Sunday 27 September 2015

Sunday, September 27, 2015 Posted by Jake No comments Labels: , , , , , , , , ,
Posted by Jake on Sunday, September 27, 2015 with No comments | Labels: , , , , , , , , ,

One month before the UK General Election in May 2015 David Cameron, warming up for a post prime ministerial career as a game-show host, announced it was "Money Back Monday"

On that first day of the 2015-16 tax year Cameron declared: 
"Today is a big day for our country. It's 'money-back Monday' - a day when, quite simply, hard working taxpayers get to keep more of their own cash. A whole host of changes to our tax, benefits, pensions and savings systems come into effect today."

Promising** a handout to the nation one month before the General Election clearly didn't do him any harm. But who actually took the money Cameron promised to give back? 

We get an insight by looking at data from the Office for National Statistics (ONS) annual report on "The Effects of Taxes and Benefits on Household Income". Comparing data from financial years ending in 2010 and 2014 (the report for 2015 won't be out until June 2016), we see the personal tax burden actually increased during the last Conservative led coalition government.

How is this possible? Surely the Tories have been lowering some income tax rates and raising allowances? Yes they have. But they take back significantly more than they give via other taxes. 

Personal taxes come in two forms:
1) Direct Taxes including: Income Tax; National Insurance Contributions; Council Tax.
2) Indirect Taxes include: VAT; Duty on tobacco, alcohol, fuel; car tax; TV licence; Stamp Duty; etc.

Between 2010 and 2014 (charts show percentage of gross income taken in tax):
a) Direct Taxes decreased

b) Indirect Taxes increased

c) Overall Direct + Indirect Taxes increased
Because the poorest pay most of their taxes as Indirect Tax they were hit hardest by Tory tax rises. Nonetheless, the richest also paid a higher rate of tax in 2014 than they did in 2010. 

Indirect and Direct Taxes for richest and poorest [click on picture for better view]
How do the Tories manage to be seen as the "party of low taxation"? They do it by saying it with such confidence people believe it is true without checking. In a speech in March 2014, David Cameron said:
"We believe in helping people keep more of the money they earn. It’s the right thing to do. Let’s be clear: there is no such thing as government money. It’s your money – taxpayer money. It’s not my money, not George Osborne’s money, not the government’s money - it’s your money. Hard-working people’s money."

In the same speech Cameron went on to promise: 
"A bit of extra cash that can help a Dad afford those trainers for his son or help a Mum celebrate her daughter’s birthday with a meal out."

The reality is those who depend on a tax reduction to buy trainers and pizza for their children were far less able to afford those treats. Even those at the other end of the income scale found themselves with more tax taken from what they have to invest or to spend on a whim.

The Conservatives warn us the Labour Party can't be trusted with the UK's economy and security. And yet five years of a Tory led government brought higher taxes, increased national debt, cuts to the military, and cuts to the police

The real puzzle in Britain is not what the Labour Party has to do to be trusted. It is what the Tories have to do to be distrusted.

[** Cameron's promise of "money back" in this April 2014 speech was based on an analysis the Tories hadn't published. Sir Andrew Dilnot of the UK Statistics Authority complained about this in a letter that stated:
"Reference to the analysis was made in the Conservative Party press release, but the analysis has not been published and is neither available to all other parties nor to members of the public. We regard this as unsatisfactory because of the significance that we attach to the principle of equal access to statistics and underlying analysis."]


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