Blog & Articles

Category: The tax and benefit system

Will the welfare cap stand the test of time?

Date: 25. March 2014
Gavin Kelly

George Osborne's welfare cap will be voted on tomorrow. It's viewed by many as a moment of reckoning for Labour in which it will be caught in a deadly trap:

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Stealth cuts to universal credit will hit the working poor

Date: 13. December 2013
Gavin Kelly

Few things in politics are certain, but certain policy announcements elicit a predictable media response. Tinker with the tax treatment of the elderly and prepare to be accused of imposing a "granny tax". Or, more hopefully for the coalition, increase the generosity of the personal tax allowance and read about "tax cuts for low earners".

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Who will benefit from the tax break for married couples?

Date: 21. October 2013
Donald Hirsch and Matthew Whittaker

David Cameron’s announcement of a marriage tax allowance has attracted significant interest. The policy will make £1,000 of personal income tax allowance transferable between adults who are married or in a civil partnership, provided the higher earner is a basic-rate taxpayer and their partner is not paying income tax.

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How to ensure a rise in the personal allowance delivers on its promise

Date: 17. October 2013
Matthew Whittaker

Income tax cuts, or the promise of them, seem likely to play a big part at the next election. Having delivered on what was initially a Liberal Democrat policy to raise the personal tax allowance to £10,000, both sides of the coalition appear keen on further increases after 2015. For its part, Labour says it will re-introduce the 10p starting band if elected. Such policies come with sizeable invoices, but they form key strands of attempts to ease the squeeze on (and to appeal to) “hard pressed families”.

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Higher income tax thresholds won’t benefit the lowest-paid

Date: 15. October 2013
James Plunkett

No manifesto for 2015 will be complete without a promise of a tax cut. Yesterday we got our first glimpse of what the Tories might offer. Senior party figures say they want to raise the personal allowance to £12,500, matching a pledge made by the Liberal Democrats. Ministers have pitched the higher allowance as a way to help the lowest earners. There may be good reasons to raise the allowance, but helping the lowest-paid isn’t one of them.

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The coalition's welfare cuts mean a dramatic rise in council tax for the poorest

Date: 31. January 2013
Matthew Pennycook

This article originally appeared on the New Statesman

The decision to reduce the budget for council tax support by 10 per cent means low-income households face a tax increase of up to £600.

Accustomed to the inflated claims of successive governments, readers might be forgiven for rolling their eyes at the phrase "radical welfare reform". Yet for once the bold rhetoric might match reality. Council Tax Benefit, the most widely claimed benefit in the UK, which provides 5.9 million low-income families with help paying their council tax will soon be abolished. From 1 April, responsibility for council tax support will transfer from Whitehall to each of England’s 326 local authorities (and the Scottish and Welsh governments). Few have yet grasped the full implications.

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Give or take: who’s making a positive net tax contribution?

Date: 12. October 2012
Alex Hurrell

In recent days there has been a lot of discussion about net tax contribution, and in particular at what point in the income distribution households start to make a positive net contribution, i.e. pay in through taxes more than they receive in cash benefits. However, there are two issues of critical importance when considering net tax contribution levels: (1) it matters whether retired households are included under consideration or not; (2) secondly, the specific measure of net tax contribution also matters.

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Why it's unlikely benefits increases will be linked to earnings

Date: 19. September 2012
Gavin Kelly

Gloomy projections all round. 

Following another Newsnight scoop, there must be debate in Westminster about whether the coalition are going to change their approach to uprating benefits - increasing them annually in line with inflation - for people of a working age. Coalition splits have already been predicted and then resolved before the pre-Autumn statement debate has even got underway.

This issue arises because the Coalition are on the hunt for welfare savings and playing around with benefit upratings is always one of the first places HM Treasury will turn to save money.  To start with it’s worth recalling that the Coalition has already changed its uprating policy from RPI (or the derived ROSSI index) to CPI for most working age benefits – generating significant savings, arising from lower living standards for recipients - than would otherwise be the case. So any further change in upratings policy comes on top of this.

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Think the cuts are biting? The pain has hardly begun

Date: 21. April 2011
Gavin Kelly

Buoyed by a run of bank holidays and balmy weather, optimistic families may think that, having absorbed the changes announced in April's Budget, the worst is behind them. Sadly, that is a false hope. Plenty more pain is in the pipeline.

To see why, just look at what is coming in terms of cuts, wages, and interest rates. The cuts that kicked in on "Worse-off Wednesday" accounted for a mere 10 per cent of the total savings arising before 2015 from changes to tax credits and child benefit. The pain is "back-loaded"; over 40 per cent of these cuts kick in in 2013.

For many, the biggest threat to living standards does not arise from what George Osborne has done but from the impact of higher prices and stagnant wages. This is not a new problem – disposable income has been falling in every region outside London since 2003 – but it is a worsening one. The current wage squeeze is expected to continue until at least 2013, when average real wages are expected to fall to under £25,000, over £1,800 lower than in 2009.

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