rowntree Foundation

Links: Report | Summary | Press release