Letters | 3 January 2009

Labour’s carrot and stick

Sir: The Spectator is right (Leading article, 13 December) to call not just for ‘benefit claimants actually to do something for their handouts’, but for a significant increase in the income tax threshold. There is little sense — or fairness — in trying to push people off benefits and into work if they are worse off in work than on benefits. In any case, there is something absurd in telling a man (or a single mother) that they are simultaneously poor enough to need benefits and rich enough to pay income tax.

The government’s proposed measures to alleviate the economic mess they have helped to create will have a significant future cost in the burden of debt they will incur. It would surely make sense if they were tailored to end the vicious nonsense by which low-wage earners (making as little as £105 a week) suffer the loss of 20p tax, 11p National Insurance contributions and as much as 50p benefit on every extra pound they earn. Taking into account the costs of going to work, such people are worse off working than unemployed.

Quite rightly, higher earners resent paying 40p today and 45p in future on every extra pound they earn. Surely not even a New Labour socialist can justify taking 80p in the pound from some of our poorest workers.

Spraying money into the economy by way of a 2.5 per cent cut in VAT (bound to benefit the rich rather than the poor) is probably an inefficient way to stimulate the economy. Tax cuts for the poor would be better and if those cuts released people from the poverty trap they would bring a substantial collateral benefit. As ever, when this Labour government uses a carrot-and-stick approach it applies it to the wrong end of the unfortunate donkey.