#038 Again…Tax The Fat Cats
The current chancellor Jeremy Hunt MP recently released his ‘Autumn Statement’ to much fanfare. There were two headline policies announced that really stood out in late 2023.
He announced a 10% increase to the minimum wage (AKA the ‘National Living Wage’, not to be confused with the (higher) real living wage, which is voluntary and is set independently by the Living Wage Foundation based on the cost of living) for 21 year olds and above, which whilst welcome is still not enough of an increase for low paid workers right now, as explored in a previous (2022) article - https://progressiveprimers.medium.com/032-lets-counter-the-cost-of-living-crisis-ffea51688353.
Hunt also announced a decrease in the basic rate of National Insurance tax, paid on income above £12'570 and below £50'270 a year, from 12% to 10%, two percentage points, for employed people, from January 2024. Similarly the chancellor cut national insurance for self employed people.
Now national insurance been changed several times in recent years, highlighting the conservative party’s indecisiveness and/or incompetence in this area. Basic rate national insurance was raised in early 2022, from 12% to 13.25%, then cut back in the brief Liz Truss era, from 13.25% to 12%, kept by Jeremy Hunt and Rishi Sunak, and now cut again by Hunt, from 12% to 10%, all in the space of less than two years.
Whilst this latest national insurance tax cut on the surface appears very positive as it increases most working people’s net income and will to a small extent help stimulate growth in the economy, when we look closer we can see it is actually also problematic for two significant reasons.
Firstly it hasn’t been offset by enough other significant revenue/tax generating policies to ensure public services, already in dire straits in 2023, are not adversely affected going forward. This may be some kind of trap for a possible incoming Labour government in 2024, or it may be simply be an optics based attempt to win votes, at the expense of our future national economic reality, but either way it is not the smart, well rounded economic policy it is being presented as.
As a side there are many progressive policies that would offset this revenue loss, some of them can be found through the links below,
Secondly, the tax cut is not really large enough to make a significant difference to most people, considering the increases we are seeing in energy, food, rents, mortgages, fuel and other costs at this time.
A better (and more progressive) policy would have been to reduce basic rate National Insurance by two percentage points and also increase the threshold at which working people pay basic rate tax, to something like £16k (currently £12’570), reversing the “fiscal drag” effect being paid by basic rate taxpayers (most working people).
These measures would deliver a much more significant amount of desperately needed money into people’s wage packets, from the very start of 2024, and the lost revenue from these changes again could be offset by progressive tax changes elsewhere, such as those put forward here -