Nick Clegg and Danny Alexander at the opening ceremony of the Commonwealth Games in Glasgow. Photograph: Getty Images.
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The Lib Dems' tax cut plans won't help the poorest

We need to reform regressive taxes, not progressive ones. 

After yesterday’s news that wages have once again fallen in real-terms, it’s becoming increasingly clear that political parties cannot avoid the issue of low pay. This is particularly pressing given growing awareness and concerns over inequality, which has highlighted that pay at the top is not so shabby.

Today’s announcement from the Liberal Democrats that they would raise the income tax threshold to £12,500 is an example of this, presented as it is as a way to help people on low and middle incomes. Previous increases to the personal allowance have been a key coalition policy and touted as part of their anti-poverty strategy. But while this will help many households with middle incomes, it won’t help as many people on low incomes. In fact, some on high salaries will also see a tax cut. 

People on individual incomes up to £99,000 will be getting a £500 tax cut, while people working full-time on the minimum wage will be getting less than £400, and those earning less than £10,000 won’t benefit at all from this proposed change. The introduction of Universal Credit will mean that this change would have even less of an effect on low income households as 65 per cent of any gain they get would be lost as their Universal Credit is withdrawn. Analysis by the liberal think-tank Centre Forum has shown that an increase in the personal allowance would benefit households higher up the income distribution (the 6-9th decile benefit most) far more than it would the poorest third of households. 

Similarly, National Insurance (NI) has been looked at, with the Lib Dems again looking to raise the threshold to £12,500. The same analysis by Centre Forum shows that such changes would help the top 20 per cent of households more than the bottom 20 per cent. A far better way to make NI more progressive would be to raise the upper limit so that those at the top pay a greater share of tax.

The point that this policy misses, and most tax reforms miss, is that people on low incomes don’t pay much income tax. As the Equality Trust’s recent report on the tax system shows, for people with low incomes, VAT and council tax, even after taking into account council tax support, are each individually bigger than income tax. When politicians discuss tax they often discuss it interchangeably with income tax but this doesn't chime with how most people experience tax. Income tax only makes up the majority of tax for those in the top 10 per cent ... like those on an MP’s salary.

If politicians want to make the tax system fairer, benefit the low paid and reduce inequality it makes much more sense to reform council tax than it does to reform income tax. Income tax is the only fully progressive tax, where those at the top pay a greater proportion of their income than those at the bottom, and many don’t pay any income tax at all. Council tax, on the other hand is, as Paul Johnson of the IFS recently noted, is the only tax which is deliberately regressive in its design. Rather than cutting council tax support and tinkering with income tax, political parties need to urgently look at reforming regressive taxes. 

Tim Stacey is Policy and Campaigns Officer at The Equality Trust.

Tim Stacey is Senior Policy and Research Adviser at the Equality Trust. 

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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.