The decision by the Liberal Democrats yesterday to endorse a wide-sweeping tax cutting policy has set the newspapers ablaze with commentary this morning and again tax cuts are on the political agenda in the conference season.
To call for lower taxes on low income families is particularly welcome as the economy faces even choppier waters. From the Conservatives, too, we can expect to hear some veiled suggestions of tax cuts in the mantra of “sharing the proceeds of growth”, but nothing close to the position staked out by the Lib Dems this week. Yet if the Lib Dems and Tories wanted to seriously push the case for easing the tax burden on the lowest paid, they’d do well to take those in poverty out of income tax altogether.
The government’s own barometer for those living in poverty is 60% of average earnings, which is roughly £14,400. Already we have an extensive, costly and on the whole ineffective bureaucracy in place to administer the complex tax credits system and other benefits designed to help those in poverty.
But it can’t be morally right to take from the poorest and then ask them apply to the government just to get a bit of it back. Means testing demeans those who are subject to intense government scrutiny, especially when we don’t factor in the invasion of privacy means testing involves. What case is there for the government to evaluate your eligibility for ‘benefits’ when it’s your money you want back in the first place?
The Lib Dems have already made a bold stand in putting the case for lower government spending, a move that even outflanks the Conservative message of higher public spending as all part of the ‘sharing’ deal between the government and taxpayer. But the silver bullet in twenty-first-century British politics is staring the Liberal Democrats in the face. In presenting the case for lower taxes on the lowest paid, they should embrace the call to take those in poverty out of income tax by significantly increasing the income tax threshold to the government’s valued level below which poverty begins. Whereas Lady Thatcher locked in the support of the C2 and D voting classes when the government allowed council tenants to buy their own council houses, the same opportunity is there for any party to take the next logical step and to take the poorest out of income tax.
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