70 per cent of the cost of cutting the personal allowance goes to the richest half of society

Income tax is quite progressive; better to cut VAT or council tax.

Tomorrow is the beginning of the 2013/2014 tax year, and one of the changes that's going through is the latest rise in the Personal Allowance, which is increasing from £8,105 to £9,440. The Tories are making a big thing of it, launching this poster campaign:

That's going to sting for the Liberal Democrats, who are desperate to claim the increased personal allowance as their legacy from this government. But the phrasing is interesting, and worth examining.

For this poster, the Conservatives have dropped their favourite claim of "2.7 million taken out of tax altogether". That's good, because as the FT's Chris Cook explains, it's not exactly true:

The poorest families are paying a lot more in indirect tax (VAT, fuel duty, booze taxes) than in direct tax (income tax, NICs, council tax). In fact, direct taxes only overtake indirect taxes in size when you hit the fifth decile.

If you look at the second decile of households by income, just over 10 per cent of the taxes they pay are income tax. The other 90 per cent of their tax burden – still over £4,000 a year – comes from various other taxes, principally council tax and VAT. Between them, those two taxes account for almost half the tax burden on that decile.

But while it might not be the case that the tax cut takes workers "out of tax", it certainly is a tax cut for 24 million people. But rather than being a positive, this is actually the biggest flaw in the policy. This chart, prepared by the Resolution Foundation (pdf), shows the distribution of that tax cut amongst houses of different incomes:

As the chart clearly shows, the families with the biggest cash gain are the third richest tenth in the country, who get £210 each; and the families with the biggest proportional gain are the fifth richest tenth, gaining an extra 0.61 per cent of their income.

Meanwhile, the poorest families barely benefit from the rise at all. That's unsurprising; you need to be earning at least £8,105 a year for the rise to help you in any way, and at least £9,440 to gain the full benefit. And in a household, that needs to be true of both earners – otherwise half the allowance is wasted.

The chart also lets us get an idea of the distribution of the costs of the rise. Almost exactly 70 per cent of the revenue being forfeit for the increase in the allowance comes from the richest half of the nation. Less than 1 per cent of the money actually goest to the poorest ten per cent in the country.

The truth is that income tax in Britain is already one of the most progressive taxes we've got. The poorest in the nation pay little, while the richest pay most of their tax in income tax. As a result, if you want to cut taxes to help the poor, you would be better off returning VAT to its old rate of 17.5 per cent or increasing – rather than reducing – the number of people exempt from council tax. If you want to cut taxes to help the rich, going after income tax is the right way to do it.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Hannan Fodder: This week, Daniel Hannan gets his excuses in early

I didn't do it. 

Since Daniel Hannan, a formerly obscure MEP, has emerged as the anointed intellectual of the Brexit elite, The Staggers is charting his ascendancy...

When I started this column, there were some nay-sayers talking Britain down by doubting that I was seriously going to write about Daniel Hannan every week. Surely no one could be that obsessed with the activities of one obscure MEP? And surely no politician could say enough ludicrous things to be worthy of such an obsession?

They were wrong, on both counts. Daniel and I are as one on this: Leave and Remain, working hand in glove to deliver on our shared national mission. There’s a lesson there for my fellow Remoaners, I’m sure.

Anyway. It’s week three, and just as I was worrying what I might write this week, Dan has ridden to the rescue by writing not one but two columns making the same argument – using, indeed, many of the exact same phrases (“not a club, but a protection racket”). Like all the most effective political campaigns, Dan has a message of the week.

First up, on Monday, there was this headline, in the conservative American journal, the Washington Examiner:

“Why Brexit should work out for everyone”

And yesterday, there was his column on Conservative Home:

“We will get a good deal – because rational self-interest will overcome the Eurocrats’ fury”

The message of the two columns is straightforward: cooler heads will prevail. Britain wants an amicable separation. The EU needs Britain’s military strength and budget contributions, and both sides want to keep the single market intact.

The Con Home piece makes the further argument that it’s only the Eurocrats who want to be hardline about this. National governments – who have to answer to actual electorates – will be more willing to negotiate.

And so, for all the bluster now, Theresa May and Donald Tusk will be skipping through a meadow, arm in arm, before the year is out.

Before we go any further, I have a confession: I found myself nodding along with some of this. Yes, of course it’s in nobody’s interests to create unnecessary enmity between Britain and the continent. Of course no one will want to crash the economy. Of course.

I’ve been told by friends on the centre-right that Hannan has a compelling, faintly hypnotic quality when he speaks and, in retrospect, this brief moment of finding myself half-agreeing with him scares the living shit out of me. So from this point on, I’d like everyone to keep an eye on me in case I start going weird, and to give me a sharp whack round the back of the head if you ever catch me starting a tweet with the word, “Friends-”.

Anyway. Shortly after reading things, reality began to dawn for me in a way it apparently hasn’t for Daniel Hannan, and I began cataloguing the ways in which his argument is stupid.

Problem number one: Remarkably for a man who’s been in the European Parliament for nearly two decades, he’s misunderstood the EU. He notes that “deeper integration can be more like a religious dogma than a political creed”, but entirely misses the reason for this. For many Europeans, especially those from countries which didn’t have as much fun in the Second World War as Britain did, the EU, for all its myriad flaws, is something to which they feel an emotional attachment: not their country, but not something entirely separate from it either.

Consequently, it’s neither a club, nor a “protection racket”: it’s more akin to a family. A rational and sensible Brexit will be difficult for the exact same reasons that so few divorcing couples rationally agree not to bother wasting money on lawyers: because the very act of leaving feels like a betrayal.

Or, to put it more concisely, courtesy of Buzzfeed’s Marie Le Conte:

Problem number two: even if everyone was to negotiate purely in terms of rational interest, our interests are not the same. The over-riding goal of German policy for decades has been to hold the EU together, even if that creates other problems. (Exhibit A: Greece.) So there’s at least a chance that the German leadership will genuinely see deterring more departures as more important than mutual prosperity or a good relationship with Britain.

And France, whose presidential candidates are lining up to give Britain a kicking, is mysteriously not mentioned anywhere in either of Daniel’s columns, presumably because doing so would undermine his argument.

So – the list of priorities Hannan describes may look rational from a British perspective. Unfortunately, though, the people on the other side of the negotiating table won’t have a British perspective.

Problem number three is this line from the Con Home piece:

“Might it truly be more interested in deterring states from leaving than in promoting the welfare of its peoples? If so, there surely can be no further doubt that we were right to opt out.”

If there any rhetorical technique more skin-crawlingly horrible, than, “Your response to my behaviour justifies my behaviour”?

I could go on, about how there’s no reason to think that Daniel’s relatively gentle vision of Brexit is shared by Nigel Farage, UKIP, or a significant number of those who voted Leave. Or about the polls which show that, far from the EU’s response to the referendum pushing more European nations towards the door, support for the union has actually spiked since the referendum – that Britain has become not a beacon of hope but a cautionary tale.

But I’m running out of words, and there’ll be other chances to explore such things. So instead I’m going to end on this:

Hannan’s argument – that only an irrational Europe would not deliver a good Brexit – is remarkably, parodically self-serving. It allows him to believe that, if Brexit goes horribly wrong, well, it must all be the fault of those inflexible Eurocrats, mustn’t it? It can’t possibly be because Brexit was a bad idea in the first place, or because liberal Leavers used nasty, populist ones to achieve their goals.

Read today, there are elements of Hannan’s columns that are compelling, even persuasive. From the perspective of 2020, I fear, they might simply read like one long explanation of why nothing that has happened since will have been his fault.

Jonn Elledge is the editor of the New Statesman's sister site CityMetric. He is on Twitter, far too much, as @JonnElledge.