As part of the national coalition agreement the Lib Dems manifesto pledge that the first £10,000 of income would be tax free was included – taking the poorest out of income tax – is starting to happen. This manifesto pledge was one of our 4 main promises.
From 1 April the start of the next tax year 1,560 Southwark residents will no longer pay income tax and another 78,200 will pay less income tax. A big start.
Once the promised £10,000 threshold is in place 6,850 Southwark residents will no longer pay income tax as all.
Combined with the government paying local councils to freeze council tax it should help the poorest in our society who work.
And from 4 January 2011 all those 1,560 Southwark residents were paying an extra 2.5% VAT on everything from clothes to processed food to haircuts. Added all up and those 1,560 residents will be worse off from 1 April and some of the wealthiest residents better off, its a standard tory government in a nut shell.
Hi Cat,
I’m flattered you keep looking in on my website. Thank you.
The poorest in our society who pay tax will from 1 April pay £200 less with another £600 less taxation per year to come in the next 2-3 years. That is good news for them and inequality in our society. As a proportion they spend much less on VAT and the VAT increase should have relatively little impact and be far out weighed already by the income tax reduction for them.
@James
“The poorest in our society who pay tax will from 1 April pay £200 less with another £600 less taxation per year to come in the next 2-3 years.”
The poorest in our society didn’t pay income tax to begin with so they aren’t getting anything out of the tax cut. All those Southwark residents on dole, income support, etc got bugger all. But they still have to pay VAT.
“That is good news for them and inequality in our society.”
No it isn’t, the poorest got bugger all. If you implement the full £10k personal allowance of the £18bn tax cut only £1bn goes to people earning less than £10k. And it doesn’t affect income inequality in the slightest.
“As a proportion they spend much less on VAT”
No they don’t.
“and the VAT increase should have relatively little impact and be far out weighed already by the income tax reduction for them.”
No it won’t, the poorest didn’t receive any income tax reduction. And you have no idea whether VAT will relatively little impact or not, if somebody in income decile 1 saves up to buy a car then the assumptions made about their spending habits are totally ruined.
The truth is that increasing the income threshold is regressive. And that increasing VAT is regressive.
Hi cat,
You’re right in that I should have said the poorest in our society who pay taxes.
The very poorest who rely on benefits will potentially see prices rise due to the VAT increase. Equally this impact on Consumer Price Index will be reflected in benefit increases they receive which are linked to CPI. Most people employed are not seeing wages increase to compensate inflationary increases – public sector wage freeze etc.
I’m afraid we’ll have to disagree about whether changes to income tax or VAT are regressive or progressive. The good thing about VAT is its generally a tax on things so good for the environment. Income tax is a tax on employing people and bad for the environment.