Tuesday, October 06, 2009

Tory thinktank claims Osborne plans to increase unemployment, poverty and welfare dependency

A couple of weeks ago, former Tory leader Iain Duncan Smith and the think tank Centre for Social Justice published a 370 page report which was mostly about how high marginal tax rates for low paid workers cause poverty, unemployment and welfare dependency.

Today George Osborne announced that a Tory government would increase marginal tax rates for low paid workers.

*

(Osborne said that households earning over £50,000 will not receive child tax credits. This will mean that for each £ that a low paid worker earns, the goverment will reduce their tax credits at a greater rate than at present. This will increase the 'Participation Tax Rate' and according to the Centre for Social Justice's 'dynamic benefits model' will increase unemployment).

5 Comments:

At 2:59 pm , Anonymous tim f said...

Dan - sorry, I didn't understand your last paragraph. Can you explain it in more detail? Is the charge that the change has a knock-on effect on those households earning under 50k too?

 
At 3:05 pm , Blogger donpaskini said...

Yes, exactly.

If you cap the earnings at less than 50k, then you have to increase the rate at which the benefits are withdrawn.

So if at present people lose 20p in tax credits for every extra £ they earn, under the Tory plans they would lose something like 25p in tax credits for every extra £ they earn, a marginal tax rise of 5%.

Is that clearer?

 
At 3:09 pm , Anonymous tim f said...

How low a household income would this still have an impact on? Would it have an impact on people with a household income of, say, 30k?

 
At 3:10 pm , Blogger donpaskini said...

It affects everyone who receives tax credits when their income increases.

 
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