The government tries to tackle fuel and child poverty by creating tax poverty

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This government just doesn’t get poverty. Rather, it begets it.

The government thinks there is child poverty and fuel poverty. Today – and next week in Parliament – the pressing issue is tax poverty.

Poverty is a shortage of income for people to pay the necessities and have a decent lifestyle. There are three ways of tackling it.

The political parties all agree the best way is to create a climate in which the economy generates enough well paid jobs, so people can go to work to earn what it takes to afford to keep themselves and their dependents.

They agree that for some, it is necessary to take money from the many to give to the few who cannot find or hold a job.

The third way would be for the state to let people keep more of their money, instead of taking so much from them in tax. If those on lower incomes paid less income tax they could afford the fuel bills and could manage the food and housing bills without requiring a benefit top up.

The government is hoist on its own targets to cut so-called child poverty. It is a curiously misnamed set of targets. Practically all children are poor. We have legislated to make sure they remain so, as we believe we should prevent children under the age of 16 from working for pay to take them out of poverty. (Please note, I support the banning of child labour!) We also usually prevent children from inheriting or receiving larger sums from relatives with property and money to give them an independent savings income which they control as minors. This government wishes to take this approach further, by preventing 16-18 year olds from entering full time work for pay without an educational component, something I do not support. I want 16-18 year olds to have opportunities for more education if that is what they want, but I do not favour compulsion.

What the government means is it wishes to cut parent poverty. That’s a good thing to want to do. I also want to cut it, along with cutting poverty for childless couples and for single people. The government’s determination to tackle parent poverty has led it into the dangerous political quagmire of abolition of the 10p tax band, offering compensation to some parents through benefits and tax credits, whilst taxing single people and childless couples more. Transferring money from one group of low income earners to another is not what a lot of Labour MPs came into politics to achieve. It is certainly not what I am about. I want to tackle the low net incomes of all.

Today there is a summit on fuel poverty. Yes, the fuel bills are spiralling upwards. No, there is nothing in the short term the government can do about the ever higher oil, gas and coal prices. Yes, the fuel companies have to pass on most of the increased costs of fuel to them. Yes, that will make them unpopular and the objects of political diversionary attacks.

Yet if you buy fuel for your car or van, for your working vehicle or for the delivery vehicle to your home, more than two thirds of the rip off price is tax. The energy companies are great tax collectors, taking money from poor and rich alike for their product, only to hand over lots of it to the government. People could afford even today’s high bills if they kept more of their own income. The government’s removal of the 10p tax band undermines everything and more besides that it is trying to do to alleviate fuel poverty. There would be no fuel poverty for the many if taxes were cut.

I believe the best anti poverty programme you can have is cutting taxes. Under this government, far from playing Robin Hood and taxing the rich to pay the poor, as socialists would like, the government is playing Sheriff of Nottingham. It is taxing the poor to give to the new rich, the Chief Executives of the ever expanding state, to the well paid bureaucrats, to the legal advisers, the management consultants, the spin doctors, pollsters and focus group masters, to the computer contractors and the PFI/PPP providers who cluster attentively around Labour’s great public sector money making machine. Labour even wants to add the political parties to the list of those who deserve more tax cash from the poor to sustain their expensive habits. There are just not enough multimillionaire footballers and movie stars to take the money off, especially when they can leave the country at the very whiff of higher taxes on their fabulous incomes.

If the government were serious about tackling parental poverty and fuel poverty, if it understood that it needs to tackle single person and childless couple poverty as well as pensioner and parent poverty, it would curb its own insatiable appetite for cash for the grandees of the public sector. It would cancel or seek value from all those consultancy, research, financing and management contracts that festoon in the profligate public sector. Ministers would curb the Ministerial drinks cupboard and cut back on the air travel.

So come on Labour. Put in place a real anti poverty programme. Understand poverty is a shortage of spending power for anyone who is poor, whether they are young or old, single or married, with or without children. It is bad news for anyone suffering from it. The best and quickest way to get more people out of it is to lower taxes. That means reining in the excesses of the multilayer government and the quango state.

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21 Comments

  1. Letters From A Tory
    Posted April 23, 2008 at 9:49 am | Permalink

    Well said, Mr Redwood. Claiming to bring people out of poverty only to bury them back in it and introduce yet more rules and regulations to confuse matters even further is astonishing.
    http://lettersfromatory.wordpress.com

  2. Matthew Reynolds
    Posted April 23, 2008 at 9:56 am | Permalink

    As QUANGO’s cost an obscene £123 billion a year while doing precious little for public service delivery and households budgets are under- pressure might I suggest axing poverty causing tax credits while sharply raising the basic personal allowance , child beneit and winter fuel payments ? If phased in over four years you could spark an economic boom ( a la Eire via smaller government & lower taxes ) while taking many pensioners and children out of poverty . How is that for a credible , costed alternative policy designed to win over voters sick of Labour’s lies & failures ?

    By the way Happy St George’s Day to John Redwood & all the clever people who regularly respond to his brilliant & incisive web blogs !

    Any Guardian readers logging on may I just ask : ‘ I do not mind other peoples cultures & belief’s and by the same token I do not expect Christianity & patriotism to be censored either .’ In a democratic society based on equality and the rule of law it should be live & let live and no one seeking to abuse the law to impose their creed on others nor should the law be used to prevent expression of love of Britain or ones Christian faith . Censorship & the law should be used to combat terrorism & BNP thugs – not preventing the celebration of St George’s day .’ It is time that the PC jobsworths in certain loony left councils grew up and that we reclaim St George’s flag from the evil BNP whose vile ideology of hate flies in the faith of true Britishness .

  3. David Jensen
    Posted April 23, 2008 at 10:20 am | Permalink

    Dear Mr Redwood,

    There is a way of containing rapidly increasing comodity prices including oil, which are a direct result of investors world wide reacting to dollar weakness and the ever decreasing interest rate set by the Fedral Reserve. Vast sums of money are moving out of stocks and cash investment products such as the toxic waste colateralised debt obligations etc, priced in dollars and sterling and into commodities and with these sudden flows ramping prices associated with the very weak value of the dollar.

    The strength of the dollar, in which comodities are priced, is falling because of the recession in America but also and very importantly, the massive fall in US interest rates to 2.25, more than halved in a year.

    Now that all commodoties have seen a strong reaction, just like the housing and stock booms, the investment funds are piling in to find new monthly spikes which is set to continue until central banks take decisive and painful action that thier self centred political and private masters will not want.

    That is to raise interest rates around the world, not just the US and then the inflow into commodities will slow and the dollar will probably rise, allowing the cost of these comodities to fall in line with the dolar increase in value as investors shift their focus.

    Pain for householders morgages and business financing, values fall to realistic bases and with this pain for the developed world, undeveloped countries seeing food riots will find their staples more affordable and consuming less of thier meagre salaries. The developed world is refusing to take the pain or hangover, the poor old thrid world have actually had the party to go with their hangover.

    That is what the developed world governments can do, and should. What the developed world of hedge funds will/would dowith their market manipulation in derivatives, massive shorting of contracts and collaberation is anyones guess.

    David Jensen

  4. David Jensen
    Posted April 23, 2008 at 10:25 am | Permalink

    Dear website editor,

    second last paragraph last sentence should insert 'poor old third world have NOT actualy had the party

  5. Derek W. Buxton
    Posted April 23, 2008 at 11:38 am | Permalink

    Thank you sir for a reasoned article, they are few and far between these days. A rise in the starting point for paying taxes would be of great help, but stopping the subsidies to power companies for windmills would be another good idea. Why should the poorer have to subsidise this stupid idea, if it is so good private enterprise would already have done it. That it requires subsidy at all puts it out of contention.

    Unfortunately despite the excellent article, I fear it will have no effect, all three parties are wedded to the possibility of being able to tax us into the ground. That is all the "climate change" scam is about.

  6. niconoclast
    Posted April 23, 2008 at 12:46 pm | Permalink

    John,why do the conservatives never reveal their tax intentions -shouldn't we all know by know what rates they favour?It is simply not good enough to say we dare not reveal our plans too soon as Labour will copy them!What if they do?Good if they do. Isn't that what we want or is yours just a grab for power for power's sake?

    We are this close to an election and I haven't got a clue what your party actually stands for on practically anything.Corportion tax -what level should it be -blank out.Vat -blank out.Petrol tax -blank out.

    I know what the BNP stand for. I know what Ukip stand for.I don't know what the conservatives stand for.Yes I do: Absolutely anything.To quote you back: "shame on you".

    Reply: The Conservatives have set out a series of tax reduction proposals in their recent tax leaflet. This includes IHT, Stamp duty for first time buyers, Council Tax and others.

  7. Tony Makara
    Posted April 23, 2008 at 1:19 pm | Permalink

    "This government wishes to take this approach further, by preventing 16-18 year olds from entering full time work for pay without an educational component"

    A very flawed policy that will set young people back and leave them feeling frustrated. At the age of sixteen I was living in a flat, working full-time, and was able to study part-time. This gave me a great deal of independence and made me aware of my responsibilities. The continual attempt to cosset young people and extend their childhood does them no favours at all. In fact I should like to see part of the last school year spend in college or on training placements, this would introduce youngsters to college life and provide blue collar skills for those that are not academically inclined. However at sixteen the young adult should decide which course they want to take, be it work or further education.

  8. Stuart Fairney
    Posted April 23, 2008 at 1:31 pm | Permalink

    One of the fundamental reasons for parent poverty is people choosing to have children they cannot themselves support.

    This is one of the fundamental problems the UK faces, yet all I here from the government is more contraceptive education programs, because that's worked so well in the last decade.

    I am very, very tired for paying for (words deleted) mothers to build up a substantial random progeny at will, and in return for their reckless behaviour, it somehow falls to me to feed, clothe, educate, house, support and otherwise completely take care of the brood.

    Well, here's a practical suggestion, (so I can't see any parties implementing it). If you receive social security benefit you are basically saying "I cannot feed myself, please help" it therefore follows you cannot support kids and should not have them.

    Therefore, in return for benefits, you must submit to mandatory contraceptive injections. If you decline the contraceptive or otherwise want kids, fine, but no more benefits as you are making this choice.

    Reply: This is certainly not Conservative policy.

  9. Peter, Southampton
    Posted April 23, 2008 at 2:09 pm | Permalink

    John,
    As a Chartered Accountant I deal with lots of tax issues. It seems blindingly obvious to me and colleagues that , for example, by increasing PA's to £12K, merging NI with Income Tax and then introducing a top rate of 50% for income over £150K the income tax collection system would be simplified with reduced administration and be tax neutral (obviously after some extrapolation of the above guesstimates).
    Benefit systems could be reformed so that each person of working age is entitled to £12k income bt restrict benefit eligibility. The subsequent abolition of tax credits would get rid of the worst beaurocracy and plenty of civil servants.
    Finally, ANY GOVERNMENT MUST reform Civil Service Pensions. Those of us not working for direct and local government pay a significant part of our rates and taxes towards occupational pensions for these people.
    The question is ' would a conservative govenment have the political will do carry out these sort of reforms?'

  10. backofanenvelope
    Posted April 23, 2008 at 5:08 pm | Permalink

    The question is ‘ would a conservative govenment have the political will do carry out these sort of reforms?’

    No.

    Reply: The Conservatives are saying sensible things about contorlling spending, eliminating waste and needless spending, and leaving taxpayers with more of their own money.

  11. tim holden
    Posted April 23, 2008 at 7:22 pm | Permalink

    The last government that had a powerul majority created a vast and bloated bureacracy. How powerul a majority will be needed to dismantle that bureaucracy and remove the ludicrous burden created by its pension requirement? A significant portion of the financial difficulty suffered by the country would be resolved if this elephant-in-the-room-surrounded-by-nettles-barbedwire-and-searchlights was faced down.

  12. mikestallard
    Posted April 23, 2008 at 7:36 pm | Permalink

    I want to look at the big picture.
    Taxation, according to the Adam Smith Institute, is now the highest it has been for 22 years (since 1986). It is rapidly approaching 50% of people's pay.
    On the other hand, the government is paying out enormous sums of money to people whom it wants to buy into its clientele. I suppose you could say that it buys votes. Power for this government, therefore, depends on handing out money, and governments are all about power. Power, for some, is used to milk the system. Power, for others, perhaps like Mr Brown, means to "do good" to poor and disadvantaged people throughout the world.
    But politicians will not give up their power: they have to have it taken from them. Even Mrs Thatcher wept as she was driven away from No10.
    The government therefore needs as much money as possible but even it is beginning to realise that the source – taxation and borrowing from abroad – is now drying up. Hence the crisis over raising new taxes.
    I really think that you believe that this government is going to change. It is not going to change.
    The only hope for people like me is that there will soon be an election where they are routed. I am still going to vote Conservative – just.

  13. David Hannah
    Posted April 23, 2008 at 7:37 pm | Permalink

    What we are witnessing here is truly astonishing. Socialism has successfully transformed some 3 million people of working age into clients of the state, through various benefits and other alternatives to working for their incomes.

    Today, the next phase of this project is to build on that achievement, and to ensure that even the employed are also dependent on the State to attain a living wage. That's why the recent tax changes hit people on the lowest incomes hardest. We have yet to see the “compensation package” that the government will offer, but one can be fairly certain that it will involve additional handouts or tax credits; thus bringing formerly independent members of society into the sphere of the state benefits system.

    Why must those on low incomes plead to have some of their own money returned to them, instead of removing them from the burden of taxation completely? How can one justify the imposition of Income Tax on those earning the minimum wage? Quite simply; the government wants to have as many people beholden to the state for their income as is possible—ensuring that they have a vested interest in the continuation of Labour's statism. I'm sure you will agree that this is an unacceptable state of affairs, and a dangerous one for the future of the country. The question is, what are the Conservatives going to do about this intolerable situation?

    I've long been an admirer of the 'flat tax' proposal that aims to stop pilfering the incomes of the poor by setting a personal tax allowance at a reasonable level (circa £12K). Not only does this proposal take the poorest out of the taxation system, it brings the richest into it.

    Tax avoidance is an expensive endeavour in itself—worthwhile only when the alternative is the confiscation of 40% of their incomes (a sizeable amount of money in their case). A uniform 20% rate would surely be preferable to the constant hassle of offshore accounts, expensive accountants and elaborate trust schemes engineered to hide their incomes from the taxman. Why have the Conservatives dismissed this proposal?

    Reply: George Osborne spoke in favour of flat tax originally, and now is a strong advocate of lower and flatter taxes.You are right – we need to leave people more of their own money to spend instead of creating an expensive money go round between tax and benefits.

  14. Nick
    Posted April 23, 2008 at 9:36 pm | Permalink

    Where are the tax cuts going to come from?

    At the current rate of overspending, you need to cut 122 billion a year (10.2 x 12) from spending before you get anywhere near a tax cut.

    Nick

  15. John, wrexham
    Posted April 23, 2008 at 10:45 pm | Permalink

    dear john,

    i hope the next conservative government will reform the tax system to remove the new paternalism of gordon brown ie he taxes the poor and gets them to ask for it back by filling in lots of forms and then they are supposed to feel grateful.

    it is ridiculous that the minimum wage adds up to an income of around £11,500 a year, but the govt. start taxing people's income at £5,200 a year. i can't think of a greater disincentive to go out and work than a tax system that does that to people. surely the minimum wage is the minimum wage a worker can survive on. low earners shouldn't be paying 10% income tax they should be paying 0%, as is well known poorer people already pay plenty of tax on their expenditure, probably more than the rich as a percentage of their income.

    as for the public sector pensions, the worshippers of the private sector are living in a daily mail fantasy land if they think every town hall paper pusher is going to retire with a gold plated pension. i work in the public sector in a museum, and have just had my annual statement for my pension, it will be just under £3,000 a year. naturally the chief execs are doing fine, but they are a tiny minority. our local councillors can always limit the chief execs' pay bill if they want, so why don't they?

    meanwhile keep the blogs coming as it is usually thought provoking.

  16. Donitz
    Posted April 25, 2008 at 4:30 pm | Permalink

    Stuart F's view on the prevention of mass breeding by those who are inclined to the benefit culture, although alarming, made excellent reading.

    A very original proposal.

    I would also add to this proposal a total ban on the ownership of gigantic plasma screens, sovereign rings and chicken McNuggets.

  17. Pam Cadman
    Posted April 28, 2008 at 5:31 pm | Permalink

    Dear John
    I have never been so angry about the tax system as I am now! We are a married couple without children (not by choice) and after briefly studying the working tax credit benefit and family tax credit benefit, I cannot believe the difference in the entry criteria for claiming. Unless I am misinterpreting it, it seems as though a couple with children can still claim when on £66,000 approx. but a working childless couple cannot claim if they are earning more than £16,000 approx.
    We are not only penalised here but the same applies to council tax for which we have to pay the full amount even though the majority of the tax seems to be allocated to education – again favouring families.
    I have always admired your courage in speaking out when others court popularity by only saying what they think the majority electorate want to hear.

    Reply: I agree that the present system attacks single people and couples without children. The problem is too much wasteful spendign resulting in taxes that are too high.

  18. Bazman
    Posted April 28, 2008 at 8:21 pm | Permalink

    It's more, shall we say 'financially advantageous' to have five children and not work and always has been under any government for 'working' people. Any sane answers?

  19. tRISHA
    Posted May 5, 2008 at 4:34 pm | Permalink

    I am glad that he mentions single people, I think this labour government think we are all extinct except when it comes to paying taxes"

  20. UK Voter
    Posted September 3, 2008 at 8:17 pm | Permalink

    Unusually for me, I could not find anything I disagreed with in your article. Let us hope that even if this government can't listen, they can at least read.

  21. tRISHA
    Posted September 6, 2008 at 8:53 pm | Permalink

    I do hope that something comes out of this for single and childless couples. We seem to have to bear the brunt of everything. The government says that it taking care of hard working families. When I cared for my mother whilst I was working full time (I am single) and filling in for a mother who was always taking time off I did not get any pre or post carers leave like mothers and fathers do I just got on with and did not complain. But parents today just complain that they do not get enough, well it's about time the government put their footdown with them and told them they are not getting any more. Our poor soldiers in Afganistan and Iraq are getting killed – some say that it is because they do not have adequate equipment, I am not surprised, the governement cannot afford it as they are giving all the money to parents with children.

    Disgruntled

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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