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26 September 2014

Ukip tax policy: blue collar or white tie?

Ukip's tax announcements are ostensibly to help blue-collar workers, but the wealthy would gain the most from them.

By Tim Stacey Tim Stacey

The Ukip party conference has kicked off with a clear message – “this is the party for blue collar workers, as much as blazer wearers”. The self-proclaimed People’s Army has looked which direction the political winds are blowing and seen that a growing number of the electorate is not just dissatisfied with the political class, but also the creeping elitism and inequality within our society.

To this end conference began with bold new tax proposals intended to demonstrate the party’s focus on ‘ordinary workers’. They have announced that they would add new tax band to the UK’s tax system, proposing to reduce the tax paid between £42,000 and £55,000 from 40 per cent to 35 per cent. They have also announced that they would raise the income tax threshold to £13,500 and scrap the top tax rate of 45 per cent altogether.

The question of course is who really benefits from this? The answer is, those at the top.

We have analysed the effect on individual’s income. Although some of those at the lower end of the income scale will undoubtedly benefit, it is those at the top who are set to gain most.

The biggest beneficiaries from the policy announced today on the new income tax band would be those being paid £55,000 and higher, who would each get £650. When you factor in the increased personal allowance tax threshold, those being paid between £55,000 and £100,000 would receive £1,350 compared to the £400 given to a person being paid £12,500 working full time on the minimum wage. (For reference anyone being paid over £47,000 per year is in the top 10 per cent for pay).

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If you consider the effects of scrapping the top 45 per cent, these changes become even more regressive. Someone being paid £1m will receive £43,150 from all these changes. Meanwhile someone in the bottom 10 per cent (with pay less than £6,284) of pay will receive nothing.

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There are therefore undoubtedly those on lower pay who will benefit from Ukip’s planned tax policies, but the real winners are those at the top. More importantly, the result of these policies would be to widen economic inequality even further. For blue-collar workers, it’s perhaps not the most attractive message.
 

Tim Stacey is senior policy and research adviser at the Equality Trust. This article was first published on the Equality Trust website. Read the original here.