Good to see Labour finally getting on board with this Green Party policy. All credit to the leadership candidates for this.

Yeah, well done, thirteen years in government nothing and within weeks of opposition, some progress. Easier to talk about this type of thing when you are at least 5 years of needing to act.

However, all the candidates, with the possible (half hearted) exception of Ed Balls, miss the real crux of the matter. All the legislation regarding minimum/living wages are meaningless until to considerably tighten up employment laws. There is no point in having a living wage if you are on a zero hour casual contract, work for an agency etc.

Unless the Labour Party is willing to look at agency working seriously then the rest of it is pointless. If you are not sure about it, go and apply (for a laugh) for a post with an employment agency, at the ‘living wage’ level. More often than not, they will charge you a fee for your work clothing/disclosure notice work boots etc., and in some cases charge you an administration fee for the privilege of getting their wages paid to them.

I have heard of a few places that charge the employee for losses from shoplifting or non payment of restaurant bills. A loss that could run into twenty or thirty pounds or more. That is going to hurt the ‘living wage’ of people, eh?

The problem with this type of thing is that, by definition, these people are the most vulnerable in the labour market. They do not need ‘codes of conduct’ or ‘certificates of intent’, they need, good strong laws with actual biting punishments to defend them. Whatever the Labour Government did or did not do employment was perhaps the one area where they were especially reluctant to legislate on.

Labour’s problem here and in of course at the election was the fact that they have abandoned their tradition roots (and indeed routes to power). The most vulnerable in society have no-one to speak for them, they are no longer able to get organised and have no advocacy. Their MPs have bigger fish to fry and the grass roots feel no connection to them.

How can any of the Millibands really understand the problems that your average hospital cleaner faces when she is expected to rent her uniform for 15 quid a week? She is facing the sack if she complains, what experience do the Milliband(s) have of facing that stark choice? If he was being stiffed on a book deal (for example) he would employ the best contract lawyer money could buy and have his day in court, but how does the waitress deal with the fact that the nice couple at table three have done a runner with her rent money? Who does she turn to? Her New Labour MP will mumble something about ‘check your contract’ whilst filling in his expense form.

As I’ve had occasion to point out before.

The difference between the current minimum wage and the currently proposed living wage is entirely the tax and national insurance tax levied upon low earners.

No, really, it is: the difference between the £7.60 an hour (or whatever it is this week) proposed and the £5.91 of the minimum wage, at 37.5 hours a week, 52 weeks a year is….the amount of tax and NI that is charged on that £7.60 an hour.

So, to get everyone earning the living wage all we need to do is raise the tax and NI allowance to the amount of that minimum wage. £11,500, £12,000 or so.

There we go, job done.

Tim Worstall @ 3

You are dead right. And this is the way the Coalition government seems headed. May take a while in current circs, but by the end of this Parliament this should happen.

As Jim @ 2 says Labour seems to be very good at progressive policies while they’re in opposition. In fact, they were very good at progressive policies before 1997 as well, but if there’s anything New Labour taught me it’s that their promises aren’t worth the paper they’re written on.

Tim W @ 3 Flowerpower @ 4

A couple of points, gents.

Shifting the tax burden from progressive to regressive taxation does the poorest in our society no good. Whoever gains from that, it is not the poor. If you ‘really’ wanted to remove the poor from the tax system, the money you spend raising the tax threshold for everyone would be betterr put to use by removing those in the lowest incomes from the council tax. The Lib Dems have a history in shooting that very idea down in flames, so forgive me if I think that the Lib Dems are less than trustworthy on any issue, not least, ‘helping the poor out of tax’. It will be a cold week in hell before these people do anything for the poor.

Second I think you both miss the point of a ‘living wage’, the living wage is about attempting to keep the poorest connected to the rest of society. No-one else would be expected to forgo a rise in standard of living because they had a tax cut. I don’t remember the tax cuts for high earners during the eighties being met with wage restraint, so why attempt to fob the poorest of with a few quid in their wage packet as a rise, esp when you more than make up for it with a huge hike in VAT/council tax/travel fares etc.

“I don’t remember the tax cuts for high earners during the eighties being met with wage restraint,”

Because they weren’t meant to be. Quite the opposite.

The aim of cutting marginal tax rates would be to encourage more work. You know, this Laffer Curve thing? High marginal tax rates discourage work? So, if you cut marginal tax rates then, at the margin, more work is done.

And given that the working poor face the highest marginal tax rates (some 3 million face 60% or more, the combination of income tax, NI and benefit withdrawal) reducing said marginal tax rates sounds like a really, really good idea.

“No-one else would be expected to forgo a rise in standard of living because they had a tax cut.”

No one is arguing that anyone should. Only that a tax cut *is* a rise in the standard of living. ‘Coz you’ve got more money to spend on your living, see?

“esp when you more than make up for it with a huge hike in VAT/council tax/travel fares etc.”

Oh, but I wouldn’t “make it up”. I’d go off ang slaughter some more of what the tax money is spent upon. Just getting rid of the press officers hired since 1997 by govt would save £500 million: getting out of the EU £8 billion. There’s fat around to cut you know. And no, cuts offset by tax cuts are not fiscally contractionary.

But the real point is a moral one. The entire argument about the living wage is that it is in some manner “immoral” that people should not be able to afford to live while working full time.

Let us accept, arguendo, this point. So what makes it fucking moral to tax people working full time to the point that they cannot live?

“And given that the working poor face the highest marginal tax rates (some 3 million face 60% or more, the combination of income tax, NI and benefit withdrawal) reducing said marginal tax rates sounds like a really, really good idea.”

It is pretty much the key to a whole range of social problems really.

Tim @ 7

Oh, but I wouldn’t “make it up”. I’d go off ang slaughter some more of what the tax money is spent upon. Just getting rid of the press officers hired since 1997 by govt would save £500 million: getting out of the EU £8 billion. There’s fat around to cut you know. And no, cuts offset by tax cuts are not fiscally contractionary.

That is assuming of course that the poor don’t further suffer when these cuts takes place. Cutting (for example) ‘home help’ may save that person a couple pence in their council tax, but if that means they are then forced to give up work to help look after an infirm parent hardly makes them ‘better off’ does it?

The wider point being of course, that irrespective of the size of the budget, you have to decide where you raise that revenue. If you cut progressive tax and leave regressive tax alone you still end up shifting the burden onto the poorer into society. If you want to reduce the tax burden of the poor by cutting the budget, then you should cut regressive taxation. However, we both know that not really the point of the exercise.

And given that the working poor face the highest marginal tax rates (some 3 million face 60% or more, the combination of income tax, NI and benefit withdrawal) reducing said marginal tax rates sounds like a really, really good idea.

No, no, no no!!!

You are insisting that income tax and National insurance are the reasons for this ‘marginal tax rate’. Can you possibly explain why you appear to be fixated on this? Income/NIC are progressive taxes.

People on low wages do not pay very much income tax. If you earn 150 quid a week, you pay tax only on the 50 quid or so, the first 100 (or there abouts) being exempt from tax. So although you pay 30% tax (and NI) on the 50 quid, it actually is about 10% of your wages. Still 10% is 15 quid and that is a lot of money.

On the other hand once you move from unemployment to a low paid job you lose housing benefit and that could be as much as 50 quid or about a third of weekly wage. You also lose your Council tax rebate too and that can take something like thirty quid out of your wages too. This loss of benefit dwarfs anything you have lost on income tax/NIC. Add to that slightly fuzzy expenditures like bus fares and packed lunches and you get more expenses.

It is the regressive nature of the tax/benefit system that acts as a barrier towards employment, not income tax. It is the high rents and council tax we need to tackle, not something like income tax that, at the level we are talking about, are pretty trivial compared to the huge loss of income that other losses incur.

So what makes it fucking moral to tax people working full time to the point that they cannot live

I agree, we need to tackle a tax system that punishes the poor to the extent that they are better off on the dole. If you know of a Party who have anything approaching a solution, tell me the name of that Party so I can see what they have to say.

All I have read is people who start of with the premise that income tax needs to be cut and then go and forge the question that requires that solution. However, when you actually make a little effort to actually understand the very real problems that people encounter in getting back to work, things tend to look a more complicated.

Doubling the tax allowance of everybody in the Country in the vague hope that people who already paying least income tax get some kind of relief seems a bit futile to me. I have no idea how much cutting tax for everybody in the Country will cost, but surely to Christ that money could be better targeted to help the lowest paid workers and help them overcome the genuine barriers to work?

The Tories, obviously, and the Lib Dems are pretty much wedded to the idea of undermining the progressive end of taxation that they are unable to look at the wider picture. We can dismiss the Tories on this issue. They have no interest in helping the poor. Not when they were in Government the last time, nor opposition or Government now. The Lib Dems however, are a different kettle of fish.

They have either came to this conclusion for cynical reasons to move the Party to the Right whilst using progressive language or they are just plain mind bogglingly incompetent.

Either way, they have made idiots of themselves…

“You are insisting that income tax and National insurance are the reasons for this ‘marginal tax rate’.”

Err, no, I’m not. Go back and read what I said again.

“(some 3 million face 60% or more, the combination of income tax, NI and benefit withdrawal)”

Note the “benefit withdrawal” in there? It’s the combination of all three.

Please note also that no tax is “progressive” or regressive. Only ways in which a tax is applied can be so. We could have income tax which was *only* applied to the first £20,000 a year: that would still be income tax but it wouldn’t be progressive.

And in this sense higher personal allowances make the income tax system *more progressive*.

“If you know of a Party who have anything approaching a solution, tell me the name of that Party so I can see what they have to say.”

UKIP actually…..essentially because they adopted (with refinements by Mark Wadsworth on the benefits side) a plan from the Adam Smith Inst. A high (£12,000) personal allowance with a 30% or so flat tax (income and NI merged) on top of that. That is, surprisingly, *more progressive* than the current system (umm, not sure about what the effects of the new 50% rate will be on that claim).

“I have no idea how much cutting tax for everybody in the Country will cost,”

The rule of thumb is that a £1,000 rise in the allowance reduces tax income by £6 billion or so (there’s 30 million taxpayers, current tax rate is 20%, thus £200 per tax payer lost for each grand rise in allowance times number of people). total cost £36 billion….and that much again for NI changes (and NI really should be abolished anyway,)

“but surely to Christ that money could be better targeted to help the lowest paid workers”

But this is what is causing the tax/benefits trap: targetted help to the working poor which is withdrawn as they become not poor.

“wedded to the idea of undermining the progressive end of taxation”

As I say, raising the tax allowance is a decidedly progressive move, not regressive.

“total cost £36 billion”

Actually its 36 billion minus the money saved on benefits and gained through increased employment as a result, and the money gained on additional consumption taxes

Ed Balls was the only candidate who put his money where his mouth is by actually paying the minimum wage to his department employees (included contracted staff) when he was a cabinet minister. See http://www.edballs.co.uk/index.jsp?i=5015&s=1111. The other ex-cabinet-minister candidates are fully of lovely language now but what was stopping them then?

planeshift @ 11

Yes, that assumes of course that the people who take up jobs are not getting further benefits and that no-one is displaced from the labour market in the process.

Tim @ 10

“(some 3 million face 60% or more, the combination of income tax, NI and benefit withdrawal)”

Yes, but it is the loss of benefits and rebates that make up most of that 60%. The icome tax/NIC is not the problem, being faced with a huge rise in your rent/council tax bill is. That is what we need to address.

Please note also that no tax is “progressive” or regressive

Well the way our tax system works, income tax is pretty progressive and most other forms of tax is pretty regressive.

UKIP actually…..

You are having a laugh. This doesn’t nothing to redress the balance. These people are nasty scum and their tax proposals only confirm that.

total cost £36 billion

If we want to use 36 billion to reduce the poverty trap for the poorest workers, we could use that in so many better ways. The vast majority of that money will be going to the better off and, within the context of the set goals of the stated aims of the policy, be wasted. It makes far more sense, in terms of reducing the poverty trap of the poorest workers by taking the poorest people out of the Council tax system, or subsidising their rent. Christ even giving the poorest workers free bus passes would make the many of poorest workers better off.

Last week the so called ‘poverty tzar’ said he found it unacceptable to give the rich 10 quid a week child benefit, but they can see nothing wrong with giving these same rich people a twenty quid a week tax cut! A tax cut that they are half heartly selling to us as ‘helping the poor out of poverty’. Its an ill wind I suppose…

But this is what is causing the tax/benefits trap: targetted help to the working poor which is withdrawn as they become not poor.

No, what is causing the benefit trap having highly regressive taxation coupled with high housing costs which we try to rectify with benefits. Change tax system to a more proggesive one and deal with the outrageous cost of housing and the benefits trap is no longer. Of course the rich will kiick up merry hell…

As I say, raising the tax allowance is a decidedly progressive move, not regressive.

No matter how you spin it you are shifting the balance of the total taxation burden from progressive tax onto regressive taxation.

“No matter how you spin it you are shifting the balance of the total taxation burden from progressive tax onto regressive taxation.”

No, you’re still not getting the point. No particular tax is either regressive or progressive.

Think it through for a moment. If VAt only applied to Lamborghinis it would be a higly progressive tax, wouldn’t it? Similarly, a flat income tax with no personal allowance would be neighet regressive nor progressive…..and the insane French pre-Revolution tax system was highly regressive.

It’s the way a tax system is implemented that makes it R or P, not the tax itself.

“It makes far more sense, in terms of reducing the poverty trap of the poorest workers by taking the poorest people out of the Council tax system, or subsidising their rent.”

But that’s what we already do! That’s exactly what causes the benefits trap: you get these subsidies if you’ve got a low income but as your income rises then we take them away!

“These people are nasty scum and their tax proposals only confirm that.”

You are aware I’m in UKIP are you?

Look, there really are ways to deal with this all and yes, UKIP really has thought about it and our proposals would deal with it.

1) Citizen’s basic income. Just like the Green Party (although UKIP calls it something different, we don’t want to be associated with *those* nutters).

You get a simple basic amount just for being a citizen resident in the UK. This does not get withdrawn as your income rises. Other than for the sick and disabled there are no other benefits.

Excellent, that’s the benefit trap dealt with.

2) We have an income tax system with a high allowance. So there is no income taxation of the low paid.

Excellent, that solves the tax part of the tax and benefit trap.

We also suggest relaxing the planning permission rules….that brings down the cost of housing.

Excellent, we solve all three of the problems you point to and yet you’re the one calling us “nasty scum”?

I certainly don’t see why raising the tax threshold is a regressive move. OK so higher paid tax payers benefit as much as lower paid ones in absolute terms but as a proportion of their income the benefit is worth less to them, and anyway this can always be clawed back by lowering the thresholds for higher rates of tax.

A high (£12,000) personal allowance with a 30% or so flat tax (income and NI merged) on top of that.

How much would that raise in total compared to current rates?

Tim @ 15

It’s the way a tax system is implemented that makes it R or P, not the tax itself

Well right now VAT, council tax and the like are pretty regressive and income tax is fairly progressive. What the ConDems are proposing is a further shift from taxes that are right now, progressive to taxes that are right now regressive. I concede that it could be possible that in a parallel universe, income tax is insanely regressive and VAT is widely despised because it is progressive in nature, but here in the this continuum, the move is pushing more of the tax burden onto the shoulders of the poor.

2) We have an income tax system with a high allowance. So there is no income taxation of the low paid.

Excellent, that solves the tax part of the tax and benefit trap.

There is this obsession with income tax AGAIN. Why is that? Why this obsession with income tax? People on low incomes don’t pay much income tax! Why is this simple message not getting through? The tax that causes the benefit trap is Council tax, because it is highly regressive and for people on low incomes it can become the single biggest tax on their income, to the point that it actually acts as a barrier to taking a low paid job. Income tax can NEVER be a barrier because it is never big enough to take enough out of the wage packet, because income tax is a tax on income, therefore the lowest incomes pay the lowest rates*.

You cannot fix the benefits trap by cutting or removing income tax and NIC because that never acts as a barrier to employment. There are far bigger and more serious financial barriers to certain people, high rents and council tax being the most common others include the price of prescriptions for some people and affordable childcare for others. Making these people exempt from income tax will have no effect on the benefit trap for the lowest pay because income tax payments at the lower end of the labour market cannot possibly make up the difference that a high rent of say, 60 quid a week does or even a Council tax bill of 30 quid.

*until we get to the really rich who can pay less than their cleaner.

But that’s what we already do! That’s exactly what causes the benefits trap: you get these subsidies if you’ve got a low income but as your income rises then we take them away!

And as I said earlier, if you are serious about fixing the benefit trap, then you really need to look at the council tax. Council Tax is far too regressive and really punishes the poor. To eliminate a large chunk of the benefit trap you can use that 36 Billion quid we appear to willing to spend on ‘removing’ the benefit trap by totally rejigging the council tax so that the poorer workers do not pay it. Pehaps scrapping it and replacing it with income tax is the answer.

yet you’re the one calling us “nasty scum”?

It is a bit harsh to call ‘everybody’ in UKIP Nasty or Scum, but any party whoose leadership openly embrace a slightly racist, xenophobic ethos with a huge side order of climate change denial and a call for forced labour can expect to be considered a pretty Nasty party.

Anyone claiming to be decent who side with such people need to give themselves
a good shake.

Andrew @ 16

If I can assume that point is directed at me, then let me explain my thinking.

Raising the threshold to 12,000 will inevitability mean that less revenue will be raised from income tax, which means that the overall burden will therefore shift between the progressive end of the taxation regime to the regressive end of the spectrum. So even if we simply remove Tim’s 36 Billion quid from the budget, then although the overall pie gets smaller, the proportion of tax taken in progressive/regressive means will shift, meaning that even if the entire tax bill comes down the burden has shifted onto the backs of the poorer. The question is then how do you pay for the tax cut. If you now lose the community home help, does your 15 quid a week pay for your mother’s private home help? If not or you have to give up work to look after her, are you ‘better off’?

Of course, the proposal as it stands was suppose to be ‘tax neutral’, in the sense that the Lib Dems meant to raise other, in that case, that is a clear regressive tax move. If we shift VAT up to 20% then the poor will lose any tax gain from income tax at a stroke. Once you add in excise on beer, fags and petrol, then it is the poorer end of the wage market that picks up the tab too.