Fraser Nelson And Osborne Agree Low Paid Should Not Be Taxed

Fraser writesI would prefer for Osborne to set his own definition of fairness: i.e. that people who work hard for low salaries are charged no tax.

The reason this is not being talked about is because the level of the minimum wage is too high to permit such a sensible idea.  It would need to be lowered from the current GBP 6 an hour to about GBP 3.50 for a no tax zone of low pay to be created.

The suggestion of lowering the minimum wage at all brings out blood-curdling socialist screams of agony, let alone lowering it all the way to GBP 3.50 an hour.  Yet in a double dip recession, such a move will become inevitable.

Comments on the BBC say that in the CSR, government spending is being returned to the levels of 2006, which doesn’t sound all that bad.  Yet these moves are being made on the assumption of rising government revenues.  What if Osborne’s and everybody’s assumptions prove to be optimistic, and the double dip recession kicks in hard in 2011?  The government might only receive the revenues it received in1996, and not the equivalent of 2006.  Osborne could be faced with a far worse canvas than he is planning on right now.

The problem is to estimate the extent to which the fast growth in the economy from 2001-2008 was based on excess credit expansion, which is now being reined back.  If the falling level of credit in the economy has its likely knock-on effects on growth, a double dip could well be on the cards.

More extreme measures would become necessary, and one of those would have to be the resetting of the minimum wage.

By the time attention is given to the minimum wage, it would make sense to reset it to the level at which income tax and national insurance are not payable.  There are already six million people idle at home.  A double dip might send this figure soaring.  Extreme measures will be necessary to price people back into work.

This from a Politicalbetting thread –

  1. 453. Still not on the agenda is the minimum wage which is set at $9.50 in Britain, yet is $7 in the US including $2 an hour for tipped labour (some regions have variations). If Europe wants to compete, the minimum wage needs resetting to allow jobs to be created a lower rates. The rate of $9.50 might make sense inside the M25. What about in depressed northern cities and less successful places?
    If someone earns GBP 3.50 an hour over 40 hours and income tax and national insurance were taken out of the equation at this level, it would provide take home of GBP 140. That would make a sensible minimum, which would create a market for millions of jobs to help get the 6 million idle at home back out and working.

         by Tapestry October 21st, 2010 at 01:40

  2. 464. Thankyou, Tapestry, for reminding me that there is – incredibly – a way that yesterday could have been even worse for the poor.

         by James Kelly October 21st, 2010 at 01:44

  3. “the bonfire of civilisation as we know it”
    Osborne actions today will simply returned public spending to the historic trend, to a level of spending similar to that which was present in 2006. I don’t remember 2006 being the end of civilisation.
    We can argue about the speed, the size, etc, the individual things being cut, but giving it the end of the world stuff doesn’t do you any favours.

         by Oracle October 21st, 2010 at 01:46

  4. 463 – The bonfire of civilisation?
    Come off it!

         by Lucian Fletcher October 21st, 2010 at 01:49

  5. 462.
    “If I was to post here that after 13 years in power Labour could legitimately point to things wrong in the country. . . .”
    Perhaps it is the (official) Tories’ fault that Labour’s attempts to enlarge/deepen the gap between rich and poor over 13 years were not even more successful? :-(

         by wage slave October 21st, 2010 at 01:52

  6. 466. Oracle, would you apply the same logic to growth? After all, the meaning of the word ‘recession’ is simply a shrinking economy. When we were in recession, would a statement from Gordon Brown to the effect that “ah well, returning the economy to the size it was in 2006 can’t be so bad” have been greeted by you with a) approval or b) hilarity and utter disbelief?
    I’d suggest your own line of argument isn’t doing you a lot of favours.

         by James Kelly October 21st, 2010 at 01:53

  7. BBC had it funding cut?
    Lesson = cut it more next time.

         by SallyC October 21st, 2010 at 01:53

  8. SallyC

         by Seant October 21st, 2010 at 01:59

  9. 463 – Clegg said it last month at the LD party conference. He said that the damage done in the 1980s would not be repeated.

         by Southam Observer October 21st, 2010 at 02:04

  10. 464.It is no help to the poor having a government we cannot afford, just as it is no help to the poor legislating that they must be paid more, when the only result is higher unemployment.
    With tax and NI removed from salaries below GBP 7000 a year, the minimum wage could be set at a level which gets people back to work, instead of being held up at current ludicrous levels which ensures millions are sitting at home.
    The word ”minimum” is not being thought about. My first job earned me GBP 4.50 a week for six days a week on a farm in the 1960s. My second job earned GBP 9 a week. Within four years after that I was earning GBP 30 a week. I would not have had my first two jobs under today’s crazy laws, and would have been kept idle at home.

         by Tapestry October 21st, 2010 at 02:25

  11. 473. “when the only result is higher unemployment”
    Higher unemployment is a laudable concern, in which case I’d suggest your first port of call should be Mr Osborne, to talk him out of adding a million to the ranks of the unemployed at a stroke. That’s quite a day’s work.
    “I would not have had my first two jobs under today’s crazy laws, and would have been kept idle at home.”
    Has it ever occurred to you that it’s at least equally as likely that you’d simply have been in a higher-paid job in the first place?

         by James Kelly October 21st, 2010 at 02:35

  12. 474. The idea that farms could pay anything at all above agricultural wages in the 1950s and 1960s is ludicrous. They were set at the level that farmers were assumed to be able to afford. In those days sometimes people worked for goods alone. One farmer who didn’t observe the pay scales, paid me with two bottles of cider which were promptly stolen by another worker who was an alcoholic who watched where I put them in a hedge! Another time we were given potatoes. One farmer gave me ten shillings for a day’s work in cash. GBP 4.50 seemed quite a good pay at the time. There were few profits to pay from. Yet I loved the work, and proudly handed the GBP 4.50 to my mother each week for my keep. People have forgotten what hard times are like. They might soon be reminded if deflation kicks in hard in a double dip.

         by Tapestry October 21st, 2010 at 02:52

    1. 475. “People have forgotten what hard times are like. They might soon be reminded if deflation kicks in hard in a double dip.”
      Well, quite. Another message that needs to be driven home to Osborne as a matter of urgency – not that he will ever really know what hard times are like, whatever happens.
      I’m not in a position to prove you wrong about farm wages half a century ago (I presume you’d also assure me that finding any work other than farm work was utterly inconceivable) but even if you’re right there’s not an awful lot of read-through to the present-day. And just how much would you still have been beaming with pride at your poverty pay if you hadn’t happened to be in the first flush of youth?

           by James Kelly October 21st, 2010 at 03:48

    2. 477. The point in the end is about government revenues. They are projecting spending at GBP 700 billion a year, while currently they are receiving about GBP 450 billion. They are assuming that revenue levels will recover back to the GBP 600 billion level where they were in April of 2008, from where they have fallen in 2009 to under GBP 500 billion, and in 2010, but the exact figures have been heavily clouded over.
      But what if there is a double dip, and government revenues fall to below GBP 400 billion, and spending also surges to above GBP 700 billion sent skywards by unemployment and social claims? The projected GBP 100 billion gap could instead be GBP 300 billion.
      In those circumstances the government must do all it can to get people back to work. One part of the strategy will have to be a near halving of the minimum wage. I am proposing that that be accompanied by a lifting of tax and National Insurance so that this level of pay is untaxed entirely. When I earned GBP 4.50 a week, I can remember feeling aggrieved that I was paying tax on the small amount I earned. The dynamics of low pay and work, which could become highly significant to the country’s economic survival, like it or not, will be all the greater if the tax part is removed, as both Fraser Nelson and George Osborne are advocating.

           by Tapestry October 21st, 2010 at 04:09

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