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””
rob tennant
I think Alix has shown up this “shocking report” for what it is – an attempt to discredit the Lib Dems on what is, to anyone not blinded by partisan ties, their strongest policy. “does nothing to help those who don’t pay tax” – durrrr, it’s supposed to help those who do pay tax, not all of whom are rich! you’ve really let the side down, Sunder – and I expected better of you, Will. The only reason Labour is attacking the Lib Dems on this is because they didn’t think of it first.
In the key marginals…..time to turn our guns on the Lib Dems….. « Moments of Clarity
[…] illiteracy makes his program for ‘fairness’ nothing more than hot air; something Left Foot Forward expose with their unpicking of the policy […]
Richard Watts
Yet more reasons why progressives should not vote for the Lib Dems: http://bit.ly/9KPWKf
Matthew
I know it’s been said, but “Rob: the reason why they analyse it on a household basis is simple” is utterly idiotiarian. Income has been assessed on a houshold basis for decades, if not longer, simply because it’s the most obvious unit in which to do so.
I think Alix makes some good arguments, but they aren’t conclusive. The reason one considers taxation policy with expenditure and with income distribtion measures is because they are all about money – raising the personal allowance by 3,500k directly means you can’t spend the money on, say, housing benefit. Alix is right that whether someone on 9,000 pays income tax or not is a moral issue, but wrong insofar that there’s no obviously liberal answer.
Matthew
Sorry, it is a moral issue, but it’s not morally obvious it’s a bad or good idea.