Bring back 10p tax rate

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by Mark Irvine

Today’s budget represents another missed opportunity to do something radical to help the lower paid.

Now perhaps this is not too surprising since the last Labour government, despite lots of fine words, did precious little to get to grips with low pay during its 13 years in office either.

When Labour came to power in 1997, women workers were stuck firmly at the bottom of the pay ladder and the same was true 13 years later when Labour ran out of steam and lost the 2010 general election.

 

During that long period in government lots of public sector employers, including many Labour controlled councils, paid lip service to equal pay and the provisions of the Equal Pay Act 1970.

In 1997 a female cook in a busy school kitchen was paid the equivalent of £3.00 per hour less than a male refuse worker.  Ten years on in 2007 the pay gap remained and still exists today, in many areas, affecting other typically female dominated jobs such as carers and classroom assistants.

Despite its moral compass people lost confidence in Labour and one big reason was Gordon Brown’s momentous decision to axe the 10p tax rate which targeted help on many thousands of low paid, often part-time workers, the vast majority of whom are women.

The headline measures in today’s budget were much as expected: cuts in fuel costs, support for first-time home buyers and an increase in personal tax allowances which will rise by £1,000 this year and again to £8,105 in April 2012.

Now the increase in personal tax allowances will benefit everyone earning up to £115,000 a year, whereas the 10p tax rate was a measure specifically designed to boost the pay of the lowest paid workers.

So while the introduction of higher tax allowances will help offset the ever rising cost of living for everyone in work, some will do much better than others.

Because according to the Financial Services Authority (FSA) there has been a £20 billion windfall to mortgage payers over the past few years because of our artificially low interest rates.

And the bigger the mortgage the bigger the killing people will have made.  Not through any risk taking or hard work, but simply because interest levels dropped like a stone after the banking collapse.

Low paid workers have benefited least from this turn of events because people in low paid jobs often can’t afford a mortgage; yet those enjoying above average earnings will have benefited most.

Whichever way you slice the cake, the lower paid groups have lost out big time compared to what some people like to describe as the ‘squeezed middle’.

So I say bring back the 10p tax rate on all earnings up to, say, £17,000 – which would give a big boost to the lower paid to the tune of around £1,000 a year.

Low paid workers will spend the extra cash which can be paid for by redistributing some of the £20 billion windfall that has fallen into the laps of mortgage payers – by sheer good luck and nothing else.

 

Mark Irvine regularly blogs here.

Bring Back 10p Tax Rate

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