Friday, 9 April 2010

A Question from Chris


All Parties bang on about Government “efficiency savings” but mainly skirt round the biggest inefficiency of all – paying benefits to people who don’t need them. A typical example is the winter fuel allowance – it’s not enough for the needy, and yet is completely un-necessary help for many. Why not, instead, actually INCREASE the standard £250 allowance to £416 – and then double-tax it. In round pounds,

•A non-taxpayer would get a substantial lift from £250 to £416
•a 20% taxpayer would still get £250 (£416 less 40% tax),
•a 40% taxpayer would get £83 ( £416 less 80% tax)
•a 50% taxpayer would get nothing (£416 less 100% tax)

Where this double-taxing of the fuel allowance actually pushed someone into tax, or into the next tax-band, there would be some in-between figures that apply. What’s really important, though, is that unlike other clawbacks and means-tests, the extra marginal tax on a £ of any other income will still only be at their normal highest rate of tax payable, not at some punitive claw-back rate. If the principle were shown to work and be politically acceptable, a similar scheme could then be devised for an increased but double-taxed Child Benefit that could then replace the Tax Credit mess, plus all the current child-related add-ons to other benefits. In this way the government would be targeting help where it is needed most, without elaborate means-tests and over-lapping benefits.

1 comment:

  1. Hi Chris,

    I have forwarded this to our policy team in the Welsh Assembley and asked them to look at this seriously. Looking at this proposal it seems to suggest fairness which is in line with Liberal Policy.

    I will contact you as soon as I've had information back from the team.