Sorry Rob but paying tax doesn't give you "a stake in the system"

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Robert Halfon is a breath of fresh Conservative air - prepared, from the left of the party, to say things that help us develop good policies that work for the broad majority of people. Above all, Robert has consistently reminded us that inflation and the cost of living matter more than anything else to those ever-remarked-on 'hardworking families'. Back in January, I quoted a Cullingworth local on the subject:

"It's all gone wrong - tits up, hasn't it" Says Lewis. In response to my request for clarity he continues, "the economy, the government. Everything has gone up, bread's like 50% more expensive and look at diesel. People can't afford stuff - come March there'll be a real mess. We've got to get prices down."

For too many people involved with government and with the advising of government this isn't the reality of their lives. They may vaguely notice how the weekly shop at Waitrose has gone up quite a few quid and they'll have spotted increases in the gas bill and the cost of insurance but this hasn't compromised their ability to eat out when they wish and afford a two-week holiday in Tuscany plus a winter trip to Chamonix for the skiing.

So Rob is right. But sometimes he falls into the elephant traps that await people who walk dangerously close to the prevailing metroliberal ideology:

There are two different choices: ensuring that everyone who earns the Minimum Wage pays no tax altogether, or by introducing the 10p tax on earnings up to £12,000. This would cost significantly less than raising the personal allowance, and is politically symbolic. It also allows people to pay into the ‘system’, meaning that they have a ‘stake’ in it. 

I hear the argument in that last sentence often from bien pensant social democrats. The idea that the funding of government is like some sort of grand insurance policy, a system into which we should pay so as to demonstrate we are good citizens. This attitude reinforces the myth - the lie, I would say - that society and the state are the same thing, that being an Englishman means you adhere to the foreign concept of an English State and that only by paying taxes are we a part of that society.

Taxation is merely the means by which the government pays for the things that government does. It is not a badge of citizenship, some sort of right of passage into the happy world of being British. No-one ever said; "hey look guys, I've arrived - I've got a tax bill!" The contributory principle referred to in reference to that most hideous of taxes, National Insurance, was always a con and remains a con. Not everyone contributes (including most of the beneficiaries of the systems the tax allegedly finances), it falls hardest on the poorest, it kills jobs and it suppresses wages.

Our aspiration should be for anyone below average wage not to pay income tax. We should start with raising the threshold to the minimum wage and then committing to raising that by a given amount more than inflation each year. This would signal our commitment to those hardworking families, to people who fret over how to pay the rent or mortgage, how to keep food on the table while paying the bills and try to manage, amidst all this financial stress, to have a little fun in their lives. And if they end up paying no income tax that would be great. And those people would thank us for it.

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Perhaps we should think about taxing the poor a little less?

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What do you mean you hadn’t noticed? Perhaps you were too busy campaigning for a ‘living wage’ or ranting about fuel poverty to notice that the policies beloved by left and centre fall hardest on the poor. Indeed, rather than babbling about that ‘living wage’ maybe we should mention that it is quite repulsive – truly hideous and ghastly – that anyone on minimum wage has part of that income taxed.

But I’m not here to talk about income tax – although I don’t think anyone earning less than average income should pay any – but about all the other imposts, duties and proposals that fall most heavily on the poor. Here’s a little list:

• Energy prices. All those jolly schemes to promote ‘green energy’ and save the planet are little more than a tax – the planet may need saving (although I think she’ll be fine and hunk dory for quite a few million years yet) but is it right that we do this with a regressive tax? Worse still a regressive tax that those with large roofs for solar panels or paddocks for windmills can avoid – and those are things that someone’s granny in a council flat doesn’t have.
• Tobacco duty. OK this is about making people healthy (or so we’re told by assorted nannying fussbuckets) but we also know that people from the C2DE categories (i.e. the less well off) are far more likely to smoke than those in the ABC1 categories. Raising the duty year after year above rates of inflation is a huge tax on the less well off – except for those who now smuggle the stuff, of course!
• Employers National Insurance. No this really isn’t a tax on the employer – they have a budget to employ people and the NI is in that budget. If employers didn’t pay national insurance then wages would be higher – we know that rises in employers NI reduced wages.
• PAYE. You’ve read all those stories about how rich folk with clever accountants reduce their tax bills? Ever wondered why you can’t do this? It’s called PAYE – lower paid people don’t fill in a tax return and the employer does the payments. All those allowances, fiddles and dodges that you’ve heard of – they only apply to people who fill in a tax return. I’ve no doubt that there are thousands – perhaps millions – of people paying too much tax. And they’re mostly the lower paid.
• Minimum pricing for alcohol. This is the most blatant – “we don’t approve of the poor drinking cheap cider” is effectively the message that it sends out. After all it would be simpler to just increase the duty on alcohol (something that us middling sorts consume more of that the poor) but the moralising ‘return of gin alley’ arguments dominate.

I’m pretty sure there’s more of these – even without me mentioning the de facto tax that is allowing inflation to run at two per cent plus. And – all with either the direct intention or the unfortunate side effect of falling more heavily on the less well off.

Perhaps we should think about taxing the poor a little less?

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So what exactly is that money for?

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Again the unedifying debate over care for the elderly - characterised by the sons and daughters of comfortable middle-class folk arguing that their parents assets shouldn't be use to provide care for those parents.

"It seems so wrong that after mum and dad worked hard all their lives, everything that they saved for had to go. The day we sold the house my sister and I could barely speak for tears, as we packed all their belongings up." 

The mum in question is on her own, is 85 and has dementia. Of course it's sad that lives end this way, dementia can be a terrible slow death and is traumatising for the person's family. But what exactly did mum and dad save for? It seems to me (and always has done) that part of the reason for saving is to provide care when we can't look after ourselves any more.

There really is a need to look at how we provide care for the elderly, it is one of the biggest public health challenges that faces us. But the standards and breadth of care will never come about so long as we carp and wail about the loss of inheritance. Is it not worse that people with significant assets (or more commonly those who stand to inherit those assets) expect someone else to pay for their care? Especially when that someone else is a struggling family or a young man earning just above minimum wage.

And while we're talking about tax - we are still living with the consequences of Nye Bevan's great lie. With this idea that we "pay in" to the National Insurance system. It is - and always has been - just another tax on income but we still hear this:

"They paid into the system all their lives"

No they didn't. They just paid taxes to provide the things government was providing - they had the benefit of hospitals, schools, roads, police, an army and all the other things we've voted for having. The truth is that they've eaten the cake. And it was a pretty big slice.

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