There are two political/economic achievements I can claim. Not that I achieved them alone, but there was very definitely a part in them for me. Suggesting, convincing people at the right points in the policy development process. And one of them is at risk:
It is understood that a freeze on tax thresholds is being considered as one option to pay for up to £10bn of the extra annual cash injection. This would, however, mean another big policy U-turn by the Tories, who are committed to raising the tax-free threshold to £12,500 and increasing the level at which people pay high-rate tax to £50,000 by April 2020.
The point I made was quite simple. The difference between the Living Wage and the minimum wage is, pretty much entirely, down to the taxation of low wages. If people received the minimum wage free of income tax (and it’s a slam dunk if it’s free of both NIs) then they would, in their hands, have what the Living Wage insists they should get. We’d also reduce the far too high marginal tax and benefit withdrawal rates, increasing labour supply, make the poor better off and so on.
Plus there’s that moral point, if minimum wage is the minimum that it’s just and righteous that people should gain for their labour then what in buggery are you doing taxing it?
So, the tax allowance should be whatever the minimum wage is. That’s why the aim is that £12,500, that’s what the full year, full time, minimum wage was when the policy was adopted.
Working against that we’ve the fact that fiscal drag is just too tempting a place to go get tax money. Which is why we ended up in this ludicrous situation in the first place, with people working part time on minimum wage playing taxes upon labour income in the first place. Several decades of such fiscal drag.
So, of course I think they’re doing the wrong thing here. But then I’m also right, they are doing the wrong thing. Because if you want the poor to be better off you have to stop taxing them.