Archive for the ‘Squeezed Middle’ Category

Sharing Tax Benefits of Growth with « Squeezed Middle »

mardi, novembre 19th, 2013

Increasing income inequality in the UK, together with policies to protect low-income families and the lowering of tax rates on high earners to encourage less tax avoidance, have resulted in the top 50% of tax payers now contributing over 90% of total income tax collected. Indeed the top 1% (those earning over £160,000 per year) pay around 30% of total income tax and the top 10% almost 60%. These high earners are, therefore, funding by far the largest proportion of Britain?s public services.

Yet the opposition Labour party has threatened to return the top rate of income tax back to 50% (from the current 45%) should it be returned to power at the next General Election in May 2015. At the other end of the scale, the governing Coalition of the Conservative & Liberal Democrat parties is also progressively increasing the tax-free allowance to some £10,000 or more before 2015.

However, with the economy now finally developing a solid pattern of growth, in good time for the Conservative party to benefit at the 2015 election, where is the associated policy to demonstrate sharing the financial benefit of growth with a broader part of the electorate e.g. the ?squeezed middle? income earners? Raising the higher (40%) tax rate income threshold is one answer, if the projected overall increase in tax returns from growth will allow, although there is still the need to pay for the costs associated with any ?green? taxes diverted from the energy bills of hard-pressed British consumers.

Welfare Benefits – Separating Fact from Fiction

vendredi, avril 12th, 2013

With the Welfare debate developing as a key policy differentiator between the major political parties, the on-line Guardian newspaper on Saturday 6th April, 2013 carried the interesting article below on the overall benefits system in Britain:
Benefits in Britain: separating the facts from the fiction

« For 2011-12 it is estimated that 0.8%, or £1.2bn, of total benefit expenditure was overpaid as a result of fraud. This is far lower than the figures widely believed by the public, as revealed repeatedly in opinion polls. A TUC poll recently revealed that people believe 27% of the welfare budget is claimed fraudulently.

Hard to judge, and hard to generalise. There is a lot of movement in and out of work, so many Job Seekers Allowance claims are very short. More than 80% of claimants never go near the work programme because they aren’t on the benefit for long enough. A lot are off it in under six months. For disability benefits, there are a lot more long-term claimants, of course. In 2012, 18% of working-age households were workless; in only 2% had no one ever worked. More than half of adults in households where no one has ever worked were under 25. So although the proportion of households where no one has ever worked has increased recently, it is likely to be a manifestation of high and rising young adult unemployment. »

This has been followed by an article in the on-line Sun newspaper on Sunday 7th April:
Brits say benefits are too generous. Poll backs Tories’ attack on State handouts.

« SIX out of ten voters think State handouts are far too generous, a poll reveals today.
In a massive vote of confidence for David Cameron?s blitz on benefits, they think the PM is right to CUT them.
Most people believe at least HALF of claimants are not in genuine need and don?t deserve any help.

And they think striving families struggling on low incomes are being squeezed at their expense.
The huge public support for an overhaul of the welfare state is spelled out in a YouGov poll for The Sun. »

Then Alister Heath writing in the on-line City A.M. Monday of 8th April, 2013 sums it all up quite well by bringing together what he terms the HYSTERIA surrounding reform of financial services and welfare in his article:
Facts are vital to the debate on welfare and banking reforms.

« With some caveats, I?m broadly in favour of the coalition?s reforms to the welfare state, and wish the changes went further. Instead of helping the most vulnerable get back on their feet, the present system all too often traps them in poverty; it is also unfair to those who work. But I?m worried about Iain Duncan Smith?s decision to rely on complex computer systems, an area in which governments tend to fail.
What is clear is that the case for a return to personal responsibility should be made without seeking to demonise the vast majority of those on benefits. Nobody should feel the need to exaggerate the present system?s many woes. »

The Conservative party is currently « making the political weather » as they say and leading Labour on the issue of welfare reform. However, with the public generally in favour but apprehensive about the actual impact on individual hardship cases, there’s a need to concentrate on the facts and ensure successful implementation of the new welfare benefits system before the May 2015 General Election.

Public perception of an issue is important in politics but getting it wrong will make it too easy for Labour, very much on the defensive, to respond with e.g. their pantomime « nasty party » label for the Tories and throw away a clear lead with the public on this issue in the opinion polls.

Francois Hollande & British Family Allowances

vendredi, janvier 4th, 2013

Most of those of us who are towards the right of the political spectrum have been chuckling happily at the latest embarrassment of François Hollande. For those reading this from outside France, a flagship part of the President?s election manifesto was to tax annual incomes above a million euros at 75%. But his proposal to enact this has been struck down by the Constitutional Council. In France, unlike England, income taxes are levied on households not on individuals. But this ?super tax? was to be levied on individuals. So a couple who both had incomes of 900,000? would not pay this extra tax but a couple, with only one earner of over a million but with a significantly lower joint income than the other couple, would pay it. The Constitutional Council would not accept this because it was unfair.

For those of us who follow British politics, doesn?t that ring a bell? It does for me, in part because of a conversation I had with a member of my family recently in England. There the Government has, very reasonably in my view, decided to claw back all or part of the family allowances paid to the better off. But the amount the family will lose will depend on the income of the parent who is the higher earner, regardless of the income of the other. So, just as under the Government?s proposal in France, a couple with two earners each on £40,000 a year will not be penalised, whereas a couple where one of them earns £60,000 p.a. while the other stays at home caring for their children, will be.

We do not have a Constitutional Council in the UK; we rely on the good sense of ministers and parliamentarians under our system of parliamentary sovereignty. In general I believe that this system serves us well but, this time, it has let us down, badly. So has the Government. Of course, we are told, it is all very difficult, because we have separate taxation for husbands and wives. But the information, i.e. the income of both husband and wife, to make a system work fairly is known to the Government. If ministers had the power, when a senior civil servant tells them that something cannot be done, to find a more junior civil servant who can find a way in which it can be done and then make the two swap places, I believe that the problem would have been solved. As it would have been had David Cameron told Iain Duncan Smith that if he could not find a fair system, then he could not have his legislation and would have to raise the money elsewhere. All politicians know that there is no such thing as a tax that everybody considers fair. But that is no reason for adopting a system that everybody considers unfair.

The Government have done themselves electoral harm in two ways. Firstly the system is so daft that it has made them seem economically incompetent. And the battle for voters? perception of economic competence is going to be a key element of the next election. Secondly they have stirred up considerable resentment among parents affected, many of who would otherwise have voted Conservative but who will certainly not do so now.

As the song has it: ?Ain?t it all a blooming shame?.

Robin Baker

Squeezed Middle

lundi, janvier 24th, 2011

One of the first sound-bite attempts of Ed. Milliband, as the newly elected Labour party leader, focussed on the Squeezed Middle of the British electorate for his future national election prospects, although he lost some credibility when questioned due to not being able to more precisely define what he meant by this part of the population. Indeed, the squeezed middle according to Mr Milliband seemed to include anyone neither very rich nor very poor i.e. just about everybody else or perhaps the 75% in the middle who also contribute around the same proportion of total income tax taken by the government. It is interesting then that Reuters today (24 January, 2011) issued a report on Life in Europe »s Squeezed Middle.
In summary, even as Europe has begun to grow again, the global financial crisis which has adversely impacted tens of millions over the last three years is still influencing people and households to watch their budgets, save more and avoid over-extending. The plans and hopes of a generation are seen as having been scaled back and, even if the general economic situation improves, will affect the continent of Europe for years to come. Examples of the experiences so far of austerity affecting relatively affluent people are described for Spain, Germany, Greece, Romania and Britain. In Spain, working Spaniards are facing the fact that they will not be as rich as their parents. Germany is booming again but the experience of being forced to work shorter hours to keep more people employed has left many workers scarred. In Greece, there is a growing wave of emigration. For those Romanians who managed to avoid getting into too much debt from the wide availability of cheap credit, when Romania was the fastest growing economy in the EU two years ago, there are hopes for a better year ahead.
Addressing Britain, the example from the squeezed middle is a young mother with two children and currently unemployed but, thanks to the British policy of mixing affordable social housing with high-end real estate, receiving a subsidy from an independent, not-for-profit housing association to live with her family in one of the most expensive areas of London, next to Westminster Abbey and Big Ben. She, her partner and two children are currently insulated from the impact of the cap on housing benefit introduced by the government as part of the £81 billion public spending cuts. However, their monthly rent of £600 is only a third of what they could be charged on the private market if they were forced to move. That said their annual income of £32,000, just above the national average, comes largely from her partner who works for the London police but is concerned about the security of his job, given the 300,000 public sector positions expected to disappear with government budget cuts, including thousands in the police force. Even if he keeps his job, he will find his pay frozen for the next two years and be paying more into his pension fund. This squeezed middle family is, therefore, already cutting back on unnecessary expenditure before they start feeling the effects of the government cuts.
Considering the examples taken by the Reuters reporters, the squeezed middle covers a rather broad spectrum of which one imagines Conservative party strategists are already well aware. It also seems apparent that although the Office of National Statistics is attributing to the bad weather the unexpected 0.5% contraction in UK GDP for the last 3 months of 2010, the economy currently appears to be stagnating with the squeezed middle concerned about the future and, therefore, cutting back and spending less, offsetting somewhat e.g. the 1% or so growth in manufacturing.