Outside the marginals

a commentary on the politics that followed the UK 2010 & 2015 elections

Universal Benefits from Universal Tax

I can’t help but share some of the concerns expressed about the move away from universal benefits.  However, I am also particularly concerned about the impact of this change when combined with the move to ensure that those earning less than £10,000 pay no (income) tax.  Universal benefits should be matched by universal taxation.

One of the arguments for universal benefits is that all should feel they get something out of the system.  However, I think all should feel that they also contribute something to the system.  There is a danger that we will separate into those who contribute to the state and those who draw on the state.  That cannot be good for unity – as in “all in it together”.

The government I think is trying to argue in purist style “from each according to his ability, to each according to his need“, which is slightly ironic. It is a pity that if they are going to do this they do not have the cojones to carry it through.  So if they will not take from those with the real ability to pay, it is a pity that they are taking from those with need.

I reject Marx’s dictum; you need to blend both paying and receiving to create a unified society.  So how?

If all tax reliefs were to be expressed as credits (calculated at standard rate), everyone could then pay tax.  So the personal allowance, (£6,475 in 2010/11) which is worth £1,295 to someone who pays 20% tax (20% of £6,475), but twice that to someone paying 40% tax, should be changed to a personal credit of £1,295 to everyone.  Everyone would receive the credit (possibly direct from the state), and then all income would be subject to tax.  If this was done with all reliefs, the PAYE system would be made considerably cheaper and easier for employers to administer.  Income tax for the self-employed would be significantly easier to understand.  All receive something, and all contribute.

Over time the tax credit could be raised (if necessary financed by a higher rate of tax), so that basic unemployment pay would be unnecessary – it would be covered by the credit.  By making the credit age related, child benefit and age allowances could be abolished – being replaced by the individual’s credit (children could attract a credit).

We need to simplify the system – the current proposals to “claw back” benefits and reliefs from people earning particular amounts is extra complication – good for no one except the accountants and lawyers.

If all receive, all will have some reason to feel part of our society; if all contribute, all will have some understanding that society has to be paid for.

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