I'm no economist - but here's my thinking .....

[itsgettingweird]

It may be a really stupid thought but here it is.

National living wage is £9.50/ hr.

Presuming someone works FT at 37 hrs a week 52 weeks a year then they earn £18278 annually.

Currently the personal tax allowance is £12500 (ish).

Therefore people "lose" approx £1100 a year in tax based on that £5500k figure. Then pay NI on that sometimes.

These people will often then get UC/TC.

If they say it's a living wage then some economist somewhere has obviously said people need that amount to meet basic living costs - and that was before covid and the war in Ukraine.

I'm thinking it would make sense to change the system so that personal allowance starts at the FT wage at cost of living wage so £18278 and that benefits are recalculated from this amount (that's not to say to you don't get any top ups dependent on family situation but rather you don't tax people and take them below that amount and then pay back out iyswim?).

It just suddenly dawned on me this morning that we tax people when we've set the standard required and it makes no sense to me (someone may be able to explain it!). And I only came across this because I have recently taken on a second job.

My first I earn £21k as pro rata (32 hours a week term time only - FT wage is £28k) and the second at £10 an hour at 20% tax. (Second job is casual hours during school holidays)

It was when I realised I took home less than the hourly cost of living wage for job 2 I realised how those on low incomes are actually ending up not having enough to live off.

So is it completely daft to set personal allowance at cost of living wage for FT work and adjust the benefits system or am I being really simplistic and missing a huge point somewhere?!

Therefore people "lose" approx £1100 a year in tax based on that £5500k figure. Then pay NI on that sometimes.

The tax and NI they pay is their small contribution to their healthcare and state pension. The amount they pay in doesn't even touch the sides of what they take out. Especially, as you say, most people earning the NMW are in receipt of benefits as well. So effectively they aren't paying anything in to the system they take from.

But if people started paying tax at 18k then everyone would be benefitting, not just those who need it.

But the whole point of a contributory system is that everyone pays something in and everyone takes something out. That way everyone feels they have a stake in it.

How would you convince people to pay into a system that only benefits others?

Not everyone on a low salary gets uc/tc. Eg. low earning people with high earning partners.

Having a system that 50% of the population contribute to but get nothing back and 50% of the population pay nothing in to but get all their living costs back from us a very common idea on mumsnet. Mumsnetters haven't thought about how they are going to convince the 50% of contributors to pay into their dream system though. We live in a democracy and a mumsnet party wouldn't get anywhere near power because most of the population wouldn't vote for anything as barmy as mumsnet ideas.

A ha!

And there's that flaw in my thinking!

It just seemed odd to me people were paying in £1100 for example and then getting back (for example £500 per month) UC.

I was thinking get less UC and pay less in iyswim?

That's actually very patronising and rude.

You have no idea what I think (and I don't get benefits so it wasn't even about benefitting me iyswim?)

I just didn't understand a system where you paid in a small amount and got more back when elsewhere they say this is an amount you need to meet living costs.

I asked a question and other posters have managed to point out why it doesn't and couldn't work like that without judging me or making judgements about how I may think.

I'm actually quite concerned for people on low incomes.

The reason I work pro rata is I have a disabled child (well he's just turned 18) and so the difference in my FT pay and my take home is supplemented by disability benefits.

MOST people on minimum wage full time do NOT get any UC at all.

Childless people will not get anything from UC is they work full time minimum wage, unless possibly if they are disabled.

@itsgettingweird

There are countless mumsnet threads where posters clamour for more money from the state and argue that higher earners should pay more in but get nothing back. No one has yet come up with a convincing argument as to why these higher earners should pay more in, so that mumsnetters can be full time, stay at home parents for 18 years. Mumsnet is a niche part of society though and these views are widely ignored, or if the thread gets in the press - laughed at.

There may well be.

But it was clear I did not even mention high earners paying more and I said I don't even get benefits myself.

The only reason I even knew the minimum living wage thing was because I've taken on a second job (something I enjoy which is why I'm doing it) and suddenly it dawned on me that people were taxed at a lower level than that wage and then got more back and it made no sense.

But as pointed out I was thinking about one wage families - I think because I've been a single mum since ds was 1!

I can see now why the system exists as it does rather than looking purely at that £18k figure.

I was thinking about cost of living - not SAHP!

@itsgettingweird

The welfare state was based on the idea that everyone pays in and everyone gets something out. This is why many people were against removing child benefit for higher earners. All it does is make those who actually contribute resentful and encourages them to vote for a party that offers lower taxes and a reduced social safety net.

A really hope we don't start means testing the NHS (also a common idea on mumsnet because higher earners should be forced to pay for other people's healthcare via taxation and then pay for their own healthcare privately). Fast forward a few years and we'd end up with no NHS, charities providing the bare basics for those who couldn't afford to pay privately.