UK Poverty Post

A ‘Robin Hood’ Budget

The Chancellor Alistair Darling has said there will be “no giveaways” in tomorrow’s budget. He has intimated caution despite the surprise likelihood that tax receipts will be higher than the same month last year, excelling the expectations set out in last Decembers Pre-Budget Report (something that appears stems from a decision by Treasury economists a year ago to decouple the public finance forecasts from the growth forecast). It seems sensible at this stage for Mr Darling to use a large part of any windfall draw down borrowing given the fiscal realities he is currently faced with, especially as it will be difficult for Mr Darling to confidently claim this is more than a fillip off the back of a welcome reform of the Treasury’s calculation methods). However, as I outlined in my last post, the reality of poverty in the UK is also extremely dire.  Beyond the inevitable dichotomy between proponents of prudence or giveaways, there is an underlying need for the Government to seek new sustainable forms of revenue where they exist. Imagine what he might deliver on Wednesday if he also introduced a fully fledged Robin Hood tax…

A more progressive taxation system:

>>National Insurance has been rising rapidly but it is effectively capped meaning higher earners don’t pay any more than anyone else. Where possible necessary rises in NI, should be replaced by increases in income tax.

>>Reduce indirect taxes such as consumption taxes that disproportionately impact the poor, and reduce demand – much needed during this fragile recovery.

>>Resort to regressive indirect taxes only when they achieve worthwhile social goals, and offset regressive impacts elsewhere in the tax, and benefits system.

>>Reduce the tapers on tax, and benefits

Make welfare a genuine springboard for all:  Pay for strong, and comprehensive social protection (compared to consumer citizens, and narrow workfare policies).

>>Investing in a less myopic welfare system will be cost neutral over the long-term anyway as it will lead to greater employment in more highly skilled, and better paid roles that in turn will increase the net tax-take. The system should also be designed to prevent people being forced into the informal economy. The informal economy proves there is untapped productivity, which if utilised could increase tax receipts.

>>Invest a net £2.7 billion per year to increase earnings disregards and introduce a standard 55% withdrawal rate for both out-of-work and in-work benefits, to end the benefit trap.

>>The administration of the welfare system is far too complex and makes benefits less predictable, which in turn increases financial insecurity and people’s ability to make rational financial decisions – the system has to be radically simplified.

>>There also should be a full analysis of the differentiated effect these measures will have on women and men.

>>As a first step in welfare reform, roll out the Create Consortium’s proposals for a Community Allowance beyond the pilot areas, especially if further evidence supports the view that the model would prove cost-neutral.

Expanded community ownership: With measures to enable poor communities to organise, and access benefits. This would cost £5m to start up the infrastructure, and the facilitation, and would yield savings in the long-term.

Tackle debt at the bottom: Continue and increase investment into DWP’s growth fund that provides small loans with wider access, and longer repayments. £100m would directly enable 225,000 people access affordable credit (rather than having to use high cost lenders), and 80,000 people would be enabled to open a basic bank account or savings account.

Increase family-friendly jobs:

>>Create a pool of employees to provide extended maternity cover so small businesses have no excuse not to hire women.

>>Realise long-term ambitions to extend paternity cover; enabling couples to break away from traditional gender roles at the beginning of parenthood by ensuring the law doesn’t actively encourage one gender to take on the role of primary child-carer.

Economically empower women: £3bn to make childcare affordable, flexible, and accessible. The lack of affordable childcare in Britain (childcare in the UK is the most expensive in Europe) is a key stumbling block for women that want to work. This is the single best way to . Spending here would also enable good nurseries to meet their obligations to provide a minimum amount of free childcare without having to close because of financial pressures. The Government could also remain committed to its recent action on the gender pay gap.

Tackle domestic violence: Ensure secure and stable funding of specialist services for women and girls who have experienced violence (such as rape crisis centres), which are at constant risk of closure. Almost half of women in England and Wales experience domestic violence, sexual assault or stalking in their lifetime, but face a postcode lottery when seeking support

Increase the tax take through better Labour rights:

>>Increase enforcement of labour rights – eg. through more on-the-ground inspectors. The two key agencies the GLA and the EAS only have 64 inspectors between them to inspect the largest and most fragmented agency sector in Europe. We currently only spend about £3 million on these government bodies that have a remit to protect the most vulnerable in society.

>>It is proven that better enforcement is likely to lead to people being brought into the formal economy – increasing tax revenues, and enhancing observance of basic standards like the minimum wage.

Reduce fuel poverty: Invest £5 billion to fully insulate every home in Britain – saving around 10 million households over £200 a year on their energy bills, and helping to eradicate fuel poverty. Fully insulating every house in the UK would reduce household emissions (that amount to a quarter of national carbon emissions) by more than 20%.

Re-skill the unemployed: Provide training for roles in green growth, manufacturing and digital technology. A £5bn investment in the training and mentoring could help drive new growth. This properly funded overarching approach will be accompanied by robust policies to encourage sustainability, and strong policies to support manufacturing, such as targeted Government export insurance guarantees.

Improve social housing: Smash the social scourge of bad housing by investing £2.6 billion per year to meet the government’s annual target of 45,000 new social houses annually. This will also help the construction industry that remains in dire economic straits, and which is an enormous employer, is economically strategically important, and accounts for between 6% and 9% of UK GDP.

Alistair Darling should use the budget tomorrow to introduce a Currency Transaction Levy across Sterling – a safe and lucrative first step towards an international Robin Hood Tax.

Spend 2 minutes to urge the Chancellor to act.

This article also appeared on the Robin Hood tax website