Labour steps up MumsNet campaigning with ad attacking Tory child tax credit plans

'Wittgenstein, what on earth does ``remove the stigma from child benefit and to place importance on the mother and child.' mean?

_What_ stigma associated with child benefit? _What_ importance on the mother and child? It's a much-loved benefit, universal so it isn't means-tested, paid to the mother not the father, and at 98% has the highest takeup of any benefit by a country mile. What on earth are you talking about?'

Exactly, but it wasn't always so. There were many allegations in the past of family allowances being wasted by fathers on drink. You are probably too young to know how it used to play out. 'What on earth are you talking about?' ... and a little civility would not go amiss either.

Who do you think set Mums Net up? If mums self organise and set up their own network do you expect they should set up one for dads as well? If you think there should be dads net get off your proverbial behind and set it up.

Great to see this kind of campaigning. Isthere a DadsNet? If not, why not?

Can I open another theme on this initiative? This debate below reflects how Labour is partly losing the plot with working women. Mums Net is more than about tax credits.

Labour's record on provision of health visiting, school nursing is not very good and some would suggest appalling. They have not protected community health services as typically political pressure arises from the provision of acute services where the minority of health care is provided. Health visiting numbers have consequently been decimated.

You wil find that Mums Net are very vocal supporters of health visiting. The Tories are making positive noises in this respect. Why is Labour allowing them to make political capital on a model of nursing provision which fits comfortably within a social democratic ethos i.e. poor health is caused by poverty, social exclusion?

Colin

Wittgenstein, what on earth does ``remove the stigma from child benefit and to place importance on the mother and child.' mean?

_What_ stigma associated with child benefit? _What_ importance on the mother and child? It's a much-loved benefit, universal so it isn't means-tested, paid to the mother not the father, and at 98% has the highest takeup of any benefit by a country mile. What on earth are you talking about?

@ Ludwig,

"Which is where the WTCs are introduced on a sliding scale?"

Perhaps - but it's Speenhamland forwarded to the 21C ....

I forget many things, Mike ......

We'll have to agree to disagree - but as far as "reducing welfare costs" do you remember the article I wrote last year in which I noted that welfare costs actually went up during the Conservative "tax-cutting years."

Peter,

You forget one thing... the marginal rates of taxation for people wanting to work and come off benefits... which are as high as 85%.

Lift up the tax threshold and you reduce that marginal tax rate.

And that makes work pay.

So government might not get a huge tax take from some of the lower paid jobs (it shouldn't anyway, the top 10% of earners pay 40%+ of all income tax) but it would start to reduce the government's welfare costs as well.

And that is not small fry at all.

As for low wages, are you suggesting to alter the labour market? The reason low wages exist is because there is a ready demand of people with the skills to do the job.

But that's another story for another time.

'Wage £13,000 : personal allowance £6000 : 20 per cent tax on £7,000 = £1,400 = £11,600 after tax : less than someone earning £12,000 ....'

Which is where the WTCs are introduced on a sliding scale?

@ Mike Thomas,

I wholeheartedly agree that lifting the income tax threshold would create more purchasing power but, I'm afraid, we'll never agree that the basic problem is not the level at which taxation cuts in, but the low wages in the first place.

Now, as it happens, HMRC ("Distribution of total incomes before and after tax") reckon that in 2007/08, 8.4 million people with an income of less than £12,000 per annum received £64 billion in aggregate and paid £3.7 billion in tax. This paltry sum - £3.7 billion - is not going to set a £1,400 billion economy alight.

The problem lies in the low wages in the first place, Mike - not the tax threshold.

If you want to set the tax threshold at £15,000 per annum income, that would "release" another £5.2 billion in tax (total : £8.9 billion) which, again, is not going to stoke the fires of a £1,400 billion economy.

And, as I have demonstrated, whatever tax threshold is selected has to be universal for (I've got the table now) 32.5 million taxpayers, with big consequences for the "loss" to HMRC.

I am stunned.

If you stopped taxing people at £7000 and lifted it another £5000 where do you think the money goes?

Bearing in mind that the lowest earners have the highest percentage of their income go on autonomous expenditure.

They spend it. It goes into the wider economy, it creates demand for goods and services, that creates economic growth for everyone.

And growth means employment.

Ludwig,

"But if the exemption up to £12k is restricted only to those who earn that amount and all other taxpayers only have their personal allowance, what does it look like then?"

You have to apply a universal exemption/personal allowance to all income receivers.

For example : wage £12,000 fully exempt - zero tax.

Wage £13,000 : personal allowance £6000 : 20 per cent tax on £7,000 = £1,400 = £11,600 after tax : less than someone earning £12,000 ....

And so on, up the income scale ....

One last question before I retire.

'
But, in round figures, that means 30 million tax-payers won't pay 20 per cent tax on £6,000 per annum (round figures) : a loss to HMRC of £36 billion, which, if present levels of expenditure are to be maintained, will have to be recovered from somewhere else'

But if the exemption up to £12k is restricted only to those who earn that amount and all other taxpayers only have their personal allowance, what does it look like then?

I'm going to sleep on this. The last thing I noticed was that in 2008 it was estimated that it would cost £7bn to restore the 10p tax rate.

Ludwig,

"Scrap my last comment - it's innumerate"

That's ok - low wages and how to deal with them are a minefield - and a national scandal since God was a boy.

The real question is why is it necessary in AD 2010 that such mechanisms eg tax credits are still necessary? Before tax credits, we had income support, and before then we had supplementary benefit. In the early 19C, there was Speenhamland ....

When British employers get themselves out of a "subsistence income mindset" for the people who sweep the factory floors, for example, then we'll be able to do away with taking money from "the rich" to give to "the poor."

As I have remarked on another page - in the aggregate, the money is there ; it's just the way that it is distributed that causes the problem ....

@ Peter T,

"did you not once calculate that tax credits cost as much to administer as the people receive back from the tax they have already paid?"

Not me.

Actually, you'd be surprised at the low level of government administration costs.

For instance :

In table 2.1 of Public Expenditure Statistical Analyses (2009), administration costs for £291 billion of Departmental spending in 2006/07 ie outturn numbers, are £10.8 billion : 3.7 per cent.

In table 10.1 of Annual Abstracts (2009) the NI Fund took in £77 billion in contributions, paid out £67 billion in benefits and had administration costs of £1.4 billion : about one per cent of "money handled."

The Life Assurers are on the public record of regularly doling out £5 billion a year in "commissions" - type MQ5 into Google to see what's happening in the private sector .... someone has to pay for ladies in black shrouds in TV adverts for Scottish Widows ....

Scrap my last comment - it's innumerate - the 22bn encompasses people earning over 12k, of course.

Well, let's just press it a little more. I think that at the level of £12,481ish, the gross cost to the Treasury is £36bn, but net (taking into account the WTCs @ 22bn - or does that include CTCs as well?) £14bn. Is that right or have I misunderstood (again, again!). I don't want to jettison this prematurely.

"But, in round figures, that means 30 million tax-payers won't pay 20 per cent tax on £6,000 per annum (round figures) : a loss to HMRC of £36 billion, which, if present levels of expenditure are to be maintained, will have to be recovered from somewhere else."

On the other hand, a £10k salary after tax costs the employer over £11.5k in wages. There's also the cost of administering the tax payments. Taking them out of tax reduces the amount the employers have to pay to give the same take-home salary.

It also stimulates spending because people on low wages tend to spend their money rather than save it. Even if you can afford to buy a house/flat, you put your extra money into improving it rather than a Cayman Islands account. That money goes to retailers and tradesmen who pay tax.

@ Peter B; did you not once calculate that tax credits cost as much to administer as the people receive back from the tax they have already paid?

@MT: maybe you are surprised but tax credit looks like job creation to me where as lifting the minimum allowance and the 10p tax rate will never be.... except to create jobs and opportunity in the business world for those stuck on benefits. There is a cost benefit for business, especially small or micro businesses in only having to pay and administer NI.

Daft thing for a socialist to propose but after all we should be about creating equal opportunity and giving people a chance to improve themselves - too Ruskinite for New Labour though, where dependency and keeping people there is all.

Charlie,

It wasn't me who "picked" an income level of £12,000 (noses and cherries are "picked" ; most other things are "selected" or "chosen." Naughty of me ....).

I was just illustrating that it's not as easy, at first sight, as it appears to be. If it was that easy, it would have been done decades ago.

I would also say that the billions bunged to the bankers - and I do share your frustration - is not quite relevant in the context of what is being proposed.

Using your figures....

Say £12k pa income tax threshold would cost £45bn.

Not to mention the ability to reduce welfare spending in terms of tax credits - £6bn.

Cut government spending by 6% - £39bn

And reducing effective income tax rates on the lowest 20% of workers from 44% to something nearer the 36% norm.

Incidentally, the economic growth that would be created by boosting incomes in this way would probably pay for this tax cut.

@ Peter J, Ludwig,

Tax credits are (not quite) peanuts in the assessment : £22 billion estimated for this fiscal year.

And - tax credits only go to "working families" ; there's an awful lot of single people (and pensioners) who would receive £12,000 or £16,000 tax free.

Ludwig : warning - don't ask ..... :-)

The £31k figure comes from someone who is involved in Treasury analysis. The intention of the Tory proposal was to remove this particular tax credit from those with a combined income of more than £50k. In fact, the rate over £50k is marginal and this tax credit ends at £58k, I understand. The deduction that I make of this is that it is a policy made up on the back of a fag packet. It just seems nonsensical when the economy is £400m.

"As Sir Humphrey would have said, "That's a courageous decision, Prime Minister.""

Obviously you would pick an income level which would pay the same tax as now and people above that would pay more. Besides £36b is peanuts when Brown is giving away our money hand over fist to bankers, arms traders et al.

Disregarding the fact that the £31,000 is a made up Labour figure, if you are going to use this as a stick to beat the tories with them you cannot say elsewhere that the tories are only interested in helping their "rich friends".

This policy specifically targets the better off whilst leaving the lower paid untouched. Is it now Labour policy to oppose this principle? What happened to being the champions of those with the least?

@ Peter B

Oh damn. You come and bring reality into this argument.

@ Mike T

The Ballot Act was introduced in 1872.

@ Peter B

You have to factor in the tax credits too.

@ MT

And Cameron isn't buying votes with IHT and Marriage Tax Allowance?

Get off that high horse. This is politics.

Ludwig,

Brown buys votes with taxes.

Why else would he spend £2.6bn during a by-election to restate the 10p tax rate?

Charley,

"Call me greedy but I can honestly say that a 12K personal tax allownace is the one thing that would 'buy' my vote for Labour. Its progressive, socialist, fair, cheap and Labour won't do it in a million years."

Correct.

But, in round figures, that means 30 million tax-payers won't pay 20 per cent tax on £6,000 per annum (round figures) : a loss to HMRC of £36 billion, which, if present levels of expenditure are to be maintained, will have to be recovered from somewhere else.

As Sir Humphrey would have said, "That's a courageous decision, Prime Minister."

Now, bump the tax free allowance up to £16,000 (as has been mooted on these pages), it translates to a loss to HMRC of around £60 billion.

Sir Humphrey would then be moved to say, "That's a very courageous decision, Prime Minister."

Labour won't do it in a million years ; neither will the Conservatives.

1 Median gross income across all employees £20,801
2 Median gross income across F-T employees only £25,123

On the basis that those with income below 60% of the median income are in 'relative poverty', any earning the following should be exempt from income tax:

1 £12,481
2 £15,074

"So hang on here a minute, you are effectively saying that taxes have been made more complex deliberately to create jobs?"

That and to make people feel grateful to The Great Beanefactor as we tug our forelocks for our Tax Credits.

@ Mike Thomas

Don't understand your comment.

I think you'll find we agree more than you think Peter.

So hang on here a minute, you are effectively saying that taxes have been made more complex deliberately to create jobs?

So a good tax system should make taxes as expensive to collect as possible and create as many jobs to collect it as possible?

I've heard it all here now.

Kirkegaard - always the 'will', I'm afraid.

There doesn't seem to be a similar petition currently on no 10 petitions, making a quick search. So, should you wish to pursue this approach, could we collectively produce a form of words?

http://petitions.number10.gov.uk/new


http://petitions.number10.gov.uk/new

Is the problem that simplifying general taxation would not be too difficult as much as dealing with the Unions and the job losses that would go along with it?

Ludwig - as a Kirkegaardian I ponder why is it that over the last twelve years when New Labour have come to a fork in the path they have always taken the right hand one?

I suppose old socialists like me can wait until they go round in a circle and come back to where they started after all that was what happened when the party of Micheal Foot always went left handed at the same fork!

Blimey. This is an Alice in the Looking Glass Moment.

I find myself in rare agreement with Charley, MB and MT on tax allowances.

Though I understand the principle of universality when it comes to education or the health service, trying to buy off people up to 31k with tax credits is messy, bureaucratically inept and probably wins few votes.

@ Ludwig

A cross party petition is a great idea.

'I completely agree, it's a sop to the middle class to make them a client of Brown's largesse.'

It was a somewhat misguided attempt to remove the stigma from child benefit and to place importance on the mother and child.

@ Charlie I don't want Labour to buy your vote - I want what is equitable for you and people in your position. That was once what Labour was about - it still should be.

I completely agree, it's a sop to the middle class to make them a client of Brown's largesse.

Incidentally, the £31,000 threshold is Labour's calculation, not the Tories.

As for kicking the middle classes in the teeth, I take it shifting effective tax rates on the middle class (40 & 60th income percentile) higher than those on the rich isn't?

Labour have taxed the middle income earners until the pips have squeaked.

As for the lowest earners (lowest 20%), they pay the highest effective tax rate of all income bands. The answer is very simple, end income tax credits and lump it into the tax threshold. Push it to something meaningful like £10K pa.

How to pay for it? How about putting Capital Gains Tax back to where it was before Brown messed with it including a simplified form of tapered relief.

"I really wouldn't mind if it was introduced in the March budget - even if that induced protests of politicking. "

Call me greedy but I can honestly say that a 12K personal tax allownace is the one thing that would 'buy' my vote for Labour. Its progressive, socialist, fair, cheap and Labour won't do it in a million years.

Well, all political parties have gone wrong on that tax issue there then. I agree with you (and Roger J. Davies) that there should be a minimum threshold below which tax is not paid. We can debate what that level is, but it is the strongest point that has come out of this list that the politicos ought to assimilate - and quickly. I really wouldn't mind if it was introduced in the March budget - even if that induced protests of politicking. I'm of the mind that we should start a petition at no 10 petitions.

Good post monkeybot, as I said in my contribution that got eaten by the moderation moggy (o;

There are people (yes like me) earning 8, 10 or 12K a year and paying full whack tax to prop up people on 31K making lifestyle choices.

Oh well, it's child tax credits - soft spot for all parties. I guess the point is that Osborne reckoned it would only affect those couples receiving a combined income of more than £50k, whereas it is projected that it will affect all couples earning more than £31k.
I must say I have every sympathy for you on this one.

If you're family income is more than £31k, why would you need tax credits?

I don't mind my taxes going to help the families I see earning less than me and still being overtaxed, but £31k is 50% more than I earn. People earning more than the average wage should not be getting benefits paid for by those of us earning below it.

The fact that Liam Byrne can say "as low as £31k" whilst not addressing the fact that there are people earning half of that and still paying the same tax rate is staggering.

"That is not backing Britain's great middle class. It is giving them a kick in the teeth."

Britain's great middle classes need to learn to keep it in their pants until they can afford the consequences of taking it out without coming to me for handouts.

If I wasn't paying council tax to fund the schools, hospitals and various other services I never use, I'd be able to save up to move out of the one-bed flat I live in and replace the 16-year old Corsa that I drive. I might even be able to afford a bit of a pension.

“If you take £400 million out of child tax credits in 2010, then 1.3 million middle class families on household incomes as low as £31,000 will lose their child tax credit."


Giving benefits to people on 31K is barmy when part-time wokers on 8, 10 or 12K are paying their full whack of tax. And just because its Mumsnet you didn't need to get a fine year-old to draw the ad!