The tax system as it now operates is archaic in so far as it treats a married woman's income as though it belonged to her husband. In matters such as privacy, tax allowances and reliefs, women are treated differently from men to their disadvantage. Such arrangements undoubtedly no longer reflect the true nature of the relationship between the sexes in our society. The effect of that is not simply to irritate; it perpetuates divisions between the sexes which hamper women's expectations and damage their choices. The effects are not merely on the legal position of women, but on our practical position.

The publication of the green paper on the reform of personal taxation marked an important step towards the equal treatment of women and, at the same time, stressed the importance of marriage to the fabric of our society. It was long overdue, and I congratulate the Government on tackling the issues directly in a well-argued case. Nevertheless, it has been disappointing that responses to the Green Paper have apparently been limited. Perhaps that is not surprising as for many people the subject of tax is arcane and rather threatening. They do not understand the mechanism by which tax is calculated and they accept the assessments made for them and pay accordingly. That is especially true of PAYE. Therefore, any consultation exercise on the reform of personal taxation faces particular problems.

First, are the representations reflecting fairly the interests of those affected, and, secondly, how can the views of the silent Majority be canvassed? The Green Paper provoked a certain amount of campaigning by several pressure groups. Most of them have a relatively small Constituency and are not concerned with the overall picture. There is nothing wrong with that; such groups exist to put the views of those whom they represent. However, the Government need to see further. Short of a national organisation for the reform of married women's taxation, the views of the majority are untapped.

One further point has some relevance. There has been comment from some of the more vocal women's organisations which tend to be on the Left politically. In some cases they have no sympathy with the way in which our economy operates and, not surprisingly, they do not like the Green Paper proposals. But such views are at the margin and should be treated as such. We are dealing with practical problems and the majority of those affected are uninterested in the ideology of fanatics. To say, as some have, that the women's movement is opposed to the Green Paper is to attach far too much importance to a limited, if noisy, group.

I want to take the opportunity to examine some of the arguments that have been put forward while stressing that the basis of the reforms suggested in the Green Paper must represent the way ahead. Reform of the system must take account of several objectives. First, and most important, it must place the tax treatment of married men and women on an absolutely equal basis. There should be a personal allowance against income which is the same for all. There should be a series of changes to the treatment of savings income which remove inequalities to women and disincentives to marriage. If equality of the sexes demands equal personal allowances and no distinction between the sexes in taxation as the foundations of the new system, the expectations of society will provide the superstructure. To be seen to be fair, tax must reflect the values that people hold.

I do not believe that the tax system can or should be used to coerce social change. Its purpose is to fund those services that we require the Government to perform and to do that while avoiding discouraging people from doing things which are part and parcel of our way of life. An obvious example is that there should be no circumstances in which a couple would be worse off in tax terms as a result of getting married rather than cohabiting.

The first step must be a move towards a single personal allowance with a phasing out of the married man's allowance. Equality of treatment — and flexibility in family relationships — suggests that there should be no distinction between husband and wife. Each individual would be responsible for his or her tax returns and correspondence with the Revenue and could remain, if he or she so chose, absolutely independent for tax purposes. Left in that form, the tax system would do nothing to alleviate the financial difficulties a couple suffer if either spouse stops work to look after children or dependent relatives or takes part in unpaid voluntary activity of some kind. Couples in that position would receive the least relief from tax.

I argue that it is right for the state to recognise the family unit as the basic building block of society and marriage as the institution which supports that. The figures are straightforward. In Britain there are more than 11 million married couples of whom nearly 10 million are under the age of 65. The more that the state can do for those units — or, at least, the more unnecessary disincentives it can remove — the greater would be the stability of society as a whole. The consequences, not least in terms of Government expenditure needed to perform a role historically taken by families themselves, are profound.

The first step after the introduction of the single person allowance would be to make arrangements for that allowance to be transferable between spouses in the event that one does not use his or her allowance. That would not be restricted solely to a wife who stopped working to have children. It would be equally applicable if a partner stopped work to look after a dependent relative, to perform unpaid social work or simply to run the home.

Some people argue that that form of transferable allowance scatters relief where it is not needed to the detriment of those with young children in the poverty trap. The argument continues that it would be better to target assistance by abolishing the married man's allowance and using the money saved to fund a substantial increase in child benefit. That implies that the state gives greater weight to the bearing and raising of children than to a wide range of other unpaid activities upon which society depends to a great extent. Those who argue in favour of the child benefit route are arguing ultimately that the wide range of other voluntary activity should be replaced by state-run bodies with the bureaucracy and uncertainty of long-term policy that that inevitably implies.

Let me give some examples. Magistrates in our society receive expenses, but no salaries. A large number of them and married women who do not earn a wage or salary. Charities depend to a great extent on the fund-raising and organisational abilities of volunteers who are not paid and whose motivation is a genuine desire to help. Many people look after elderly relatives or the disabled, who do not necessarily live with them, and cannot seek paid work because of the responsibilities that they have taken on.

All those people embody the idea of service to the community on which we all depend. It is wrong to believe that somehow we are all taking advantage of their service and that this exploitation should be replaced by state provision. On the contrary, the state has an obligation to recognise the true value of such work and its importance matches equally the work of those who raise children and should be equally treated.

Under that argument, it remains to justify the choice of marriage as the best vehicle for underpinning a network of voluntary service. The answer is that it is perfectly logical. Those who do not do paid work by choice are supported by others, and by far the commonest framework for this is the family; more specifically, marriage.

To apply fairly, any system of taxation needs to be as simple as possible. Taxation is a general method of raising revenue from society as a whole. It is a general form of revenue raising, and is conducted on an annual basis; but it is inflexible and does not respond immediately to fluctuations in circumstances which may not be relevant to the year's taxability or, if they are, can be sorted out later.

On the other hand, welfare benefits are specific and immediate. They can be targeted quickly to assist those whose need is sudden, due to variations in individual or household circumstances. That is what it exists to do. Taxation exists not to assist people but to raise money, in the least socially damaging way possible. and at the moment there is little continuum between the two. We must ensure that in raising revenue the state does not then drive people to seek assistance from it.

There is no doubt that the current systems of tax and benefit have a grey area in which the workings of one system cause penalties in the other. The first key to unlocking that problem is to raise the tax threshold. The second lies in the provisions of the Social Security Act 1986, in particular, the introduction of family credit. Ultimately, the objective must be to prevent the poorest people from paying any tax at all.

I have heard another arguement against transferable allowances. That briefly says that if a spouse transfers the allowance to his or her partner, on later returning to work such a person begins to pay tax from the first penny earned, and in some way that is said to be unfair. It is hard to understand that.

First, on a person returning to work the allowance would presumably be used by that person and no longer be transferable — a perfectly equitable state of affairs. Secondly, more money would be earned and the family would be better off overall. The spouse who had received the transferred allowance might be paying more tax, but together the couple would be paying tax exactly as before, with the same overall relief.

Before going on to consider aspects of the tax system as it deals, or should deal, with savings income, I should like to say a word or two about a structure of tax reliefs through additional allowances. As I said, I see those as necessary to achieve two things—removal of disincentive and active encouragement of self help.

In the latter category I would include a series of allowances which recognise particular long-term family circumstances and disabilities, such as the current widow's bereavement allowance, the dependent relative allowance, the blind person's allowance and that for a married man with children whose wife is wholly incapacitated.

Those allowances are specific and necessary within a system of transferable allowances. I would argue that to allow transfer is to recognise the need to assist in less specific areas. It is a matter for debate whether, for example, looking after a dependent relative who does not live under the same roof, but whose care prevents a person seeking paid work, should attract additional transferable allowance. It is obvious that the state would be responsible for the care of such individuals if private provision were not forthcoming. It would be sensible and financially prudent to provide incentive for the latter. In this context, to have such an allowance is obviously sound. Similar arguments can he adduced for many situations and should be considered on their merits, with the basic proviso that they represent long-term situations that are not suitable for consideration under welfare benefit provision.

Thus far, I have concentrated on the taxation of earned income. In the area of savings income, the degree of equality between the sexes is minimal. Once again, the person who is most heavily penalised is the married woman. The reason is straightforward. Although a wife may elect for her earned income to be treated separately for tax purposes, no such option exists for tax on savings income. Of course, that can have unforeseen consequences. First, a woman cannot have savings without revealing them to her husband — unless she hides them in cash under the floorboards. Secondly, a married couple are greatly disadvantaged. The wife's savings income will attract tax at her husband's rate. If that is greater than hers, their tax bill in this respect will be greater simply because they are married. That inequity also applies to the capital gains tax exempt allowance. A married couple receive one allowance, with their gains being aggregated. If they were not married, they would receive the benefit of two allowances.

Again, the solution is to separate the tax affairs of man and wife. It is perfectly reasonable to expect each person to look after his or her savings, and it should be equally acceptable for tax matters to be similarly treated. Wives should be given, at minimum, the option to elect for separate treatment.

Some people may believe that a discussion of savings income applies only to the wealthy and, therefore, at best is peripherial to the current discussion. But I disagree on two counts. First, I disagree on principle. It is not reasonable to reform one part of the system on the ground that the sexes are not treated equally and that married women are discriminated against if, within another part of the system, the inequality is left untouched. Any reform must see men and women treated equally across the board. Secondly, it is mistake to think that only the wealthy have savings income. Everyone with a building society account has savings income.

Likewise, as home ownership has moved towards 60 per cent. owner-occupation, as occupational and private pension provision increases, and as employee share ownership schemes multiply, so the level of capital ownership in society rises. The fact is that the spread of ownership of wealth is improving. A simple example illustrates that point. Take a couple aged 50, with a mortgage which they have nearly paid off. They may well have savings invested, and the possibility of an occupational pension. Let us say that the wife's parents die, having previously bought their council house, which she inherits. Even following the appropriate tax, the wife will have substantial capital to invest. As home ownership spreads, that will be more and more common, and the tax system should recognise that.

How are we to bring about these changes? Fundamental alterations to the starting points of tax calculations cannot be revenue neutral. It is asking a lot of people to accept that, with a system that is unfair and in need of change, they must bear the brunt of that change without gradual introduction. Many simply would not be able to afford it. The answer is to phase in changes, allowing taxpayers who pay relatively more to have time to adapt and the Treasury to have time to adjust to lower tax revenues. It would also add impetus to the Government's aim of reducing the tax burden.

The problems involved in the reform of taxation are complex, and political will is needed to sort them out. It is outrageous that such discrimination against women still continues. The sooner we correct it, the better. The Government have shown that they have the political backbone to tackle difficult issues and, unlike the Opposition, the perception needed to see beyond the smokescreen of pressure groups. With the election safely won, I hope that this will form part of the next Budget.