David Cameron’s latest tax announcement: not new and certainly not progressive

Struggling households won't benefit from Cameron's latest announcement - and he's made it before

The ‘British people deserve a reward’ after years of austerity, prime minister David Cameron has said in a speech today.

And he, apparently, is the man to deliver it.

Or at least that’s what Cameron appeared to be suggesting when in the course of the speech he announced that, on winning the election, a Tory government would raise the tax-free personal allowance to £12,500.

Nothing like the announcement of a brand new tax cut to get the week started, eh?

Only this isn’t a new announcement – it’s identical to a pledge made by Cameron in his speech at Conservative Party conference back in October. The question is: why are the BBC and other media outlets reporting it as if it were a brand spanking new announcement?

More important than this, though, is the underlying unfairness of raising the income tax threshold – again.

Rather than being progressive, which is how it’s invariably portrayed by Conservatives and Liberal Democrats, the greatest percentage change in net income from increases in the personal tax free allowance are seen by those at the upper end of the income scale. Not least because the policy only benefits those who earn enough to actually pay tax.

Millions of people have earnings below the income tax threshold of £8,105 and will therefore see no benefit from the rasing of the tax threshold.These aren’t the ‘skivers’ of right-wing caricature either; the recovery has been characterised by the growth in insecure work – eight milion people in the UK now work part-time.

Analysis carried out for Left Foot Forward in 2010 found that some three million households in the poorest quarter of the household income distribution would not benefit from raising the personal allowance to £10,000. And as should be obvious, none of those people will benefit from raising the threshold again to £12,500. What all of them will be paying, however, is VAT – increased to 20 per cent by Geroge Osborne back in 2010.

Analysis by the liberal think-tank Centre Forum has also shown that raising the personal allowance benefits households higher up the income distribution significantly more than the poorest third of households. And it serves to increase the gap between the bottom and the middle – resulting in low income households falling further behind relative to the middle.

So to sum up: this isn’t a new announcement – but nor is it a progressive one.

James Bloodworth is the editor of Left Foot Forward. Follow him on Twitter

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