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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Is Yvette Cooper surging?

The bookmakers and Westminster are in a flurry. Is Yvette Cooper going to win after all? I'm not convinced. 

Is Yvette Cooper surging? The bookmakers have cut her odds, making her the second favourite after Jeremy Corbyn, and Westminster – and Labour more generally – is abuzz with chatter that it will be her, not Corbyn, who becomes leader on September 12. Are they right? A couple of thoughts:

I wouldn’t trust the bookmakers’ odds as far as I could throw them

When Jeremy Corbyn first entered the race his odds were at 100 to 1. When he secured the endorsement of Unite, Britain’s trade union, his odds were tied with Liz Kendall, who nobody – not even her closest allies – now believes will win the Labour leadership. When I first tipped the Islington North MP for the top job, his odds were still at 3 to 1.

Remember bookmakers aren’t trying to predict the future, they’re trying to turn a profit. (As are experienced betters – when Cooper’s odds were long, it was good sense to chuck some money on there, just to secure a win-win scenario. I wouldn’t be surprised if Burnham’s odds improve a bit as some people hedge for a surprise win for the shadow health secretary, too.)

I still don’t think that there is a plausible path to victory for Yvette Cooper

There is a lively debate playing out – much of it in on The Staggers – about which one of Cooper or Burnham is best-placed to stop Corbyn. Team Cooper say that their data shows that their candidate is the one to stop Corbyn. Team Burnham, unsurprisingly, say the reverse. But Team Kendall, the mayoral campaigns, and the Corbyn team also believe that it is Burnham, not Cooper, who can stop Corbyn.

They think that the shadow health secretary is a “bad bank”: full of second preferences for Corbyn. One senior Blairite, who loathes Burnham with a passion, told me that “only Andy can stop Corbyn, it’s as simple as that”.

I haven’t seen a complete breakdown of every CLP nomination – but I have seen around 40, and they support that argument. Luke Akehurst, a cheerleader for Cooper, published figures that support the “bad bank” theory as well.   Both YouGov polls show a larger pool of Corbyn second preferences among Burnham’s votes than Cooper’s.

But it doesn’t matter, because Andy Burnham can’t make the final round anyway

The “bad bank” row, while souring relations between Burnhamettes and Cooperinos even further, is interesting but academic.  Either Jeremy Corbyn will win outright or he will face Cooper in the final round. If Liz Kendall is eliminated, her second preferences will go to Cooper by an overwhelming margin.

Yes, large numbers of Kendall-supporting MPs are throwing their weight behind Burnham. But Kendall’s supporters are overwhelmingly giving their second preferences to Cooper regardless. My estimate, from both looking at CLP nominations and speaking to party members, is that around 80 to 90 per cent of Kendall’s second preferences will go to Cooper. Burnham’s gaffes – his “when it’s time” remark about Labour having a woman leader, that he appears to have a clapometer instead of a moral compass – have discredited him in him the eyes of many. While Burnham has shrunk, Cooper has grown. And for others, who can’t distinguish between Burnham and Cooper, they’d prefer to have “a crap woman rather than another crap man” in the words of one.

This holds even for Kendall backers who believe that Burnham is a bad bank. A repeated refrain from her supporters is that they simply couldn’t bring themselves to give Burnham their 2nd preference over Cooper. One senior insider, who has been telling his friends that they have to opt for Burnham over Cooper, told me that “faced with my own paper, I can’t vote for that man”.

Interventions from past leaders fall on deaf ears

A lot has happened to change the Labour party in recent years, but one often neglected aspect is this: the Labour right has lost two elections on the bounce. Yes, Ed Miliband may have rejected most of New Labour’s legacy and approach, but he was still a protégé of Gordon Brown and included figures like Rachel Reeves, Ed Balls and Jim Murphy in his shadow cabinet.  Yvette Cooper and Andy Burnham were senior figures during both defeats. And the same MPs who are now warning that Corbyn will doom the Labour Party to defeat were, just months ago, saying that Miliband was destined for Downing Street and only five years ago were saying that Gordon Brown was going to stay there.

Labour members don’t trust the press

A sizeable number of Labour party activists believe that the media is against them and will always have it in for them. They are not listening to articles about Jeremy Corbyn’s past associations or reading analyses of why Labour lost. Those big, gamechanging moments in the last month? Didn’t change anything.

100,000 people didn’t join the Labour party on deadline day to vote against Jeremy Corbyn

On the last day of registration, so many people tried to register to vote in the Labour leadership election that they broke the website. They weren’t doing so on the off-chance that the day after, Yvette Cooper would deliver the speech of her life. Yes, some of those sign-ups were duplicates, and 3,000 of them have been “purged”.  That still leaves an overwhelmingly large number of sign-ups who are going to go for Corbyn.

It doesn’t look as if anyone is turning off Corbyn

Yes, Sky News’ self-selecting poll is not representative of anything other than enthusiasm. But, equally, if Yvette Cooper is really going to beat Jeremy Corbyn, surely, surely, she wouldn’t be in third place behind Liz Kendall according to Sky’s post-debate poll. Surely she wouldn’t have been the winner according to just 6.1 per cent of viewers against Corbyn’s 80.7 per cent. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.