I congratulate my hon. Friend the Member for Broxbourne (Mrs. Roe) on her stimulating and thoughtful speech. She has long had an interest in this subject, and in her the cause of fundamental reform of personal taxation has found an informed and enthusiastic champion.

I can understand my hon. Friend's sense of disappointment that we have been unable to go ahead with transferable allowances at this stage, but as I am sure that she appreciates, this step would involve a change in the treatment of every married couple paying tax in this country. We could not embark on a change of this magnitude without a clear and demonstrated strong measure of public support.

As I have made clear elsewhere, the response to the green paper struck a note of welcome for transferable allowances. The Majority of all those responding who expressed a preference supported the Green Paper proposals. My hon. Friend will be particularly glad to hear that a majority of the women's organisations that commented favoured transferable allowances. However, the number of people responding was low—only about 400 individuals and about 70 organisations. In these circumstances, I think we were right not to press ahead but to take time for further reflection, and to explore the possibility of finding some kind of halfway house.

This does not mean that transferable allowances have been permanently set aside My hon. Friend's speech has admirably summarised some of the advantages that we saw and still see in this system. It offers married women the opportunity for independence and privacy in their tax affairs. It is flexible in recognising a wide variety of different circumstances and reduces the tax burden on families where one partner, for whatever reason, chooses to stay at home. One of its great strengths is that it reflects the reality of how families organise their financial affairs rather than how theoreticians feel they should be organised, a point that I think my hon. Friend made.

My hon. Friend appreciates the way in which transferable allowances would help not only married couples where one partner is caring for children, but also those looking after elderly parents or disabled relatives. She also sees a place for specific allowances to recognise particular circumstances. The widow's bereavement allowance is a relatively new provision that we introduced in 1980 and extended in 1983. This year we have increased the blind person's allowance by 50 per cent.

I should like to take the opportunity to thank all those organisations and individuals who accepted our invitation to comment on the Green Paper. We described the response as thin, but I hasten to say that this is a comment on the quantity and not on the quality. I am fully aware of the trouble that some organisations went to in canvassing opinion and so giving us access to the views of many more individual taxpayers than might have responded on their own account.

My hon. Friend has remarked elsewhere that one of the problems is that the main beneficiaries of reform will be married women and that married women of Britain have no pressure group to represent them. As she said, we tend to hear from all sorts of special interest groups on these occasions, but it is harder to reach the silent majority.

What, then, of the consultation on the Green Paper? Has it been an unproductive exercise? I think not. The response has been helpful in revealing the consensus of opinion about the major problems within the present tax system.

There is now widespread concern about the way married women are treated. It is rightly felt to be anachronistic in this modern age that the income of a married women should be added to that of her husband and taxed as his as if she had no separate identity. The Green Paper recognised this and the financial penalty that it may involve. This is because a wife's income may bear tax at a higher rate than it otherwise would, because it is taxed at her husband's marginal rate. This is mitigated to some extent by the wife's earnings election which allows a wife to be taxed as a single person on her earned income. However, this election is beneficial only for higher income couples and does not affect the treatment of investment income. My hon. Friend was especially concerned about that.

Many married women have a particular sense of grievance that they do not have a tax allowance in their own right as married men, single people and even children have. The wife's earned income allowance, unlike other personal allowances, is available only against earnings from employment or self-employment or a pension paid to a married woman in her own right. It is not available against a wife's income from savings, which is invariably treated as the husband's income — even though the savings may pre-date the marriage, or arise from the wife's earnings or a bequest.

My hon. Friend is absolutely right that the problem is not confined to the better off. Well over half of all the adult women in this country now have a building society account, and there is real resentment that a married woman cannot have even a small savings account without having to reveal the interest to her husband for inclusion on the tax return.

A married man's responsibility for declaring the joint income of himself and his wife and meeting the tax liability on it denies married women the right to privacy and independence in dealing with their own financial affairs. A wife must provide her husband with details of her income, but there is no reciprocal obligation on him. That emphasises the inequality of treatment between married men and women under our tax system. It can seem inexplicable to a woman who is doing a full-time job, running a home and bringing up children that she is not normally expected to fill in her own tax return or be responsible for paying tax on her own income.

The message has come across that married women feel that they are second-class citizens under the tax system, and that tax law reflects a view of women's role in society that is wholly out of place in the 20th century. I have considerable sympathy with them. I made it clear in the Budget debate that the Government feel that it is particularly important to give women a fair deal in tax matters. That will be in the forefront of our minds as we are looking at alternative avenues of reform.

A second matter of concern which emerged from the response and on which I regularly receive correspondence is the so-called tax penalty on marriage. My hon. Friend referred to that as well. I have already mentioned the rule that adds together the incomes of a married couple, and the fact that a married woman does not have a full personal allowance. That may mean that the couple pay more tax than two single people in otherwise similar circumstances simply because they are married. That cannot be right.

My hon. Friend also referred to the treatment of a married couple's capital gains, and the fact that they have only one amount to set against their joint gains. The Green Paper suggested that the capital gains of husbands and wives should also be taxed separately, and that each should have an exempt amount. This is becoming a matter of interest to more and more women because of the spread of share ownership. Four million women now own shares—18 per cent. of the adult female population.

There is also a penalty for couples with children. An additional personnal allowance is available to single parents with sole responsibility for children in recognition of the extra help they need. But the allowance also goes to couples with children who are living together as man and wife but who are not legally married. If there are two or more children, they can each claim the additional personal allowance; so their total tax allowances are larger, and their tax Bills smaller, than those of a married couple in similar circumstances. That is widely resented.

The tax penalties on marriage are another matter to which we give a high priority. We think that they are wrong.

Moving to independent taxation with transferable allowances in the way suggested in the Green Paper had the great advantage of achieving a shift in the burden of tax away from low income and single earner couples, without losers in cash terms, and without making invidious distinctions between couples on the basis of the way they chose to organise their lives.

A number of the organisations that responded were attracted to an alternative system, which would use the extra tax raised by the abolition of the married man's allowance to fund increases in social security benefits, and in some cases to create new ones. That system has fundamental disadvantages. As my hon. Friend said, it applies a set of judgments to the reasons why one partner in a married couple may decide not to seek work outside the home, and rewards some while penalising others.

On the whole, advocates of this system are not concerned if some married couples lose some of their tax allowances without any compensation in terms of benefit if they do not approve of the reasons why one partner does not work and is supported by the other. My hon. Friend gave as examples voluntary work and unpaid public service. And little concern is shown for the older wife who, after devoting many years to bringing up a family, would find it hard to re-enter employment.

Concentrating on the support of children rather than the family unit would also ignore marriage. Transferable allowances would have none of these drawbacks. That system was built on the reality of how family finances operate. It provides flexibility and leaves the choices to those who are best equipped to make them. If one partner in a married couple chooses or, by force of circumstances, is unable to take paid work, it is wrong that he or she should suffer an additional financial penalty.

The response to the Green Paper has brought us an important step along the road, and I hope that the time will not be too long delayed before we can make further progress. We shall be looking for other ways—perhaps a halfway house—in which we can pursue the objectives that both my hon Friend and the Government share