WOULD THIS WORK?
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.