The headlines from the Tory friendly papers, after their conference, would have us all believe that their tax cutting proposals will help the lowest paid and the squeezed middle but let’s face it, as ever they will benefit the rich most. This works in two ways: they will save more in tax and the direct costs of replacing public services with private provision are much more affordable for them. For the rest of us public delivery of services is much more affordable and efficient.
The New Economics Foundation published a great analysis of why the Tories' plans benefit the rich: Those earning £10,500 or less will gain nothing from these changes. These workers (17% of the workforce) alreay pay no income tax. "Moving the top rate threshold is more obviously regressive. Anyone earning over £41,900 a year is already in approximately the top 15% of the population. At £50,000 a year or above, they will be in the top tenth of society. The median (middle) income in the UK is £27,000 a year."
Because of this, changing the higher rate threshold overwhelmingly benefits the wealthiest section of society. The top 5% will gain well over £2,000 a year from the changes, while the effect across the rest of society will be minimal – people simply do not earn enough." Analysis by the IFS earlier this year suggests that 69% of the money given away would go to workers in the top half of the income distribution. Just 15% would go to workers in the bottom half.
It’s worse than that though: the majority of us who use public services will suffer as they are cut as a result of these giveaways to the rich. Charges will (and are) go up for services delivered by the public sector costing us more or leaving some to do without. Other services will be cut leaving us to do without or buy from the private sector.
John Weeks, Professor Emeritus at SOAS, University of London, writing in the Conversation this week shows How Cameron’s tax giveaway will end up costing you more. Private delivery of health education and pensions for example is much more efficient than in the private sector. Look at the US health systems it costs a fortune but the US has higher infant mortality than all but two EU countries (Bulgaria and Romania) and life expectancy almost three years lower than the UK. Getting your bins emptied by a private bin contactor would cost more than your council tax.
Tax giveaways make seem attractive but they cost you in the end.