Matthew Butcher is the media and communications officer for FairPensions

The British Social Attitude Survey, released yesterday, has thrown out a host of results that might well leave those on the left feeling dismayed.

Britons, it would appear, are becoming increasingly individualistic and less willing to pay higher taxes to support healthcare spending, education and protecting the environment. Has the time come to explore ways to help the poorest in society without increasing the amount of tax we have pay?

It should come as no surprise that people are becoming more protective of their money when the average income rose by only 0.4 per cent in the last year, well below inflation. Only yesterday we learnt that millions of people in this country and taking on short-term, high interest loans to see them through to pay day.

The problem that we face is not that people don’t recognise our country’s challenges nor that we don’t care about each other, but instead that people don’t feel like they are in a position to give any more to the taxman. An illustration of our empathy towards each other is the 82 per cent of people surveyed who think it is ‘very important’ to reduce child poverty in the UK.

The major reasons given in this year’s survey for child poverty in the UK are parents’ addictions (75 per cent) and parents’ unwillingness to work (63 per cent) while less than half of people think that low pay is a reason that children live in poverty.

The sad fact is that almost six out of ten children in poverty are living with at least one parent who does work. Research carried out by UNICEF earlier this year paints a bleak picture of life on low pay for parents. They are often forced to work such long hours to support their families that they hardly spend any time with their kids.

For these workers having a job doesn’t by any means guarantee an improvement in the quality of their lives.

Though a large chunk of these low paid employees work for the state, and would therefore benefit from more government spending, the majority, according to the Resolution Foundation, work for private companies.

It is these private companies, and in particular our biggest corporations, who should be footing the bill when everyone else is feeling the squeeze. This year we’ve been asking Britain’s biggest companies to pay their workers living wages.

Not only do Living Wages benefit the workers, their children and the companies but they also save the taxpayer from subsidising corporations through government tax credits that are required to boost the poverty wages of their lowest paid staff.

We should not be surprised that British public, who seem permanently beset by depressing economic news, aren’t willing to pay more tax. Instead we should be upping our pressure on the biggest corporations in the land to pay their way.

See Also:

• To end inequality without redistribution of wealth, we should pay a living wage – Duncan Exley, December 8th 2011

• Economic gloom is killing Britons’ sense of common interest – Anne Summers, December 7th 2011

• New video from the Fair Pay Network makes the case for a living wage – Alex Hern, November 28th 2011

• Citizens UK: “The Big Society is flawed if people have to work two jobs” – Peter Carrol, October 21st 2011

• Lifting the lid on low paid Britain – Lee Savage, 4th October 2011

Owen Tudor is the head of European Union and international relations at the TUC

The chancellor finally broke cover on the Robin Hood Tax at the European finance ministers’ meeting in Brussels yesterday. For months, the government line has been they support the impulse behind the policy – the prime minister said the same in response to the archbishop of Canterbury last week - but there are not enough other countries in favour for it to work.

It’s never been a particularly convincing line - last month the chancellor was reported to have given secret pledges to the banks a Robin Hood Tax would never happen - but his performance at the Ecofin meeting gave the game away once and for all.

He threw the kitchen sink at the idea, and trampled on the few remaining hopes he would side with the people rather than the banks.

Some of his arguments were procedural: there was no clear majority in the EU, the timetable was wrong, the details had not been worked out.

If he believed these to be problems, the right response would be to devote time and energy to building the coalition globally, and fine-tuning the detail so it has more in common with the unavoidable UK stamp duty rather than the late and unlamented Swedish transactions tax of the 1990s which is persistently raised even though the IMF has made clear it is no example of anything except the need to design taxes properly.

But in practice, we know from the chancellor’s behaviour yesterday, and reports from other world leaders about the government’s approach in the G20 discussions last week, that our political representatives have been obstructive and oppositional, rather than constructive and positive.

Some were either wilful misinterpretations of the proposal or flat out lies. For example, a Robin Hood Tax will not fall largely on pensioners; this was a completely new one on us - not once in 18 months of discussions with politicians or civil servants has anyone suggested this, which is strange if it’s one of the main problems with the proposal.

The tax would be set at such a low level it will barely impact on anyone who is not trading huge amounts of money on exotic financial products on a daily basis.

However, George Osborne’s 2.5 per cent VAT hike on virtually everything people buy on a daily basis impacts on ordinary people to the tune of hundreds if not thousands of pounds every year.

That’s also the problem with his concern about the impact of a Robin Hood Tax on growth.

The worst case scenario in a flawed European Commission impact assessment suggests a 0.5 per cent to 1.76 per cent impact on GDP over 20 years, and even the Commission accept that this assessment is highly speculative, based as it is on a highly contentious ‘Dynamic Stochastic General Equilibrium’ economic model. Contrast that with the already observable effect on growth of the VAT rise.

And finally, some of his arguments are the exaggerated hyperbole that is more familiar coming from the TaxPayers’ Alliance or UKIP. Apparently, George Osborne thinks the Robin Hood Tax would cost the EU economy over 500,000 jobs – the sort of figure the CBI once put on the impact of a national minimum wage, or indeed any social measure emanating from the European Union.

For the record, there are 1.6 million jobs in the UK finance sector, and, as in the rest of Europe, most of them are cashiers in retail banks, insurance salespersons and the like.

They don’t trade in complex derivatives or engage in high frequency trading – actually that’s mostly done by computers, whose idleness is not captured in the ILO unemployment count. Even in our wildest dreams, a Robin Hood tax will only make a few top city financiers unemployed, and if they’re as clever as their “masters of the universe” self-description suggests, they might be able to find other jobs.

European finance ministers yesterday agreed to ask the Commission to do more work on the detail of the draft directive. That - rather than George Osborne’s petulant hyperbole - was the right decision.

As Olaf Cramme recently wrote, it is preferable to be:

“…influenced by the grey EU technocrat in Brussels to being ruled by the 25-year old credit default swap trader in the City of London.”

See also:

• Osborne in public: “I am not against Tobin taxes”; in private: “He remains unconvinced” – Alex Hern, November 9th 2011

• On the Financial Transaction Tax, why is Osborne on the side of the one per cent? – Shamik Das, November 2nd 2011

• Miliband and Balls need to be more vocal in support of the Robin Hood Tax – Vaughan Gething AM, October 17th 2011

• Osborne increasingly isolated on Financial Transactions Tax – Owen Tudor, September 19th 2011

• Robin Hood Tax would lead to calmer markets – Simon Chouffot, August 6th 2011

By Tim Nichols

Ed Miliband’s speech contained some tremendously important and bold attacks on powerful elites that have helped create and perpetuate today’s social and economic inequalities. Despite much to welcome it is important understand why many may be upset today.

Minutes after taking applause for his rejection of Murdoch during the phone hacking scandal, Ed Miliband breathed new life into the News of the World’s myths about benefit claimants.

He attacked a ‘take what you want culture’ highlighting benefit cheats and a system in which “benefits are too easy to come by for people who don’t deserver them”.

The party’s recent focus groups have apparently found the public still hostile to benefit claimants they believe are either defrauding the system, or swinging the lead instead of seeking work. Focus groups always bring up ideas based on their daily media diet, so this is no surprise given the relentless hate campaigns towards benefit claimants in much of the press. Hostile public perceptions are less surprising still when you remember that former Labour secretaries of state such as Purnell and Hutton played an active part in propagating these dangerous myths.

Isolated cases of fraud are reported, alongside hysterical comment pieces that create the false impression such fraud is rife. Official statistics on disability claimants are grotesquely distorted into out-and-out headline lies that label millions of genuinely disable people as ‘scroungers’. Instead of using the facts to refute the claims, Labour minsters responded with promises to end “free riding” on benefits with harsh new sanctions.

A just society requires not just that people speak truth to power, but that politicians speak truth to people too.

There is a great true story the party could tell instead to counter the false perceptions encountered in their focus groups. Labour has a tremendous track record on reducing benefit fraud. When they left government, fraud in the benefit system was at its lowest level ever recorded. The verification framework (a new standard for provision on evidence of identity and income introduced in Blair’s first term) and more investigation officers reduced fraud significantly.

Most claimants are desperate to work, but they have been let down on promises to provide the tailored support to help them into sustained work that they need. Even before the recession, in many areas of high unemployment the jobs were simply not there. We have not had a serious industrial policy for years. A million disabled people in incapacity benefits and allowances say they want to work, but they are still subjected to serious levels of employer discrimination.

Meanwhile, disability charities are reporting disturbing increases in verbal and physical assaults suffered by disabled people – an increase which they link to the hostility of the press towards claimants of disability benefits.

But there does exist a major problem of fraud and taking without giving in one area: taxation. An elite of corporations and super-rich individuals is cheating the nation out of tens of billions lost to tax evasion and avoidance each year. We seriously reduce the deficit overnight if we put a stop to these tax cheats, allowing us to avoid harsh welfare cuts of disabled people and families.

Miliband called on Cameron to “put aside the politics; look at the facts”. If he wants to prove his claim to believe in the welfare state, he should start by following his own advice and stay within the facts on benefit claimants.

See also:

• And now a Catholic leader attacks coalition’s welfare cuts – Will Straw, July 21st 2011

• Getting by on benefits is no easy ride – Anjum Klair, February 17th 2011

• How to fake up a Daily Mail benefits story in five easy steps – Declan Gaffney, February 25th 2011

• £40bn “tax gap” likely to be an underestimate – Will Straw, December 14th 2009

• FT takes apart Osborne’s Swiss tax deal – Shamik Das, August 30th 2011

A new poll shows that just 25 per cent of voters – including only a third of Tory voters – would support the abolition of the 50p tax rate. The findings suggest that Chief Secretary to the Treasury, Danny Alexander, is on the right side of the debate in dismissing his Tory colleagues as living in “cloud cuckoo land“.

The YouGov poll for the Sunday Times found that just 25 per cent of voters supported a policy to scrap the 50p higher rate of income tax. Even fewer voters – just 21 per cent – thought that the policy would boost growth. As the graph below shows clear majorities of supporters for all major political parties oppose the move.

In recent weeks, senior Tory politicians have called for the policy – introduced by Alistair Darling – to be scrapped. Last week London mayor, Boris Johnson, said that abolition of the 50p rate would be “a signal that London is open for business … That’s the right direction to be going in“. Former Conservative chancellor, Lord Lamont, used an article in the Sunday Telegraph to write:

“Lower taxes are important. Our taxes are uncompetitive and too high compared with other European countries. The fifty per cent higher rate of income tax is probably one tax which could be abolished without any effect on revenue.”

Last week the Financial Times reported that Mark Field, Tory MP for the Cities of London and Westminster, had urged the Chancellor to “look at a big iconic move” such as scrapping the 50p top rate of tax, accompanied by an acceleration of the plan to take the lowest paid out of the tax system. Meanwhile a host of commentators including Spectator Editor, Fraser Nelson, have called for George Osborne to scrap the tax.

The Treasury appears to be split on the issue with George Osborne reported to be in favour of scrapping the tax by 2013 while Danny Alexander said yesterday that those who supported the right-wing policy were living in “cloud cuckoo land“.

Today’s newspapers have been well briefed on the Budget and seem certain that George Osborne will raise the tax threshold by a further £600. The policy sounds good but, in reality, has several problems.

1. It’s not as big as you think

The Daily Mail claims today that:

“Twenty-five million workers will be promised tax cuts of up to £320 a year in today’s Budget…

“That means two million paying 40 per cent income tax will be £45 a year better off. Those on the basic 20 per cent rate will gain the £320 benefit.”

The Telegraph have also bought the Tory spin claiming “in cash terms the savings is £320“. The Sun who clearly missed Nick Clegg’s January op ed on their own pages trailing the policy write:

“in a surprise move, he will hand a £205 income tax cut to the 23million Brits who do not pay the higher rate. Once other financial calculations are taken into account, it will actually be worth £320.”

But as Channel 4 News’ Faisal Islam has pointed out on Twitter, “Not £320. Its £120. Basic maths. 20 per cent of £600 equals…..”

The £320 figure presumably comes from combining the new £600 tax threshold rise worth £120 with the £200 that was announced in the June Budget. In other words, double counting.

2. It’s not as fair as you think

As Left Foot Forward has repeatedly pointed out, raising the tax threshold – a key plank of the Liberal Democrats’ manifesto – is a badly targeted, regressive approach to tax reform. As the Observer reported at the weekend:

James Browne, senior research economist at the Institute for Fiscal Studies, said the measure was an inefficient way of helping the poorest households. “You’re giving a fixed cash amount to all basic rate taxpayers, so relatively little money is going to the people who you’re taking out of tax altogether,” he said, pointing out that more than 90% of the beneficiaries would be likely to earn more than £10,000 a year. “If you really wanted to target low-earners, perhaps you would be better off to increase the working tax credit.”

Indeed, while top-rate tax payers did not benefit from the earlier tax threshold rise, on this occasion “everyone on less than £115,000 will benefit“. Hardly a good use of scarce public resources

3. You’ll probably end up paying for it

The Daily Mail’s piece goes on to ask “Where will he find the cash?” Given that Osborne is unwilling to consider a slower ‘Plan B‘ to reduce the deficit it’s a good question. The initial raising of the tax threshold by £1,000 cost £3.9 billion so a further rise of £600 is likely to cost £2.34 billion and probably more given the decision to allow people earning between £37,400 and £115,000 to benefit from the move. The Financial Times reports that, “Mr Osborne will help to fund the measures through a £1bn crackdown on tax avoidance and a previously announced extra £800m tax on banks.” But that still leaves a £600 million shortfall and that’s before the expected cuts to fuel duty have been paid for.

In June, the Chancellor raised VAT to 20% to pay for his income tax cuts and corporation tax cuts. Families were hit by an average £170 bill for the VAT rise. As Gavin Kelly of the Resolution Foundation told the Observer:

“For many working families, any gains from allowances are likely to be greatly outweighed by cuts to tax credits and the rise in VAT.”

Don’t be fooled when George Osborne claims he’s cutting your taxes today.

Natan Doron is a research assistant at the Fabian Society; he has recently completed an MSc in Environment & Sustainable Development at University College London

Late last year Left Foot Forward reported that the Lib Dems had scrapped their election pledge on removing the Air Passenger Duty (APD) which they felt was unfair to Caribbean voters in Sarah Teather’s constituency. Clearly the Liberal Democrats breaking election promises is not news, but this coalition is the self-proclaimed “greenest government ever”. That is why the coalition agreement promised, amongst many things, to replace APD with a per-flight duty.

The noble idea was that by taxing each flight as opposed to each passenger, airlines would be encouraged to stop running half-empty flights by making sure that every flight was as full as possible. One of those classic win-win policies for environment and business gains.

Channel 4, however, have broken the news that this promise is being moved into the column titled ‘broken’. The reasoning is that this coalition promise contradicts European Union law. Which law in particular is unclear, but the problem is that this sets up the perfect Tory-led coalition excuses to use on one of their flagship green policies:

‘We wanted to do it but Brussels won’t let us.’

Such excuses will not wash when Mr Osborne fails to announce the policy in his budget.

Neither the per-plane tax nor the reasoning of being constrained by EU law are very new. As set out quite clearly in this parliamentary briefing from June 2010, Alistair Darling had already proposed the policy, explored it and concluded that it wouldn’t be possible.

In January 2010 during a house of commons debate, former Exchequer Secretary Sarah McCarthy-Fry explained:

“We have not yet found a solution within the constraints of the law. The area is not straightforward; it is a very complex area of European and international law.”

For this reason, Darling and his team made it clear that bringing aviation into the EU ETS would be a more effective and efficient way of actually reducing emissions from aviation. This episode has a number of political morals but the main one is that one shouldn’t hold out too much hope of progress from the coalition on green issues; what we should expect are more broken promises.

Aviation is consistently proving to be one of the trickiest policy areas with little room for manoeuvre amongst business and environmental concerns, let alone the attitudes of a public who enjoy flying and are quite keen to carry on. With Boris Johnson clearly intent on figuring out where he can build his new airport, the title of “greenest government ever” will only appear more ridiculous as time goes on.

The Daily Mail this morning published the surprising news that “Labour’s 50p tax rate ‘could cost the country £350bn’, Osborne warned“. The number, if it were true, would be eye watering. Readers can decide for themselves whether it’s worth more than the fag packet on which it was calculated.

The source of the story is the Adam Smith Institute who have put together a short report titled ‘The Revenue and Growth Effects of Britain’s High Personal Taxes‘. The report concludes:

“At a minimum, the policy risks flat growth for a decade, and a possible recession at the end of the period. The net effect upon government finances, adverse from the outset, gets worse from year to year and ends up with net losses of some £350bn after ten years. In the worst-­‐case scenario, approximately £640bn of revenue would be forgone.”

The Mail made no mention of the fact that the £350bn would be spread over 10 years but, even so, £35bn is a huge number. The Adam Smith Institute get this number and their claim about “flat growth” from projections over how many individuals will leave Britain as a result of the tax regime. As the table below shows, the survey of “tax advisers” found that at a minimum, 25% of personal taxpayers and 15% of corporate taxpayers are considering leaving the UK.

From their survey of “several dozen” tax advisers (I’m told by author, Miles Saltiel) and assumptions about migration and recruitment, which are not disclosed in the report, the authors extrapolate that at least 17% and up to 31% of higher rate taxpayers working in London’s financial services sector will leave the country. In other words up to a third of all those working in the City and earning above £150,00 will have left the UK by 2016.

Saltiel told me that his calculations were “a lot better than a wet finger in the air” and that although he was “pretty comfortable” with the conclusions, there were not enough survey respondants “to do a statistical thing”. Statistical things aside, readers will no doubt remember similar claims by Paul Daniels and Frank Bruno after the 1997 election.

New research from Oxford University details how the G7, and Britain in particular, have been engaged in a 30-year race to the bottom on corporation tax with large companies getting away with paying less than small. The findings come as George Osborne plans to cut Britain’s corporation tax by a further four percentage points from 28% to 24%.

“Very large companies pay lower rates of corporation tax than smaller businesses, according to research by Oxford University that will fuel debate about whether big business pays enough tax.

The research from the Oxford University Centre for Business Taxation outlines that:

“In only in two industries – textiles and wood, paper and publishing – do larger companies have a higher [Effective Tax Rate] than all other companies. In all other sectors, larger companies have a lower average ETR. The difference is most extreme for the agriculture and manufacturing of motor vehicles sectors – where the largest 100 companies have a negative average ETR, largely due to large negative tax in a few companies. The mining sector still stands out with the largest tax payments for both the largest and the smaller companies.”

The report also finds that:

• The UK has the lowest corporation tax rate in the G7.

• For over 25 years the UK’s corporation tax rate has been well below the G7 average.

• UK corporation tax revenues have been more volatile than corporation tax revenues of G7 countries as well as UK GDP and personal income tax revenues.

• Revenue in the G7 from corporation tax has stayed roughly at 3% of GDP while it has gradually fallen from a peak of 4.5% in the mid-1980s.

• The UK has tended to recover more revenue from corporation tax than other G7 countries but in recent years this has been due to tax reforms which encouraged small companies to pay personal income as corporation profit rather than as salaries.

A startling graph from the report – reproduced in today’s Financial Times and above – outlines the race to the bottom in detail. The fall has occured while VAT has risen over a similar period from 10% to 20%. The Oxford University report outlines that:

“in the June 2010 Budget, the government announced gradual corporation tax rate cuts to 24 percent over the next four years, which might further fuel downward competition.”

The Staggers have published a great picture today from this week’s New Statesman cover article by Gavin Kelly of the Resolution Foundation. The image – which shows how individual tax and benefit changes due this year will impact a normal family – underlines the meagreness of the Lib Dem’s flagship policy to raise the income tax threshold.

As well as misleading the British public on Britain’s debt position, Nick Clegg was at pains on the Today programme this morning to talk up the Lib Dems’ policy of raising the tax free threshold by £1,000 to £7,475 in the June Budget. Meanwhile, Simon Hughes used a column in this week’s New Statesman to make a similar point.

The problem for Clegg and Hughes, as Gavin Kelly points out, is that the policy is not even enough:

“to offset the rise in VAT, let alone the far larger tax credit cuts.”

Channel 4 News’ Economics Editor, Faisal Islam, concurs. In a tweet this morning he wrote:

“it seems a bit odd for Clegg to boast about the £200 income tax cut when it is paid for by raising VAT to 20%”

The total tax cut is worth up to £170 for basic rate taxpayers but the VAT rise will, according to the Lib Dems’ famous poster, cost the average family £389 per year – more than double. The policy is also – as Left Foot Forward has previously shown – an expensive and regressive way to target help at the lowest paid.

The right-wing press are surprisingly alone today in reporting remarks yesterday by George Osborne to The Spectator. The Chancellor said:

“The VAT rise is not temporary. It can’t be. We are talking about a totally different scale of revenue and the VAT rise is a structural change to the tax system to deal with a structural deficit.”

Left Foot Forward sets out some facts about the tax rise.

1. The VAT rise is avoidable

According to the Budget red book, The increase in VAT from 17.5 per cent to 20 per cent raises £13.5 billion by 2014-15. But cuts to income tax, national insurance, corporation tax, and council tax cost £12.4bn. Net of Tory tax cuts, the VAT rise brings in just £1.1bn. New OBR boss, Robert Chote, said in May:

“When Mr Osborne said that “the years of debt and spending” made the £13 billion increase in VAT unavoidable you might just as well say it was his desire to cut other taxes that made it so”

2. VAT is a regressive tax

Using data from the ONS, the Fabian Society’s Tim Horton has said, “The richest 10% pay one in every 25 pounds of their income in VAT; the poorest 10% pay one in every seven pounds as VAT”. There is a debate about whether VAT remains regressive when measured against households’ spending rather than income. But on Tax Research UK, Richard Murphy has explained why this is only true if the poor have savings, access to borrowing, and the same consumption patterns as the rich. As The Guardian‘s Aditya Chakrabortty has concluded, “since VAT takes no account of one’s ability to pay, it cannot be called progressive.” Even the TaxPayers’ Alliance accept that “VAT hits the poor twice as hard as the rich“.

3. VAT hits the north harder than the south

Research published last week by the marketing firm, Acxiom, shows that there is a north-south divide in the impact of the VAT rise. The study showed that London and the South East were more resilient to the tax rise than other regions. Among the ten places least affected by the VAT rise were the Tory heartlands of West Berkshire, Buckinghamshire, Surrey, Hertfordshire, Wokingham, Windsor and Maidenhead, and Oxfordshire where David Cameron’s Witney seat is situated. Meanwhile Hull, Blaenau Gwent, Stoke-on-Trent, Leicester, Middlesbrough, Orkney, Eilean Siar, Ceredigion, Merthyr Tydfil, and Gwynedd will be worst affected.

4. The increase is the fourth rise in VAT by a Tory government

As Duncan Weldon has shown:

“When VAT was introduced, by a Conservative government in 1973, it was set at 10 per cent. Geoffrey Howe, despite promising not to “double VAT” in the 1979 election campaign, raised it to 15 per cent. It was then increased to 17.5 per cent by Norman Lamont.

“In the 37 years since its introduction, VAT has risen from 10 per cent to 20 per cent. Meanwhile the basic rate of income tax has fallen from 30 per cent to 20 per cent.”

5. The VAT rise is a broken promise

On April 1st, David Cameron told Sky News, “our plans don’t involve an increase in VAT” while after the election in mid-May, the new Prime Minister told Andrew Marr that a VAT rise was “not something we plan to do“. Next Left saw it coming and raised the spectre of the “Geoffrey Howe dodge” in April in honour of a previous Tory broken promise on VAT.

As with tuition fees, the Liberal Democrats campaigned heavily on the issue of VAT publishing posters declaring “Tory VAT bombshell: You’d pay £389 more a year in VAT under the Conservatives“. An example, perhaps, of sticking a bit too closely to their pledge of “no more broken promises“.