Research Finds Tax Credit Schemes Leave Co-Habiting Couples Worse Off

The results of an investigation into the finances of 98 families with low or modest incomes released last week by CARE has revealed that in over 70 per cent of cases the couple would be financially better off if they lived apart.

Couples would be on average £64 better off per week if they lived apart, even when additional housing costs are taken into account, the research found.

The research paper presents provisional results from an analysis of the disposable incomes after housing costs in 2006/07 of ninety-eight couples with children on low or modest incomes.

The research is based on the Department of Work and Pensions Tax Benefit Model Tables, April 2006 edition published on 31 October. Housing costs are taken to be those used in the model tables. Utility costs are not taken into account.

CARE said, "Although not all couples would be better off financially from staying apart or living apart, the research shows that many would gain financially.

"For many low income families the gain would be significant and it is difficult to believe that this is not having some effect on family relationships. Economic theory would suggest that decisions on whether to live together or apart are influenced by financial considerations. The issue may not be so much one of the breakdown of families as of family formation. There is empirical and increasing anecdotal evidence that 'fiscal' factors do affect these decisions."