I have tabled an oral question in the Lords to ask the government what measures they will take to ensure that wage-earners who are below the income tax threshold will benefit from any future increases in the personal allowance.
In a little-noticed debate last September the Liberal Democrat conference debated social and economic inequality. Inequality, the conference decided in the obscure language motion-writers use, “is an obstacle to individuals determining their own destinies and reduces aspirations”.
The resolution also, equally clumsily, said that inequality “prevents talent from fulfilling its potential to the detriment of the economy and society”. And, more accessibly, that it “creates a sense of unfairness, weakening the fabric of society and setting groups of people against each other.”
And don’t we see that now as leading Tories, and some Labour too, talk about “strivers versus skivers” and denounce “scroungers” who dare to keep their curtains closed as they catch up on sleep after part-time working on the nightshifts at Asda and Tesco.
The motion went on to state that “Conference regrets that current levels of inequality in the United Kingdom are too high, leading to these problems.” And that it “believes that addressing socio-economic inequality benefits everyone, not just the poor.”
Unfortunately we are part of a coalition government that is presiding over a country where the level of economic inequality continues to rise (as it did during the 13 years of New Labour government). And since the government is systematically making the poorest people even poorer – most of those who live wholly or partly on benefits – these are not comfortable times for our party.
But are we not making great strides in raising the personal allowance, taking millions out of paying tax at all, with a target of £10,000 by the end of this Parliament and possibly up to the minimum wage next time? Yes: and I support these policies.
The problem is that they do not help the very people at the margin of living on benefits and working – the lowest paid of all. Almost 5 million workers in 2013-14 will earn too little to pay any income tax. When the threshold increases further, as the personal allowance as goes up even more, there will be millions more. And once you pay no tax, you get no benefit at all from the increase in personal allowance.
At the same time, even in work, you may be getting benefits such as the working tax credit and housing benefit. They are being capped at 1% (okay, thanks to Liberal Democrats that’s better than the 0% the Tories wanted) or in the case of housing benefit subject to all manner of arbitrary cuts. So you may be in work but the state is cutting your income and you do not benefit from the one act of state beneficence which is designed to specifically help the working poor.
Of the 4.3 million people already in this very unfair position, almost two-thirds (63%) are women. Of course most will have part-time and often casual jobs but that’s all the more reason for treating them fairly. My purpose in putting down a House of Lords question today is to spread understanding of the problem.
I hope this will start a real discussion within our party and beyond and lead to policies to solve what is really quite wrong – and in the words economists use, as a means of persuading people to get jobs it’s just inefficient. As well as very unfair.