Rich to lose most, more to pay higher tax – IFS

Today the Institute for Fiscal Studies published an analysis of the likely impact of the tax and benefit changes due in April, with a complicated and mixed picture summarised by its balanced headline: Rich to lose most from new measures in April, as 750,000 brought into higher rate tax.

The media coverage however has been to latch onto the second half of that headline and bury the first part a long way down the story. Take The Independent, with its headline Teachers and nurses dragged into top-rate bracket. It goes on to point out how some tube drivers also will end up top rate tax payers (which myself I think raises rather at least as many questions about the level of pay for tube drivers as it does about where the top rate comes in).

That is one notch of journalistic quality above The Guardian story which doesn’t mention the rich to lose most at all. I mean, it’s not as if The Guardian ever takes an interest in how the rich and poor are affected relative to each other is it…?

Of the mainstream news outlets I’ve checked at the time of writing, it is only the Financial Times which leads with the rich to lose most, which may be something to do with the background of their typical reader…

Read more by or more about or .
This entry was posted in News.
Advert

61 Comments

  • Does this take into account public services?

  • “more to pay higher tax”

    Good !

    More of my income will now be taxed at the higher rate, but only because I have a relatively well paid job. I have stated before on this site that I would prefer to add a penny on both higher rates then to have raised VAT (or to have mitigated the rise). That’s not because I believe in higher taxes simply because I believe that taxation on earnings is the fairest system and that higher earners need to contribute more at this time.

    If Tube drivers and teachers / nurses end up paying the higher rate it is because they are earning a reasonable wage. This and the raising of the threshold are the best things to come out of the coalition to date.

    But there is bad here too such as the change to CPI from RPI for benefits.

  • In pure journalistic terms it isn’t really newsworthy as far as most papers are concerned to headline ‘Rich to Pay More’ because most people would be surprised if that wasn’t the case and I include the rich in that. Headlines are about sellings newspapers – not about balance.

    I am also surprised that you seem to be advocating that newspapers should have used the ‘balanced’ IFS headline – Rich to lose most from new measures in April, as 750,000 brought into higher rate tax.

    In space terms that headline would be ludicrous for a broadsheet so where does it put it as far as a tabloid is concerned. Off the top of my head I would go for: TAX HIKE SHOCK – So everyone would buy the paper to see if they were hit but then I used to earn my living as a journaliust and was very good at my job.

    I really find your particular slur on tube drivers as quite disgraceful – why don’t you question whether teachers or nurses are worthy of their pay? Why save that solely for tube drivers?

    I really think it is very unworthy of you Mark and it would be a mark of you as a person if you delete the remark – we all make mistakes and on reflection I’m sure you will agree you have made one here.

    Do you actually know the weight of responsibility that tube drivers carry with the number of passengers they carry squeezed into tubes?

  • The more interesting question here is about income inequality. As a % how many people are actually in the brackets affected? That is the story here. That and how far the so-called boomer generation has housing wealth skewed in a system that taxes income rather than assets.

    I also have to say Mr Pack, the comment about tube drivers is a bit low. They might be an unlovely bunch, but I don’t think that judging like that is very nice either.

  • Have just read the pdf and see that on top of the 750k being added this year to the higher tax bracket that there will be a further 850k by 2014-15 if the £10k allowance goes ahead.

    As to the London tube driver’s wage it appears they get £40k for a 35-hour-week according to the DT which as we know never exaggerates. The 40 per cent rate kicks in at £37,401 but obviously there’s a £6400 personal allowance to be taken into account so a driver has got to be doing O/T to pay higher rate.

    They do of course work at weekends, Bank Holidays and unsocial hours – I reckon they should be paid more!

  • I see no Iceberg 31st Jan '11 - 8:31pm

    Osborne hits hardest at those who can least afford it. It’s because he hates the poor.

    Apart from the wealthiest 2 per cent, the IFS later calculated that low-income households of working age would lose the most because of the cuts to welfare spending.

  • EcoJon
    “They do of course work at weekends, Bank Holidays and unsocial hours – I reckon they should be paid more!”

    Would it be fair to say that you think that everyone should be paid above average wages?

  • I wonder if those 750,000 will then be happy when they find that their child benefit is stopped next year because they have been pushed into the top tax bracket. A double whammy for them I presume?

  • “I wonder if those 750,000 will then be happy when they find that their child benefit is stopped next year because they have been pushed into the top tax bracket. A double whammy for them I presume?”

    Now that I don’t agree with as it’s lazy implementation and should be based upon household income and hits single wage families disproportionately. But the concept of higher earners paying more tax is to be welcomed.

  • @ Eco-Jon
    “They do of course work at weekends, Bank Holidays and unsocial hours ….!”

    Unlike our Deputy PM who only works part-time for a full-time salary.
    A leaked memo from Nick Clegg’s office to the Sunday Telegraph reveals that the Deputy Prime Minister’s ministerial box closes at 3pm Monday to Thursday and at noon on Friday, so that he can see more of his family.

  • I see no Iceberg 31st Jan '11 - 9:46pm

    @BB

    What do you think all that “Alarm Clock” guff was for BB ? To remind him when it’s 3pm of course.
    It certainly wasn’t because it was a well thought out piece of public relations policy wonk nonsense.

  • @Chris Jenkinson
    Posted 31st January 2011 at 9:43 pm

    Are you saying that the Telegraph has got it in for Clegg then? I wonder why Clegg’s office felt they had to respond if the story was not true.

  • @ I see no Iceberg
    “What do you think all that “Alarm Clock” guff was for BB ? To remind him when it’s 3pm of course.
    It certainly wasn’t because it was a well thought out piece of public relations policy wonk nonsense.”

    Lol!

  • Going slightly off topic. The woman who has cleaned the public toilets in my area for twenty years is being made redundant. The youth club which my friends disabled son attends is closing. I admire the Liberal Democrats for helping to make these tough choices and that you are supporting Eric Pickles in cutting out waste in local government. I will certainly be voting for you in the future.

  • Foregone Conclusion 31st Jan '11 - 10:23pm

    How many nurses or teachers earn above £44,000 a year? Not many – for nurses, outside of Central London, only those in Band 8 earn that much. A midwife consultant, a ‘modern matron’ or a nurse consultant would earn over £44,000, but these are hardly typical of nurses in general.

    @BB

    The box is not ‘closed at 3pm’. New, non-urgent material stops being added to the box at 3pm, and he works through that until it’s done (I have no idea how long this would take him to get through). I really see no problem with this – you can’t measure the effectiveness of a minister by such simple metrics. Reading Chris Mullin’s diaries, it is obvious that he worked all hours God sent at the Department of the Deputy Prime Minister, yet he acknowledged that his time was filled with ‘pointless activity’ and that he was unable to get the slightest thing done, e.g. he was unable to get past the first bureaucratic hurdle of doing something about leylandii (to my knowledge, nothing has happened about that to this day). Clegg in particular is something of an oddity as a minister – unlike, say, the Home Secretary, he doesn’t have many official powers, and so his job is essentially to run the constitutional change agenda and exercise an unofficial roving brief in other areas, so I doubt he has much urgent paperwork to begin with.

  • @Simon Shaw

    What is an above average wage? And if everyone was paid above whatever it is would that not affect the average level figure?

  • @Foregone Conclusion

    If he doesn’t have much urgent paperwork to begin with then why is he closing his box at 3pm and not leaving it open in case something urgent does come up after 3pm. Don’t expect me to feel sorry for him. Many people work long hours and then have to commute home and earn far less than he does.

  • @Foregone Conclusion

    The leylandii is still growing 🙂

    More seriously the way civil servants bury Ministers is in paper so they can’t see the wood for the trees or is it the trees for the wood?

  • SociJon – “I used to earn my living as a journaliust [sic] and was very good at my job.”

    My word, you do get about. Not content at being a top capitalist, setting up and running successful companies, you were also an ace journalist too. And modest to boot. And you still find time to be a socialist at weekends. Bless.

  • Foregone Conclusion 31st Jan '11 - 11:28pm

    @BB

    I am not ‘asking you to feel sorry for him’. I did nothing of the sort. What I asked is for you to accept that he might not be a workshy, shiftless individual, and that there are better ways of measuring how effective a government minister is than how many hours he works a day on formal paperwork. However, that involves being reasonable and even handed about Nick Clegg, and since most of the press and the entire Labour Party seems to be suffering from Clegg Derangement Syndrome at the moment, I suppose that’s too much to ask.

  • Tabman,

    Politics of envy. Not very attractive!

  • The bottom 10% bear the second highest burden. You can’t credibly complain about the balance of media coverage when your own piece is an exercise in spin.

  • I love the fact that the more people coming into the top rate tax band is dues to the increasing of the personal allowance which means hundreds of thousands more will pay no income tax at all is completely omitted from most coverage even the BBC news failed to mention it. Talk about accentuating the negatives.

    Also most of the losses are from removing people on £40k+ from tax credits which IMHO they should never have been eligible for in the first place. Why the hell should the government be giving tax credits to people on incomes way above the average?

  • David Allen – irony is not just American English for ferrous.

  • Liberal Neil 1st Feb '11 - 12:03am

    I agree with Peter 1919.

    Overall this is great news. Half a million people at the bottom end will be taken out of paying income tax while those on the 15% highest incomes may a chunk more tax.

    Most of the new people going into the higher rate are only doing so to accomodate the rise in the basic allowance.

  • @Mark Pack

    Come on Mark it was a cheap shot worthy of the DT and DM – they don’t qualify if they don’t do OT. I actually thought you were a better person than that but you live and learn. And I think you are overegging the pudding a bit to say they are among the best paid people in the country on £40K.

    God Bankers drop that running for a tube.

  • Liberal Neil 1st Feb '11 - 12:21am

    @EcoJon

    I think Mark makes a very fair point. I find it difficult to see how the level of skills and responsibilities of a tube driver are equivalent to those of a nurse or teacher on a senior grade.

    And if they are earning enough to be in the Higher Rate tax bracket then they are amongst the 10-15% of highest earners. They may still earn wll below the levels of the relatively small number of super-rich, but they are still on approaching double what most people earn.

  • @Liberal Neil

    I just don’t see it that way Neil so I’m afraid we will need to disagree. It’s like the LibDems supporting the dismantling of Employment protection for every uk worker – I don’t think it’s right but it would appear that most LibDems do.

    I watched a fair bit of the Health debate today and Tories and Labour were going at it hammer & tongs but virtually no LibDem input in fact I’m not sure I actually saw any. I was doing other things so could have missed it but I doubt it. But presumably the LibDems have marched into the Tory lobby on this as well and I don’t think that’s right either. And Cable’s claim that it will increase growth is actually quite bizarre and has no logical basis.

    And then the latest news is about the jobs created by the private sector in the last 12 months. Turns out that of the 200,000 jobs only 6,000 are full time. And the Tory Coalition believes that this same private sector can take up the slack caused by the loss of hundreds of thousands of Public Sector full-time redundancies coming down the track. This is really getting quite scary but the LibDems continue to support the Tory cuts ideology and I don’t think that’s right either because everything is being gambled here on what increasingly looks like a desperate throw of the dice.

    http://www.dailymail.co.uk/news/article-1352333/Part-time-work-Of-200k-jobs-created-year-3-time.html

  • Mark

    I think picking out one particular job and attacking for them for being overpaid is a little petty – there are many jobs that are overpaid when compared to others. Nurses and teachers do work very hard and should be paid more – where are the LD proposals to do so then?

    I work in a company where PhD qualified scientists earn less than 20K but the accountants and HR ‘professionals’ earn over double that. Not fair really but then if it gets to you then you will drive yourself mad.

    I don’t know what a tube driver has to do for his/her money – they may be overpaid but then so are many other people – including journalists!

  • Baszc – “I work in a company where PhD qualified scientists earn less than 20K but the accountants and HR ‘professionals’ earn over double that. Not fair really but then if it gets to you then you will drive yourself mad.”

    Fairness doesn’t enter into it. PhD scientists would be paid more if their skills were scarce and in demand. Companies aren’t stupid; if employing someone makes them more money they will do the maths. If they don’t, they go out of business.

  • Mark

    In your post above you did suggest that tube drivers are undeserving of their salaries compared to teachers and nurses. I pointed out that this particular bête noire of the right-wing press is often trawled out as an example of excessive pay – do you really know if it is excessive? Perhaps they deserve it, have you a clear idea of the pay structure and the responsibilities – do you pay higher tax and do you deserve it?

    In response to Tabman – the same company pays twice the salary to those based in the US or Europe and in the Far East this sort of technical skill is highly valued. Why this is the case is probably linked to a lot of things but I cannot believe that paying talented engineers/scientists such comparatively low salaries is going to help the long-term future of the economy

  • Tabman

    I forgot to say that if you had read my post properly I was suggesting that things were not ‘fair’ and in this case the argument of Mark is moot regarding tube drivers.

    The righ wing also uses ‘unfairness’ argument a lot – look at their ranting about public service manager salaries and tube/train drivers. As you said – life is not fair!

    What we can debate though is how the potential disparities will help the long term future of the UK economy. We talk about lack of innovation and that the manufacturing sector needs to support the recovery when those who will contribute to it could earn more by being an HR manager or accountant or banker, even moving abroad to work for the same companies on twice the money.

  • Mr Pack – With respect (and to be clear, I do mean that)

    ‘if you look at the levels of training and skill it requires to be a top nurse, a top teacher or a top tube driver, the first two of those take longer to achieve and make more of a difference to how the service they provide to the public.’

    That is not what you said in the article – you did not mention levels of training, that is a whole different question. I know a few teachers who argue that there should be greater differentials in pay in teaching. There is a world of difference between a ‘top’ nurse consultant and a nurse. For that matter, one could argue that a career structure with defined, national progression pathways is a very substantial benefit.

    It is interesting to note that all three of your examples are unionised heavily – but that is for another day.

    I simply think it is a bit low to start picking on individuals and individual jobs – these people pay tax as set out by government and have done nothing wrong, who are you to sit in judgment?

  • You seem to be equating “higher rate tax payers” with “rich”.

    Great, so by that logic all we have to do is lower the upper-rate tax threshold until everyone is in it and then all taxes will only ever affect the rich.

    The we really will all be in it together, yes?

  • EcoJon
    “What is an above average wage? And if everyone was paid above whatever it is would that not affect the average level figure?”

    Glad to see that you recognise the idiocy of that position.

    So, on the basis that you recognise that not everyone can earn above average wages, would you like to tell us who you think should earn below average wages to compensate for your very highly paid tube drivers (who you previously said you think should be paid even more)?

  • @Foregone Conclusion
    “involves being reasonable and even handed about Nick Clegg, and since most of the press and the entire Labour Party seems to be suffering from Clegg Derangement Syndrome at the moment, I suppose that’s too much to ask.”

    I am afraid that is too much to ask. I don’t remember Clegg being very reasonable when he told us ‘lefties’ we were no longer wanted by the party after he had our votes securely in his pocket. He deserves all the negativity as far as I am concerned.

  • At the end of the day the Coalition tax plans put approaching a million people into the Higher Rate tax band and remove a much smaller amount from being taxed.

    Bringing in the tube-driver red herring looks to me like a typical Tory ploy to try and divert the anger of Higher Rate taxpayers away from the Coalition government and onto a relative handful of tube drivers who only cross the Higher Rate threshold when they do OT.

    @John Brace who said: ‘Labour brought in tuition fees, putting another obstacle in the way of kids from less well-off backgrounds going to university’.

    Labour did bring in tuition fees and basically expanded university places with the money and opened up more opportunities for working class kids. The LibDems increased the fees but cut the university grants so the money will go to replacing the grant cut and probably end up in a contraction of university places. If people are to believe what you say then tell the whole story and don’t just pick the bits that suit your argument. And I won’t rub the open wound of the personal pledges on tuition fees that the public will never forgive you for which will cost you more votes than any vote ‘stealing’ by Labour.

    @Mark Pack who said: ‘ the reason I mentioned tube drivers was because the news story I linked to had picked them out for special comment’.

    Perhaps Mark a little pause for reflection on why the tube drivers had been singled out for attention by the paper might not have gone amiss.

    @bazsc who said: ‘so are many other people – including journalists!’ I totally agree with you bazsc but then some of us journos thought we were underpaid 🙂

    @Ian Sanderson (RM3)

    This was a few years ago and my memory is hazy on the detail but one of the top PhDs at the Roslin Institute – of Dolly the Sheep fame – was having a break and a vending machine guy came in to fix a faulty soft-drink dispenser. The mechanic said to the PhD something along the lines of ‘I bet you earn a fortune here’ and the talk turned to wages. The PhD almost fainted when he heard what the mechanic earned and chucked his job and becamse a mechanic. This is a true story btw and I seem to remember that the PhD was actually happier in his new job because of the freedom he obtained from the ‘politics’ of academia. Wonder what he’s doing now 🙂

  • If you read my comments correctly Dan you will see that I was not defending tube drivers etc – what I was in fact doing was pointing out that the focus on one job of the many that are perhaps overpaid was petty and not useful. The fact it is a job that always seems to be a favourite of right wing ranters is suspicious.

    The discussion of salary is a stagnant one as there are a lot of exaggeration and misinformation going on. Quoting salaries without context etc is misleading and I have no confidence in the numbers reported. There is always an agenda in there somewhere.

    I am astonished though to see such comments as those from Tabman and Ian Sanderson who seem to take a very market-driven, laissez-faire attitude. I particularly like Ian’s comments on how PhD scientists should become accountants or be happy to do their job for a basic living standard. I hope I have misinterpreted him but I would hope for more after 6/7 years of study in an area where we seem to be lacking.

    It is funny how those with low salaries should not be expected to be incentivised by salary but those at the top need have cash thrown at them!

    A ‘fair’ reward system based on worth is unrealistic but I would have hoped that LD supporters would be more questioning of why certain jobs deserve high rewards and others don’t. GPs salaries have massively increased vs those of teachers and yet we still complain about the quality of people going in to teaching. Also, why an engineer in most of the rest of the world is held in esteem and is paid accordingly when in the UK it is a pretty low status job and most people think engineer’s fix things.

    There are lots of things that progressive parties could do to challenge perceptions and bring a little more ‘fairness’ into what jobs are rewarded/valued but reading some of the comments on this thread it seems that this is a bit of a dream.

    I do not think salary is all the story either – a move towards insecurity, short-term contracts, accepting poor employer behaviour (shame on you Vince for the changes to employee tribunal rights) is also something that could and should be reversed. This started 30 years ago and has continued up until now. I had hoped that the LD would try and do something about it.

    By the way, on topic, good to raise the bottom threshold of tax. Still doesn’t make up for the rest of the policies though

  • Peter Chivall 1st Feb '11 - 1:31pm

    I found it interesting that many of the centre-left papers like the ‘Guardian’ thought that ‘middle income’ meant £40k plus. Last night on Radio 5 at 4.50pm they interviewed a ‘stay at home’ mum whose husband earned over £50k. She didn’t ‘know how she could manage’ and might have to cut some of the children’s after school clubs. It’s a pity the interviewer didn’t ask her how she thought parents on half their household income (i.e. those on median incomes) managed?
    That’s why I always distrust Labour apologists who cry crocodile tears over families on less than £20k, but refused to oppose Gordon Brown’s abolition of the 10p tax rate and still pitch their appeal to the ‘squeezed middle’ (i.e. those households on £40k plus).
    There are many things wrong with the Coalition and I dislike and distrust Osborn and never warmed to Clegg, but their tax policies are more honest and just than anything Labour has done since Callaghan.

  • Dominic Curran 1st Feb '11 - 1:36pm

    this post has gone on a massive tangent about tube drivers – i feel like we’re in the debate equivalent of aldwych station: on the map but not actually part of the network.

    i also don’t see what’s wrong with the story – lots of people being taken out of tax at the bottom (and this is just the first step, by the time we get to a threshold of £10,000, there will be many, many more poor peolpe not paying income tax at all) and those at the top being dragged into paying more. That’s called re-distribution. If you don’t like, it, vote Tory!

  • Dominic Curran 1st Feb '11 - 1:38pm

    ps and before any pedants state that aldwych isn’t on the tube map, i say get a life and appreciate poetic license in pursuit of a stretched metaphor.

  • @ Mark Pack

    Stepping into the ongoing debate surrounding your snide comments re-tube drivers pay, I would like to state for the record that all train drivers appear to be fairly well paid down to the fact they’re responsible for the lives of the people they drive (intercity drivers get paid a fair bit more and Eurostar are paid more still) .

    It’s a bit like Airline pilots, they’re paid for the lives not just for the training however detailed that may be.

    OK, you might not like Bob Crow (many don’t) but I don’t think you should take needless shots at Tube drivers – if you’re so jealour with your poor pay why don’t you become one?

  • @Peter Chivall

    Are their tax policies really more honest than Labour’s. It’s good to see the personal allowance increased at a higher rate than it normally is. But what about the extra indirect taxation such as VAT and fuel duty as well as benefit cuts which means those at lower income levels will be worse off despite the increase in tax allowance,

    So I;m afraid I view the increase in the alowance as primarily a cheap vote winner.

  • @Simon Shaw who said: ‘Glad to see that you recognise the idiocy of that position’. Not my position Simon it was your’s. I was just asking for some clarification from you which you have failed to provide.

    However having watched you in action befoe I have no interest in wasting any time on you as you seem more interested in setting traps than having a free and open exchange of views.

    And your obvious inability to spot my humour really says a helluva lot about you and might I suggest that you lighten-up as it will make you feel better 🙂

  • EcoJon
    “Do you actually know the weight of responsibility that tube drivers carry with the number of passengers they carry squeezed into tubes?”

    EcoJon
    “They do of course work at weekends, Bank Holidays and unsocial hours – I reckon they should be paid more!”

    You seem to be suggesting that you didn’t mean one of those two above statements (you were just trying to be humourous).

    So which one did you mean and which one was the joke? It might be better if you made it clear if you want to join in with “serious” political debate.

  • matthew fox 1st Feb '11 - 8:39pm

    Strange how the article misses the increase of VAT.

    That comes across, as a bit of a bombshell.

  • Lets not forget that only £1K increase in income tax threshold has been accepted by Osborne. Just because the LibDems want it to go up another £3K doesn’t mean that it will. When the other £3K fails to materialise, the excuse will be – we are only the junior partner in the Coalition and can’t have everything we want blah, blah, blah.

  • @Simon Shaw – go an raffle your donuts mate – you ain’t capable of political debate just spouting an entrenched position from a closed mind.

  • Looks as though Cameron has been caught-out on the NHS big-time Hope Milliband roasts him at PMQ

    http://www.mirror.co.uk/news/top-stories/2011/02/02/david-cameron-s-dodgy-claims-on-nhs-reforms-are-exposed-115875-22892385/

Post a Comment

Lib Dem Voice welcomes comments from everyone but we ask you to be polite, to be on topic and to be who you say you are. You can read our comments policy in full here. Please respect it and all readers of the site.

To have your photo next to your comment please signup your email address with Gravatar.

Your email is never published. Required fields are marked *

*
*
Please complete the name of this site, Liberal Democrat ...?

Advert

Recent Comments

  • Tom Arms
    I meant to say that the UK supplies the nuclear warheads for its deterrent....
  • Tom Arms
    There are some areas where the US is likely to dominate for a very long time. Space is an obvious one. Ukraine would be up the proverbial creek without America'...
  • Ruth Bright
    @Paul is surely right, do we have age breakdowns for stats on members and active supporters?...
  • Tom Bailey
    Alex Macfie says: "He [Farage], has just seized on one case of supposed “anti-white bias” by the police (the only one available)" So the 3 decades of Brit...
  • Alex Macfie
    @Simon Robinson &c: Please stop pretending Nigel Farage is acting in good faith. He has just seized on one case of supposed "anti-white bias" by the police ...