Monday, 21 April 2008

10p or not 10p?

The Institute for Fiscal studies has been furiously providing the egg-headed analysis of the Government's 10p travails. The irony of this political row is that the 2007 Budget was actually redistributive:

http://www.ifs.org.uk/budgets/budget2007/distribution.ppt

There are losers and they are some of the lowest paid. As ever in politics, the symbol assumes an importance that is greater than the substance. So while row reaches fever pitch (see here for a taste of the tone) it is probably worth remembering that this Government has been consistently redistributive over the years. It is also important to factor in non-fiscal policies such as the national minimum wage and the New Deal which have helped the lowest paid families without children.

Indeed, the 10p tax rate was actually introduced by Gordon Brown in the first place! Disagree with the abolition of the rate. Make a good case but please make it in the context of all the changes that have taken place both in Budget 2007 and over 11 years of Labour Government.

And please make it in a restrained fashion. This is not the Poll Tax. It is more similar to changes to lone parents' benefits made in the early part of the Labour Government which were equally clumsy. But look what happened subsequently. If you look at the IFS chart it shows that Brown's Budgets have increased the income of lone parents who are out of work by over 10% and of those in work by over 15%. That's a hell of a record of betrayal!

My guess is that the Government has got the message on the 10p rate abolition as well. The Pre-Budget report will take significant action to compensate the losers of this tax change I am sure. So ask yourself, is it worth handing a huge political victory to the Conservative Party because of this singular, politically clumsy (albeit mildly harmful) measure?

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