John Bercow: Tory tax cuts should champion the poor, not the rich

I am sick of the claim that we are concerned only about the rich. Sadly the charge has stuck
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The Independent Online

John Redwood has suggested that the £4bn of proposed Conservative tax cuts represent merely a down payment and that more would follow. To my mind, given the rising budget deficit, pressure on public services and voter scepticism about extravagant promises, big tax cuts are neither affordable nor desirable. Any speculation to the contrary should be decisively quashed. There is a world of difference between prudent proposals to help the most needy in society on the one hand and showering largesse on the affluent majority on the other.

John Redwood has suggested that the £4bn of proposed Conservative tax cuts represent merely a down payment and that more would follow. To my mind, given the rising budget deficit, pressure on public services and voter scepticism about extravagant promises, big tax cuts are neither affordable nor desirable. Any speculation to the contrary should be decisively quashed. There is a world of difference between prudent proposals to help the most needy in society on the one hand and showering largesse on the affluent majority on the other.

The Conservative pledge to slash council tax for pensioners will be warmly welcomed. As it is right to help most those who have least, the top priority now for Conservatives should be to slash taxes for the lowest paid people.

Consider the plight of the working poor in Britain today.

People on modest incomes pay income tax and national insurance at a rate of 33 per cent. Moreover, 1.5 million low-income working households are penalised by tax credit and benefit withdrawal when they try to boost their income, twice as many as in 1997. They keep just 40 pence of every extra pound they earn.

Wait a minute. Isn't Gordon Brown supposed to be a champion of the poor? Well, yes and no is the answer. He lowered the starting rate of income tax from 20 per cent to 10 per cent but more than halved the bandwidth from £4,300 to £1,500 in 1999-2000, thereby increasing tax by stealth. This starting rate now applies to the first £2,020 of taxable income. In effect, this much lauded lower rate has had little impact. Indeed, when combined with the reduced bandwidth, those earning £9,000-10,000 a year are worse off.

There is no denying that the interaction of the tax and benefits system is both fiendishly complex and deeply regressive. What is more, when the impact of other taxes such as VAT and council tax is taken into account, the poorest fifth of householders pay a higher proportion of their income in taxes than any other group.

Amongst the working poor forced to hand over a scandalously large slice of their earnings to the Inland Revenue are part-time workers on the minimum wage; students working to pay their tuition fees; and pensioners receiving just £60 a week from a personal pension.

What needs to be done? Oliver Letwin should pledge that in his first Budget he would raise the personal allowance and the earnings threshold to the point where a person working 20 hours per week at the minimum wage becomes exempt from income tax and employee national insurance. Only people with income exceeding £5,058 would pay income tax and national insurance. Hundreds of thousands of families would gain from this. It would cost £3.7bn, could be delivered over two years and would be worth every penny.

Some of Britain's low paid will climb out of poverty by acquiring skills or qualifications that enable them to earn bigger incomes. Others might not progress to better paid employment, because poor health, lack of motivation or even the absence of opportunity prevent them doing so. Yet they slog their guts out for paltry pay and are fighting a hellish battle to make ends meet. If they could only keep what they earn, they would have a sporting chance of winning that battle.

There are two good and simple reasons why the poor should be the main beneficiaries of the initial Tory tax cuts. First, it is morally right to assist those who earn the least and are hit the hardest by the tax system. The needs of the poor, in terms of the struggle for survival, are unarguably the greatest. The benefit to them of relief from tax would be vastly greater than to the rich or comfortable.

Secondly, it makes political sense for Tories to help the poor. I am heartily sick of political opponents' claims that Conservatives are extreme, out of touch and concerned only about the interests of the rich. Sadly, the charge has stuck as poll after poll has shown us for over a decade. In standing for the Conservative leadership, Michael Howard recognised the problem. Rightly, he was at pains to stress that he wanted to reclaim the tradition of One Nation Conservatism which has defined the party for much of its most successful history. From Wilberforce to Shaftesbury, Disraeli to Lord Randolph Churchill and RAB Butler to Iain Macleod, the Conservative Party knew that its duty to the disadvantaged was paramount. So it is today.

Yet mere words are not enough. To persuade the electorate that Conservatives have changed, that we offer a distinctive alternative and that we will deliver is our most urgent necessity. The obvious step is to put the working poor at the forefront of our Timetable for Action. Take the poor out of tax. Let them keep what they earn. Above all, we should proclaim this message with the passion so often reserved for speeches about Europe and immigration.

Of course, this "help the poor" approach is not certain to work. Yet it is right in itself and would represent a decisive break from the failed messages of narrow self-interest which characterised the 1997 and 2001 campaigns. It is surely worth a try.

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