IPPR Still Doesn’t Get It

ipprLeft-wing think tanks the IPPR and the Resolution Foundation have a joint report out advocating higher “living wages” forced on employers by regulatory diktat. Guido doesn’t dispute their claim that low pay increases the welfare bill by billions. Brown’s blizzard of redistributive bureaucracy and welfare transfers effectively left taxpayers subsidising low paying employers. Low paid workers pay taxes which they then get back in benefits…

Apart from the obviously wasteful tax-to-pay-benefits merry-go-round their policy has another fundamental flaw completely ignored by the wonks; it will increase wage costs and reduce corporate competitiveness, further undermining economic growth. Wouldn’t it be better instead to just raise the personal income tax threshold to £12,500 – as advocated by the LibDem’s Danny Alexander – effectively taking minimum wage earners out of income tax. It will have the same outcome – raising take home pay – without undermining competitiveness.

Raising the tax threshold is simple, has popular appeal and will benefit those on low earnings proportionately more than those on higher earnings. It will take some pressure off the “squeezed middle” and won’t increase the welfare trap. It isn’t a perfect policy, prominent Orange-booker Mark Littlewood, a wonk at the rival Institute for Economic Affairs, is wary that it will result in millions of voters being unaffected by the basic rate of income tax who therefore won’t be incentivised to vote for parties and policies that favour lower taxes. He fears that low-earners will have no reason to buy-in to tax cuts if they are taken out of the income tax bracket entirely.

IPPR’s wonkish sophistry may well appeal to Ed Miliband, IPPR’s Will Straw is likely to become a Labour MP at the next election. If in 2015 the coalition parties are both standing on a platform of reducing taxes on the working poor with the Labour Party standing on a platform of taxing the poor and increasing welfare benefits, Miliband will be on the wrong side of the dividing line. “Vote Labour and tax the poor” is a winning campaign slogan – for the coalition parties…




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Quote of the Day

David Cowling, the BBC’s head of political research, in an internal memo…

“It seems to me that the London bubble has to burst if there is to be any prospect of addressing the issues that have brought us to our current situation. There are many millions of people in the UK who do not enthuse about diversity and do not embrace metropolitan values yet do not consider themselves lesser human beings for all that. Until their values and opinions are acknowledged and respected, rather than ignored and despised, our present discord will persist. Because these discontents run very wide and very deep and the metropolitan political class, confronted by them, seems completely bewildered and at a loss about how to respond (“who are these ghastly people and where do they come from?” doesn’t really hack it). The 2016 EU referendum has witnessed the cashing in of some very bitter bankable grudges but I believe that, throughout this 2016 campaign, Europe has been the shadow not the substance.”

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