The Lib Dems met at their conference under the banner of ‘fairer tax in tough times’ and the theme is nothing new given that it was one of the four pillars of their infamous 2010 manifesto. The central part of their programme is a commitment to taking the lowest paid out of tax by raising the income tax threshold to £10,000 by 2014. It is something the junior coalition partners are continuing to campaign hard on at a local level and it’s a policy they believe is widely popular and also crucial to any prospects of electoral success in the future.
Aside from debates around how progressive raising the threshold is as a standalone policy, one thing is certain – any analysis of the figures shows that the coalition Government are in fact increasing taxes for many of the lowest paid. Their claims to be putting money back into the pockets of the lowest paid are nothing more than a sham, particularly in places like Haringey.
For a start, 36,000 of the lowest paid families in our borough are facing a £220 increase in their yearly bills from next year as a result of the Government’s cuts to council tax benefit. The Government claim it is cutting council tax support by 10%, but with increasing demand and the requirement to protect pensioners, remaining claimants are facing an actual cut of around 20%. Eric Pickles is forcing his version of the poll tax on local communities as part of the Tories’ new brand of welfare localisation, bringing back the principle that everyone should pay local taxation, irrespective of their income.
The Lib Dems claim that raising the income tax threshold will save households £220 a year by 2014; this is the same amount as thousands of families will be losing in their council tax support, between 4 – £5 a week. Of course, some of these households will have also lost support from working tax credits this year. 1880 couples with children in Haringey have now lost around £3,500 a year as a result of the tax credit changes.
Both the cuts to working tax credits and council tax benefit run counter to the Government’s claims to be ‘making work pay’ and take away financial support to many of those trying to get back into the jobs market through part time work. They’re also on top of the VAT bombshell last year that affected all households, but has hit the lowest income families disproportionately hard and hurt the economic recovery.
April 2013 will be a significant date – As thousands of low paid households face an increase in their tax bill as a result of the council tax benefit changes, those earning the most will start benefiting as the 50p top rate is cut down to 45p. In places like Haringey, that isn’t the end of the story as the introduction of the overall benefits cap will see an increase in families arriving at customer service centres seeking help as it becomes increasingly difficult for them to meet their rent payments.
It will be after April 2013 that the consequences of yet another Liberal Democrat broken promise will be felt and yet again it will be those with the least who are hit hardest. There will undoubtedly be more press releases from Liberal Democrat MPs like Lynne Featherstone trying to claim success in taking the lowest paid out of tax. In reality, the more their Government implements its failing austerity plan, the more of the tax burden is being placed directly on the shoulders of the lowest paid households.
As with their key manifesto commitments to create jobs, investment in the future of renewable industries and support continued funding for local services, the Lib Dem commitment to fair taxes is nothing more than a sham. As Labour activists, it is now our duty to go out and expose the Lib Dem’s tax policy for what it really is.