Women lose up to pounds 10bn under Labour

Measures proposed by the Chancellor of the Exchequer since 1 May could end up making women billions of pounds poorer. Diane Coyle, Economics Editor, examines the hidden gender bias in Gordon Brown's plans.

Changes to government spending plans since the general election, and proposals for a new tax credit put forward in last week's Green Budget, overwhelmingly penalise women and favour men. Women could be up to pounds 10bn worse off as a result of Mr Brown's policies, while the increased "New Deal" spending on welfare-to-work programmes heavily favours men, according to independent researchers.

The biggest threat to women's pockets comes from Mr Brown's intention, signalled last week, to introduce a "working families' tax credit". Experts reckon it could cost female earners billions of pounds.

Unlike Family Credit, the existing benefit for low-earner households, the new tax credit would go directly into the pay packet of the household's main earner. In three-fifths of eligible families, that is the man.

The Government's controversial decision to go ahead with the cut to lone parent benefit is just one example of the emerging gender bias. It will save pounds 400m a year from the social security budget, and the Government has insisted that it has no alternative but to go ahead with it because of the pressure on the public finances.

The burden will fall almost entirely on single mothers. Of Britain's 1.4 million lone parents with dependent children, 1.28 million are women and only 120,000 are men.

Alistair Darling, Chief Secretary to the Treasury, yesterday defended the cut in lone parent benefit, saying it was more important to get people back to work than to pay them benefits. Speaking on On The Record, he said: "We have brought forward, as Gordon Brown announced last week, the welfare-to-work programme which will provide a million places for children enabling lone parents to get into work."

But Ann Cryer, Labour MP for Keighley, said: "My message for Labour MPs, particularly to the 101 Labour women MPs, is that I think we ought to stand together on this and we ought to send a message to women outside, those who are going to be on the receiving end, that we're on their side."

In the Green Budget, Mr Brown said pounds 300m would be spent on up to 30,000 after-school clubs, with pounds 220m coming from Lottery funds. This followed the announcement in July of extra spending of pounds 200m over three years on a scheme to help lone parents claiming benefit get back into work. However, the pounds 500m combined spending on the programmes compares with the pounds 3.2bn Mr Brown allocated for young people unemployed for more than six months. The "New Deal" programme gives four alternatives to work: full-time education, a subsidy to be taken up by a private-sector employer, voluntary work or a position on a new environmental task force.

Although the number has been falling rapidly since the introduction last October of the Job Seekers' Allowance, there are still 122,096 18-to-24 year olds who have been out of work for longer than six months, according to the latest official figures. Of those nearly three-quarters (89,387) are men. One adviser to the Government, privately acknowledging that the schemes favour men, said: "Single motherhood is the female equivalent to these long-term unemployed youths."

The expenditure on returning young people to work amounts to more than pounds 26,000 per head, compared to pounds 350 per head per lone parent. Although the Government has made plain its determination for single parents to work wherever possible, making a real dent in the numbers claiming benefit will be very expensive because of the cost of childcare.

The new working families tax credit looks set to be equally controversial. If the credit directly replaced Family Credit, which is paid to the woman in three-fifths of cases, rather than supplementing it, it would represent a transfer of about pounds 400m from men to women, according to the Institute for Fiscal Studies (IFS), an independent research body.

In addition, the working families tax credit would almost certainly require the reintroduction for claimants of the joint taxation of husbands and wives - or cohabiting partners.

The full abolition of independent taxation of men and women, introduced by Nigel Lawson in 1988, would cost women pounds 14bn because second earners would start paying tax on their first pound of income. It would drive many women who work part-time back into the home by making it not worth their while to work.

While the Government would be extremely unlikely to impose joint taxation on all couples - which would be politically explosive - the proposed tax credit will require claimants to opt for joint taxation. Otherwise, it would unfairly reward poorly paid second earners with a high-income partner.

Chris Giles, an economist at the IFS, said: "A switch to any form of joint taxation would cost women a huge amount of money." This figure would run into several billions, he said. While their husband or partner would gain the new tax credit, many women would have to pay much more tax.