Declare victory and yet once more into the breach dear friends
Perhaps a decade ago we started making the point that if you’d like the low paid to have more money then just stop taxing them so damn much. An example from the middle of the campaign of insistence here.
The background was the beginning of the living wage campaign. The idea that the minimum wage - something we shouldn’t have anyway but - didn’t produce the desired lifestyle, therefore everyone should pay more than this. We kept pointing out, along with annual calculations to show it, that if the minimum wage were not taxed then that post-tax income would be the same as that living wage taxed under the current system. So, to achieve that living wage just stop taxing the minimum wage. The personal allowance should be the full year, full time, minimum wage.
At which point, yesterday’s Budget:
The 20% tax band currently starts on earnings above £11,850, and when that rises to £12,500 next year someone earning around that mark will be better of by £130.
Another way to put the same point is that the personal allowance will rise to £12,500. Which is how we can date this pledge. For back when we were shouting about this - and we can track who we convinced, how the proposal moved through policy making committees and into manifestos - that full year full time minimum wage was some £12,500 a year.
Thus victory, do the Happy Dance etc.
Except, of course, time has moved on, the value of money declined as it does. The aim was not that the personal allowance be raised to £12,500, rather the moral point that if there’s some irreducible minimum that someone must be paid for their labour then that amount should not be taxed. If the minimum wage has risen then that personal allowance should also.
We’d also add that national insurance allowances should be raised to the same amount.
So, yes, victory, Happy Dance, but also once more into the breach. It is righteous and just that we wish the poor to have more. The simplest method of which is to stop taxing them so damn much. The income tax and national insurance allowances should be set at the full year, full time, minimum wage. Until they are then we’re over-taxing those low paid. And why the hell do we want to do that?