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A Conservative Government for Low Earners

Iain Duncan Smith pumps his fist in the air at the living wage announcement.

It has been a difficult decade for millions of people in this country. With the Coalition Government inheriting a budget deficit of £160 billion back in 2010, the country faced economic meltdown. In many parts of the media, the general narrative of the last 8 years has been one of unrelenting doom and gloom for the poorest in society. Indeed, we have seen a VAT increase, public services under pressure, the benefit freeze and many other tough decisions taken by the government.

But if you manage to get past the self-indulgent finger wagging of The Guardian, the left-wing protesters and the Twitterazi, there has clearly been a determined effort by this government to improve the life chances of the many. First and foremost, has been the cutting of direct income taxes for over 30 million people by raising the personal allowance from £6,475 in 2010 to £11,850 by April 2018. This means basic rate tax payers are paying £1,075 less income tax than 8 years ago. It is ridiculous when commentators suggest this tax cut disproportionately helps middle earners as it proportionately helps lower earners much more. When I was earning £15,000 a year working in jobs such a support worker in a homeless hostel, this tax cut was hugely beneficial.

The introduction of the National Living Wage has been another great achievement of this government. The lowest paid 20% of workers have seen a £2,000 pay increase in the last two years. Since April 2016, those on the lowest wage have had an increase of 16% in pay at a time when inflation has been 5.6%. This is a real terms increase of 10.4% in just over 2 years.

As well as tax cuts and pay rises, the Conservatives introduced 15 hours a week free childcare for the lowest paid parents of two years. Additionally, since 2016 all low and middle earners have been given access to 30 hours a week free childcare for 3 and 4 year olds (the equivalent of £5,000 a year paid childcare). Even though there has been teething issues with these policies, they have been great initiatives.

Another way the Conservatives have helped children of the lowest paid has been through the Pupil Premium. This £2.5 billion a year of extra funding provided to schools for children who are on free school meals or in care has been grotesquely underreported in the media. In my current job, defending the educational interests of children in care, I have seen the Pupil Premium transform the lives of the most disadvantaged. This flexible grant serves many different purposes including extra one-to-one support, smaller class sizes and widening cultural opportunities for the child. The Pupil Premium is instrumental in reducing the attainment gap and giving the poorest children more of a chance in life.

If we are to continue the trend towards a lower income tax, higher wage and lower welfare dependant society, as a party we need to go further in helping people keep more of their own money. The government needs to fulfil its manifesto promise of raising the personal tax allowance to £12,500 by 2020. This means basic rate tax payers will be paying £1,200 less income tax than in 2010. Raising the National Insurance threshold from just over £8,100 to £12,500 would be another measure to help the lowest earners. If both personal allowance and NI thresholds were equalised, this would be worth a further £500 a year to all basic rate tax payers. This would be a progressive tax cut and would genuinely take the lowest paid workers out of direct taxation altogether.

As the introduction of the National Living Wage has shown, higher wages can be achieved without risking unemployment. There is a persuasive case that it should be paid to over 21s instead of over 25s. With young people’s unemployment rate being twice that of the general population, it should not be introduced lower than 21 because they might not be hired due to a lack of experience.

There are other policies which the current government should implement to help the lowest earners. Cutting VAT on fuel bills and on petrol would be an extraordinarily popular and indeed a populist measure. We pay some of the highest fuel bills in the world and action needs to be taken on this front. There also needs to be the introduction of some holiday pay, maternity and paternity rights for the self-employed. With 45% of new jobs created since 2008 being self-employed, this group of £5 million or so workers need to know that the government is on their side for having the gumption to be their own boss.

The current government has made good progress in moving our country to a lower income tax, higher wage, lower welfare economy. With the budget deficit at sustainable levels, we should now go further and cut taxes for lower and middle earners. As Conservatives, we must never forget that we believe that taxpayers know how to spend their own money better than any government.

About Paul Maginnis

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Paul Maginnis is a Conservative Party member, and author of The Return of Meritocracy: Conservative Ideas for Unlocking Social Mobility.

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