Sunday, April 20, 2008

Deliberate Impoverishment

Inside Gordo's head

Being of a charitable disposition we'd persuaded ourselves that Labour's grotesque impoverishment of 5.3m poor childless working households had been straightforward blithering incompetence. We'd imagined it must be yet another unintended consequence of yet another half-baked fiscal measure rushed through to grab headlines and stymie the Tories.

True, we could see the abolition of the 10p income tax band was driven solely by the need to fund Gordo's headline stunt of 2p off the standard rate. But surely he hadn't intended to make the poor poorer.

It turns out we were wrong: this was a deliberate and callous act of policy.

We know that because Darling told us this morning:

"Of course you know when you make any changes to the tax what the effects will be.”

In other words, ghastly lying Brown knew all along about the losers, but assumed he could get away with it.

So now he's been blown, now those Labour rebels are supposedly going to vote it down (yeah, right), what happens now? Reinstate the 10p rate?

Not a chance. That would cost £7.2bn this year and £8.6bn next. Darling simply doesn't have the money for the simple reason that it's been spent on cutting the standard rate to 20p. He says:

“What I cannot do is to rewind the Budget. The financial year has already begun. There are millions of people who are already paying tax at 20p rather than 22p.

It simply isn’t possible as you go into a financial year to unravel the whole thing and attempt to rewrite it.”

Instead, he's hinting that if the working childless poor make it through another year of ramping food and fuel prices, if they survive another year of downward pressure on their wages from mass immigration, and if by some chance they're still alive next April, he might see if he can throw them a crumb or two.

It is the disgusting calculation of a bankrupt regime that long ago sold its own granny.

So what would we do? Would we reintroduce the 10p starting rate?

No. As we blogged here, we'd much prefer to help the working poor via the clean simplicity of a higher personal allowance. And the Institute for Fiscal Studies agrees, its Director writing today:

"A more popular way to reduce the number of losers would be to raise the personal allowance people can earn before they start to pay income tax and National Insurance. This would also be more cost-effective, as it would partly unwind the reform that created the losers in the first place. Raising the allowance by £100 would remove 1.3 million losers and cost £800 million; by £300 would remove 3.3 million losers and cost £2.5 billion; by £750 would remove almost all the losers and cost £6 billion."

We reckoned we'd need to raise the allowance by £1,000 pa, costing £7-8bn, but the IFS has a much bigger envelope-back than BOM, so we bow to their £6bn.

It's still a lot of money though and sadly we don't think next April's Chancellor Balls will have the cojones to do it. Much more likely, he'll concoct yet another layer of indecipherable tax credits, this time twisted to pick up the childless working poor. If they can fathom it out.

What a nightmare.

PS How would we finance the the £6bn pa? Where would you like to start? First we'd axe a large chunk of Gordo's £6bn pa tax credits - they wouldn't be needed so much with a higher tax free allowance. Second, we'd shrink HMRC another notch or two- fewer taxpayers and fewer tax credits should mean fewer tax bureaucrats. Third, we can the useless Sure Start programme... (cont on p94).

1 comment:

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