Economy and public finances Resolution Foundation response to OECD economic survey of the UK 6 February 2013 The Resolution Foundation welcomed the OECD’s advice today (Wed 6th Feb) that the government should act to ensure that work always pays for second earners. The report echoes the Resolution Foundation’s Commission on Living Standards, suggesting that government could take steps to give equal treatment to second-earners under Universal Credit and increase support for childcare. James Plunkett, Director of Policy at the Resolution Foundation said: ‘With money so tight, the OECD is right that the litmus test for government policy needs to be whether it will boost growth and living standards. Rising female employment has been a key driver of rising family living standards but after accounting for childcare costs, many second earners will be no better off working under Universal Credit. The government should modernise our tax and benefit system by introducing equal treatment for first and second earners under Universal Credit whilst any new investment in childcare should focus on extending the number of universal hours available for young children. Ends Notes The OECD Economic Survey: United Kingdom 2013 is available at http://www.oecd.org/newsroom/publicationsandstatisticsforjournalists.htm The Resolution Foundation’s Commission on Living Standards set out specific fully-costed policy proposals to make work pay for second earners, recommending: Making Universal Credit friendly to second earners (overwhelmingly women) by treating them as generously as (mostly male) first earners. Under current government plans, a low paid second earner will face an effective tax rate of 65 percent from the first pound they earn. Under the Commission’s proposals, a second earner would be able to earn around £2,000 before Universal Credit starts to be withdrawn Increasing the current free 15 hours of childcare for three and four year olds and disadvantaged two year olds to 25 hours a week and for 47 weeks a year (compared to the current 38 weeks), charging the extra 10 hours each week at £1 an hour. This would mean parents of young children would benefit from the equivalent of three days of childcare a week for just £10 Each of the Commission’s recommendations was carefully costed and fully funded by a mix of spending reductions and highly targeted revenue-raisers including
