Friday, 13 July 2012

Taxes and the "living wage"


On Tuesday Bradford Council debated (if that's the right word for a time when we all rather agree with eachother) exploring a 'living wage' policy for the City. And we agreed to look into the matter through the Corporate Scrutiny Committee and subsequently a report back to council.

All this got me to thinking. Mostly about whether such a policy - especially if enforced through public procurement - complied with though tricky EU rules. I have my doubts but that is something we'll doubtless discover in due course.

Meanwhile, some cleaners in Whitehall hit on the idea of popping a letter onto the desks of ministers pointing out that they earned below the "living wage" for London:

Over 150 cleaners from across Whitehall signed – and personally delivered – letters to eight cabinet ministers including George Osborne, Theresa May, Nick Clegg, and Vince Cable, and the president of the supreme court, Lord Phillips, in an attempt to increase their pay from the national minimum wage of £6.08 to the London living wage – two pounds more.

A pretty effective campaign when you also tell the papers!

However, something else struck me at this point - even with the tax threshold raised to £10,000, people who are earning minimum wage pay income tax. Parliament sets the lowest rate at which people should be paid and then takes some of that away in income taxes.

It seems to me that rather than using moral pressure to get businesses to raise their costs (wages are, after all, a cost) we could improve lower earners standards of living simply by saying that people on minimum wage shouldn't pay income tax. Indeed, if people think that actually £8 and odd is the appropriate lowest rate (in London) then people on that minimum income shouldn't pay income taxes.

It seems to me that there is common cause here between us grumpy old free marketers and the massed hordes of lefties - gang up on big, corporate government and tell them to stop taxing poor people quite so much.

Now that's a thought...



Anonymous said...

Politicians don't do the logical, or indeed the right things. They do what's poltically expedient. Raising the income tax threshold to what it should be - around 20k, will reduce the amount government has to buy votes. Whereas forcing people to pay their employees more costs the politicians nothing, but wins favour with the economically illiterate. Inner cities are expensive for a reason: many people/high demand - limited resources. Insisting that employers cough up more doesn't change that reality in the slightest.

Anonymous said...

On the contrary, every earner should pay some tax - it's just the thresholds which need changing.

Why start as high as 20% ? If the lowest earners paid a token, say 2%, increasing by 2% increments with pay increases, it would eliminate the 'big step' changes which encourage tax avoidance. Carry on up to the top rate (whichever is politically acceptable at the time).

That way, every earner gets the message that services are paid for by taxation, even from low beginnings. At the moment, we have an underclass which nevr pays any direct taxation, yet enjoys the services funded by others.