Ed Miliband steps up his bid for the Labour leadership today by promising substantial tax cuts for any company prepared to guarantee a \”living wage\” of at least £7.60 an hour. The commitment is designed to appeal to the party\’s core supporters who believe New Labour took insufficient measures to combat low pay, despite having introduced a legally binding minimum wage that now stands at £5.83 an hour.
A company that agreed to set the \”living wage\” as its minimum rate – as opposed to the legal minimum – would pay lower rates of corporation tax.
The difference in take home pay between the minimum wage and the living wage is entirely the amount of income tax and national insurance charged on the wages of the low paid.
If you actually wanted to provide a living wage to everyone working then what you would do is make the income tax personal allowance and the national insurance threshold the same as the full time full year minimum wage.
There, all done, all sorted.
But of course these crazed lunatics campaigning for the living wage can\’t see this: perhaps they just can\’t manage the sums. Therefore we get the ideas like the imposition of a different corporation tax rate dependent upon wage rates.
Can we shoot them all, please?