Nick Clegg’s “worker’s bonus” – what I said about it on BBC’s Daily Politics

By Stephen Tall | Tue 19th November 2013 - 1:45 pm

I guested on BBC2’s Daily Politics on Monday to discuss Nick Clegg’s announcement that he wants the Coalition to offer a “worker’s bonus” in the next budget, taking the personal allowance up to £10,500 – beyond the £10,000 that was promised by the Lib Dems at the 2010 election.

The other two guests were ex-No. 10 Labour policy wonk Matthew Taylor, now chief executive of the RSA, and Conservative backbench MP Dominic Raab.

You can watch the 10-minute debate here (til 25th November).

Here’s my view in 6 sentences:

I’m a fan of the party’s policy of raising the personal allowance, a tax-cut targeted at low-earners and which has taken two million of the lowest-paid out of tax altogether.
I’m sympathetic to the party’s policy of raising this still further, to £12,500, the current earnings for someone working full-time on the minimum wage – if it’s a minimum wage (and some way off a living wage) the idea of the state clawing some of that back through tax is quite wrong.
However, as I argued here in February, the party should first raise the threshold at which National Insurance Contributions are levied – this would help the million-plus low-paid earning between between £7,748 (the NIC threshold) and £9,440 (the personal allowance threshold) and be a more progressive measure.
This increase in the NIC threshold should be focused as far as possible on helping the low-paid, perhaps by increasing Working Tax Credits (as the IFS has recommended here).
That said, I understand why Nick Clegg has made the announcement he did – raising the personal allowance is the Coalition’s single most popular measure, one which both the Conservatives and Labour are now eager to adopt, and which Nick is determined should be owned by the Lib Dems.
Though less progressive than an increase in the NIC threshold, it is easier to explain on the doorstep – and income tax is more unpopular than NICs.

I’m not sure I managed to get all these points in, but it was a lively exchange…

* Stephen was Editor (and Co-Editor) of Liberal Democrat Voice from 2007 to 2015, and writes at The Collected Stephen Tall.

5 Comments

Lucas Amos 19th Nov '13 - 4:24pm

Excellent
Cllr. David Becket 19th Nov '13 - 5:07pm

Raising the tax threshold does more for the better off than those at the bottom on the heap.
We need a three pronged policy
Raising the Tax Threshold
Raising the National Insurance Threshold
Fixing the minimum wage at the rate of living wage.

Now that really would lead to a fairer society
Max Wilkinson 19th Nov '13 - 7:13pm

Great policy for people on low and average wages. In addition, this is very easy to explain to voters.
Graham Evans 19th Nov '13 - 9:27pm

Stephen is adsolutely right that few voters understand the significance of NI , which is why Gordon Brown was able to get away with increasing the tax take from earnings while claiming not to have raised the basic rate of tax. In fact I have an idea that this approach may even have been pioneered by the Tories prior to 1997. Increasing the level at which NI becomes payable would in theory be better than increasing the tax threshold, but given the political realities perhaps it would be better to start floating the idea now with a view to implementing the change once we have taken everyone earning the minimum wage out of by having to pay tax. And by floating the idea I mean talking much more about NI and the con trick Gordon Brown pulled on the electorate.
Matthew Huntbach 19th Nov '13 - 10:51pm

Though less progressive than an increase in the NIC threshold, it is easier to explain on the doorstep – and income tax is more unpopular than NICs.

Yes, and this shows how people are easily fooled, because in real terms the two things are exactly the same – a portion of one’s income taken and used for state expenditure.

People do actually realise they are being fooled, when they come across politicians using fancy language, juggling and twisting these things. Sure, you can get remarkable changes in what people will say they support just by superficial changes of language – call 1% out of your income “national insurance” and you’ll get a different response from if you call it “income tax”. But underneath, I think people want politicians who aren’t doing this, who aren’t playing these clever-clever games, coming across like the smooth salesmen who sold them all those rubbish financial policies we’re now getting more smooth salesmen telling us we should use them to claim our compensation for.