Lib Dem tax policy “fails the fairness test”

Nick Clegg's planned policy of "tax cuts for people and families on low and middle incomes" would be deeply regressive according to a new report.

Nick Clegg’s planned policy of “tax cuts for people and families on low and middle incomes” would be deeply regressive according to a detailed analysis by Tim Horton and Howard Reed for Left Foot Forward.

In December, the Liberal Democrats set out a policy to “raise the threshold at which people start paying income tax from current levels to £10,000”. They have made this policy one of four central “tests” for cooperation with a minority government in the event of a hung parliament and Nick Clegg has said:

“This will be a huge change to our society, to make the tax system fair. Offering real help – and hope – to millions of low income families. A vital step towards delivering real social justice for all.”

But a detailed report, ‘Think again, Nick! Why spending £17 billion to raise tax thresholds would not help the poorest’ (pdf) by Tim Horton and Howard Reed for Left Foot Forward shows that:

• the measure would do nothing to help the very poorest, who don’t have income large enough to pay tax;

only around £1 billion of the £17 billion cost (6 per cent) actually goes toward the stated aim of lifting low-income households out of tax;

• households in the second richest decile would gain on average four times the amount than those in the poorest decile; and

• the policy would increase socially damaging inequalities between the bottom and middle.

Horton and Reed conclude that:

“the Liberal Democrats’ proposed tax cut fails the fairness test.

“Spending £17 billion on increasing the personal allowance is a very poor way to help those on low incomes. It could actually harm the welfare of low-income households by increasing inequality and relative poverty.”

While debates about tax and spend will no doubt be animated at the Lib Dems’ conference in Birmingham, Left Foot Forward hopes that this factual analysis will assist the discussion.

Download the report by clicking here.

135 Responses to “Lib Dem tax policy “fails the fairness test””

  1. Lee Griffin

    .@leftfootfwd hilariously think taxing "wealthy" activities to provide 6% overall redistribution to poor = "regressive" http://cli.gs/BynM9

  2. James Mackenzie

    RT @leftfootfwd: Lib Dem tax policy "fails the fairness test": only 6% goes to poorest families http://cli.gs/BynM9

  3. Social Liberal Forum » Fabians fail the fairness test:

    […] access over the weekend at Lib Dem conference, I’ve been itching to get my paws on the latest Left Foot Forward report on the Lib Dem proposal to raise the income tax threshold to £10,000. “Think Again, […]

  4. Politics Summary: Monday, March 15th | Left Foot Forward

    […] his speech, Clegg mentioned his policy to raise the personal tax threshold to £10,000 three times. Left Foot Forward published analysis on Saturday of how only 6 per cent of the £17 billion would go to helping the […]

  5. Alix

    Right. I’ve now started to unpick it properly (so have others by the look of it). I cannot believe how shifty that graph is! The actual text admits it doesn’t take into account the tax rises the Lib Dems propose to pay for the raise in PA! The impact of those would throw the “gain” to the top decile into reverse. The others would stay the same (but then we knew that, because as you persist in failing to understand, people who pay very little tax won’t benefit from a tax break as much as people who pay for tax).

    Your graph, presented in isolation here, is a shocking piece of partisan propaganda. I’m really trying not to sound hyperbolic, but, well, you’ve actually disgusted me.

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