Compass set out blueprint for tax reform over spending cuts - written by compassoffice
Uncategorized - 28 Comments » - Posted on November, 24 at 10:19 am
Polly Toynbee covered the report here and Richard Murphy debated Tory MP Michael Fallon on the Today programme here.
The “In Place of Cuts” report published to by Compass sets out tax proposals, which would see 90% of income earners benefit from reforms that make Britain fairer, and help avoid prolonging the recession.
The report calls for a new top rate of tax and for the 10p tax band to be reintroduced by Labour.
Polling carried out for Compass by Yougov show large majorities support the introduction of progressive tax measures
This Compass report sets out a programme of detailed tax reforms based on a Treasury model simulation that will:
• Cover the deficit by raising £46.8bn in additional revenues
• Rule out the necessity for across the board spending cuts and so avoid prolonging the recession
• Redistribute income to 90% of households
• Reintroduce the 10p tax band to make the tax system fairer
Polling conducted by Compass shows such measures would be hugely popular:
• 78% would like to see a tax system whereby the richest 10% at least pay the same percentage of their income in tax as the poorest 10%, only 14% disagree
• 59% would like to see the re-introduction of the 10p tax band – with only 13% against
• 62% would like to see the tax reform measures (detailed below) that increase the incomes of 90% of households with 24% against
Neal Lawson, Chair of Compass, said:
“The forthcoming Pre Budget Rreport needs to be a turning point in British politics; we can get the economy growing again and in so doing make the tax system fairer and avoid socially damaging public service cuts.
“It is absurd that an economic crisis triggered by greed and risk raking at the top has become a Dutch auction of socially and economically damaging public spending cuts.
“The opinion polls are showing that the greater the sense of choice the voters have the more the next election becomes a contest and not a walk over for the Tories. The tax reforms being pushed by Compass are not just the right policies for the country but would be very popular too.
Jon Cruddas MP for Barking and Dagenham said:
“This report must be heeded by the government – it shows unequivocally that there is a strong alternative to the public service cutting agenda the Tories are after. Tax reform that makes the system fairer, and that has proved incredibly popular in polling must be central to Labour Party policy.
“Measures such as those outlined in this report would help those on middle and low incomes and ensure that vital services wouldn’t be cut – such an agenda would put clear water between the Labour Party and the Tories.
Note to editors
Compass is the leading left of centre pressure group with 30,000 members and supporters across the country.
The report was written by George Irvin, Dave Byrne, Richard Murphy, Howard Reed, and Sally Ruane
The details of the tax reform measures are:
1. 50% Income Tax band at £100,000 2.3
2. Uncap NICs and make payable on investment income 9.1
3. Minimum income tax bands 14.9
4. Reintroduce 10p basic rate -10.5
5. Higher Council Tax bands 1.7
6. Abolish tax havens for ‘non doms’ 10.0
7. Financial transaction tax 4.2
8. Cost cutting measures e.g. Trident, ID cards, 15.1
£46.8 bn
The full report is available at www.compassonline.org.uk/publications/
Polling was conducted by You/Gov 19th and 20th November from a sample of 1069 adults
Posted in Uncategorized | 28 Comments »
Load of flim-flam.
You want to reform the tax system? Remove the upper limit on NI and make the level at which the basic rate of Income Tax is paid the same as the full time minimum wage. Why are people who only earn the NMW paying tax?
Two very simple things that would require minimal administrative work and little reprograming of the IT systems. It would help the lower paid and also make the higher paid pay more.
This a great way for government to shit on all of us, under the guise of saving the country, new taxes, new ways of kicking the people at the bottom harder, even if I thought labour would be interested in Compass to be honest Brown would not.
> Why are people who only earn the NMW paying tax?
Partly because unless you added complexity to the tax system someone living off £12k of unearned income, or earning £12k from 3 hours a week consultancy, would also pay no tax.
I’ve learnt that “progressive” these days, especially when spouted by left wing figures results in “expensive” for everyone else.
“Why are people who only earn the NMW paying tax?”
Well OA, I think in New Labour Land, those who earn the minimum wage are simply too thick to either notice, care or, indeed vote.
Low earners are thick people beneath contempt – why not double their taxes then tell them they are no worse off – New Labour doctrine
Try Libdems if you want sensible taxation policy.
> Why are people who only earn the NMW paying tax?
… and it would mean the current moderate tax advantage to the self-employed from the “pay the not-really-working spouse £5k” tax trick would turn into many self-employed paying hardly any tax.
A self-employed earning £30k could pay the not-really-working spouse £12k, and Grandma or teenage kids £4k, and then only pay tax on £2k of his £30k earnings. Nice job.
Well rwendland, it does happen. I recommend anyone self-employed who has a not-working wife to make them a business partner. Employing children, even better. Sounds like a lovely family business.
Do you consider this to be wrong? It’s perfectly legal.
> Do you consider this to be wrong? It’s perfectly legal.
I wasn’t commenting on the legality or morality. I know it is legal (though IR35 has reduced the scale of it).
Just pointing out the impication of increasing the basic rate tax threshold from £5k to £12k means turning a moderate tax perk into widespread tax exemption for a large number of people. (And I doubt if that largely Tory voting group of people would thank Labour for this by voting for them!)
Messing with the tax and benefits system in major ways requires a deep understanding of the implications of any change – there are a lot of gochas there.
rwendlan, there’s nothing complex about saying that whatever the annual NMW is for a 40 hour week (we’ll say 12K for ease), is the basic tax exempt code. It wouldn’t matter if they earned it in a week, a day or a year, the first 12K in any yearbecomes exempt. That’s not complicated.
It is morally wrong to say ‘this is the minimum we will allow you to earn’ then bloody tax them.
Hell yeah, ask Brown Balls after the 10p fiasco. (which still pains me like a lance through the heart).
There are dozens of small businesses that are run as a lifestyle thing without ever making much money, certainly not big tax-payers.
I think it’s good for the country, as many of these entrepreneurs make lousy employees and choose small business as a dole alternative.
Running a modest business for small reward is better for the soul than making the same on benefits.
It’s certainly my ambition to run a small family business with my future wife and assorted children.
Brown axed the £10k allowance for incorporated businesses a couple of years ago. He’s had his pound of flesh. I hope the micro-lifestyle-business sector will be left alone so we can acheive our ambtions.
I’d be well pleased with a joint income of 20k, by the way. I still think thata joint income of £20k ought to below income tax thresholds.
A lot of microbusines owners switched to Labour from tories, so it would be daft to lose them for a few quid.
As always, tax the rich. Same applies to businesses.
I’m all for small lifestyle thing businesses. But making a tax change that means a £30k employee pays tax on £18k, but a £30k self-employed may pay tax on just £2k, simply is not fair. And it would even more incentivise the move from reliable employment to uncertain contracted out work – which I don’t really think the majority of workers want.
Rwendland you’re looking at the self-employed person the wrong way. You are trying to suggest that they can’t employ family members, only ‘outsiders’. I was self employed for 4 years when I was in the pub game. The inland revenue saved me a fortune – one YEAR I paid £11 in tax for the full year and it was the tax office who helped me do it.
You are never going to win over self-employed. As my tax inspector said to me, it’s designed for you to abuse it like this because you lose other perks that someone on PAYE and standard NI gets.
“£30k employee pays tax on £18k, but a £30k self-employed may pay tax on just £2k”
HiRwendland, this only works if the spouse isn’t working. Effectively they are using up unutilised tax allowances within the household.
This might be a winning tax formula – allowing all employed couples to pool tax allowances like the self employed , might help where mum is a stay-at-home mum. I’d find such proposals attractive even though they dont affect men now.
It was actually tory policy in 2005. Not a bad one, though they are “wedded” to marriage whereas many couples dont want marriage (been there done that).
Maybe we ought to tax on household income – like we make benefits. Tax and benefits oought to be 2 sides of the same coin with the same rules.
YorkshireBeard
“Well rwendland, it does happen. I recommend anyone self-employed who has a not-working wife to make them a business partner. Employing children, even better. Sounds like a lovely family business.”
This is downright disgraceful if you ask me!
By the way YorkshireBeard, my last comment was not in any way intended to be a personal attack on you. Just the principle.
I hope I havent offended you.
I had a quick shufty at ‘In Place of Cuts’. I got to the point in the Executive Summary where the authors referred to “the estimate by the Institute for Fiscal Studies (IFS) of an annual structural budget gap of £39 billion per annum for 2011-2014, or about 3% of current GDP.” They apparently got this figure from a report in The Independent, which is when I realised that the authors didn’t understand what they were talking about, and that they hadn’t even bothered to read IFS Briefing Note BN87 which states quite plainly that “the gap between … spending and tax revenues when the economy has fully recovered” is projected to be “around 6.4% of national income (or roughly £90 billion a year in today’s terms).
Since getting a number wrong by £51 billion is a pretty big mistake, I gave up after that.
A few question to those who have trawled through the entire report.
re trident and id cards. are these not a short term expense as opposed to ongoing year in year out ( although I agree that they should be cut, particularly ID cards.)
The current annual deficit is forecast by the treasury to be 175 bn, although most economists expect it to be between 200-220 bn. Supposing compas figs are correct, what about the 150 or so bn that remains as an annual deficit.
Increased taxation is taken directly from net income. What will the effect be from removing billions from tax payers disposable income.
Past experience has shown that increasing tax on high earners doesn’t necessarily equate to a net increase in revenue. In the 80’s when Thatcher reduced the top rate of income tax, revenues increased substancially, What happens if the reverse effect happens.
What effect would a unilateral tax on financial transactions have on the city ( which accounts for 30% of gdp ) Have compass factored in the massive transfer of activity to say……..the far east if such a tax was unilaterally adopted.
As I have said, I havent looked at the proposal in detail yet ( I’m a bit knackered after a particularly hard day ) but it seems to me that these proposals, even if they produced the sort of revenues envisaged ( which I question )will not close the deficit gap in any meaningful way but will have a seriously detrimental effect on the wealth creating potential of the UK. In addition, consumer spending will suffer, and remember, we have a consumer led economy. During the past decade, the savings rate in the UK has been extremely low, falling to negative on occasions. This indicates that any reduction in consumer income will directly correlate with a reduction in spending.
In essence this is more money grabbing when what the UK really REALLY needs is investment in productive industry, the only thing that can provide the future wealth which will keep us in the style we have become accustomed to.
What effect would a unilateral tax on financial transactions have on the city
Ah yes the Tobin Tax. I must admit I don’t know the answer to this one. I expect you’d have to go away and read some academic papers with lots of equations in them and I’m far too lazy to do that. The trouble I have with the Tobin Tax is that its proponents claim that it will raise untold billions that will somehow appear almost out of thin air. I keep thinking to myself; the money must come from somewhere. And presumably if the government has the money, somebody else won’t have the money, and therefore won’t be able to spend it on what they’re spending it on at the moment, and whoever’s benefiting from all that spending will notice it when it’s gone.
aneurin, the Tobin Tax is the second persuit of Alchemists – just behind the formula to turn lead into gold and just in front of finding and hatching a Dragon’s egg.
Since getting a number wrong by £51 billion is a pretty big mistake, I gave up after that
Should get a job in the City in investnment banking. That sort of error is apparently well within tolerance .
The gaping hole in this is that the annual deficit is 200bn. The govt have said that they’ll reduce this to 100bn per annum within four years with, as yet, unspecified cuts and tax increases.
If compass intends to reduce the deficit with tax increases alone, they have to explain where the additional 200bn per annum will come from. Off the top of my head, this figure represents about twice the annual total income tax reciepts of the UK.
aneurin
you are quite right of course. Every penny of taxation is a penny less spent elsewhere in the economy.
jacks2, it also relies on our creditors remianing benign and allowing us to pay how and when we want to suit us. Bit pie-in-the-sky is that.
OA
Absolutely, If Labour go into an election with this policy, and win, we’d be bankrupted faster than a ferret up a trouser leg.
End of, I think.
> re trident … are these not a short term expense as opposed to ongoing year in year out
Ongoing costs of Trident are larger than most people think.
The running cost estimates I’ve seen are in the region of 3% to 5% of the defence budget, or between one and two billion. The Atomic Weapons Establishment 2008 costs were about £800 million, so I guess that is extra.
Over the 25 year lifetime I think annual running costs exceed capital cost/depreciation.
James Thurston
Not offended at all. Indulge me.
I’m all in favour of the family, hope that doesn’t make me sound too tory or at least anti-Labour. I’ve not been overly successful on the marital front, but I work as hard as I physically can to try to give my boys, my family, the very best I can manage. They go on all the school trips and take part in out-of-school-activities that cost an arm and a leg. We’re off to London in the New year and we’re giddy. Sacrifices have been made though.
One day I aspire to something better. Something that will suit me and my family. As pointed out earlier, a little business making a household income of £20k would be just fine.
If you’ve run a small business you’ll understand that the spouse gets sucked in full time. Will my kids be working for me whenthey’re old enough? Dead right. Families pull together. Of course you split the earnings, legitimately, to maximise tax advantages. Who pays more tax than HMRC advise? Is that really disgraceful? If so, I challenge you to a game of morals top trumps. Disgraceful? Support your argument!
Incidentally I’m on my uppers at the moment, but when I do achieve my next goal of a modest family business, it’ll be my fifth small business and I’ve yet to go bankrupt personally and I have never closed a business owing a penny. In total I have employed about 50 people and I never took more than the lowest paid member of staff, which was in he order of £20-24k The top earners were making £60k.
True entrepreneurs take virtually nothing out of their businesses – in the short term the thrill of the business means you reinvest every penny. And that creates jobs, wealth, tax revenues. None of this is/was incompatible with Labour 1997-2005, hence the votes.
Yeah everyone would like an Aston Martin, but I’ve known 100’s of entrepreneurs and most, at least to start with, live off beans and sausages.
Im older now and enjoy life more even though I am flat flat broke and struggling. The ‘thrill of the business’ gave me health problems that made me realise what is important.
Don’t pick on the ‘petit bourgeoisie’ they’re strugglers too.
“Try Libdems if you want sensible taxation policy.”
Aye, like local taxation policy that result in councils in poorer areas having to have the lowest municipal spending?
Just a thought on taxation for higher income earners. How about a top limit on salaries for the public sector, quango and state owned industries. Why do we pay Thompson at the BBC £800,000, Crozier his millions and Ian Blair when head of the Met got £400,000 (although the Brazilian boy’s family only got £100,000 compensation.) Limiting these to say £150,000 would be the equivalent of a very healthy tax income. Why should we have these high salaries set so much higher than the average income?
[...] Compass have also issued a report detailing what a fairer tax system might look like, with an 8-point plan of measures that [...]