Tuesday, 22 April 2008

Why Gordon axed the 10p tax rate

The current fuss and hot air generated by Gordon Brown’s axing of the 10p tax rate is truly amazing.

The New-Labour rebellion over it for one. These are the same planks that were making like performing seals with much clapping and ‘hear hear’s when their master and then leader in waiting, Gordon Brown, actually did the dirty deed in his last budget as chancellor.

What is also amazing is that most of the pundits and commentators only get half the picture. Gordon Brown may lack bottle to do stuff in the light of day, but he has considerable animal cunning and likes complex double and triple bluffs concealing much of what he does in the hope no one will ever notice, let alone call him on it.

A number of them have noted that the changes coincidentally leave those on low incomes with no children much worse off. They have all the pieces but seem to fail to fit all the pieces of the jigsaw together.

It also shows how few pundits read this blog ;-) as I pointed what follows out at the time.

So - let's set the picture and go over it again. Cue wobbly fade…

Before Gordo’s last budget there was much rending of clothes and gnashing of teeth over ‘Child Poverty’. New Labour had foolishly promised (though why breaking some promises should bother them more than others is not clear) to halve child poverty in Britain by 2010 - and there was no way they were going to meet that target.

Now New-labour were presumably too stupid to realise this is effectively impossible when they set this target. But because of the way the formula is calculated ‘Child Poverty’ is defined by a moving set of goalposts. If you were to somehow magically increase the household incomes of all families, every single one, who fall within the definition at midnight on Sunday - and then re run the figures the poverty line would have increased and you would still have children living in ‘poverty’. You can do the sums for yourself if you care to.

So what has this to do with the abolition of the 10p tax band? Well there is one way of getting a temporary boost to the child poverty figures. It is a matter of percentages. If you take from the really poor who it would take a lot of cash to lift out of actual poverty and give that to those who are not so badly off just below the ‘poverty’ line and only need a little to lift them out, then you can keep the goal posts more-or-less where they are and improve the figures no end. It works especially well if you mostly just take from those poor who have no children.

One suspects it is far from a coincidence that Gordon Brown, knowing he would be judged on New Labour's rash promises on ‘Child Poverty’ decided to do the one thing that could easily improve his figures and might be made to look like a tax cut. Rather like a magician drawing your attention to his right hand whist his left does the real trick.

So it looks suspiciously like just another, albeit particularly dodgy, case of New Labour manipulating figures to pretend to be accomplishing something.

If it is true then it shows the his truly cynical nature, the true depths to which he is willing to sink and puts the lie to any claims he may make to actually care about the poor.


Mark Wadsworth said...

That is probably true. Well done, I'll link to that, if it's OK. Here via GS.

Anonymous said...

Here via Mark, also linking. Fascinating take on it.

CFD Ed said...

Thanks guys.

Geoff Walsh said...

Visiting from Philip Thomas's page, interesting take on this one.

Did he really think about the impact? This is taking redistributionism to extremes and whilst logical is cruel.

Well spotted

RobW said...

Very interesting thoughts...

CFD Ed said...

Thanks Geoff. It is certainly not in the spirit of the concept of reducing child poverty, but that seems typical of this government, in so many aspects of what they try to measure and control.

They so often seem to make things worse, because they seem exclusively concerned with monitoring and meeting targets rather than actually making things better or even maintaining previous levels.

Geoff Walsh said...

Phil, I will link to this as well if I may.

Grendel said...

The thing that got me is that one of the 'compensatory measures' used to buy of the rebellion will be further adjustments to the minimum wage.

Another burden on business because these freaks can't do their sums properly.

CFD Ed said...

Grendel, It will be interesting to look at the impact of the whole complex of compensatory measures in the light of how they impact on the Child poverty figures.

Maybe they will look a little different in that light.

I have not done it, but my bet is that it will not disturb the overall apparent improvement in the figures.