Category: High tax, low pay

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High tax, low pay

New thinking about low pay

The way we tax the low paid and them give them back complex, means-tested benefits really does my head in. Those people in society who typically are least capable or inclined to deal with “the System” are forced to deal with it twice. Once to take money off them in tax. Twice to give them back their own cash in tax credits. This set up may suit Gordon Brown and the thousands of civil servants who have to maintain this system but it is hugely costly and just a waste of life. Low paid people waste their lives paying tax and reclaiming it and civil servants have miserable jobs doing all the admin.

Two stories tonight approach the same problem from different ends. The LibDems saying that the tax threshold should be £10,000 (see LibDem story) and David Cameron saying that the Tories should be about giving people time back as well as cash in tax cuts (see Cameron story).

Right now if you do a 37.5 hour week on the minimum wage of £5.05 per hour you will earn £9,847.50 or £10,000 pretty much. Linking the minimum wage with the tax threshold would ensue that the low paid were not mired in the tax and benefits system and would also have the benefit of keeping Government honest with the minimum wage.

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Ealing and Northfield High tax, low pay

Ealing tops agency staff league

Last week the Evening Standard reprinted some figures from the GMB union that showed how much London councils were spending on agency staff.

Ealing was listed at the top of the table spending £44.3 million. The GMB made Freedom of Information requests to obtain this information. I understand that Ealing managed to cock up their response and that the real figure is £28.6 million. This would still leave us as the 6th most prolific user of agency staff.

This was a weakness recognised by the previous Labour administration and is one that the current Conservative administration will seek to remedy. Agency staff do have a useful role to play though and the GMB is being plain silly in the way it presents this issue as “privatisation”. Does the GMB really think that if there is no social worker available then clients should be ignored until the Council gets around to hiring a new staff member. No, the Council should get a temp in.

I bumped into the Chief Executive of Lambeth council on Saturday coming home from an ALG event. He was new to his job having previously worked as a Chief Executive in the Midlands. We were chatting about the challenges of local government and his first point was “the thinness of the local labour market”. In other words you can’t get good people. I told him that in Ealing many of our services were dependent on new migrants. Many council jobs are not very sexy. Being a care worker, a social worker, a teacher, etc is hard grind. We need more local people to get back into the job market and the hard grind. Then we can reduce our dependence on agency staff and deliver better services. Some part of the solution is training and child care. A big part would be reducing the tax burden on the low paid, see article. Over to you Gordon.

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Ealing and Northfield High tax, low pay

Labour don’t take local elections seriously

Watching the Labour election broadcast just now it is clear that Labour does not take the local elections seriously. Rather than talking about the issues they used their whole 5 minute national TV slot to take the Mickey out of the Conservative leader. Not only do they not take the elections seriously they obviously don’t take voters seriously either.

Interestingly their chameleon character goes around stealing Labour policies. Notably the cartoon character grabs the “Minimum wage” with his sticky tongue. The Labour party is not quick to tell you that tax on a single person doing a standard working week on the minimum wage has gone up from 6% to 9% since it was introduced. See previous posting.

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High tax, low pay

Low paid tax rate goes from 6% to 9%

A couple of days before the budget the Low Pay Commission confirmed in a press release that the minimum wage would rise to £5.35 in October. This is good news for the low paid. On budget day the Chancellor again used fiscal drag to pull yet more people into paying higher tax. This does not exclude the low paid. That’s the bad news.

A person on the minimum wage working a 37.5 hour week was taxed at 6.02% when the minimum wage came into force on the 1st April 1999 and will be taxed at 8.91% in October of this year. Whilst the minimum wage has increased by 49% since it was introduced the personal allowance has only increased by 16% in the same time. The effect of this fiscal drag is to divert cash from the lowest paid to the state on a massive scale.

The Low Pay Commission have researched low pay in great detail but I have searched their first 6 annual reports and have failed to find any comment from the LPC on the way that the Chancellor is taking a higher and higher proportion of the minimum wage each year. He is happy to use fiscal drag to clobber the middle classes but in doing so he has also managed to move the tax rate for the lowest paid workers from 6% to 9%.

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High tax, low pay

Poor getting poorer under Labour

Catching up with the weekend press this morning I noticed a piece in The Business.

“The poorest households in Britain grew even poorer during Labour’s second term in office, according to a government survey. It shows the most deprived 10% of society faring worse than any other income group. The rising minimum wage, economic growth and overall prosperity bypassed the poorest 6m in Britain – whose average income was £91 a week in 2004-05 after housing costs. It had been £92 in 2000-01.”

All their figures come from the Department of Work and Pensions. You have to work really hard to understand what the DWP do with numbers. By looking at quintiles of the population (ie the bottom fifth, 2nd bottom fifth, middle fifth, etc) the DWP can come up with headlines like “New figures show good progress on poverty”. When The Business dug beneath the figures and looked at deciles the going backwards story emerges. The bottom decile are having a hard time whereas the 2nd bottom decile have done better thus hiding the misery of the bottom decile. The nuts and bolts are hidden in some stats called Households Below Average Income.

The bottom decile are on benefits and their income is typically linked to inflation rather than wages so they will always go backwards unless we can get them off benefits. The minimum wage is not helping incentivise them as much as it might because Gordon Brown taxes the poor so heavily. To know more information on various food benefits reaching to poor people living in other places such as Florida, click here ebt florida.

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Health, housing and adult social services High tax, low pay

The Lords of Health are doing OK

This morning the Telegraph reported that the highest-paid NHS chief executive was Sir Jonathan Michael, of Guy’s and St Thomas’s NHS Foundation Trust, whose salary rose by 11.5 per cent to £214,000.

Apparently a spokesman for Guy’s and St Thomas’s Trust said: “Sir Jonathan’s salary reflects the level of responsibility and expertise that his role demands”. I am not sure that his salary reflects his job security.

Across the board last year NHS Chief Execs got 10% and directors 7%. Currently Gordon Brown is trying to keep nurses rises down to 2%.