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of an effect on low income households as 65 per cent of any gain they get would be lost as their Universal Credit is withdrawn.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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Erdogan’s purge was too big and too organised to be a mere reaction to the failed coup

There is a specific word for the melancholy of Istanbul. The city is suffering a mighty bout of something like hüzün at the moment. 

Even at the worst of times Istanbul is a beautiful city, and the Bosphorus is a remarkable stretch of sea. Turks get very irritated if you call it a river. They are right. The Bosphorus has a life and energy that a river could never equal. Spend five minutes watching the Bosphorus and you can understand why Orhan Pamuk, Turkey’s Nobel laureate for literature, became fixated by it as he grew up, tracking the movements of the ocean-going vessels, the warships and the freighters as they steamed between Asia and Europe.

I went to an Ottoman palace on the Asian side of the Bosphorus, waiting to interview the former prime minister Ahmet Davu­toglu. He was pushed out of office two months ago by President Recep Tayyip Erdogan when he appeared to be too wedded to the clauses in the Turkish constitution which say that the prime minister is the head of government and the president is a ceremonial head of state. Erdogan was happy with that when he was prime minister. But now he’s president, he wants to change the constitution. If Erdogan can win the vote in parliament he will, in effect, be rubber-stamping the reality he has created since he became president. In the days since the attempted coup, no one has had any doubt about who is the power in the land.

 

City of melancholy

The view from the Ottoman palace was magnificent. Beneath a luscious, pine-shaded garden an oil tanker plied its way towards the Black Sea. Small ferries dodged across the sea lanes. It was not, I hasten to add, Davutoglu’s private residence. It had just been borrowed, for the backdrop. But it reminded a Turkish friend of something she had heard once from the AKP, Erdogan’s ruling party: that they would not rest until they were living in the apartments with balconies and gardens overlooking the Bosphorus that had always been the preserve of the secular elite they wanted to replace.

Pamuk also writes about hüzün, the melancholy that afflicts the citizens of Istanbul. It comes, he says, from the city’s history and its decline, the foghorns on the Bosphorus, from tumbledown walls that have been ruins since the fall of the Byzantine empire, unemployed men in tea houses, covered women waiting for buses that never come, pelting rain and dark evenings: the city’s whole fabric and all the lives within it. “My starting point,” Pamuk wrote, “was the emotion that a child might feel while looking through a steamy window.”

Istanbul is suffering a mighty bout of something like hüzün at the moment. In Pamuk’s work the citizens of Istanbul take a perverse pride in hüzün. No one in Istanbul, or elsewhere in Turkey, can draw comfort from what is happening now. Erdogan’s opponents wonder what kind of future they can have in his Turkey. I think I sensed it, too, in the triumphalist crowds of Erdogan supporters that have been gathering day after day since the coup was defeated.

 

Down with the generals

Erdogan’s opponents are not downcast because the coup failed; a big reason why it did was that it had no public support. Turks know way too much about the authoritarian ways of military rule to want it back. The melancholy is because Erdogan is using the coup to entrench himself even more deeply in power. The purge looks too far-reaching, too organised and too big to have been a quick reaction to the attempt on his power. Instead it seems to be a plan that was waiting to be used.

Turkey is a deeply unhappy country. It is hard to imagine now, but when the Arab uprisings happened in 2011 it seemed to be a model for the Middle East. It had elections and an economy that worked and grew. When I asked Davutoglu around that time whether there would be a new Ottoman sphere of influence for the 21st century, he smiled modestly, denied any such ambition and went on to explain that the 2011 uprisings were the true succession to the Ottoman empire. A century of European, and then American, domination was ending. It had been a false start in Middle Eastern history. Now it was back on track. The people of the region were deciding their futures, and perhaps Turkey would have a role, almost like a big brother.

Turkey’s position – straddling east and west, facing Europe and Asia – is the key to its history and its future. It could be, should be, a rock of stability in a desperately un­stable part of the world. But it isn’t, and that is a problem for all of us.

 

Contagion of war

The coup did not come out of a clear sky. Turkey was in deep crisis before the attempt was made. Part of the problem has come from Erdogan’s divisive policies. He has led the AKP to successive election victories since it first won in 2002. But the policies of his governments have not been inclusive. As long as his supporters are happy, the president seems unconcerned about the resentment and opposition he is generating on the other side of politics.

Perhaps that was inevitable. His mission, as a political Islamist, was to change the country, to end the power of secular elites, including the army, which had been dominant since Mustafa Kemal Atatürk created modern Turkey after the collapse of the Ottoman empire. And there is also the influence of chaos and war in the Middle East. Turkey has borders with Iraq and Syria, and is deeply involved in their wars. The borders do not stop the contagion of violence. Hundreds of people have died in the past year in bomb attacks in Turkish cities, some carried out by the jihadists of so-called Islamic State, and some sent by Kurdish separatists working under the PKK.

It is a horrible mix. Erdogan might be able to deal with it better if he had used the attempted coup to try to unite Turkey. All the parliamentary parties condemned it. But instead, he has turned the power of the state against his opponents. More rough times lie ahead.

Jeremy Bowen is the BBC’s Middle East editor. He tweets @bowenbbc

This article first appeared in the 28 July 2016 issue of the New Statesman, Summer Double Issue