Labour planning to freeze tax thresholds longer

[Overthebow]

In the news today that they’re considering freezing the income tax thresholds past 2028. AIBU to think this is absolutely a tax rise for workers? I can’t believe they’d do this, they’ve been frozen for so long already.

This nicely highlights the crux of the problem. Those European countries that have public services we aspire to tax those on average incomes higher than we do in this country. So for public sévices to materially improve, everyone earning more than around £30k needs to pay more income tax, more NI and receive less in benefits.

But, the last Labour government created an in-work benefits dependency costing tens, approaching hundreds of billions, that’s virtually impossible to easily unwind, and the tories have created a low tax economy because that’s what drives growth. Neither delivers the levels of tax receipts to provide the level of services we want. Overlay on that a dysfunctional NHS operating under a model than no other health service in the world attempts while delivering worse outcomes and you have a recipe for disillusionment. It’s encouraging in some ways that this government says it’s tackling both. Though its attack on benefits is, in my opinion, focussing in the wrong place - the elderly and the disabled are not a popular target!

There has for far long been a focus on the income tax rate instead of the level at which you start paying tax, apart from in the coalition years. Instead of a sales tax (VAT) at around 10%, we now have seen it double by stealth over the years. Whereas what was 33% income tax rate is now 20%.

It may be not the way to go about it, but at least freezing the level at which you pay higher rate tax is a start, though I disagree with not raising personal allowances.

This nicely highlights the crux of the problem. Those European countries that have public services we aspire to tax those on average incomes higher than we do in this country. So for public sévices to materially improve, everyone earning more than around £30k needs to pay more income tax, more NI and receive less in benefits.

I think people would be happier to do that (I'm on that kind of income, single income household), if everything else didn't cost so damn much. Housing specifically eats up enormous quantities of most people's income, and has a knock on effect on pretty much everything. Add extortionate childcare for so many parents to that. Increasing energy and food bills. It doesn't leave much leftover does it?

The last government's solution to the high energy bills was to throw even more money at people to pay those bills rather than investing in energy saving and insulation, for example. They just all seems to totally lack any imagination, ambition and intelligence.

That’s a major problem, I agree. But one of the reasons is that incomes in that lower / middle bracket haven’t risen as much over the last 20 / 25 years as you might expect. And I think there are two reasons for that - the in-work benefits culture was originally an attempt to massage the unemployment levels under the Blair government. But what it has actually done is depress salaries / wages for everyone, including those who don’t qualify for those benefits, and created a huge transfer of money from the (originally Labour) government to the private sector.

Then the massive increase in the number of young people going to university, again to keep unemployment levels low in the short term, without investing anything to increase demand for graduates, also depressed graduate salaries for one, if not two, generations.

So we now have the perverse situation where a newly graduated young person from a middle of the road university with a middle of the road type degree earns only 10/20% more than minimum wage, and career progression for them, plus all those who leave school and don’t go on to university, is really really tough. In real terms their income increases at a glacial rate.

In the mean time because no government for 40 years has invested in social housing these working grads are competing with those on benefits for an ever shrinking pool of houses to rent. It’s no wonder rents have skyrocketed…and the stupid thing is that the politics of envy means that the private sector is also disincentivised from filling the gap that government / local authority have created by not investing in social housing / houses to rent. So now neither the private or public sector are investing in properties to rent. Which has exacerbated the problem further. Now, this government has said it wants to supercharge house building. But it hasn’t said how it’s to be funded, and if they expect the private sector to fill the gap then they’ll either need to change the tax system, or create further subsidies, funded no doubt by PFI or off government balance sheet finance at higher than costs.

This government is awful. The last one was bad and out of ideas. This one just wants to make life even harder for those who work.

I nodded along to all of that.