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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29 Responses to “David Cameron’s latest tax announcement: not new and certainly not progressive”
robertcp
I was referring to this particular policy and not other coalition policies. As it happens, the IFS has worked out that middle earners like me have gained from the coalition’s tax and benefit changes. I certainly don’t feel any worse off.
Chris Matthew Steele
Raising the minimum wage as offered by labour would be a much better policy as would benefit the lower earners more and also the economy as people will have more money to spend, in turn the tax revenues the government receives would be higher so it can keep the public services well funded!
Graham
Say you’re over 21 working full time on the minimum wage. That’s about £13k a year. So you would benefit from raising the threshold.
Say you work only part time, say 20 hours a week. That’s about £6500 a year. Raising the tax threshold would not help. but raising the minimum wage by a third would still only net you about £8500.
The truth is that part time jobs never pay enough to live on. If you want to live off work you either have to get a full time job or get two part time jobs. If you’ve got a poorly paid full time job then you have to learn skills that the market pays more for. It’s a fact of life. Nobody is going help you but yourself.
Some commentators here seem to think that a giant benevolent hand could cone down and lift people out of penury into a comfortable lifestyle. The best that would ever happen is tweaking around the edges: poor people wokld still be poor, it’s the way the whole system works. The only way out is through individual effort.
Leon Wolfeson
Got a link on that?
Guest
It’s a fact of life that 25%+ of the population must die, right, as you oppose every last benefit and social welfare net, which is your obvious goal (and not the current situation).
And you support poverty, and spout the myths of being able to earn your way out…nope,
you’re just out to exploit workers, for as little as you can pay. The reality is that there are multiple ways to virtually eliminate poverty, such as a Basic Income.
But then you’d not be able to get away with treating workers like ****. YOU want to stop people being helped. There’s a sharp difference. You should pay tax.