Tories the party of low taxation? The truth

In last week’s PM questions May repeatedly claimed that the Tories are the party of low taxation. Is that true?

Well like most questions of this sort the answer is not as simple as the question, but for the super rich receiving an annual fortune in capital gains the claim is surely true.

For the 20% on the lowest incomes and Mrs May’s ‘just managing’ the exact opposite is the truth.

But firstly understand that tax is gathered in all sorts of guises. Obviously income tax, but also inheritance tax, VAT, tax on fuel, insurance policies, stamp duty, capital gains, council tax, TV licenses, road tax, corporation tax, national insurance and so on.

So when the Tories claim to have ‘taken millions out of tax altogether’, this is a straight perversion of the truth since those earning too little to pay income tax are hit harder than the better off by indirect taxation.  Taxes they cannot avoid paying.  e.g. VAT, fuel tax, council tax, inurance tax, road tax, tv license etc.

The above graph clearly shows how indirect taxes are regressive , increase income inequality, and the most painful for the poorest 20%.

The poorest households pay  more of their disposable income in indirect taxes at 27.0%,  than the richest at 14.4%..  Indirect taxation has been consistently increased by the Conservatives.

There has been a 14% increase in the average amount paid in Insurance Premium Tax for all households, reflecting the  Conservative November 2015 increase in the standard rate from 6% to 9.5%.  (Source ONS)

Taking just the VAT rate as an example one can see the consistent way in which the Tories have hidden proportionally higher rises for the poorest in our society.

  • VAT came into force under the Tory PM Ted Heath in 1973 a rate of 10%
  • In 1974 the rate was cut under Labour’s Harold Wilson to 8%
  • In 1979 the Thatcher Tory government almost doubled the rate of VAT to 15% -an increase of 87.5%.
  • In 1991 under John Major the Tories raised the rate yet again to 17.5%.
  • The Labour government reduced the rate back to 15% following the international banking collapse in 2008.
  • The rate was returned to 17.5% under Tory PM David Cameron in 2010.
  • Tory PM Cameron raised the rate again to 20% in 2011.

Raising the VAT rate by a massive 150% (8% to 20%) is not exactly the behaviour of a ‘Party of low taxation’.

But even that is not the end of Tory tax increases.  When Thatcher took power in 1979 the employees rate of National Insurance Contributions was 6.75%.  In 2017 this has increased to 12%.  Although if you are a mega earner pocketing over £3750 per month the rate falls to 2%.

Make no mistake, NIC contributions are a tax on income, raising the standard tax rate to 32% whilst the higher rate is is only increased to 42%.  If you include the indirect tax differential of 27% for the poorest and 14% for the wealthiest you begin to see the true picture of Tory taxation policy in modern Britain

But as I said the Tories are the party of low taxation for some.  The Capital Gains Tax  rates paid are 18% and 28% for higher rate tax payers, a saving of 14% over earned income with an additional £11,300 tax free!!  The Liberals intended to equalise the CGT with income tax when the entered a coalition with the Tories, but the Tories failed to deliver!

So Mrs May – Party of Low taxation??  If she believes that she is seriously ill informed for a Prime minister. If she does not, well people will judge for themselves.

MOG

 

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