All the things I could do if I had a little money. (Image: Flickr/fsecart)
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Raising the personal allowance: more expensive than you'd think, and not as progressive as they say

One of the announcements from yesterday’s budget was the Chancellor setting the path of income tax bands from 2015/16 to 2017/18. The personal tax allowance, the amount of income that can be earned before paying the 20p basic rate of income tax, will rise to £11,000, and the higher rate threshold, that amount earned before paying the 40p higher rate, will rise to £43,300. 

This sounds significant, but is a substantially less generous policy than the one mooted earlier in the week, of an £11,000 personal allowance this year, not in 2017/18. Because tax bands are up-rated by inflation anyway, delaying the £11,000 by two years substantially reduces the benefit to taxpayers. In the absence of any policy intervention, the personal tax allowance would be expected to rise to around £10,760 in 2017-18. This means the announced measure is a rise of just £240, and a benefit of £48 in reduced tax for basic rate taxpayers, rather than the £80 they would receive had it been implemented this year. The rise in the higher rate threshold is £400 higher than where it would fall if increased in line with inflation.

One suspects the chancellor turned away from the idea of an £11,000 personal allowance sooner because the OBR have substantially revised down their expectations of inflation. This increases the cost of an £11,000 personal allowance, since the gap between where it would fall under inflation-uprating and £11,000 is larger. Nonetheless, putting up tax bands faster than inflation is not cheap. The modest increases proposed in yesterdays budget will, by the Treasury’s own reckoning, cost close to £1.5bn.

Also important is that the OBR’s downward revision of inflation makes both the Liberal Democrats and Conservatives tax ambitions, of a £12,500 personal allowance by 2020/21 and, in the Conservatives case, a £50,000 higher rate threshold, much more expensive. At the time of the Conservative party conference last Autumn, this package of tax cuts was costed at around £7.2bn. Factoring in the impact of lower inflation, this has risen closer to £9bn. With the Coalition setting out a fairly gentle path of rises out to 2017/18 yesterday, the assumption has to be that the remaining £6.5bn of tax cuts will be back-loaded in the remaining years of the parliament.

The Coalition have justified their expensive tax cut strategy by highlighting how many workers have been lifted out of tax in this parliament. But, as has been consistently pointed out, those on middle to high incomes benefit the most from personal allowance increases. And those on the lowest earnings do not benefit at all, as they aren’t earning enough to pay tax anyway. Our distributional analysis of yesterday’s announcements (see below) illustrates this regressive pattern.

As the personal tax allowance has continued to rise above inflation, this latter group is growing in size. Using generous and expensive tax band up-rating as a strategy to support those on low incomes hasn’t just run out of road, it was flawed from the outset. Many commentators have pointed out that a rise in the threshold at which employees start paying NICs would be a better use of similar funds. Even better would be using this money to make Universal Credit and other in-work benefits more generous, since that would be much more tightly targeted at those on low incomes, and have little to no benefit for those higher up the income distribution.

 

Spencer Thompson is economic analyst at IPPR

India Bourke
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Pegida UK: the new face of Britain’s far-right movement, and how to challenge it

“Let them drink tea,” Birmingham tells Islamophobes.

“Spooky,” is how Pegida UK – the latest branch of a global, anti-Islam, protest group  chooses to describe its silent march on the outskirts of Birmingham. 

“Islam is Nazism incarnate,” announces its new leader, Paul Weston, to a few hundred soggy, sober, brolly-clad protesters waving “Trump is Right” placards. 


Pegida UK protestors march through the rain. Photos: India Bourke

Such numbers are a far cry from the tens of thousands who attended the movement’s inaugural rallies in Germany in 2014, in response to the perceived “Islamisation” of Europe. And they would be derisory if the cheers Weston receives from his supporters weren’t quite so chilling, nor echoed so far.

For Pegida UK is not alone. From Calais to Canberra, thousands marched in the name of the movement’s toxic platform of anti-immigration and anti-Islam last weekend. I went to see the Birmingham rally to find out why such a protest is taking place in Britain.

***

"Today is the first of many European wide demonstrations that will bring people together like never before,” Tommy Robinson, UK founder and ex-EDL leader, tells the assembled crowd. “It's planting the seed of something huge.”

Robinson hopes to exploit a gap within Britain’s far-right. Traditional groups are fractured: the British National Party was decimated at the last election, standing just eight of a previous 338 candidates. In its place, a swell of smaller, extremist bodies – from the Sigurd Legion to National Action – are pressing an ever more militant agenda. Pegida hopes to scale back the hooliganism in order to garner a wider appeal, but it shares these groups’ confrontation with Islam, and each may spur the other on.

“With Pegida we’re seeing the rise of a seminal new threat,” says Birmingham MP Liam Byrne. “In the rise of Isis and politicians like Donald Trump, you have forces determined to promote a clash of civilisations between Islam and the West. Pegida is trying to surf that wave and make sure it crashes on our shores.

Opponents hope the movement will suffer the same implosion that felled the BNP and EDL, with both leaning  too much on their leaders’ personal brands. Robinson certainly seems as adolescent as ever: laughing as he swipes away a photo of a scantily-clad blonde on his iPhone screen to show me the international Pegida leadership’s “hidden” Facebook group.

Their new apparently "suited and booted" middle-class following is also less than wholehearted. One pin-striped IT executive I speak to seems embarrassed by the whole affair: “I’m just a cowardly family man who can’t see a solution being offered by mainstream politicians. I’d be sacked if they knew I was here,” he says, declining to give his name. 


A Pegida protestor poses in front of the main stage.

As long as such hesitation prevails, Pegida UK will struggle. Still, there’s a sense more needs to be done to ensure its demise.

Matching protest with counter-protest is the traditional leftwing response, and this weekend saw thousands of Pegida opponents take to the streets across Europe. Yet, in some cases, direct confrontation can risk drowning out – even alienating – the very voices it seeks to win over.

“Smash the facists into the sea,” instructed the Twitter account of the North London Antifa group ahead of last weekend’s far-right, anti-immigration protest in Dover, where injuries were sustained by demonstrators on both sides.

***

Instead, many now believe a better answer begins with that most British of pastimes: tea and a chat.

On the day before the Birmingam march, hundreds of the city’s cross-party leaders, religious figures and citizens gathered together at Birmingham Central Mosque to share their concerns over shortcake and jalebi.

“Groups like Pegida are parasites on the real concerns people have,” says John Page from the anti-extremism group Hope not Hate. “So we have to listen to these issues to close the cracks.

Initiatives around the city will attempt to take this approach, which sets a welcome lead not just for the UK, but Europe too.

The blanket smearing by groups like Pegida of Islam as a religion of sexist, homophobic Jihadi Johns places the burden of action disproportionately on the city’s Muslims. “It is our turn now to suffer these attacks,” says Mr Ali, Birmingham Central Mosque’s 42-year-old administrator. “It was the Irish, then the Jews, and now it is the time for us. But we are proud to be British Muslims and we will do what we can to defend this country.” 

A permanent visitors gallery, Visit-my-Mosque events, and publications that condemn Isis, are just some of the ways the community is challenging demonisation. It is even hosting a documentary crew from Channel 4 – a bold move in a city still reeling from Benefits Street.


Birmingham resident, Luke Holland, at a peaceful counter-protest in the city centre.

Mr Ali says: “The extreme right know nothing about Islam, but neither do many Muslim extremists.” The mosque is therefore in the process of formulating a “code of conduct”, making clear that hate speech of any kind is unacceptable.

"We have to help young people become the next Chamberlains and Cadburys and Lucases of this city," regardless of background, says Labour councillor Habib Rehman. Instead of letting them slip into despair and extremism of any kind, "we have to tell them: 'Yes You Khan!’”

Tea and talk is not the most dramatic response to Pegida’s claim it will have “100,000 decent people on the street” by the end of the year. But, in Birmingham at least – the city of Typhoo, where bhangra is as familiar as Bournville, and “No dogs, no Irish!” still sits heavy on the collective mind – tea, for now, means hope.

India Bourke is the New Statesman's editorial assistant.