This is what should happen.

If the Tories want a morally sound and hugely popular tax policy, they should scrap the whole thing and instead cut the taxes of the very poorest. As far as I’m concerned, it’s nothing short of obscene that workers on the minimum wage pay income tax at all, and then have to beg pitifully to be allowed some of it back – assuming they’re eligible, that they can understand the forms, and that they can get over the worry that an incompetent state machinery will pay them too much, and then send the bailiffs round.

Tax credits make their recipients suffer the highest marginal tax rates of any group in society. They show what happens when a man with no imagination and too much faith in his own intellect is allowed to design a policy. Most importantly, as far as the Tories go, they are a policy that has sticky Brown fingerprints all over them, and one that Labour could never disown.

The replacement should be a non-traditional tax cut, aimed squarely at those at the bottom of the workforce. If the Tories scrap the £15bn that tax credits cost, and can fire a further £35bn worth of Gordo’s army of useless numpties, they could afford to raise the personal income tax allowance to a whopping £15,000. If you\’re concerned that vital services would be devastated, just remember that no one really noticed when they were all hired, so it would be surprising if anyone noticed when they get fired. This cut would free those working a 48-hour week on the minimum wage – or up to £6 per hour – from paying any income tax at all.

Nothing could be more powerful, or more attractive. It would be the great symbol of the new Toryism. It would be a slap in the face for Labour’s pretence to be the party that looks after the poor. Every piece of syrup-brained interfering middle-class leftism of the last half-century, from inhuman council estates to ‘progressive’ schooling, has hit the poor hardest. It could be the start of the roll-back – if Cameron has more bottle than Brown.

Guess which political party already advocates this? UKIP.

11 thoughts on “Yup!”

  1. Isn’t this the first stage to a modern flat tax policy (the one with a susbstantial non-taxable allowance) ?

    It wouldn’t matter, the likes of Polly Pot et al would snarl and make up some complicated formula as how this benefits the rich more than the poor and increases our GINI factor, blah, blah.

    Not that I, or anyone else, gives a flying ferret what Polly thinks.

  2. I’m afraid to say that simplifying tax and benefits system would only allow us to sack civil servants costing £5 billion to £10 billion per annum. And for the time being UKIP are proposing a personal allowance of ‘only’ £10,000. But hey. Big steps in right direction.

  3. The problem with this, though, if your interest really is the ‘poor’, is that most of the money goes to those who aren’t poorl

    Say it costs £50bn.

    Everyone who earns more than £15,000, which must be about 18m people, would gain a bit more than £2,000 each. That’s £38bn.

    The other 10m will gain between £0 and £2,000. I’m not sure of the distribution but let’s say it is relatively even, so the average gain is £1,000. So there’s yer other £10bn.

    So just over 1/5th of your money has gone to the poor, and obviously most of that has gone to the richer poor. In the meantime there are no tax credits etc.

    So I’m not against the idea of lowering taxes and removing people from them, but the arguments in favour of not particularly to do with welfare.

  4. Matthew, the flip side of this is to reduce the benefit withdrawal rates to the same rate as basic rate tax/NI.

    That means (1) you don’t need a parallel system of means testing – all you do is make benefits totally non-means tested, (2) massively improve returns to working and get rid of poverty trap.

    As a quid pro quo, benefit claimants shouldn’t also get a tax-free personal allowance as well.

  5. But wouldn’t that cost another huge load of cash, as you’re now paying everyone benefits, and everyone benefits for a long time until their tax (say at 20%) is more than the benfits.?

  6. Allan S, yes, we were in touch at the time.

    Matthew, no and thrice no! You clearly have NOT looked at the DWP model tables or at the DWP official figures for total spending and so on.

    The Citizen’s Income Trust http://www.citiziensincome.org have shown that paying a flat rate £59 to ALL working age adults (£34 for children, £119 for OAPs) could be combined with a flat rate 33% on all earned income (equates to a personal allowance of £9,000 if you so wish) is fiscally neutral.

  7. Indeed so was I, Allan, and I think I noted that your final proposal involves everyone not in receipt of tax credits paying a higher marginal rate than at present.

  8. Hey, UKIP aren’t the only ones that advocate it, I tell any fellow Tory that will listen that this would the easiest stepping stone to simplifying the tax regime. In the end you might prefer a system where all income is taxed equally but as even a temporary fix, it’s ideal.

    The problem is it represents real change and as we know politicians prefer to talk it and tinker than get stuck in.

  9. Doesn’t all the debate above imply that Tories and Tory voters have even the slightest interest in helping the poor? I’m sceptical of whether that hypothesis is supported by the data…

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