Look Left – Unravelling the ‘granny tax’, unemployment stats and Boris


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Granny-tax

• The budget continued to unravel this week, with increasing opposition to the ‘granny tax’, ‘pasty tax’, ‘church tax’, ‘caravan tax’ and ‘charity tax’.

On the ‘granny tax’, new research this week revealed that, far from hitting only better off pensioners as ministers had claimed, well over half those affected will be below the average taxpayer income.

As Left Foot Forward reported on Thursday:

George Osborne’s ‘granny tax’ will hit new pensioners on a personal or occupational pension of just £67 a week.

The House of Commons Library (pdf) have calculated that, in order to be adversely affected by the changes to age related allowances announced in the budget:

• Those turning 65 after 5 April 2013 would need minimum additional taxable income of approximately £3,472 – £67 a week;

• People aged 65-74 on 5 April 2013 would need minimum additional taxable income of approximately £4,767 – £92 a week;

• People aged 75+ on 5 April 2013 would need minimum additional taxable income of approximately £4,927 – £95 a week.

While Shadow Chief Secretary to the Treasury Rachel Reeves explained on Left Foot Forward how the ‘granny tax’ was taking money away from pensioners to give to the super rich via the cut in 50p tax rate:

We need to remember the situation most pensioners face, which is that they don’t have ways of making up for a loss of income by going out and finding work. As a result they are particularly vulnerable to rises in the cost of living and unanticipated changes to their financial circumstances. Indeed, this is why old age relief was introduced by Winston Churchill in 1925.

Moreover, pensioners have already been hard hit by this government.

The Winter Fuel Allowance has been cut; pensions have been indexed to a lower measure of inflation; the increase in the state pension age for women has been brought forward; and last year’s VAT rise added £275 to the costs faced by an average pensioner couple.

Analysis by the Institute for Fiscal Studies confirms that as a result of tax and benefit changes implemented by this government, pensioner households have seen their incomes fall by 1.4 per cent. Most have little prospect or opportunity to make up that loss.

Cuts to vital services like the NHS, social care and local transport also hit older people harder. Distributional analysis of the 2010 Spending Review showed that, on average, pensioner couples were set to be hit by cuts to services they use amounting to £1,275 a year, or 6 per cent of their household income, while single pensioners stood to lose services worth £1,305 a year, or 11 per cent of their income.

Concluding:

The only people insulated from the impact of this government’s unfair choices and economic failures are the wealthiest. For the prime beneficiaries of this, the biggest revenue raiser in the budget, won’t be poorer pensioners, or families with children, or young people looking for work. Nor is the money being used to reduce government borrowing.

Instead the money is being spent on a £3 billion tax give-away for the richest one per cent of our society – another measure Labour sought to stop in Parliament this week. The fact the government were said to be surprised by the anger this has aroused shows just how out of touch they are with the tough reality faced by most people today, and how far they have strayed from the values and priorities of the British people.

Also this week, Richard Wilson, Joan Bakewell, Prunella Scales and Larry Lamb wrote to the government urging a rethink on the tax.

 


This week’s most read:

1. How DWP’s incompetence cost taxpayers and disabled people Neil Coyle, Disability Alliance

2. Tory MEPs vote for gender identity to be on list of mental and behavioural disorders Shamik Das

3. Liverpool MP reiterates anger at comic’s “stupid and grossly offensive” Hillsborough comments Shamik Das

4. How plain packaging on cigarettes will work Martin Dockrell, Action on Smoking and Health

5. We need a firm limit on the time we are prepared to tolerate anyone being unemployed Graeme Cooke, IPPR


 

• The latest unemployment figures this week were encouraging, with a headline fall of 35,000, and a rise in employment of 53,000 – though the underlying story remains poor.

As Left Foot Forward reported on Wednesday, the stats (pdf) show worrying signs of continuing weakness in the labour market:

• The claimant count measure of unemployment (which only counts those actually claiming Jobseeker’s Allowance) rose by 3,600 in March 2012 to 1.61m, its highest since October 2009 and up 145,200 over the past year;

• Youth unemployment remained above the one million mark and the number of long term unemployed people rose by 38,000 on the quarter;

• The rise in employment was driven by a rise in part-time work, with the number of people in full-time work down by 27,000;

• There was another rise in ‘under-employment’ with an additional 89,000 people working part-time because they cannot find a full-time job;

• A record 1,400,000 people are now in this position, whilst 627,000 are currently on short term contracts but want a permanent one.

On Tuesday on Left Foot Forward, IPPR’s Graeme Cooke took a deeper look at the problem of long-term unemployment:

Long term unemployment has more than doubled since the start of the recession. As Graph 1 (jpg) shows, the number of people out of work for more than a year has risen from around 400,000 in 2007 to reach 855,000 in the three months ending in January 2012.

The majority of people who lose their job find another one fairly quickly, even in a recession – but those who suffer a prolonged period of unemployment risk losing touch with the labour market and face permanently reduced work and income prospects, not to mention the detrimental health and social impacts of being without work.

Adding of potential solutions to the problem:

The big worry is whether, when stronger job growth does return, people who have experienced long term unemployment will be able to take advantage. Our society is still grappling with a disastrous legacy of this kind from the 1980s and 1990s recessions: high levels of worklessness, poverty and benefit spending.

There is already some evidence a similar problem might be being stored up again. Before the recession about one in five unemployed people had been out of work for a year. That proportion is now up to a third (during a period when the denominator in that equation has been rising rapidly).

And while there has rightly been a strong focus on youth unemployment, it is worth noting that more than two-fifths (43 per cent) of the over-50s who are out of work have been unemployed for more than a year.

The government’s response to this problem is its flagship Work Programme. It is too early to tell how effective this policy is being, though there is no obvious dent in the unemployment numbers despite provider contracts being up and running for many months now.

Concerns have already been raised about the likely effectiveness of the Work Programme and even under the best possible performance scenarios, less than half of people going through it will find sustained employment.

So what happens to those who don’t?

At the very least, the government should introduce a job guarantee for those reaching then end of their Work Programme placement without a job, who would at that point have spent three years out of work.

This should provide 25 hours of paid employment, combined with on-going support and job search, which individuals would have to take up or face losing their benefits. It would effectively create a time-limit on JSA.

As Graeme concluded, action must be taken:

As we learn more about how well providers are getting on, the debate about the best way to prevent the human and economic tragedy of long term unemployment will sharpen; IPPR believes that while the state, private and charitable sectors all have a vital role in supporting people into work, society should place a firm limit on the amount of time we are prepared to tolerate anyone being unemployed.

Also on Left Foot Forward this week on the economy, read our latest monthly economic update, looking at how the coalition’s failures have put Britain in the global growth slow lane.

• In less than two weeks’ time, voters in the capital go to the polls to elect the Mayor of London.

As polling day approaches, the campaign has become ever more negative. For just one example, take a look at the spin from the Boris Johnson campaign following Thursday’s Sky News Mayoral debate.

The Tories issued a document titled “the lies of Ken Livingstone”, which, unfortunately for them, was full of, erm, what’s that word again? Read the rebuttal here.

Boris doing what he does best then, throw around some accusations, try to rattle the opposition, ruffle one’s hair, tell a few jolly gags, wave your arms about, basically do anything other than talk about your record, debate policies or outline your vision, which has been the template for his re-election campaign.

As Alistair Campbell blogged today:

There are two questions that matter: of the two men who have been London Mayor, who has done more for London? And who is best placed to be Mayor for the near future?

And as Lord Adonis wrote midweek:

London would not be hosting the Olympics in 100 days had we not invested in its transport system. With the mayoral campaign dominated by the row over whether we have to choose between investment or cutting fares, Londoners should recall who is really responsible for the current improvements: Ken Livingstone…

Over the years, Ken has called all the big transport issues right. He was right to invest in buses and the Tube, to introduce the congestion charge and Oyster card, and to launch Crossrail and London Overground. And he’s right this time about a fare cut and new investment in our transport network.

Quite; the questions that count, once all’s said and done, are about London, who’s most shaped its past, who’ll deliver for the present, and whose policies will best shape the city’s future – a Mayor for the rich or a Mayor for the many?

Progressive of the week:

Tony Blair, who this week made an impassioned case for philanthropy, as the government’s ‘charity tax’ plans came under renewed attack from all quarters.

Addressing the Global Philanthropy Forum Annual Conference in DC on Monday, he said:

“This is absolutely the right moment for government to do all it can to promote philanthropy; and certainly nothing to harm it.”

Adding:

“Change can happen through committed people in government and some change can only happen through government. When I think, in my own 10 years in office, of reforms in health, education, law and order; advances in civil rights; peace in Northern Ireland – these changes required the power of government.

“However, 10 years taught me something else; the limitations of government. This is where desire and strategy get blocked by the politics of vested interests; by bureaucracy; by the innate tendency to inertia of a system designed to manage the world not change it.

“Government in this guise, loves process. It rewards caution. It disdains risk and distrusts creativity. It thinks in a linear way and challenges that don’t fit neat government definitions or which stretch across boundaries, disappear into the machinery never to re-emerge and certainly not as solutions.

“When acute crisis threatens, government can act with speed. But otherwise it ponders endlessly and then proceeds at a glacial pace. It is into this space – not as a substitute but as a complement to conventional government and politics – that the philanthropic sector has marched.”

Blair also appeared on Newsnight to outline the adverse impacts of the coalition’s plans and the importance of philanthropy; as shadow Cabinet Office minister Gareth Thomas wrote on Left Foot Forward last week:

“David Cameron’s latest attack on philanthropists has put another nail in the coffin of the Big Society. Not content with undermining the voluntary sector, he has now taken to insulting people who give generous donations to charity. It shows staggering arrogance.”

Regressive of the week:

Right wing TV historian David Starkey, no stranger to controversy, who this week compared Scottish first minister Alex Salmond to Hitler.

At an event hosted by the Bow Group in Parliament on Wednesday he said:

“If you think about it, Alex Salmond is a democratic Caledonian Hitler, although some would say Hitler was more democratically elected.

“[For him] the English, like the Jews, are everywhere.”

As you can imagine, it provoked quite the backlash – Left Foot Forward’s Ed Jacobs has all the reaction to his remarks here.

Evidence of the week:

Gordon Brown’s “Education in South Sudan: investing in a better future” review (pdf), published this week as his office launched a campaign to get one million children into school in South Sudan.

Amongst the findings of the report are:

• Six years after the end of the Sudanese civil war, more than one million children remain out of school;

• Of the 134 countries for which secondary education enrollment data are available, South Sudan currently ranks last;

• Less than five percent of 13 year-old girls in South Sudan have completed primary school;

• In some parts of South Sudan, the ratio of students to trained teachers is more than 200 to one.

While its recommendations include an emergency ‘education catch-up’ plan for South Sudan, through classroom construction, teacher training and targeted incentives to encourage parents to send their children to school, particularly girls.

Gordon Brown’s plan would get another 1 million children into school by the end of 2015.

At the launch of the report, he said:

“Headline figures for the cost of the proposed programme have to be considered against the potential flow of benefits, as measured by the number of children in school, the expanded opportunities for learning, and the renewed hope that will come with progress in education.

“The US$400m a year for four years that is required may seem unaffordable. The question that has to be asked is whether the world is willing to stand-by while 2.5 million children lose their chance for an education that could lift them out of poverty, create jobs, build a more peaceful and resilient society, and support economic growth.

“Failure to expand opportunities for education will increase the risk of more conflict, which will in turn leave donors facing the prospect of increased humanitarian aid costs. Viewed against this alternative, the cost of implementing the actions proposed in this report – around US$5 per child – is a small price to pay for a very high return.”

Please sign the Avaaz petition to put pressure on the World Bank to adopt the plan.

This weekend on Left Foot Forward:

Saturday:

• Beatrix Campbell writes about the legacy of collusion between loyalist paramilitaries and the security services in Northern Ireland.

• The Week Outside Westminster – sign up to receive it by email here.

Sunday:

• Craig Berry looks at the left and right of happiness.

• The World Outside Westminster – sign up to receive it by email here.

 


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  • Anonymous

    You are quite right to point out that the big victims of the granny tax and the attitudes behind it are new private sector pensioners, rather than existing ones. I was lucky enough to be able to time my retirement just before annuity rates finally collapsed. Had I retired two years later, my occupational pension would be about 25-30 per cent lower. Older pensioners may have been partly shielded from cuts in living standards but the Government/Bank of England monetary policy, designed mainly to keep down the cost of Government borrowing and raise inflation, has had a gruesome effect on the future living standards of those recently retired or soon coming up for retirement. Apart from those who have become unemployed, they are probably the worst losers from our economic troubles.

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  • Anonymous

    Carrying on where Labour left off. More tax, more tax and more tax.

    Ever increasing deficits. Ever increasing government debts.

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  • Anonymous

    Gotta burn anything the 99% might recieve!
    Gotta make sure the debt rises by killing growth so you can do the above.

  • Anonymous

    Tell us what the debts are?

    Somehow I think you will deny that people are owed a pension

  • Anonymous

    No, YOUR line is that pensions are evil. Your campaign against them is notable, 1%er.

    The debts are the result of a systematic refusal to tax where wealth has shifted.

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