On 28 October, John Healey will deliver the Burnham government’s first Budget. Advance briefing has promised a “steady-as-she-goes” approach that defers key fiscal choices. This, we believe, would be a missed opportunity for a new administration that has vowed to learn from Labour’s past mistakes.
Below, Arguably contributors and policy experts outline 10 measures the Chancellor could take to boost economic growth, living standards and fiscal stability.
Remove the tax cliff edges that penalise work
One of the basic principles of a just taxation system is to incentivise work. Britain, however, has contrived to develop a model unusually good at doing the reverse – at both ends of the income spectrum.
The Carer’s Allowance (worth £4,495 a year), paid to those who spend at least 35 hours a week caring for someone with a disability, is withdrawn entirely if they earn more than £10,192, meaning that a carer able to obtain extra hours, a pay rise or a promotion can be left thousands of pounds worse off.
Meanwhile, someone who earns over £100,000 not only has the personal allowance of £12,570 tapered away, creating an effective 62p marginal rate, but also loses their entitlement to 30 hours of free childcare and to tax-free childcare (worth up to £2,000 per child). The distortions that result are, as the IFS has put it, “among the most severe you will ever see within a tax and benefit system” or, more bluntly, “absolutely insane”.