Skip to main content

Marginal Tax Rates

Volume 470: debated on Thursday 10 January 2008

To ask the Secretary of State for Work and Pensions what estimate he has made of the marginal deduction rate experienced by a lone parent, local authority tenant, with two children under 11, with child care costs, working 36 hours per week at adult rate minimum wage. (173347)

The Department considers the issue of marginal deduction rates (MDRs) within the wider context of making work pay. It is not possible to calculate the MDR in this particular example because it would require assumptions to be made about rent levels and child care costs as well as issues such as disability. More generally, the number of families facing MDRs in excess of 70 per cent. has fallen by 545,000 since before Budget 1998.

The Government provide a broad range of support for lone parents that focuses on ensuring that work pays, that barriers to employment are addressed and that lone parents are made aware of the employment opportunities available to them.

The in-work credit (IWC) is currently being piloted in 22 Job Centre Plus districts and will be rolled out nationally from April 2008. The IWC further increases the financial benefit from a move into employment and is helping lone parents move away from benefit dependency. This, combined with tax credits and the national minimum wage, means that most lone parents are likely to be significantly better off in work.