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Osborne’s tax Trojan horse

We all know the welfare budget has been one of the main targets of ‘Slasher’ Osborne’s cuts. However, this Budget saw a more insidious threat emerge to the welfare state that Labour, Beveridge and Bevan et al built on the foundations laid, ironically, by the Liberal, David Lloyd George. Under the guise of ‘simplyfying’ the tax system, he announced his long-term ambition to merge income tax and national insurance. This process, taking years and costing an absolute fortune, is the death knell of the contributory principle and in time it will be the thing that more than anything destroys the welfare state.

Don’t get me wrong, national insurance is a far from perfect system but the technical details here are as important as the overall idea and trajectory of government policy which is to undermine and ultimately end welfare provision by the state in its entirety. Even the technical details make for grim reading as this move further enshrines rampant inequality in the tax system:

Basic rate taxpayers will see their income tax jump from the current rate of 20% to 32%. Higher rate taxpayers would see their rate go from 40% to 42%, while the highest rate individuals would move from 50% to 52%.

That’s right. Those on lower incomes will face a tax hike of a full 10% more than those paying tax at higher rate. You can clearly see that the principal gain is not to employees or wage earners but to businesses which save on administration and will therefore see real-terms gains which will no doubt be promptly trousered rather than invested, just like with the lavish and reckless slashing of Corporation Tax.

When you factor in ballooning inflation, abolition of tax reliefs (again in the name of ‘simplification’), cuts to the provision of services aside from welfare, this amounts to an assault on low-earners on a staggering scale. Redistribution through the tax system is simply an illusion perpetuated by those who have no interest in advancing the actual cause. So it is that the much-vaunted raising of the tax threshold has elevated poor people out of tax, at the expense of services they rely on and increases to things like VAT, a move which has produced the only kind of inflation it ever could — price driven inflation with no compensation through a rise in wages. In real terms therefore this ‘progressive’ move, treasured by Liberal Democrats, always suckers for what sounds nice in theory, is deeply regressive in its overall impact.

Realistically, the only kind of redistribution that works is one that is centred on raising wages and restricting higher incomes. It’s true that this also raises inflation but at least it does so in a way which raises peoples ability to pay the increased prices they are being asked for. Inflation actually acts as a watchdog, a means of maintaining capitalist control over surplus-value (what they lose through wages, they rake back in through raising prices) and as such cannot be a concern of those who want true redistribution of  not just social wealth but also democratic power in our economy and our politics. Osborne’s tax Trojan horse will destroy the welfare state and  is just another means of this government continuing its war on society, especially the poor, to make us all pay for the crisis of a system which as it always does has become unblanced due to the greed of those at the very top.

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