So, we heard a lot this week from David Cameron who claims the Tories now care about poverty and inequality! Well, if you were in any doubt here’s a new analysis of the Tories’ tax priorities. Guess what? Their plans are hugely weighted to the very wealthiest. 

• Married Couple Allowance – new data shows the highest earners receive 13 times as much as people on lower incomes and any couple in which both partners have to work to earn more than £6500 each, get nothing.
• Inheritance Tax Giveaway – All the benefit goes to 2% wealthiest.  98% of public don’t pay it so get nothing. 
• Abolishing the 50p income tax rate – this gives all the benefit to the highest earning 1% of the population.  99% of the population get nothing.
• Reversing fairer Pension Relief Rules – this gives all the benefit to the 1.5% top pension savers.  98.5% of pension-savers get nothing.

 To pay for these tax cuts, the Tories will need to find billions of cuts to public spending, not to mention the rest of their long list of tax and spending promises. 

And while most the benefit goes to the 2% best off, it’s the rest of the public who pay due to cuts to schools, hospitals, police and transport.

 Full details

 Married Couples tax break

 The only form of marriage tax break that has been discussed by David Cameron and George Osborne is that proposed in 2007 by the Conservative Party Social Justice Commission; a transferable personal allowance. 

This would not be given to every married couple.  This proposal would do nothing for:

• Widows and widowers;
• divorced couples;
• co-habiting couples;
• married couples who both work and both earn over £6,500 each;
• married couples who both work and both earn less than £6,500 each.

This would allow one member of a married couple to take advantage of their spouse’s unused tax free allowance, but only if the spouse was not earning or earning less than the tax free allowance.

“A TPA [Transferable Personal Allowance] of the full personal allowance amount would provide only modes financial support for marriage – £20 a week to those making use of it – encouraging rather than incentivising it. The main rationale for the allowance would be to provide symbolic recognition of the institution of marriage. It would indicate that marriage is valued because of its benefits to children and the wider society. It would make it easier for a mother or father to remain at home to look after their children whilst the other spouse worked, or for one partner to do voluntary work within the community, look after elderly or disabled members or manage a home in a way that enables partners and families to have more undivided time together. We would thus see this as a measure with the potential to increase family stability and improve the quality of family life.”

Family Breakdown, Final Report of the Conservative Party Social Justice Commission, 10 July 2007, p71

 “I am conscious of my job to provide for those people, giving them a bit more cash in their pockets, helping to keep interest rates down, lowering family taxes when we can afford to do so. It makes such a difference to so many people. And when you see the debate in the media about the £20-a-week tax cut (Iain Duncan Smith’s proposed tax break for married couples) it really makes a difference it most certainly does.”

George Osborne, Tatler magazine October 2007 edition

 Jon Snow:                  “One of the most damaging things is when a marriage breaks down and ends in divorce. You get married again – you get it again? “

David Cameron:        “Yes, it’s a married couples’ allowance … it’s a recognition of marriage, so those people who, and we haven’t said precisely how we’re going to do it, but if you recognize marriage and the tax system then you recognize all marriages, yes of course.”

David Cameron, Channel 4 News, 12 July 2007

 John Humphrys:         “Alright, but let’s be absolutely clear that you are talking about something like raising personal tax allowances, transferable child tax allowances, all that sort of things, what you’re saying is making it more profitable to be married than to be single?”

David Cameron:        “Yes. Yes.”

John Humphrys:         “Alright, so that’s an absolutely commitment, let’s be clear about that.”

David Cameron:        “Yes.”

BBC Radio 4 Today Programme, 16 February 2007

 This was confirmed as recently as October 2009 in George Osborne’s speech to Tory Conference (October 2009):

“That is why we are going to support marriage in the tax and benefit system. “

 Cost and distribution

 In answer to a PQ by Lord Oakeshott of Seagrove Bay (27 Oct 09), the Treasury costed this at £4.9bn.

http://www.publications.parliament.uk/pa/ld200809/ldhansrd/text/09102779001493

Income decile	Average gain (£ per year)
Bottom	30
2nd	90
3rd	120
4th	140
5th	160
6th	200
7th	220
8th	240
9th	310
Top	380

 

 

Under this proposal the very highest earners will get a tax break 13 times as much as the less well off.

 

Inheritance Tax Giveaway

 “Encouraging savings is why I made my promise that only millionaires would pay inheritance tax. Of course this financial crisis means it cannot be a priority for our first Budget, but in the lifetime of a Parliament we will honour that pledge.”
George Osborne, speech to Tory Conference, October 2009

 

“I am happy to confirm that our inheritance tax proposal will introduce a threshold of £1m per person (not per couple). This means that it would be possible for a married couple to enjoy a threshold of £2m.”

Theresa May, Shadow Leader of the House of Commons, Daily Telegraph, 3 September 2008

Cost and distribution

The Cost is £1.2 bn

Only 2% of people will pay Inheritance Tax, so the Tories’ tax cut gives nothing to 98% of the population.

However, a family worth £2m, would get a tax cut of £520,000.

And It’s the 3000 richest estates that get an average of £200,000 each.

Reversing 50p Income Tax Rate

David Cameron and his team have also said they want to reverse the new 50p rate of income tax and fairer limits on pension relief.

“The shadow cabinet’s completely united about this point. We don’t like the 50p. We don’t approve of these high marginal tax rates which will do damage to Britain but it’s got to form its place in the queue of taxes we want to get rid of.”
David Cameron, Today Programme, 24 April 2009

George Osborne has indicated they won’t reverse 50p on day one, but will do it soon after their pay freeze comes to an end.  They are currently saying the pay freeze won’t last more than one year:

“The new 50p tax rate and associated changes to the taxation of higher earners should be kept in place for at least as long as the public sector pay freeze, in order to ensure that the richest in our society pay their fair share of the burden of tackling Labour’s debt crisis.”
Conservative Party website, 06 October 2009
http://www.conservatives.com/News/News_stories/2009/10/Specific_measures_to_start_tackling_Labours_debt_crisis.aspx

Cost and distribution

Cost: £2.4bn.  Source: Budget 2009 Red Book (page 153 footnote 3) – including both 50p rate (scored Budget09) and 45p rate (scored earlier)

The 50p Rate is only paid for by the highest earning 1% of the population so scrapping it gives all the benefit to this group

Reversing Fairer Pensions Relief Rules during next Parliament

The Tories promise that this is also in the ‘queue’ of taxes they will reverse.

“The most recent of these are the changes to tax relief on pension savings announced in the Budget.  The first introduced what the government likes to portray as a gradual tapering of tax relief for those on the new higher rate of income tax but is in fact a sharp withdrawal.  And the second, and perhaps more significant change for this audience, makes employer contributions to pensions taxable as income for the higher rate earners.
Those proposals break the basic covenant between savers and the Government, enshrined in the Turner report, that responsible savers will be rewarded for setting aside some of their income in pensions savings for their retirement. However, instead of being rewarded, this government has now decided that they will be taxed several times over.
As George Osborne has already made clear, I am afraid that I am not able to stand here today and promise you that a Conservative government will reverse this measure.  There are a number of new tax rises we don’t agree with, but this one will have to take its place in the queue.”
Theresa May, Speech to the CBI Pensions Conference, 23 June 2009

Cost and distribution

Cost: 3.1bn – source: Budget 2009 Red Book costing for 2012/13 (page 153 footnote 4)

This would only benefit the 1.5% top pension savers.