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Who benefits from Lib Dem tax cuts?


3:19 pm - March 14th 2010

by Don Paskini    


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Our friends at Left Foot Forward are hosting an excellent debate in the comments on this post between critics and supporters of Lib Dem plans to raise the starting threshold at which people pay income tax:

Tim Horton and Howard Reed argue:

“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.

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.”

Alix Mortimer replies:

“These are what Ben Goldacre calls zombie arguments. No matter how many times you knock them down, they always get up again.

There are dozens of Lib Dem policies that “don’t help the very poorest who don’t earn enough to pay tax”, just like there are dozens of Labour policies that don’t – because they are about other things. This policy is about a fairer tax system. It does what it says on the tin. It will make the tax system fairer and flatter, and in the process it will offer the greatest proportional help to people who pay tax but are nonetheless on low pay.

For people who don’t earn enough to pay tax, we have a little thing called a welfare state. And, coincidentally, the welfare state as constructed by Labour currently includes so-called “tax credits” paid over to households earning up to about £70k in some cases. As I’m sure you know another Lib Dem policy is to taper those tax credits. High-minded claims about Labour’s opponents failing to concentrate funds on the poorest are not well-founded.

You have reinterpreted the “stated aim” to suit your purposes. The stated aim is to make the tax system fairer. This has the *effect* of lifting low-earners out of poverty. Two, you are implicitly assuming that absolute gain is more important than proportionate gain. This can pretty easily be knocked on the head. £300 per year will make far more of a difference to someone earning £12k than someone earning £30k. And *everybody* earning £12k will feel that difference. Ignoring this simple truth suggests a disturbing lack of interest in people’s actual circumstances.

There *is* a debate to be had about the only point in which actual figures are quoted, i.e. point 2. This debate is largely about principle. The two questions are “Does absolute gain matter as much as proportionate gain?” and also “Should the tax system be fairer and flatter as a matter of principle?”. To which my answers are of course no and yes respectively, and accordingly, I don’t mind that the tax cut goes to everyone. It’s just a fairer tax system. I like fair tax systems. Your respective answers are yes and don’t care, so far as I can see.”

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About the author
Don Paskini is deputy-editor of LC. He also blogs at donpaskini. He is on twitter as @donpaskini
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Reader comments


Alix’s reply is unconvincing. He claims the aim of making taxation “fairer and flatter” as though they are the same thing whereas a fairer tax system is more progressive and, therefore, less flat.

I think Alix is making a good point, she (FYI) isn’t confusing fairness and flatness.

How progressive a tax is shouldn’t be the only criterion for how “fair” it is.

For example you can have a very highly graduated tax system which also has large exemptions for certain activities which result in those with accountants sidestepping much of tax. On the other hand, you can have a less progressive tax system with a large tax free allowance. I think it is “fair” to call the latter tax system “fairer.”

With any tax cut the rich are going to benefit because they pay a lot of tax (when they’re not avoiding it of course), that in itself isn’t a reason to not cut tax.

If the drop in revenues is going to be precipitous then that may be a reason to oppose the cut but opposing it because its not a magic bullet is not useful.

“This can pretty easily be knocked on the head. £300 per year will make far more of a difference to someone earning £12k than someone earning £30k. And *everybody* earning £12k will feel that difference. Ignoring this simple truth suggests a disturbing lack of interest in people’s actual circumstances.”

If the Lib Dems are so concerned with people’s actual circumstances, they should know that the poorest are the ones that benefit the most from the public services that must be cut back in order to facilitate this tax cut. £17billion worth of cuts in exchange for £1billion for the poorest taxpayers is not a good deal for the poor- and it *is* about the poorest who don’t pay tax whether the Lib Dems would like to ignore them or not, because it implies a cut in the services they use the most.

4. paul barker

Mikesc, lets just have a look at some of the “public services” the Libdems have actually said they will cut: Trident, ID cards, Tax & Pension subsidies for high-earning groups, the NHS IT project etc. Can you say how any of these actually benefi the poor ?

They’re arguing for a reduction of the pool of public spending in order to fund a tax cut that benefits the rich more than the poor. That is money that could be better directed at the areas that would have to be cut alongside those things in order to make the cuts less harsh.

MikeSC. This tasx cut is fully costed from raising taxes elsewhere, and has no bearing whatsoever on any other cuts that might happen.

Specifically, most of the money will be raised from making Capital Gains Tax apply at the same rates as Income Tax instead of at 18% as under G. Brown, and from the so-called “mansion” tax on homes worth over £2million.

It’s very clearly laid out as being revenue neutral, increase taxes on the wealthy in order to help the lowest paid. It’s been fully costed and worked through, and doesn’t involve any spending cuts.

The other cuts being discussed, such as ID cards and trident, are going to save money to do other things, including reducing the deficit and paying for other spending commitments, such as the pupil premium.

The tax policy, overall, cannot be argued as being regressive, as it’s revenue neutral, it means the poorest pay less and the wealthiest pay more.

Sure, the increased threshold, on its own, helps everyone, especially DINKY households, and much of the direct cost of it, on its own, goes to people not the poorest. But overall, the lowest paid gain significantly more proportionately.

In addition, those currently not being paid or only working part time and claiming benefits lose a chunk of the disincentive from earning more, as the marginal earnings increase is improved significantly, which is a major overall benefit.

“MikeSC. This tasx cut is fully costed from raising taxes elsewhere, and has no bearing whatsoever on any other cuts that might happen.”

That makes as much sense as the Tories claiming their inheritance tax cut is fully accounted for. Matching the numbers doesn’t make them intrinsically linked- cutting £1 in taxes and cutting £1’s worth of ID cards doesn’t mean that it is isolated.

It’s still a tax cut that aids the richest- thus costing the poorest in services that they would not be adequately compensated for losing.

The fact is that the Lib Dems have chosen to cut deeper than they need to- even if this gap was plugged with green taxes and the like, they are merely giving with one hand to take away with the other- and giving the richest far more than they need to and far more than is sensible when public services are under threat.

Mike, how is increasing taxes on the rich giving them money? The LD tax policy is revenue neutral overall, designed to rebalance the system in favour of the lowest paid, which is what it does.

If you can explain how increasing taxation on the wealthiest is somehow giving them more money then the rest of your point might have some validity.

To clarify this paragraph- That makes as much sense as the Tories claiming their inheritance tax cut is fully accounted for. Matching the numbers doesn’t make them intrinsically linked- cutting £1 in taxes and cutting £1’s worth of ID cards doesn’t mean that it is isolated from the £10 in cuts that come from somewhere else. Because the poor will suffer most by the “100% cuts” that your party has promised to deal with the deficit, more than the comparatively little they will gain in tax cuts.

What cuts, specifically, will hurt the poorest. Name them.

My concern about the analysis of the Lib Dem proposals is that it seems to be based on a very specific (and narrow) definition of “fariness”.

Hence, for example, my own guest post over on Left Foot Forward – http://www.leftfootforward.org/2010/03/tax-policies-aren%E2%80%99t-just-about-who-gets-what-money/ – pointing out that taxing people out of the income tax system brings them more benefits than simply the end of year difference in their total tax payments. Not having to deal with an at times complicated and imposing bureaucracy for example.

“Mike, how is increasing taxes on the rich giving them money? The LD tax policy is revenue neutral overall, designed to rebalance the system in favour of the lowest paid, which is what it does.

If you can explain how increasing taxation on the wealthiest is somehow giving them more money then the rest of your point might have some validity.

Far more than they need to, is what I said. They don’t have to make it tax neutral do they? Tax neutral means more cuts. More cuts harm the poorest vastly more than the richest, and the Lib Dems are positioned to cut more than any other party. You cannot isolate your tax-neutrality from your intention to cut deeper than is politically necessary when others are prepared to look at raising taxes on the rich in order to protect public services as much as possible, rather than raise taxes on the rich as slightly as necessary to compensate for this measure.

“What cuts, specifically, will hurt the poorest. Name them.”

Are you aware that we are looking at future cuts in more or less every department? To name individual possible cuts would be ridiculous.

More cuts harm the poorest vastly more than the richest

You assume that the only cuts possible are to services to the poor.

This isn’t true. How is cutting the Trident programme and scrapping the ID card scheme, as the two biggest headline examples, hurting the poorest?

My household currently lives below the poverty line. When you talk about how the policies I’m supporting are going to hurt the poorest, you’re asserting they’re going to hurt me and my family. Given that I’ve read them all through in a fair amount of detail, don’t you think I’d know if they were going to make me worse off?

They’re not. I’ve checked.

Your argument that “this money you’re raising could be used on other things” has some validity, but that’s not how the policy was designed. The headline objective of the tax commission set up by Kennedy in 2005 was to raise the threshold to bring the lowest paid out of tax. The other tax rises are being introduced to pay for this objective, one which is a genuinely good thing to do in my opinion.

You disagree; that’s fine, but calling it regressive when it palpably isn’t and then repeating the same talking points without adding substance when asked makes for a frustrating discussion.
==
I’ve just got your comment saying that asking you to name a cut is ridiculous. Sorry, but repeating an assertion that supposed cuts as a result of this policy will hurt the poorest when this policy doesn’t involve any cuts is a lot more ridiculous.

Yes, every department will be asked to make cost savings; if you haven’t seen examples of public sector waste across the board, including health and education (I work in the latter, I see wasted resources, especially at LEA & OFSTED level) then there’s very little that can be said to persuade you otherwise. Money can be saved in a vast variety of ways, without actually hitting front facing services.

If you have an ideological attachment to the idea that this isn’t so, then you’re not going to accept anything further I say as being valid, regardless of any specific facts.

So, I say again, what cuts have the LDs proposed that you dislike. Name one. Just one.

“You assume that the only cuts possible are to services to the poor.

This isn’t true. How is cutting the Trident programme and scrapping the ID card scheme, as the two biggest headline examples, hurting the poorest? ”

For the last time: “That makes as much sense as the Tories claiming their inheritance tax cut is fully accounted for. Matching the numbers doesn’t make them intrinsically linked- cutting £1 in taxes and cutting £1’s worth of ID cards doesn’t mean that it is isolated from the £10 in cuts that come from somewhere else. Because the poor will suffer most by the “100% cuts” that your party has promised to deal with the deficit, more than the comparatively little they will gain in tax cuts.”

You’re cutting Trident and then cutting taxes- all the while other areas are being cut. There is no imperative to cut Trident and then use that money to lessen the tax-rises on the rich rather than lessen the cuts in other services.

16. Luis Enrique

Alix is surely right – you can’t help people who don’t pay tax by adjusting the tax system, so it’s no criticism of any proposed adjustment that it doesn’t help people who don’t pay tax.

“Alix is surely right – you can’t help people who don’t pay tax by adjusting the tax system, so it’s no criticism of any proposed adjustment that it doesn’t help people who don’t pay tax.”

You can’t help them- but you can hurt them further by adjusting tax so that you have less money at your disposal than you otherwise would to pay for public services.

18. rob tennant

I am not exactly the Lib Dems’ biggest fan. I find them at times self-righteous, annoying and pedantic – and I would say all of these things of Mat Bowles, who seems to spend most of his time on LibCon attacking anyone who would dare criticise the Lib Dems’ latest policy or gaffe-laden interview.

However, as someone on a low wage, I can instinctively and rationally see the difference raising the threshold will make. I have no objection to paying taxes. However the combination of NI contributions and income tax on my salary takes a massive chunk out of my already low wages. I want to pay into the system. But because I earn so little, to not have to pay tax on the first £10,000 would make a massive difference to my life.

The Lib Dems’ tax policy, of raising the threshold and paying for it with the green taxes, the mansion tax and closing the IHT and CGT loopholes, strikes me as the most progressive policy under debate in this election. If implemented, it would make a massive difference to my life and that of millions on low wages. Yes, we aren’t so poor that we don’t work at all: but surely when we earn so little, it’s pure common sense (as well as just and fair) to tax us less and tax the rich more?

The only criticism I would make is that Clegg and Cable aren’t being clear enough about what they would cut. Is it true that they would pay for the deficit with 100% cuts and no rises in taxes? How does this square with all the taxes mentioned above, that will pay for raising the threshold? Or do those taxes just about cover the raising of the threshold, and so there won’t be enough leftover for deficit reduction?

And before Mat Bowles attacks me again for not knowing enough about what Clegg and Cable are currently saying, yes the media is a bitch and doesn’t always report on what the Lib Dems’ position currently is. But I defy anyone who isn’t an anorak to be completely clear about who is right in terms of where the cuts will fall and what is or isn’t ringfenced: David Laws, Clegg and Cable have all said contradictory things about cuts recently.

One final thought: if the cuts being proposed by the Lib Dems are to Trident, ID cards etc, why doesn’t Clegg say it? Or has he, but then got carried away by praising Thatcher? The message Mat Bowles describes, of only cutting the shit and keeping public services untouched, would be incredibly popular. Instead, what we got from Clegg was “savage cuts”.

19. Luis Enrique

MikeSC

Of course you’re right. But what reasons are there to believe that the proposed LibDem increase in the starting threshold would be accompanied by a reduction in those public services used by the poorest people? There are so many other margins for adjustment (included tax increases .. didn’t I read about Clegg proposing a bank tax?) I don’t see why anybody should immediately worry about the sort of public tax cuts you appear to be worried about.

I’d have thought that increasing the rewards for working at the lower end of the wage distribution, is an attractive policy from a left-wing point of view.

20. rob tennant

you can hurt them further by adjusting tax so that you have less money at your disposal than you otherwise would to pay for public services

Geniusboy, they would raise the difference through green taxes, the mansion tax, and adjusting IHT and CGT – what about that is hard to grasp?

Seriously, I’ve read the LFF briefing paper, and the comments: and the criticism that this doesn’t help people who don’t pay tax completely misses the point. It’s like saying that increasing benefits to the poor doesn’t help people who aren’t eligible for benefits. It’s not supposed to!

I think all of the criticisms are hot air and hogwash from Labour supporters jealous they didn’t think of it first. I wonder if they criticised Brown for bringing in the 10p tax band – it certainly explains why they were so silent over him removing it, whilst ordinary people were incredibly angry.

21. rob tennant

I’d have thought that increasing the rewards for working at the lower end of the wage distribution, is an attractive policy from a left-wing point of view

It is an attractive policy from the view of a left-wing, low-paid worker like myself. I don’t understand the opposition to it from Labourites. Maybe they need to earn closer to £10k per year to see how it makes a positive difference to the lives of low-paid people.

“Of course you’re right. But what reasons are there to believe that the proposed LibDem increase in the starting threshold would be accompanied by a reduction in those public services used by the poorest people? There are so many other margins for adjustment (included tax increases .. didn’t I read about Clegg proposing a bank tax?) I don’t see why anybody should immediately worry about the sort of public tax cuts you appear to be worried about.

I’d have thought that increasing the rewards for working at the lower end of the wage distribution, is an attractive policy from a left-wing point of view.”

The Liberal Democrats have said that they will deal with the deficit with 100% cuts, 0% net tax rises. There is no need for these green taxes and bank taxes and the like to go alongside a tax cut that favours the rich more- this commitment to tax-neutrality is one that the Lib Dems have imposed upon themselves.

“Geniusboy, they would raise the difference through green taxes, the mansion tax, and adjusting IHT and CGT – what about that is hard to grasp?

Seriously, I’ve read the LFF briefing paper, and the comments: and the criticism that this doesn’t help people who don’t pay tax completely misses the point. It’s like saying that increasing benefits to the poor doesn’t help people who aren’t eligible for benefits. It’s not supposed to!”

For fuck’s sake, read. It is not that this doesn’t help the poorest who don’t pay tax, it is that it actively harms them by reducing the pool of money with which public services are funded. Green taxes and bank taxes are all very well and good- but *they* are offset by this tax cut that means those taxes wouldn’t be able to be used to protect public services from the heavy scythe of Clegg.

23. Luis Enrique

There is no need for these green taxes and bank taxes and the like to go alongside a tax cut that favours the rich more

what tax cut that favours the rich more? raising the starting rate is hardly a tax cut for the rich.

I take your point about the commitment to net tax neutrality, and your concerns about where they will cut … but given that commitment, I still think that raising the starting rate is a good idea. Ok, you’d prefer to see it accompanied by tax increases elsewhere.

From Left Foot Forward: “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”

25. rob tennant

Favouring the rich more??

What the fuck?

Person A earns £12,000 per annum. Raising the threshold to £10,000 helps them massively.

Person B earns £34,000 per annum. Raising the threshold to £10,000 helps them a little, as they are now in the 40% tax band.

Person C earns £151,000 per annum. Raising the threshold to £10,000 doesn’t really help them at all, as they are now in the 50% tax band.

So the richer you are, the less this tax cut benefits you.

What about that is hard to compute, MikeStupidCunt?

26. George W Potter

My father has to live on quite a bit less than £10k a year. Yet he still has to pay tax and rates he can’t really afford. Any proposal that would reduce that tax burden would help him immensely. A £300 saving for example would mean a lot more to him than it would to someone on £100k. And since this measure would be funded by closing tax loopholes for the wealthy I don’t see how anyone who actually cares about people on low incomes could possibly object.

And if Labourites want to criticise then maybe they should come up with a counter proposal instead of trying to nit pick the Lib Dems’ ideas. Strangely, the last thing I recall this Labour government doing with regards to taxes on people with low incomes was them abolishing the 10p tax band. Thanks for that, way to stick up for those of us living below the poverty line.

Do you not know how our tax system works?

Read the report this post is in reference to- http://www.leftfootforward.org/images/2010/03/Think-Again-Nick-FINAL.pdf

Actually read it.

Last comment was @25

@26- Getting rid of taxation all together would leave your father with extra money- but he wouldn’t gain in proportion to the public services he would be losing.

There is nothing intrinsically linked between this cut and closing loopholes for the rich- it isn’t a choice between both or neither.

29. George W Potter

Just to add a bit more, yes those who are wealthier might have an absolute gain that is larger. But it is the relative gain that is more important. If you’re living on £100 a week then a £10 gain is a 10% increase in your income. If you’re living on £1000 a week then a £20 is a 2% increase in your income. And so on and so forth as you move up the income scale. Furthermore, this kind of proposal is in some ways better as a huge chunk of society stand to gain from it and will therefore be more likely to support it as they have a stake in it. It’s the same principle as the NHS, you /could/ offer it only to people who can’t afford to go private but making it available to everyone ensures that it is supported by people across society, thereby helping to ensure it won’t be done away with by the next right wing government with a bee in its bonnet about cutting taxes to the exclusion of all else.

“But it is the relative gain that is more important. If you’re living on £100 a week then a £10 gain is a 10% increase in your income. If you’re living on £1000 a week then a £20 is a 2% increase in your income”

It’s still £30 out of the public pot, from which the person on £100 a week would derive more benefit than the one on £1000

31. rob tennant

Green taxes –> increased revenue from tax.
Mansion tax –> increased revenue from tax.
Closing CGT and IHT loopholes –> increased revenue from tax.
Raising threshold –> decreased revenue from tax.

The policy is costed. The tax rises pay for the tax cut. Simples.

As to what other cuts in expenditure Clegg is proposing, it’s not so simples. But that is separate. We are judging this one policy, which could be implemented in the event of a hung parliament. Notice that his savage cuts weren’t one of the four “tests”.

And I’ve read the LFF briefing, you partisan twat. Their principle objection is not that it gets low-paid workers out of paying tax, but that doing so increases the gap between the low-paid and those who dont get paid at all.

Well, golly gee willakers. My idea of equality is not keeping low-paid workers poor so that they don’t have too much more than those not in work. If you want equality you have to reduce the earnings of the richest, and increase the earnings of the low-paid. Tax does that. As this tax is revenue-neutral, it will rebalance the tax burden to fall more on the rich, without cutting expenditure to cover it. Benefits can be paid to those who can’t or won’t work.

32. George W Potter

I have read it. And, as already stated by several people, it misses the point.

And what are these public service cuts the Lib Dems are going to make then? Their policies include supporting the NHS, education, the welfare system, etc. Take a look at their policies sometime. On all key public services their priorities are focused more on the reallocation of funding than reducing it. Cutting bureaucracy in the NHS for example and passing on the freed up money to fund front-line staff instead.

In any event, you’re missing the point. Even if we assume that the Lib Dems are big bad wolves, out to cut services to the bone, that doesn’t mean that this particular policy idea is wrong. I can’t understand why Labour supporters haven’t taken it up themselves instead of criticising when they have no alternative to offer.

33. rob tennant

I can’t understand why Labour supporters haven’t taken it up themselves instead of criticising when they have no alternative to offer

They wish they had thought of it first, and need to deflect attention away from the Lib Dems’ main appeals to the left!

Either that or, as pointed out above, their notion of equality is not everyone doing better but everyone doing badly.

“Green taxes –> increased revenue from tax.
Mansion tax –> increased revenue from tax.
Closing CGT and IHT loopholes –> increased revenue from tax.
Raising threshold –> decreased revenue from tax.

The policy is costed. The tax rises pay for the tax cut. Simples.”

Green taxes –> increased revenue from tax.
Mansion tax –> increased revenue from tax.
Closing CGT and IHT loopholes –> increased revenue from tax.

Oh look, now we don’t have to cut so much in public services!

“And I’ve read the LFF briefing, you partisan twat. Their principle objection is not that it gets low-paid workers out of paying tax, but that doing so increases the gap between the low-paid and those who dont get paid at all.”

No it isn’t, it is that those who would be taken out of taxation in work gain less than the middle and higher. It is taking £100 of possible public expenditure and giving £6 to those in work who would be taken out of taxation, £0 to those poor enough to not pay tax whether in work or not, and £94 to the rest. Those poorest two groups would be far better served by £100 in public services.

35. George W Potter

@31 great post.

“And what are these public service cuts the Lib Dems are going to make then? Their policies include supporting the NHS, education, the welfare system, etc. Take a look at their policies sometime. On all key public services their priorities are focused more on the reallocation of funding than reducing it. Cutting bureaucracy in the NHS for example and passing on the freed up money to fund front-line staff instead.

In any event, you’re missing the point. Even if we assume that the Lib Dems are big bad wolves, out to cut services to the bone, that doesn’t mean that this particular policy idea is wrong.”

They have said that they will deal with the deficit with 100% cuts. That is a lot of cuts. Rather than spending £17billion on a tax cut that benefits the middle and over disproportionately, it would be better spent in the interests of the poor on making some of these cuts less “savage”.

37. rob tennant

@35, cheers. I’ve said it so many times now to this mad Labour bitch that I must be close to refining the argument.

@36

They have said that they will deal with the deficit with 100% cuts

I’m getting bored of this, as I have no real desire to defend the policies of another party with people who are so partisan they cannot see the wood for the trees.

Clegg did say that. It’s not defensible.

But it isn’t one of his four tests. The Lib Dems won’t deal with the deficit. They won’t form the government. If there is a hung parliament, between one and four of the four tests will be their price for cooperation. Even then, whoever wins might decide to form a minority government, and call for a second election.

We aren’t talking about deficit reduction or cuts in services here. We are talking about this particular tax policy. There is an outside chance it will be implemented. But it is separate from their deficit reduction policy, which I disagree with. This policy is budget-neutral: its cut is paid for with its rises. So it has no effect on deficit reduction.

I imagine you think we should raise taxes on the poor and low-paid so that they will get more money into public services. Ever heard of marginal propensity to save? No? Fuck off and good night, you stupid Labour twat.

Can someone who is actually going to vote Lib Dem please take over from telling this idiot he is wrong?

All this is just part of the phoney war between those who believe the fiscal deficit can be closed through tax rises and those who believe it can be eliminated by spending cuts alone. They are both wrong and politicians who are selling this message are lying to you. Everyone across the income distribution will be paying more tax and all public spending will be falling in real terms from its present value. That is just the reality of the next decade. Consider the increase to 50% of the top rate. The independent IFS calculate it could possibly be revenue negative. That is an indication of the enormity of trying to close such a deficit by taxing a relatively small group of people more. There are just not enough ‘ wealthy ‘ people to close the deficit through taxes only falling on those higher up the income distribution. To raise significant revenue lots of people need to be paying it and that is why VAT will rise to 20% in the next parliament, no matter who wins.

39. rob tennant

I should make this point clearer, then I really am done: there is an outside chance that, being one of the four “tests”, this tax policy will be implemented by a Labour or Tory minority government. But Clegg’s ‘savage’ cuts are not one of the tests. They are not part of the deal. Labour and the Tories have their own (ever-shifting) commitments on tax rises vs budget cuts. It is perfectly plausible that they will implement this tax policy alongside whatever other budget cuts or tax rises they believe in. So let’s play the ball and not the whole fucking stadium here, please. Except someone else can. Cos you’re blind and I’m tired of this partisan monkey poo-flinging.

40. George W Potter

@36 There are plenty of cuts that can be made without hitting public services. There are plenty of areas of government where cuts can be made without needing to reduce front-line services. And don’t forget, the deficit is relative to our national income. Once the economy improves the deficit will shrink to a certain extent on it’s own. The Lib Dem approach of delaying cuts until the economy improves would meant hat when cuts /are/ made they would be far less than otherwise necessary. You shouldn’t just assume that “all cuts are bad and will hurt the poorest”, there are plenty of cuts to be made that might well help the poor by reducing the unnecessary burden on state resources. I’d much rather the local job centre employed a few more staff rather than the department as a whole hire some more administrators.

In any event, I have yet to see any real argument against this particular proposal. Yes it will help the middle classes some as well as the poor. But it will help the poor the most and that’s what counts. The overall package involves taking money from the wealthier and passing it to the poor. How can anyone on the left object to that?

“But it isn’t one of his four tests. The Lib Dems won’t deal with the deficit. They won’t form the government. If there is a hung parliament, between one and four of the four tests will be their price for cooperation. Even then, whoever wins might decide to form a minority government, and call for a second election.”

Irrelevent- bad policy doesn’t become good policy just because the party doesn’t have a hope in hell. The plan put forward by the Liberal Democrats is idiotic.

“We aren’t talking about deficit reduction or cuts in services here. We are talking about this particular tax policy. There is an outside chance it will be implemented. But it is separate from their deficit reduction policy, which I disagree with. This policy is budget-neutral: its cut is paid for with its rises. So it has no effect on deficit reduction.”

Why the fuck is it separate? Tax means nothing without reference to what it is spent on. There is no such thing as a budget-neutral tax cut, even if they have matched the pennies. They have made the decision to spend the money they would gain from their other tax rises on this tax cut that favours the poorest the least. They were under no obligation to do so, their green taxes and so on could have funded whatever they like- and they chose a scheme that would increase inequality between the lower-working and the middle-working rather than use it to protect valuable public services from cuts.

“I imagine you think we should raise taxes on the poor and low-paid so that they will get more money into public services. Ever heard of marginal propensity to save? No? Fuck off and good night, you stupid Labour twat.”

You don’t need to use your imagination when you have eyes to read- if I’ve said I support it, then I support it. If I haven’t, then don’t assume. It make an ass of u and a prick as well.

“@36 There are plenty of cuts that can be made without hitting public services. There are plenty of areas of government where cuts can be made without needing to reduce front-line services. And don’t forget, the deficit is relative to our national income. Once the economy improves the deficit will shrink to a certain extent on it’s own. The Lib Dem approach of delaying cuts until the economy improves would meant hat when cuts /are/ made they would be far less than otherwise necessary. You shouldn’t just assume that “all cuts are bad and will hurt the poorest”, there are plenty of cuts to be made that might well help the poor by reducing the unnecessary burden on state resources. I’d much rather the local job centre employed a few more staff rather than the department as a whole hire some more administrators.”

If you can make savings without harming public services- then good, this should be done anyway, you can then spend those savings on better public services rather than wasting them fruitlessly. Do you think that is the reality considering how huge these cuts will have to be?

“In any event, I have yet to see any real argument against this particular proposal. Yes it will help the middle classes some as well as the poor. But it will help the poor the most and that’s what counts. The overall package involves taking money from the wealthier and passing it to the poor. How can anyone on the left object to that?”

The “overall package” contains unnecessary, harmful individual policies. It doesn’t have to be all of it or none of it.

Let’s get this “budget-neutral” nonsense clear.

Say Mr A has £10 of debt. He takes that £10 out of the money he would have spent on his child.

He also decides to raise £5 by cutting down on his smoking. He spends that £5 on booze instead.

Is that then completely neutral because they both happen to be the same amount?

“I should make this point clearer, then I really am done: there is an outside chance that, being one of the four “tests”, this tax policy will be implemented by a Labour or Tory minority government. But Clegg’s ’savage’ cuts are not one of the tests. They are not part of the deal. Labour and the Tories have their own (ever-shifting) commitments on tax rises vs budget cuts. It is perfectly plausible that they will implement this tax policy alongside whatever other budget cuts or tax rises they believe in. So let’s play the ball and not the whole fucking stadium here, please. Except someone else can. Cos you’re blind and I’m tired of this partisan monkey poo-flinging.”

Doesn’t change the fact that it is a policy that takes £17billion to reduce the tax burden by £1billion on those who would come under the threshold, and £16billion on those who would still pay tax- as it says on LFF, benefiting the 9th group four times more than the 1st.

So, erm, are Labour opposed to cutting tax for the poor? It’s quite confusing. As someone who was hit hard when Brown monkeyed around with the 10p tax-band I can tell you straight that this LibDem policy is very appealing. If only they’d ditch their Thatcherite leader….

MikeSC, “revenue neutral” when used with regard to tax (if that’s what you mean by budget neutral) is a phrase with a specific definition. It means one area of the tax take reduces while another rises to compensate. Google it. That has been the accepted definition for a good twenty years to my knowledge.

You are right to suggest that raising the overall tax take could be used to fund more public services instead of offering a tax cut. On that we have a perfectly respectable ideological difference. But the term “revenue neutral” is being used correctly on this thread and you’re not helping your argument by attempting your own redefinition.

I think it’s a good move. Raising the starting threshold at which people pay income tax is one of the most progressive policies to be pushed forward at this specific moment in time.

I just hope the Lib Dems stick to it though!

48. rob tennant

Claude, they will. It’s their USP at the moment, just like their opposition to the war and tuition fees were in 2005. I am not their biggest fan but this policy ticks all the boxes on my progressive test. And as a low wage worker, it would make a massive difference to my life. God Bless Those Lib Dems!

“MikeSC, “revenue neutral” when used with regard to tax (if that’s what you mean by budget neutral) is a phrase with a specific definition. It means one area of the tax take reduces while another rises to compensate. Google it. That has been the accepted definition for a good twenty years to my knowledge.

You are right to suggest that raising the overall tax take could be used to fund more public services instead of offering a tax cut. On that we have a perfectly respectable ideological difference. But the term “revenue neutral” is being used correctly on this thread and you’re not helping your argument by attempting your own redefinition.

I’m perfectly aware, of course, you’ve missed the point- in a metaphor using an individual rather than a state it would make no sense to talk tax- the income derived from smoking less was the tax increase, the income lost on booze was the tax cut. Just because they align numerically doesn’t mean that there is any link between those two individual policies. It is a complete non sequitur.

I’ll rephrase the metaphor- a party has a £10 deficit to sort out, and they choose to deal with that deficit with £10 worth of cuts.

They also raise £5 from green taxes and the like. They decide to spend £1 of that on (some of) the working poor and £4 of that on the rich- increasing inequality and stopping themselves from being able to reduce the cuts by £5. The poor lose the lion’s share of £5 in public services in exchange for £1 in cash.

There is no natural alignment between the tax cut and the tax rise just because they are of the same amount. The Lib Dems could choose what to spend that £17billion on, and they have chosen badly.

About to watch a film, won’t be able to comment again tonight-

I do understand that raising the amount of disposable income of the poor is a good thing. But, as LFF notes, poverty and social exclusion aren’t just a lack of income- they are the result of what that income implies a person has to do without.

It says above that the tax cut “has the *effect* of lifting low-earners out of poverty.” No it doesn’t, you’re looking at an extremely simplistic view of poverty. Because this is a policy that would spend a small amount on giving the low-paid more disposable income compared to the overall cost of it- it has the effect of hurting low-paid workers compared to the public services that money could save.

Your simplistic view of poverty as merely disposable income would see a person on £9000 (and the NHS) considered less well off than a person on £9001 (without the NHS).

“Just because they align numerically doesn’t mean that there is any link between those two individual policies.”

I’ll say it again. To say a tax proposal is “revenue neutral” means that it raises taxes in one area and lowers them in another, so that the net tax take to the government remains the same (about 39.2% currently). I’m sorry, but I didn’t make this definition up. You’re really letting yourself getting hung up on a semantic point.

“and they have chosen badly.”

Again, that’s an ideological judgement. As I said on the LFF thread, you want a bigger safety net/more public services, I want to rebalance the tax system. What you should be saying is “I disagree with this revenue neutral proposal to make the tax system fairer. I want to raise taxes and spend them on public services instead.”. Instead you’re trying somewhat pointlessly to argue that “revenue neutral” means something other than what it does.

Mind you, at least you have quickly come down to the ideological brass tacks of this, which I welcome. The LFF piece was silly because it tried to apply the term “regressive” to a proposal that tackled regressiveness and because it failed to understand that a tax cut can only benefit people who pay tax. I’d have been much less inclined to comment to the extent that I did if they’d just said, like you are, “We think there are better ways of spending that money.” Ok, think that. Just don’t expect people on low incomes (like me, for instance) and/or people who want to see the balance of taxation shifted from income to wealth (again like me) to agree with you.

I have to say this has been the most amusing thread I’ve read in ages. I love your assertion, MikeSC, that somehow the Lib Dem’s, a party that was the FIRST mainstream party to call for a higher taxation on those earning over £100k, are trying to make the rich richer and the poor poorer. I guess because it was Labour that finally gave in an did it that suddenly the fact it was a Lib Dem policy first is redundant.

I also love the idea, MikeSC, of you hiding behind dodgy statistics that exist solely to try and make the false argument that Labour are somehow better (after cutting the 10p tax band that plunged the poor deeper in to poverty) at keeping the poverty gap (which has been growing since they got in power) closed.

The thing that concerns me from reading the LFF report (apart from the lack of direct sourcing of their information) is that this is a report based on assumptions that aren’t explicitly said. Why has it been assumed that with a raise of the personal allowance to £10k that the higher rate income band will also rise? I know that it’s labour’s policy to increase the bands in line with each other, but that is more of an inflationary issue than one of fairness. Nowhere in any literature I can find do the Lib Dems say they’ll be changing the tax bands, so in reality there is very little proportional gain for those on higher incomes; if a Lib Dem or someone else wants to point out where they have said it I’ll gladly take this all back.

Then there is the issue of MikeSC’s hang up on the £17bn while only £1bn goes on the poor analysis. Aside from the seemingly flawed LFF analysis that in predictably partisan manner tries to fight the corner for taxing the poor only to give it back to them in welfare (while the Lib Dems here *don’t* tax the poor and still give it back to them in welfare), it’s a naive way of doing mathematics.

“It’s still £30 out of the public pot, from which the person on £100 a week would derive more benefit than the one on £1000”

The tax policy is neutral, so even if only £1bn went on the poor that is still (assuming the poor don’t own mansions, take advantage of lax inheritance taxation laws, have huge capital gains or fly to their UK destinations) a £1bn redistribution of wealth away from those that are easily richer to those that are poorer. You can present it as much as you want as £16bn being spent on the not-poor, but when the not-poor are paying for that £16bn and then some it becomes a highly redundant point.

Are the highest paid going to be 4 times absolutely “better off” than the poorest under Lib Dem proposals? Maybe they are, from the narrow perspective of income tax alone. Does that matter? Not one jot. If I have only one cookie and someone gives me another I’m 100% better off in cookie glee. If my neighbour has 1million cookies and they get 4 more cookies then in the grand scheme of things they are still going to be needing a crane to get them in and out of the bath; especially since the cookie increase is paid for by taxation on an individuals body fat content.

Basically it’s £30 out of the public pot for the person on £100 a week, and £30 for the person on a £1000, but only after the person on £1000 has put £60 in.

And yes, MikeSC, you *CAN* try and muddy the waters by saying that if you put all the money in to one big pot then it doesn’t really matter if the poor tax saving comes from other tax rises, as they could be perceived to have come from public spending cuts. But the reality is this isn’t happening, and it’s fairly insulting for you to try and browbeat your way past this point when people have very thoughtfully explained it for you.

You say: “Is that then completely neutral because they both happen to be the same amount?”

Oh sneaky little bugger you.

I’d repeat MatGB’s calls for you to name one spending cut that Lib Dems have stated that will specifically take money away from the poor.

To go with your woeful analogy, what is really happening is that a guy is taking £10 a month out of his booze budget to spend £10 on his child’s clothing, while at the same time he is also raising £5 to spend on his kid’s school text books by cutting his £5 monthly subscription to the Labour party in an effort to stop the creep of authoritarian policies that will erode his child’s rights 😉

The reality is completely that “who benefits” is the poorer person. They get a tax break with no frontline public service cuts, while richer people see their tax bill redistributed into other areas of tax (with middle England being nicely catered for by a smaller tax break paid for still by the abundantly rich). It’s hard to admit it, MikeSC, I know, but you’re just quite patently wrong on this issue.

“If you can make savings without harming public services- then good, this should be done anyway, you can then spend those savings on better public services rather than wasting them fruitlessly”

But unfortunately this is the mentality of a Labour supporter isn’t it? You’ve let your party screw over the poor for so long that you’ve forgotten that you could already have cut the waste but your party is ingrained in the practice of funding middle management and needless strategic and advisory third parties. We *COULD* spend the savings on more public services, but how is that exactly going to tackle the debt that continues to grow in our name?

Continue to ignore that the Lib Dem policy is to increase spending in key areas such as education, welfare and pensions, while cutting things that this country does not want or need. Continue to ignore that the only way the taxation changes are funded is by richer people paying different tax and slightly more of it. Continue to ignore that the Lib Dems have made no statement whatsoever that they’re going to cut frontline services or welfare, in fact they’ve stated very much in an opposite direction. But ignorance on a subject doesn’t make you anywhere near correct.

“Your simplistic view of poverty as merely disposable income would see a person on £9000 (and the NHS) considered less well off than a person on £9001 (without the NHS).”

Show us where Lib Dems have said they’re going to reduce front-line NHS support for the public.

54. rob tennant

@Alix

Who’s to say we have to choose between reshifting taxes towards the rich and away from low-paid workers, and increasing benefits for the poor? Perhaps if we reduced the level at which people pay the 50% tax rate, that could pay for it. I think Mike and the gooners at LFF have forced an ideological distinction that need not be: to say that, if you absolutely must choose between giving low paid workers more income and giving the unemployed more benefits/paying more into public services, is a false choice – because as progressives we believe in both.

Do I want to have my cake and eat it? Most probably.

Lucky enough, the film is shit.

“I’ll say it again. To say a tax proposal is “revenue neutral” means that it raises taxes in one area and lowers them in another, so that the net tax take to the government remains the same (about 39.2% currently). I’m sorry, but I didn’t make this definition up. You’re really letting yourself getting hung up on a semantic point.”

It’s not a semantic point at all- in saying that it is “revenue neutral”, people are trying to make it out as if it’s isolated- unconnected to the rest of economic policy. It’s not. They are under no obligation to spend the money raised from the other tax rises in this way. Revenue neutral is an obfuscation, nothing more.

“Again, that’s an ideological judgement. As I said on the LFF thread, you want a bigger safety net/more public services, I want to rebalance the tax system. What you should be saying is “I disagree with this revenue neutral proposal to make the tax system fairer. I want to raise taxes and spend them on public services instead.”. Instead you’re trying somewhat pointlessly to argue that “revenue neutral” means something other than what it does.

Mind you, at least you have quickly come down to the ideological brass tacks of this, which I welcome. The LFF piece was silly because it tried to apply the term “regressive” to a proposal that tackled regressiveness and because it failed to understand that a tax cut can only benefit people who pay tax. I’d have been much less inclined to comment to the extent that I did if they’d just said, like you are, “We think there are better ways of spending that money.” Ok, think that. Just don’t expect people on low incomes (like me, for instance) and/or people who want to see the balance of taxation shifted from income to wealth (again like me) to agree with you.”

It is completely regressive. It increases the gap between rich and poor and middle and poor. It transforms money spent on services into money in pockets, and during this transformation the poorest lose out as the services that could be saved with that money are more valuable than the little that they gain.

Let’s look at this £17billion of public spending that potentially wouldn’t have to be cut. Far more than 6% of that benefits those on less than £10,000. It is turned into a tax cut in which only 6% benefits those on less than £10,000. It is not a good deal for the poor whichever way you slice it- it is a proposal that will take more from the poor than it will return, that’s not fair and that’s not progressive.

“Who’s to say we have to choose between reshifting taxes towards the rich and away from low-paid workers, and increasing benefits for the poor? Perhaps if we reduced the level at which people pay the 50% tax rate, that could pay for it. I think Mike and the gooners at LFF have forced an ideological distinction that need not be: to say that, if you absolutely must choose between giving low paid workers more income and giving the unemployed more benefits/paying more into public services, is a false choice – because as progressives we believe in both.”

I haven’t forced any such thing. I quite clearly said that giving the poor more disposable income is a good thing- but it is not a good thing when, in order to do so, you cut far deeper than you otherwise would have to. £17billion in lost public funding to pay for £1billion in tax cuts for those on under £10,000 is not progressive.

Alright, so we can now be sure that MikeSC is a blinkered Labour mouthpiece deployed to fly in the face of logic and reality…I think we can draw a line under this particular conversation given it’s going nowhere?

As for a more interesting side of things, Rob, I didn’t think they were exclusive. Certainly everything I’ve seen come from the Lib Dems (as a voter not a member) is that they are pushing for money to go in to people’s pockets to help them when they need it, as well as to reform the tax system to make it fairer.

The reality is that there is a shed load of money that is being wasted or plans to be wasted by this government. The sheer volume of public spending that can be made more efficient or reclaimed completely means it is not outside the scope of a party to make the right sort of cuts and actually increase the welfare output, albeit marginally.

The trouble with both Labour and Tories is that they have their hearts set on some of these bigger policies that cost too much and offer too little, Trident being the obvious one. It’s too easy to get sucked in to the narrative that cuts MUST mean front-line service cuts, because usually when it’s being said it’s by two parties that if they had to cut anything would rather cut public services rather than the third party management services and pie in the sky expensive policies that don’t benefit the common person one jot.

58. rob tennant

They are under no obligation to spend the money raised from the other tax rises in this way

Is this your whole argument, about the revenue-neutral thing? There is nothing to stop them from spending the money raised from the green taxes etc on raising the threshold! You’re trying to make out like they are unable to do so, for some magic unknown reason.

“Show us where Lib Dems have said they’re going to reduce front-line NHS support for the public.”

That was just an example of the kind of logic Alix was using- taking disposable income as the sole measure of poverty and not considering the public services that money could save- poverty of income should not be divorced from ways to meet needs without expenditure of personal income.

“Is this your whole argument, about the revenue-neutral thing? There is nothing to stop them from spending the money raised from the green taxes etc on raising the threshold! You’re trying to make out like they are unable to do so, for some magic unknown reason.”

There’s nothing to stop them spending money on any other bad idea either should they want to, so what?

His whole argument is that even thought Lib Dem’s have costed a tax alteration that takes £17bn in taxation on corporate expenses and assets that are less easy to hide and avoid, to pay for £17bn of tax cuts that will proportionally significantly benefit the poor….that technically that £17bn of tax cuts doesn’t have to be paid for by the £17bn of revenue raised if you decide to swap the numbers around arbitrarily.

Thankfully by the same logic the £17bn of public service cuts that are made to pay for the £17bn in tax cuts are plugged instantly by the £17bn of tax revenues raised, so the outcome is the same (unless your name is MikeSC).

It’s childish, and it’s why it’s time to stop engaging with him

“That was just an example of the kind of logic Alix was using- taking disposable income as the sole measure of poverty and not considering the public services that money could save- poverty of income should not be divorced from ways to meet needs without expenditure of personal income.”

Oh mikeSC, you really are a crafty little liar.

@52: I can’t be arsed reading all that shit. Browsed through, and it’s nonsense- you don’t know what you’re talking about. You haven’t understood what I am saying, you haven’t understood what LFF said.

This is it in a nutshell for all you hard of thought liberals:

The Liberal Democrats have outlined a policy, and these are the effects of this policy:

-It removes £17billion of potential public expenditure
-It puts £1billion of that into the pockets of those with incomes below £10,000.
-It gives more money to the rich than it does to the poor. They may gain *proportionately* less so that, to them, it is less valuable- this does not change the fact that billions are being lost that could be used more progressively.

We are about to enter a period of deep cuts in public services- the Lib Dems are especially excited, even more so than the Tories, about the savagery of these cuts- 100% of the deficit as opposed to 80%. If you think that this is not going to affect public services, you’re deluded.

Now who benefits the most from public services? The poor of course. Money spent on protecting public services would be significantly more efficient than the 6% that would go to the poor under this plan.

The Liberal Democrats are essentially swapping £17billion of public services for £17billion of tax cuts. The poor gain significantly less from these tax cuts than they would if £17billion of the most effective public services that will have to be cut wasn’t. It would be like scrapping the NHS and then dividing the money saved among the populace with the poor getting 6%- they have gained in disposable income! How progressive! But they have lost in useful services. That it why it is regressive- it is allowing £17billion worth of cuts in public services to go ahead in order to fund £1billion worth of help for some of the poor. From taking a significant share of £17billion they have gone to having £1billion.

64. rob tennant

No public service can put food on the table, clothes on the kids, or gas in the tank. Increasing disposable income for the poorest workers allows them to better meet their everyday needs. End of. Now fuck off, Mike

I’ve read more of the LFF pdf, and it is absolutely mind blowing. In between putting two graphs together that represent two different things (and then putting a measley qualification underneath that one graph shows the impact of one policy in one year while the other a generation of Labour reforms), they completely go off the hypocritical scale.

Apparently it is not enough to judge Labour purely on one policy, as their record shows they’ve redistributed income. Yet when it comes to Lib Dem policy it is absolutely fair game to use a portion of only one policy (not even the whole policy!) to claim the party is being regressive…and even then they manage to fail completely in the logic stakes (as MikeSC so eloquently portrays in this very thread).

I honestly can’t get over how partisan this supposedly non-partisan body have been. It’s a shocking report based on only half of the reality and comparisons to incomparable ideals. Amazing.

MikeSC, you’re a liar and you’re spreading lies. I’m glad everyone can see through this as no-one other than you is moronic enough to take a policy that states clearly £17bn income from extra taxes balanced with a £17bn cost of raising the personal tax allowance threshold, and somehow equate a completely non-announced and imaginary £17bn of public service cuts.

@62: Are you fucking dense?

This is what I said: “Your simplistic view of poverty as merely disposable income would see a person on £9000 (and the NHS) considered less well off than a person on £9001 (without the NHS)”

Which is completely true. Alix said that this measure would help people out of poverty. No it wouldn’t, because in order to pay for this slight increase in disposable income the poor lose in potential public services that would otherwise not have to be cut.

“No public service can put food on the table, clothes on the kids, or gas in the tank. Increasing disposable income for the poorest workers allows them to better meet their everyday needs. End of. Now fuck off, Mike”

This is a good example of the kind of idiocy that Alix’s premise can lead to (that disposable income is the only measure of poverty, public services don’t come into it).

Are you better able to put food on the table with £100 in disposable income and a charge of £500 for necessary private healthcare or with £90 and an NHS? Are you better able to put clothes on the kids without subsidies for childcare, and thus no option to work? Are you better able to put gas in the tank when you’re doing the morning commute to a fee-paying private school?

“Are you fucking dense?”

Right back at you, you’re the prime example of why we need a government that is pledging to invest more in education, specifically mathematics. Lib Dem’s for example?

Mike, all of those things are already paid for and not under threat. In fact, the LDs also have a fully costed policy to increase education spend for the poorest families.

You, hidden in your posts, have a position. But the way you are arguing it is utterly wrong headed and has mostly already been refuted.

The NHS is not going to be abolished, and education will remain free.

So stop talking bollocks about how the NHS is going to be abolished without this money, it’s bollocks and completely pointless. Come up with an actual real example.

“MikeSC, you’re a liar and you’re spreading lies. I’m glad everyone can see through this as no-one other than you is moronic enough to take a policy that states clearly £17bn income from extra taxes balanced with a £17bn cost of raising the personal tax allowance threshold, and somehow equate a completely non-announced and imaginary £17bn of public service cuts.”

You’ve got to be fucking kidding. It isn’t balanced by £17bn of extra taxes because they do not have to commit themselves to only raising taxes while cutting an equal amount elsewhere. This is about their priorities- and how they would cut £17bn of services that they could easily avoid in exchange for £17bn in tax cuts that do very little for the poor.

You’ve completely misunderstood the LFF report as well…

Good discussion. I agree with Alix that:

“As I said on the LFF thread, you want a bigger safety net/more public services, I want to rebalance the tax system. What you should be saying is “I disagree with this revenue neutral proposal to make the tax system fairer. I want to raise taxes and spend them on public services instead.””

I’m all for taxing the rich and raising £17bn in the ways the Lib Dems suggest.

Personally, I’d have gone for raising the threshold, but putting up the basic rate so that people eaning under £25-30k benefit, rather than people earning more than that. That would free up some cash for another eye-catching initiative. I appreciate the political difficulty in having a higher basic rate of income tax, though, and the way this confuses the message.

But I think simplifying the tax system and spending £17bn on giving people a £700 tax cut probably isn’t the most effective use of that amount of money (though it is above average compared to some of the nonsense that we spend money on).

For example, instead of a flat rate £700 tax cut, we could:

Increase Jobseekers’ Allowance and Employment Support Allowance by £7/week (£2bn)

Extend the Future Jobs Fund to guarantee everyone who has been unemployed for a year or longer the offer of a job (£3bn)

Introduce free childcare for all working parents (£5bn)

Cap the withdrawal rate of benefits at 55% (£5bn)

This would stimulate the economy by putting money in the pockets of people most likely to spend it, make sure that literally everyone would be substantially better off in work than on benefit, reduce unemployment and poverty substantially, all for less than the cost of raising the tax threshold to £10,000.

MikeSC, you’re completely welcome to your wrong opinion. Meanwhile those of us that have read the announcements made by Clegg and Cable about what they’re going to raise and what they’re going to cut in taxation will continue to actually be right.

I beg you, come over to the side of being knowingly right rather than the side of being ignorantly and tragically wrong.

“Mike, all of those things are already paid for and not under threat. In fact, the LDs also have a fully costed policy to increase education spend for the poorest families.

You, hidden in your posts, have a position. But the way you are arguing it is utterly wrong headed and has mostly already been refuted.

The NHS is not going to be abolished, and education will remain free.

So stop talking bollocks about how the NHS is going to be abolished without this money, it’s bollocks and completely pointless. Come up with an actual real example.

This has to be a practical joke, it just fucking has to be.

I NEVER SAID THAT THE NHS WAS GOING TO BE ABOLISHED OR THAT EDUCATION WOULD NOT REMAIN FREE.

I’m going to have to spell it out like I would to a child aren’t I?

Some tool said that public services don’t aid the poor- don’t put food on the table etc. I gave extreme examples of when this is not the case. The fact is that the poor rely far more heavily on public services than do the rich.

To tackle the deficit the Lib Dems want to use pure cuts- cuts in public services, with no ring-fencing. It could come in cuts to the NHS, to education, to welfare, etc. I don’t know yet because they don’t know yet, but they will have to cut.

So they have committed themselves to cuts in public services. Scrapping this tax cut could save £17bn of what they would otherwise cut. A good percentage of that money would go to meet the needs of the poor. Instead, they have chosen to cut £17bn and give tax cuts of which a very little percentage goes to the poor- less than proportionate in fact. Less than 10% of the money used goes to the 10% of people with the lowest income, etc.

The fact that they have chosen to raise taxes by £17bn in other areas is neither here nor there- because they could have chosen whether to spend that money on protecting public services or on this bad policy of tax cuts.

Thank you Dan, an element of sanity into the discussion.

Yes, that money could be spent on those things, however some of the money is being raised through green taxes; polling and feedback shows that people don’t mind such taxes if they are seen to be revenue neutral and not just another way of raising money for the treasury.

Fuel tax protests and similar happen fairly regularly, and Brown’s last way through it (the low sulphur trick) worked, but what can be done next time?

Also, it’s taking the position the wrong way around. It’s not “we’ve found a way of raising £17bn, what do we spend it on”, it was clearly the other way around; when Charles Kennedy set up the Tax Commission, one of the objectives was to rebalance the tax code to take the lowest earners out of tax completely.

That is a clearly stated objective of the policy; the revenue raised from elsewhere is what we’re using to pay for the objective, which is a goob objective in and of itself.

I find it utterly wrong that the tax threshold has tracked inflation for so long that people earning less than what’s judge to be poverty level income are paying income tax. People working full time on minimum wage should not be paying income tax, for a large number of different reasons, including discinentives to work and similar.

That’s the position of the Lib Dems, and it’s a position I held before I joined them (the tax commission report was published soon after I joined, I was already arguing for such a policy indepently).

If you disagree with this policy objective, for whatever reason, fine, we disagree. But don’t mistake the threshold raising as a way to spend identified revenues; it’s the objective of the rest of the policy.

(and when they’ve recovered from conference, someone at Cowley St is going to get a snotty email from me asking why said document is not online so I can link to it, my copy is on an old machine)

“This would stimulate the economy by putting money in the pockets of people most likely to spend it.”

Don…it would give money to a variety of people that may or may not need the support. For instance, free childcare? OK so I’ve got a high power job, so’s my partner, earning £150k collectively and now we can get free childcare too. Brilliant.

I think the point being missed is that this whole tax redress is to ensure that there is no barrier to earning an amount that most people would consider poverty breaking other than lack of opportunity or skills. This is a redress of the issue that even if you have the shittiest most low paid job you aren’t guaranteed by going through that process of having an amount of income that puts you into the range of earnings that takes you out of poverty.

It doesn’t affect in the slightest the other measures to help those in poverty and unable to work, it doesn’t affect the welfare going in to encouraging people back in to work (I’m fairly sure I saw policies somewhere that were encouraging young people in to work experience, for example), it’s just a case of making the system of earning a living instantly fair without having to worry about any welfare hoops to jump through.

Hi Mat,

That’s a good point and helpful clarification about the background to the proposal. And I think it is a good policy (though wouldn’t be top of my list of priorities). The UK would be a much better place if the main political debates were over the balance of priorities between the liberal idea of freeing people by increasing their income vs the social democrat idea of freeing people through provision of public services.

I predict, on a totally unrelated note, that if this policy does get enacted, then it will be no more then a few years before the Right take up the idea that people who don’t pay income tax shouldn’t be allowed to vote – this is already an idea on the fringes of the Republican Party from which they get all their other ideas. This is not, of course, an argument against raising tax thresholds.

“Don…it would give money to a variety of people that may or may not need the support. ”

Indeed, but that’s the nature of universal public services.

And after all, the Lib Dems are proposing to give me a £700 tax cut, and while this would be nice, I’m not sure I need it more than someone who is unemployed or who has got a part time job on the minimum wage.

“That is a clearly stated objective of the policy; the revenue raised from elsewhere is what we’re using to pay for the objective, which is a goob objective in and of itself.”

The policy does not deliver on that objective in a way that makes it worthwhile. As LFF said- only 6% of the cost actually goes towards fulfilling that objective.

“I find it utterly wrong that the tax threshold has tracked inflation for so long that people earning less than what’s judge to be poverty level income are paying income tax. People working full time on minimum wage should not be paying income tax, for a large number of different reasons, including discinentives to work and similar.”

This is the fallacy. That disposable income is the only standard of poverty.

This policy deprives the poor of £17bn worth of public services in exchange for a tiny fraction of that £17bn in cash (if any). This is a policy that will leave the poor worse off than if it was not done.

Lee, that’s the new policy document, I’m looking for the report of the Tax Commission that came out in 2006, and also the policy document passed that year called Fairer Simpler Greener.

The new one is as much about local govt financing as it is national stuff and doesn’t have all of the costings, nor does it have as much of the mid to long term objectives (‘Fair Tax’ is for the very first budget, FSG had stuff in for the whole Parliament).

I’m going to ignore Mike’s repeating the same point again, I thought we’d gotten rid of broken records when we moved away from vinyl, apparently not.

Don, Fair point. For me everyone getting an extra £700 (though a portion of people would see that disappear through certain taxation changes) is at least in my eyes a benefit to the country on a whole for both universal economy boosting reasons and for holistic “national mood” reasons.

I want to see more done for the poor in this country, I’d just like to see it done more through empowerment than dictated routes of benefits, even if there must be a mix of both. I’m certainly not closed down to the idea of middle-income tax rises in the future to fund additional things, but then I’ve always been a fan of the idea of redressing the council tax system in to something more fair to redress that particular issue.

I find I’m having to repeat myself over and over- you haven’t addressed the point at all. They want to remove the poor from taxation, but to do so they want to deprive the poor of more than they will gain.

Rather than sacrificing 94% of £17billion in order to achieve their aim, would it not be 100% more sensible to just not cut some of the areas where they plan to cut savagely? If this was out of actual concern for the poor, I mean, and not a cynical stunt aimed at the middle incomed.

I would love to meet those people who assess their relative poverty based on how many employees their local council has rather than the income in their pocket.

MatGB: Fair enough, I got confused as to what you were looking for 🙂

@83: You sound like Guido Fawkes, sneering at the public sector. I suppose you’ll be happy with the deep cuts that schools and universities are preparing for, as just one example? Because you’ll have a few pints worth more in your pocket?

@ 85. MikeSC

I certainly will not be sneering. The difference is I recognise the enormity of the change that is coming over the next decade. I find the level of denialism on the left and the right bizarre. The left are deluded if they think we can eliminate the fiscal deficit without real terms spending cuts. The right are equally deluded if they believe we can eliminate it by spending cuts alone and no net tax rises.

I would suggest most people who suffer the misfortune of living a life of poverty consider their income as the fundamental determinant of that poverty. A well stocked public library would be of little consolation to me if I could not afford to buy food.

87. Sunder Katwala

There are three separate levels of debate here.

(1) Choices about taxation and spending in 2010.

“What would you spend £17 billion on” is a refreshingly counter-zeitgeist debate.

The LibDems have a revenue neutral package of reforms. They spend £20 billion on the tax threshold change and the pupil premium. They mostly raise that money at the top, except the air taxes. But they also think the structural deficit will be in the region of £80 billion, and they propose to close all of that through unidentified spending reductions – “purely spending cuts”.

The other major parties are equally or more opaque about their deficit reduction plans. So the point to all parties is that questions about tax, spending, deficit and debt levels need to be taken together. (This is a point about tax “connection” the Fabians have been making since the 2000 tax commission, but it is more pressing now).

It is important and good that the LibDems have identified some fair and popular ways to increase revenue. Having done that, and used the revenues, they do not think it is possible to deal with deficit reduction through both tax increases and spending cuts, since they have made and used all the tax increases they think feasible. So the opportunity cost of the tax threshold plan is a similar amount of public spending, beyond areas the party has not already earmarked. It would be difficult for those attracted by the policy to make a final judgement without knowing what they are trading off.

Overall, public spending is highly redistributive in its impact: the LFF paper discusses this. We can all identify public spending we would personally prefer to cut in any event, and other good areas we wouldn’t prioritise, as well as areas we would be very keen to protect. Different choices about spending have very different redistributive consequences: that is almost always missing from public and policy discussion.

(2) Structural changes to the tax system.

That affordability/priorities debate is a separate issue from arguments for and against the proposition “raising the basic rate threshold until it is at least £10k” [or more] should be the top priority for future tax changes.

There are alternative approaches. Replacing the tax threshold with a flat-rate allowance [rebate] would make future changes more distributionally progressive. Going further, the Fabian proposal for a universal tax credit would also benefit those who earn less than £7000, full-time caring responsibilities and those out of work. The reason the low paid pay the highest proportion of their incomes in taxes are the levels of indirect taxation (so income tax-payers are not the only tax-payers).

Without changing current structures, if this money was put into tax credits, it would have a more progressive distributional impact at less cost. Tax credits are assessed on household income. That would not benefit double income households earning over £60k (who currently benefit by £1400 a year) or the highest earning individuals in the top 5% (who benefit by £700). Mark Pack’s objection to this point – and preference for the threshold change over tax credits – suggests it would simplify the system a great deal. I can’t see how it does much of that in practice, because the threshold change is not replacing tax credits (presumably because that would then hit lower earners a great deal, which makes the point that the LibDems, Conservatives all seem to tacitly acknowledge that the complexity issues are outweighed by the enormous pro-poor distributional impact of tax credits).

(3) Underlying philosophy of the tax system: ideas about this may well be reflected in different tax structure proposals.

“Take the poor out of tax” has progressive champions, but it also has others on the right. The latter seek a strict separation and segregation between “recipients” and “contributors”, using narratives of “tax freedom”. We should be suspicious of the long-term motive some have here.

Attempts to sharply divide contributors and recipients are often simplistic: for example, ignoring that a great deal of redistribution is to the same individual across the life cycle, rather more than redistribution between people in fact. But support for public services depends on ideas of shared citizenship, reciprocity and pooled risks.

Within this taxation is also an expression of participation and citizenship: the phrase “I pay my taxes” to legitimate a stake in discussions. Conversely, there are (fringe) attempts to argue a ‘no representation without taxation’ line, as Don mentions.

Another aim is to equate public spending and benefits with “welfare dependency”, though many of us are also dependent (in a non-pejorative way) on various forms of public provision at different times, such as schools, transport, childcare support, health and other services.

@MikeSC “Alix said that this measure would help people out of poverty.”

If you have a look at the LFF thread you’ll see I corrected myself – I of course meant out of tax. (I wouldn’t presume to calculate what might lift people out of poverty. Just shows how ubiquitous that language has become.)

Mike said :

““Show us where Lib Dems have said they’re going to reduce front-line NHS support for the public.”

That was just an example of the kind of logic Alix was using- taking disposable income as the sole measure of poverty and not considering the public services that money could save- poverty of income should not be divorced from ways to meet needs without expenditure of personal income.”

Woah! Where precisely did I say that the tax cut would be paid for by reducing frontline NHS services?? I’ve already negated the point about saying “poverty” where I meant “paying tax”, but perhaps not having seen this correction is partly why you are confused.

One quick point, Sunder:

“The LibDems, Conservatives all seem to tacitly acknowledge that the complexity issues are outweighed by the enormous pro-poor distributional impact of tax credits).”

There’s nothing tacit about the Lib Dems’ approval of the *principle* behind tax credits. I don’t wholly hold to the party opinion on this because I have reservations about means testing, but there it is. What I’ve heard Clegg say is that you can see the germ of a good idea in the middle, but it’s strangled in typical Gordonian bureaucracy. The complexity issues are of the first importance because they stop people applying for them, and once they have applied, make it more likely that they will be bitten on the arse by clawback. I know of examples of both.

Incidentally, one thing I’ve never understood about tax credits is why Labour doesn’t just call it child benefit and be done with it. Working people under 25 who don’t have children aren’t eligible for working tax credits at all as far as I recall. And working tax credit stops being available to everyone at earnings of £13k, whatever their age. How would you defend your alternative expenditure of the £17bn to people who don’t have children?

Incidentally, love this (Sunder again):

““Take the poor out of tax” has progressive champions, but it also has others on the right. The latter seek a strict separation and segregation between “recipients” and “contributors”, using narratives of “tax freedom”. We should be suspicious of the long-term motive some have here.”

This does sound slightly like you don’t want to do something progressive because people you don’t like want to do it too 😀 I saw the same instinct at work in Will Straw’s last comment on the LFF piece, in which he warned people away from adopting any position that Guido Fawkes agreed with! Can you people hear yourselves?

92. Sunder Katwala

Alix

Thanks. On the premise that there was £17 billion to be spent on fairness causes, the field is theoretically entirely open as to how to do that. And it doesn’t all have to go in one place.

For example, half of it could go to a universal tax credit (a flat payment across all citizens); and half to working and family tax credits. That would benefit everybody, but have a more pro-poor distribution.

And/or additional public spending (funding a jobs guarantee, for example) or defending some existing spending which would get cut.

The LibDem proposal does mean £1400 for double-income households with two earners over £10k; £700 for single-earner households over £10k; less for those earning under £10k and nothing for those in part-time work earning up to £6800.

I appreciate that you see that as fair because higher earners are paying more in income taxes, and you prioritise a simpler and flatter tax system with a reduced ‘tax burden’. But that reflects a range of underlying debates and differences about tax fairness and what “progressive taxation” principles should mean.

I don’t see why you take such offence at the observation that (when the means of funding it included in the analysis) its distributional impact is regressive across 90% of society. Even if you disagree, you can surely see why those who want to see a more equal income distribution overall (for eg Richard Wilkinson reasons) would want to find a package of measures that were not.

I am struggling to see how the response to support this but then “propose an increase in benefits as well” properly reflects the level of opportunity cost in current tax/spending debates.

“The LibDem proposal does mean £1400 for double-income households with two earners over £10k; £700 for single-earner households over £10k; ”

Can we get away from this nonsense presentation? It’s a saving solely of £700 for individual people earning over £10k. If they choose to live together and gain a pooling benefit from that choice then so be it. Shared households of four people earning over £10k will save £2800 a year don’t you know? A block of flats of 20 households each with two income earners over £10k will save £28k for god sake, it is madness!

94. rob tennant

I think, poverty and deficit reduction aside, it is a progressive principle that the poorest workers pay the least tax and the richest workers pay the most. That is why I, as a progressive, support this policy. It is sad to see someone like Howard Reed, well respected from his work at ippr and the IFS, stoop so low with this partisan misinformation document.

here we go, in response to myself in Twitter…

“@Niaccurshi If the middle do better than the bottom (as happens with £10k policy) then inequalities rise. The analysis is robust.”

What utter bullshit. They have the audacity to first of all only actually scrutinise half of the Lib Dem policy, which in itself is a part of a wider economic plan. Then second of all they actually actively compare two graphs with a mealy mouthed proviso underneath that pits Labour economic redistribution over the course of many years (including many different policies, initiatives and non-governmental influences).

Off the back of this (clearly showing they approve of Labour’s managed redistribution and it’s overall “progressive” effect) we have evidence then that LFF is cherry picking it’s stances. If they’re talking about Labour then it’s the bigger picture. Lib Dem’s? Well then we can judge the entirety of how regressive or not their economic policy will be based on half of one policy!

It’s entirely disingenuous, and quite frankly insulting. Yes, a tax cut will help the middle income earners more than the poorest, the poorest don’t earn an income so it goes without saying they’ll gain nothing from a tax cut.

It’s a parties OTHER policies in improving access to employment that then play their part in how “regressive” economic policy is. To claim that the middle income earners WILL under a Lib Dem government be better off than the poor, based solely on this one portion of a policy, is to stick their fingers in their ears and refuse to listen to anything else that the Lib Dems may bring to the table, even though they have shown in the same document that that is the process they use to judge Labour’s progressive credentials.

Come on Sunder, try being consistent in your approach.

Rob @ 94

The problem with income tax cuts is tat income tax is a progressive tax. The poorest workers pay little income tax as it is. Giving ‘everybody’ a cut in income tax will result in most of the 17 billion quid going to richer earners.

That further shifts the tax burden from direct to indirect taxation, mean that the poorer carry the tax burden.

If there is 17 billion in the pot, far better to reduce indirect taxation, like council tax. Take the poorest earners out of the the council tax burden and you can really help the poor. A loss of council tax benefits when taking a low paid job really hurts the poor than income tax ever will.

“I appreciate that you see that as fair because higher earners are paying more in income taxes, and you prioritise a simpler and flatter tax system with a reduced ‘tax burden’. But that reflects a range of underlying debates and differences about tax fairness and what “progressive taxation” principles should mean. ”

This is mostly right and a good reflection of my/your relative positions. But:

(a) the policy does not advocate a reduced tax burden. It is revenue neutral. See above.

and

(b) you go wrong in the last line. “Regressive taxation” and “progressive taxation” have specific meanings, I’m afraid. You could disconnect the “taxation” bit, and say (for example) “It would be a more progressive policy to just increase tax credits”. Then we’d be into an honest ideological argument. What you cannot say is “the Lib Dem proposal is regressive”. It just isn’t. That’s not what “regressive taxation” means. Please, google it if you don’t believe me.

I’m also just going to repost a question I put on LFF:

Do you, or do you not, accept that the report appears to state that the graph shown in the post on LFF only models the raise in the personal allowance, and not the rises in tax on the wealthy which would pay for it?

Also, this puzzles me:

“you can surely see why those who want to see a more equal income distribution overall (for eg Richard Wilkinson reasons) would want to find a package of measures that were not [regressive]”

Because one of the measures you suggest on LFF is as follows:

“progressive alternatives would include the universal tax credit proposed by the Fabian Society in ‘The Solidarity Society’, which would be a flat payment across everybody which would be worth proportionately more at the bottom”

So you *do* admit that proportionality should be taken into account when considering the impact of a proposal on income? So why not for the Lib Dem tax cut? Is this an irregular verb? “My across-the-board benefit will proportionately benefit those on low incomes. Your across-the-board tax cut is regressive.”

“That further shifts the tax burden from direct to indirect taxation, mean that the poorer carry the tax burden.”

If the tax change is neutral it does nothing of the sort. I’m not entirely sure how often this needs repeating.

“If there is 17 billion in the pot, far better to reduce indirect taxation, like council tax.”

I believe the Lib Dem’s are still the only party that are committed to scrapping council tax and replacing it with a less regressive tax? And that is aside from this tax change detailed above

99. Sunder Katwala

Lee@93

I don’t think it is possible to drop a household analysis and comment meaningfully on poverty, welfare and social inequality questions. Look at the Institute of Fiscal Studies reports, Steve Webb’s analysis of these questions for the Liberal Democrats and all of the academic analysis. Of course these issues have to be considered on a household basis to say something meaningful about who is in poverty, the income distribution and so on, which is why everybody does that.

It is ludicrous to claim it is cherry-picking or unnatural to discuss the household impact.The LibDems have no plans to change this approach to analysis of distributional questions in society.

Alix

Left Foot Forward have published the full report. It includes
– the cash value by income distribution in £ terms (on page 4) alongside (also page 4) the net change in household income in % terms
– It explains why it is reasonable to consider the choice of measure in its own right, and also considers it as part of a broader package, which says that taking this into account we still have a regressive gradient in distributional gains between the bottom and the middle. This enables you to quote from the report itself to make your point, which demonstrates that the report does not ignore the point but rather makes it.

So your challenge to LFF is that, having published a report which discusses of all of these angles, you disagree with their choice of which graph to illustrate their web post, without challenging the accuracy of it. I just don’t think this carries the enormous weight you want to place on it.

I noted the universal tax credit as a potentially more progressive alternative for somebody seeking to meet the LibDem policy goal of the tax threshold policy, of tax cuts which help the poor and do something for everybody, suggesting a mixture of universal tax credit and existing tax credits could do this.

**
both & others,

I am genuinely not aware of what specific proposals the LibDems currently have across their entire policy platform for those who do not benefit from this change.

While I appreciate Alix legitimately has different ideological and policy preferences around tax, it is surely obvious there is a massive opportunity cost of a £17 billion policy. Given the emphasis on fairness, and on taking the whole thing as a package, can anybody highlight the best measures designed to help full-time carers, those out of work, and part-time earners on less than £7k and up to £10k?

If there aren’t significant things in place, even fans of this policy in general might well think it would surely be sensible to spend less on the threshold increase (through a lower threshold for example, such as £8.5k; or one could, for example, design the overall reform to benefit everyone up to the 40% threshold but not beyond it to reduce the cost), and do something which would not then see the worst-off overall fall further behind the median when the policy is introduced.

Those Rawslians in the LibDems would surely want their overall policy package to meet this test, wouldn’t they?

“It is ludicrous to claim it is cherry-picking or unnatural to discuss the household impact.The LibDems have no plans to change this approach to analysis of distributional questions in society.”

That’s not what you’re accused of cherry picking, you’re accused of cherry picking the levels and portions of economic policy you look at before you decide on a parties policy being regressive or not.

And the household question is still very much misleading, both Alix on here and John on LFF have detailed this better than I could.

“and do something which would not then see the worst-off overall fall further behind the median when the policy is introduced.”

The median won’t change, as earnings won’t change. And if you’re talking about post-tax income levels then before you try taking that stance how about you produce a nice little graph that shows the effects on post-tax income level after applying not only the PA change but also the other £17bn of tax increases, given you’re all about fairness and all.

“, you disagree with their choice of which graph to illustrate their web post, without challenging the accuracy of it”

Sunder.

The graph used does not depict the actual effect of the Lib Dem proposal. It depicts the effect of half of it. The report does not, in fact, appear to contain a corresponding graph depicting the full proposal. That is why I have an issue with it. If you claim to be unable to see why it is a problem, when writing a report attacking a policy, to create a graphic which does not actually show the effect of that policy, then you run the risk of looking completely ridiculous.

“we still have a regressive gradient in distributional gains between the bottom and the middle. ”

We’ve already dealt with this “regressive gradient”. It reflects the fact that the number of people with incomes of less than £10k increases as you go towards the bottom of the deciles (scattered throughout various types of household). Therefore they cannot benefit full from a tax cut on earnings up to £10k. This is just a statement of fact. The graph does not demonstrate that the tax cut is “regressive” because a “regressive tax cut” has a specific meaning. Which you’re STILL not acknowledging.

Lee G @ 98

I believe the Lib Dem’s are still the only party that are committed to scrapping council tax and replacing it with a less regressive tax?

Not in Scotland of course. The SNP attempts to scrap the hated council tax ended in tears, not least because the Lib dems refusal to back its scheme.

“Not in Scotland of course. The SNP attempts to scrap the hated council tax ended in tears, not least because the Lib dems refusal to back its scheme.”

I don’t know anything about Scottish only politics as I’m not Scottish. However here in UK politics it is (as far as I can see) policy to try and phase out council tax. Want to try and avoid that reality with some other irrelevant political statements?

“I don’t know anything about Scottish only politics as I’m not Scottish. However here in UK politics it is (as far as I can see) policy to try and phase out council tax. Want to try and avoid that reality with some other irrelevant political statements?”

Surely it is relevant to consider what the Lib Dems actually did when they had the chance to scrap council tax, when considering their stated policy positions?

This is not a partisan point – applies equally to Labour or anyone else.

It is like when the Tories say they want to give a greater role to local charities while merrily cutting their funding and taking away their voting rights on local partnerships.

Also this:

“- It explains why it is reasonable to consider the choice of measure in its own right, and also considers it as part of a broader package, which says that taking this into account we still have a regressive gradient in distributional gains between the bottom and the middle.”

is desperately weaselly.

(a) You know perfectly well, Sunder, that the paragraph I quote where the authors discuss the impact of including the tax rises is the only bit in the paper where the rises appear. They are not worked into the figures, they are not worked into the graphs. They are mentioned in the passage I quoted, they are admitted to change the appearance of the graph quite fundamentally (by throwing the gain for the top decile into reverse) and then dismissed.

(b) you can’t consider the raising the PA half of the proposal alone because if you do that, your argument becomes circular. You are supposed to be arguing that the whole proposal is “regressive” and that the money raised by higher taxes should be spent elsewhere, right? Well, you can’t do that if you simply omit the money raised by higher taxes from your “regressiveness” calculation! It impacts directly on what result you will get.

Look again at the passage where the “justification” for considering half of the package in isolation is offered:

“This is not simply because a decision about how to spend revenue is to some extent
independent of how that revenue is raised – and so can be judged separately, especially when that policy is worth £17 billion. (It is worth putting on the record here that we support some of the Lib Dems’ very good proposals to ask the super-rich to pay more in taxation. But that should not translate into support for their whole tax package if its overall effect would still be unfair.)”

Leaving aside for a moment the fact that this explicitly ignores the *stated aim* of the tax package to be revenue neutral (which means it cannot simply be considered as another part of revenue and expenditure – see above in this thread), look at the closing sentence: “that should not translate into support for their whole tax package if its overall effect would still be unfair”.

Its “overall effect” must include the tax rises, because they make a fundamental difference to the distribution of the benefits. This is the contradiction at the heart of the report and the graph is a symptom of it.

On council tax, Liberal Democrat policy is to replace this with a local income tax.

In Scotland, the SNP government proposed replacing council tax, not with a local income tax, but with a centralised income tax: the government would gather up this tax and dole it out to local councils according to its own formula.

This would remove the last vestiges of local government financial autonomy in a massively centralising move. Lib Dems are committed to decentralisation, and freeing up local government.

It should be no surprise that the Lib Dems refused to back the SNP’s proposal. However, the fact that what the SNP wanted contained the words “income tax” in its name seems to have confused some commenters here. I trust this is merely an inadvertent confusion due to paying little attention to Scottish politics, rather than a deliberate attempt at obfuscation.

Surely the basic question of the the way taxes are raised, ie the balance between direct and indirect taxes, between taxing income and expenditure, between the wealthiest and the poorest people etc. is a crucial one of we want a truly progressive tax system. So if one of the parties looks at the way the system currently works and decides that the balance is out of kilter in some way then it is surely reasonable to propose a way of making it better by making adjustments in different areas which overall compensate each other but make the overall system more progressive, and that seems to me to be a perfectly laudable aim in itself.
I think (and I’m sure that Alix and others will correct me if I’m wrong) that this is what the LibDems are trying to achieve, so you have to look at it as a package of various changes which are interdependent.

“Surely it is relevant to consider what the Lib Dems actually did when they had the chance to scrap council tax, when considering their stated policy positions?”

It’s relevant when you look at the Tories or Labour who’s democratic structures and routes to policy agreement within the party are non-existent. The Lib Dems seem to have a policy set out, voted for by the membership.

You can look at the Scottish example, but given the way the Lib Dems operate it is wholly irrelevant as they have decided going in to this election (and have had this policy for half a decade) to reduce the effect of council taxation and replace it with something less regressive to the poorer in the local authorities. I don’t know the details, but I would assume the Lib Dem’s had an argument about Scotland being different.

In fact fuck it, given that no-one criticising the Lib Dem stance here is actually willing to give anything other than conjecture, hearsay and half researched bollocks I guess it is down to me to actually look in to the “Lib Dem’s stop council tax scrap” claim myself…

…OK. So first of all it is SLD policy to scrap council tax just as it is for the rest of the LD party.

http://www.scotlibdems.org.uk/scrap-the-unfair-council-tax

Second, this issue of the SNP and LD clashing over removing council tax…

http://news.bbc.co.uk/1/hi/scotland/7882302.stm

LD’s didn’t want to back it because it would have turned the local income tax in to a secondary income tax that happened to go to Local Authorities. The point of LD approach to LIT is that local authorities retain authority over their budgets and managing the LIT levels to ensure those budgets can be managed.

So actually, fool on me for taking Jim at his word, his obfuscation worked a little more than I thought it had.

Can we get back on point then, that the Lib Dem’s are still the only party out of the big three that want to even do anything about council tax?

Lee Griffin @ 103

I don’t know anything about Scottish only politics as I’m not Scottish. However here in UK politics it is (as far as I can see) policy to try and phase out council tax. Want to try and avoid that reality with some other irrelevant political statements?

The only ‘irrelevant political statement’ I see is a Lib Dem manifesto ‘promise’. The SNP are in Government in a hung Parliament in Scotland and the lib Dems of course are able to sway policy. The SNP’s attempts to replace an indirect, regressive tax with a direct progressive tax. No-one was surprised to see the Lib Dems side with the Labour/Tory hegemony in thwarting that effort. Given the fact that they traditionally sway in the wind on most issues, when they had a chance to make a real difference, they bottled it.

We are told to judge the Lib Dems by their action when they have power. Well hopefully the pensioners and low paid remember that come May.

“We are told to judge the Lib Dems by their action when they have power. Well hopefully the pensioners and low paid remember that come May.”

Yes, I too hope the poor and pensioners realise the Lib Dems will stick to their promises and won’t compromise to the extent the likes of the SNP wanted them to do so.

For the hard of thinking, such as Jim/MikeSC: Lib Dems don’t support a centralised additional tax, they support a local income tax delivered by local authorities that can manage their own budgets. Just because the SNP called it a “Local income tax” doesn’t mean it’s the same as what the Lib Dem’s wanted. It was fundamentally, at it’s core, a different way of taxation that would have benefitted some areas of Scotland and shafted others.

But then the hard of thinking don’t seem to care about details, as they show in this thread.

LG @ 110

Yes, I too hope the poor and pensioners realise the Lib Dems will stick to their promises and won’t compromise to the extent the likes of the SNP wanted them to do so.

The bottom line is this; who suffers whilst the Lib Dems stick to their ‘principles’? The Council tax really digs into the incomes of the poorest earners in society, but at least the Lib Dems where shielded from making a decision that would had the potential to them unpopular among the middle classes. No doubt the Tories would have used this in their election leaflets.

OAPs can’t heat their homes with ‘principles’, Lee. The SNP were elected as the biggest Party with this policy as its flagship. The Lib Dems are little more than a crummy little Party who twist in the wind. They scuttled a policy that had wide support in the Country for short term electoral gain. Shame on the lot of them. No wonder there is a disengage in politics.

I’m sure that those in the fringes of Scotland that would have ended up not getting enough services due to the central nature of the tax will be crying in to their SNP scarves. I’ll stick with principles, you can stick with doing half baked and ill thought out policies, and we can both agree to disagree.

Except of course I’m still right that the Lib Dems stand behind scrapping the council tax for locally controlled more progressive taxation, and you’re still crying over the way the SNP dropped the ball by not making the concessions necessary to get the Lib Dems on board.

Lee @ 112

SNP dropped the ball by not making the concessions necessary to get the Lib Dems on board.

What ‘consessions’ would the Lib Dems wanted? The Lib Dems are without a backbone and joined the Labour/Tory axis. People are fed up with all the Parties looking the same and this type of carve up just puts people off further. The SNP are the biggest Party and this was one of their major policies. The Lib Dems cannot be seen to support progressive taxation if they want Tory votes.

Jim, this is now way off topic, but even this little Englander can recall the news coverage in which the LDs insisted they wouldn’t back the SNP proposals unless they were made genuinely local. They negotiated openly on that basis.

The SNP didn’t want to make any concessions in order to blame their failure on others. The LDs refused to back a policy that, while superficially similar, was in fact against the basic principles of liberalism, namely that decisions should be made locally.

Council Tax is an abominable tax, but scrapping it and replacing it with a tax over which councils have no control whatsoever, removing all fiscal autonomy from them is deeply undemocratic and illiberal.

Strangely, the Liberal Democrat party tends to not sign up to policies that are illiberal and undemocratic, even if the proposer tries to persuade the world otherwise.

Mat GB @ 115

Council Tax is an abominable tax, but scrapping it and replacing it with a tax over which councils have no control whatsoever, removing all fiscal autonomy from them is deeply undemocratic and illiberal.

The Council tax is not only an abominable tax, but it hits some of the poorest people in society. It seems that as long as it doesn’t hurt the middle income Lib Dem supporters, the Lib Dems are happy to have this burden foisted onto to people just as long as their ‘principles’ are not harmed. Like so much of the Liberal Democrat ideology, it is fine until you talk to the people who have to suffer.

The Liberal Democrats are quite happy to publish papers on policies in the full knowledge that they will never have to implement them. Up here, it is a slightly different matter. We have PR and hung Parliaments. We have areas where we are forced to co-operate and the Lib Dems are no longer able to stand aloof and pontificate, they are expected to contribute and make big decisions that actually affect millions of people. Guess what? The bottled it and our pensioners and low paid workers suffer because of it. Well done, LDs, your political conscience is clear and it only cost the incomes of the poorest in our society, the people who have least in which to fight back with.

So far, as I can see they have contributed a big fat ZERO, and for what? So that they can keep their electoral opportunities in the leafy suburbs.

My elderly mother pays close to a hundred quid a month in Council Tax. She only wants the bins emptied and anti social behaviour tackled as well as the streets cleaned. Do you think she shells out money from here meagre pension thinking how lucky she is that the local council have local autonomy? Do you think she cares two hoots for the electoral chances of Clegg? No, she is paying an abdominal tax through the nose, simply because the squabbling little boys could not sort out a deal, lest the Lib Dems face embarrassing leaflets in Surrey. Clegg wants to own the balance of power after the next election, well, I wouldn’t let the Lib Dems run a whelk stall.

Thanks.

BTW what is ‘Liberal’ about the weakest members of society being saddled with a huge tax burden.

Jim: SNP can do no wrong, eh? They weren’t at all wrong for not making the small concession to leave autonomy in the hands of LA’s?

Jesus…

Jim:

Why didn’t the SNP agree to allow local authorities to set the rate of local income tax? What important (to the SNP) principle stopped them from doing so?

And remember…principles are bad…

Lee Griffin @ 116

The SNP have made mistakes and more than a few IMO, but propping up an unfair tax is not one of them.

@ 118

principles are bad…

No, ‘principles’ are not bad, but ‘bad principles’ are though. Any principle that stops you from backing a policy that will make taxation fairer is pretty bad in my book.

Can you explain what the point of propping up an blatenly unfair taxation policy has gained the Lib Dems? I hope they pay for that in the General Election.

Iain Coleman @ 117

Really, this has been done to death since the last election. It is difficult to see how 32 income taxes across Scotland could be made to work. Wouldn’t that mean that the richest areas would gather most money while the poorest required higher rates?

The devolved powers only allow for a 3 pence in the pound increase.

Jim,

A local income tax is perfectly feasible, and as for richer areas collecting more than poorer, well that happens with council tax already and there are existing redistribution mechanisms to deal with this.

As long as the principles are principles you agree with then they are ok, but if you disagree with them they are bad principles and shouldn’t be held to. Classic.

We’re talking here about the Lib Dem principle to local control over their own finances and governance, and the seemingly SNP principle of centralised control of local finances. The idea that Lib Dems should give up theirs while SNP don’t give up their own is, quite frankly, hypocritical a stance to take. But then I don’t believe the SNP stance is one of principle anyway.

Lee Griffin @ 122

As long as the principles are principles you agree with then they are ok, but if you disagree with them they are bad principles and shouldn’t be held to. Classic.

No, that is not what I said. Principles that you hold to that stopping you from doing things that you would like to do are bad. I assume that the LD want to change the tax burden of the poor? If so, why pass up the chance because of some ‘principle’ that you are never going to get? If the cost of that ‘principle’ (in this case the Council Tax) too much for the poorest in society to bear, then what? Ignore their plight and stick it to the SNP?

Well done you got what you wanted and my mother will be shelling out in tax for that. Thanks.

I doubt any LD canvasser would show face round here, but what should he tell my mother? Your money is worth less than council autonomy!

But then I don’t believe the SNP stance is one of principle anyway.

Whereas the LD principle of kicking the lungs out of the poorest in society is perfectly acceptable? With ‘principles’ like that your Party should fit in with an incomming Tory Government.

Iain Coleman @ 120

well that happens with council tax already and there are existing redistribution mechanisms to deal with this.

What price local autonomy under those conditions?

We already have a system that means that rich areas are better off than poorer ones via council tax, where that autonomy was hurting in the poor in the poorest areas.

The LD could not support a fairer tax that sacrificed ‘local autonomy’ and fought to retain an unfair system that local autonomy needs to be tempered in a bid to redistribute revenue anyway? Even if that means the poorest people suffer in the process? And that is worth fighting for?

I have only just come across this thread and have to say that I am disappointed that Sunder Katwala is continuing to repeat falsehoods after I have rebutted them (with evidence and references) in other blogs to which he has contributed. Either he is too lazy to check things when I have pointed out his errors or he is too obsessed with criticising Mr Clegg to limit himself to fair comment. I am appalled that he talks about “academic analysis” when he refers to a note written for LFF that has numbers wrong by 45% and percentages wrong by more than 100%.
I can make no accurate comment on MikeSC as I hate the taste of soap
1) My personal preference would differ from the LibDem proposal, but my ideas are not part of this discussion so I can give an objective comment
2) The LFF report is factually inaccurate and gets its basic numbers wrong – please check with HMRC and ONS if you doubt this.
3) The level of benefits to those not earning is not linked to the Personal Allowance for income tax and the rate of increase has been vastly different under New Labour. Dragging the level of benefits into a discussion of tax thresholds is a complete red herring – since when did a Social Security minister claim they had to limit benefit uprating to match a pro-rata increase in the personal allowance?
4) As a previous commenter has stated (hurrah! a blogger who understands that £700 matters to someone with £10k than £100k) the value of the tax cut is greater for the poor than the middle/upper-middle-earners
5) Transfers of money from taxpayers to the unemployed are NOT public services.
99% of the population support this (Conservatives have always argued for caring for the deserving poor – the Whigs, who didn’t, are extinct – and the left wing believe all poor are deserving), but it is NOT a public service – that is things like sewage, healthcare, education, police, justice, defence, … Money transfers are money transfer, services are something real. Since when was an occupational pension described as a “public service”?
There is a lot of evidence that the middle classes actually get more benefit from public services than the poor (because they are better able to cope with the form-filling and obstructive bureaucrats – my personal experience supports this view), so claims that spending on public services would give more help to the poor are claims, no more no less, not evidence. Of course my personal experience isn’t proof that this always happens but if someone wants to claim that public services disproportionately benefit the poor, then I want them to produce some evidence. I still use public transport when I can but it costs more (except for off-peak travel for OAPs and students) than an efficient car, so where is the benefit for the poor who cannot afford a car?

Oh looky, Tim “Horton hears a Who” Horton used his pathetic “dossier” on the LD tax policy as the basis of this drivel on Commentisfree:

http://www.guardian.co.uk/commentisfree/2010/mar/17/this-lib-dem-myth

Next up, Fabian Review and Progress Magazine, Tim?


Reactions: Twitter, blogs
  1. Lee Chalmers

    RT @libcon: Who benefits from Lib Dem tax cuts? http://bit.ly/aK0pLu

  2. Giles Wilkes

    The Lib Dems are taken seriously: 100 comments and counting:
    http://liberalconspiracy.org/2010/03/14/who-benefits-from-lib-dem-tax-cuts/

  3. Dr. Brendan D'Cruz

    RT @leechalmers: RT @libcon: Who benefits from Lib Dem tax cuts? http://bit.ly/aK0pLu





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