Blog & Articles

The great tax swindle

Date: 2. April 2013
Gavin Kelly

In the week when the meaning of austerity hits home for many, the one big coalition giveaway comes in the form of the rapidly rising personal tax allowance. Any criticism about cuts to tax credits or benefits is met with the same ministerial retort: just look at the size of our tax reductions for those on low and middle incomes.

And this month's hike in the income tax threshold is far from the summit of current aspirations.  The Lib Dems have already made clear that, at enormous expense, they want to go beyond next April's £10k allowance to reach £12.5k in the next parliament – all done in the name of helping the low paid. Not to be outdone, Grant Shapps let it be known that the Conservatives will be joining the bidding race. And Labour has entered the tax-cutting fray with its pledge to reintroduce the iconic 10p tax band that Gordon Brown abolished.

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Easing the squeeze: a tax cut for all?

Date: 20. March 2013
Matthew Whittaker

In the run up to today’s Budget, it has been widely reported that the Chancellor is set to announce a further above-inflation increase in the personal tax allowance – the amount that an individual can earn before becoming liable for income tax – meaning that it will reach the £10,000 target that the Government previously set for the end of the Parliament one year early, in April 2014.

The allowance would thus be more than 50 per cent bigger than when the coalition took office, and an estimated two million workers will have been taken out of income tax altogether over the period. But, with wage earners unevenly spread across families, just how much do households stand to gain from this latest move?

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Low Pay Is Fast Becoming a Defining Challenge of Our Age

Date: 28. February 2013
James Plunkett

This post originally appeared on the Huffington Post

You can tell a lot about a downturn by the image that comes to define it. From queues outside job centres in the 1970s and early 1980s to the poll tax riots that preceded the early 1990s recession, the pictures that stick in the mind have a habit of reflecting the key economic and political challenge of the time. So what will be the iconic image this time around? Images of last summers' riots will undoubtedly endure. But the more representative picture of the squeeze so far would be much less dramatic: a low paid, part-time worker, struggling in to work each day, bringing home a wage that barely pays the bills.

Today's new figures from the ONS confirm what's been suspected for some time: low pay is fast becoming one of the defining economic challenges of our age.

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Tax credit cuts: a false economy

Date: 16. March 2012
Giselle Cory

This blog originally appeared on Public Finance

If the Chancellor wants to help low to middle income households, he would be wise not to sacrifice tax credits, by far the most progressive way to help poor families

Seventy per cent of April’s new cuts to tax credits will fall on households in the bottom half of the income distribution band if the government goes ahead with proposed changes to working tax credits.

The cuts, announced at various points over the last two years and accounting for over £2.4bn in 2012/13 alone, are by far the biggest cuts to tax credits yet.  Of the 2 million people on low to middle incomes currently claiming Working Tax Credits, all will be affected in some way. For some families, individual losses will run to several thousand pounds. Moreover, these cuts will disproportionately impact on households with children, as recently reported on by the IFS.

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Is Osborne really about to give people on £100k a tax cut?

Date: 14. March 2012
Gavin Kelly

This post originally appeared on Gavin's New Statesman blog

As we close in on the budget most eyes are still fixed on the fate of the 50p tax rate. Ignore for a moment some of the squeals from Labour on this issue (more in excited anticipation that it will be axed than horror) and spare a thought for the dwindling band of true Tory modernisers. Their two central ambitions over recent years have been to demonstrate an unswerving commitment to the NHS, and to show that they could govern the economy -- and tax policy in particular -- in the interests of the broad majority rather than the affluent elite. They are struggling to believe that having watched the coalition conspicuously squander the first of these strategic objectives that it could be planning to deliver the last rites to the second too.

Yet whatever the decision on the 50p tax rate, the heated debate over it risks obscuring another more nuanced, but still highly revealing choice facing Osborne. Who should benefit from the widely expected and costly increase in personal tax allowances: the vast majority of all tax payers, including individuals to over £100,000 a year (and indeed households on £200,000), or just basic rate tax-payers? An important issue in its own right -- and one which has been given new impetus by the coalition's travails over Child Benefit.

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Taxing times for the coalition (contd...)

Date: 12. September 2011
Gavin Kelly and

This post originally appeared on the New Statesman blog

Just in case there was any risk of the coalition row on tax policy cooling down for a day or two, along comes a new report today, Tax and the Coalition, to fan the flames.

We do, of course, need to bear in mind that in this choppy pre-party conference period, there is bound to be a rash of publications appealing to the party faithful and burnishing the author's credentials in their eyes. Nonetheless, Lord Newby -- author of the report -- is a well connected Liberal Democrat peer and tax-expert, known to be close to Vince Cable. His report pulls no punches. The 50p rate must be preserved until fiscal consolidation is achieved; the Laffer-curve economics of those on the right calling for its abolition is dismissed; and a raft of tax raising measures are proposed that would hit the seriously affluent including a mansion tax on properties over £2m (served up with a swipe against Eric Pickles), an increase in capital gains tax, a land value tax, and further anti-avoidance initiatives.

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These tax cut whispers are about to get louder

Date: 21. August 2011
Gavin Kelly and James Plunkett

This post originally appeared on Gavin’s New Statesman blog

With summer over, the skies are darkening in more ways than one. Economic forecasts, previously strong for this autumn, have long been heading south. Last week sharpened the sense of impending crisis. The FTSE has been shaken more violently than at any time since the paroxysms of early 2009. On Wednesday, unemployment stats took their biggest quarter-on-quarter leap since March 2009. The US and German economies are flat-lining.

Whatever your favoured explanation for our worsening economic plight, one thing is increasingly clear: the UK economy is propped up on pillows, in desperate need of a shot in the arm. It may not be fashionable to say it, but that shot needs to involve a pickup in consumption and domestic consumer confidence.

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The 15p Chancellor? How Osborne could outflank Labour on tax

Date: 11. July 2011
Gavin Kelly

Gavin Kelly

After a year in power, in the aftermath of a traumatic recession and with unemployment still riding high, the Chancellor needs not only to deal with the immediate ...

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Think the cuts are biting? The pain has hardly begun, Independent

Date: 25. April 2011

Gavin Kelly

Analysis: The most politically dangerous cut will kick in in 2013 - the abolition of child benefit for higher-rate taxpayers

Buoyed by a run of bank holidays and balmy ...

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