Polly Toynbee (This pleb jibe exposes the Tories’ Flashman thinking, 25 September) repeats the Institute for Fiscal Studies’ assertion that the bottom third earn too little to pay tax. Actually, so far as households go – and, despite upper middle class feminism’s gift to the well off of separate tax assessments for couples, it is households which matter in relation to income distribution – the bottom third pay a rather higher percentage of their income in tax than the top third. The main culprit is indirect taxation, and particularly VAT.
The IFS argues that since the cash benefits and tax credits of the bottom 30% of households actually amount to more than the taxes they pay, the very high proportion of their income that goes in taxes is not an issue. Why? Income is income, and whatever its source it is taxed. Many benefits are based on contributions, despite the best efforts of welfare “reform” to destroy the insurance principle for unemployment and sickness/incapacity, if not yet for pensions, so people often have paid for what they get, or at least pooled risks to receive it. Other benefits, particularly means-tested supplements to low wages, subsidise employers, including many notorious tax dodgers.
And don’t buy the IFS line about low incomes being temporary. Low-income recipients do not move far in the income distribution. If you read the IFS assertions on the impact of tax on poor households, you would think that they all contained film directors taking a break between engagements. The poor pay tax, lots of tax, and lots in relation to their poverty. We need to remember this.
Professor David Byrne
•?Polly Toynbee quotes David Laws as saying “As a liberal, I feel uncomfortable at the idea of the state taking half or more of anyone’s income.” Mr Laws, a former investment banker and briefly chief secretary to the Treasury, with a double first in economics at Cambridge, must know that the 50% marginal tax rate applies only to income exceeding £150,000 a year (after deduction of allowances), not to total income. Such a misleading defence of the coalition’s decision to reduce the rate to 45% to help the rich, while sharply increasing VAT which even the poorest pay, may be thought much more objectionable than calling a cop a pleb.
•?Good to hear that Vince Cable contemplates the idea of a state bank (Cable reveals £1bn backing for bank to fund small firms, 24 September). But why not a fully fledged state bank dealing directly with the public, able to direct the direction and levels of investment in the public interest, using the services of local post offices and providing general banking services without the need for enormous salaries and bonuses? Banking can be pursued ethically, with social service as its prime objective and not with the sole purpose of maximising profits. Witness the Co-operative Bank.
•?Good Lord! Two liberals mention the multiplier and one even refers to Keynes (Search for growth could see capital spending boost, 25 September). Now all we need is for them to somehow have an influence on government…
Denby Dale, West Yorkshire
•?Britain needs productive industries which can compete effectively in global markets; but there is something pathetic as well as unsavoury about the latest sally from Britain’s business lobby (CBI wants third of public spending thrown open, 24 September). Unable to sell products in global markets, the CBI insists increasingly scarce public funds – our money – should fill the gap. As a rationale they offer “savings”, though in fact experience suggests the price of such savings is lost jobs and more poverty for many, fatter profits for a few, and unprecedented inequality.
The option should also, they say, be open to “social enterprises and charities”. But charities and voluntary organisations will at best be junior partners to corporate capital, “bid candy” camouflaging private profit. One can understand why the CBI’s members would want access to soft domestic markets; but is destroying the public service, and a large element of the British voluntary and charitable sector, a price worth paying for further featherbedding of private industry’s incompetence?
Professor John Holford
University of Nottingham
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