EMA and Couples Transferrable Tax Allowance

The main argument I’ve heard deployed against EMA is that it is a waste of money because so much is paid to individuals who, when asked, say they would have stayed on anyway. In economics this is usually referred to as deadweight loss.

Actually, I don’t think increased staying on rates are the only benefit of EMA. I think it also helps improve attainment among those who receive it by, amongst other things, providing them with money to buy useful educational resources and making them less likely to feel the need to undertake more part time work than is perhaps a good idea while studying. However, that’s not the main point I wish to pursue.

Instead, the original line of argument got me thinking about how such blunt analysis would fare against other policies. In particular it made me wonder how much of the proposed Couples Transferrable Tax Allowance, planned to be worth at most £150 a year in reduced tax to couples in certain circumstances, will actually prevent couples from splitting up. My guess? Not many.

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