JP Floru: The 50p tax rate destroys jobs for some of the poorest in society

By JP Floru.

In the last two days, I twice heard anecdotal evidence of how the 50p tax rate reduces the number of jobs at the bottom scale of the ladder, and increases welfare payments.

A person I met last night, a trendy West Londoner who at one time supported New Labour, explained how she had just fired her cleaner as, with the children leaving the house, and the 50p tax rate, she thought it no longer necessary and affordable. She used to pay the cleaner’s wages and social contributions in full.  The new part-time cleaner is paid cash in hand. The old cleaner is now claiming housing benefit and unemployment benefit.

A friend from Kent told me two days ago that she had just fired her part-time gardener, as she could not longer afford to employ him as a result of the 50p tax rate.

How many more are there out there?

The 50p tax rate (or 62.5p rate, if you include National Insurance), which does not raise a great deal of money, and was introduced for ideological purposes, destroys jobs for the poorest in society, and pushes them into a life on benefits. 

Instead of not providing the jobless with any prospects, perhaps the Coalition Government might want to offer hope? Providing jobs, which allow people to build up a CV and climb the ladder through their own efforts; instead of destroying jobs and pushing them into welfare dependency?

The easiest way would be to reduce the 50p rate. There is a risk that we will see tokenism, such as bringing it down to 48p or 45p, instead of doing what is right - that is, bring back the 40p rate. Also, bringing the 50p down and introducing other taxes instead, as some LibDem geniuses are proposing, is a nonsense: people look at their total tax bill. They do not distinguish between its component parts to decide their behaviour.

Another method is to make domestic staff tax-deductible. It creates jobs for the jobless, allowing them to escape from welfare dependency, and allowing them to climb the ladder and build up a CV. It helps busy people to find help so that they can focus on what they are best at. And even though it reduces the tax take it will also reduce the nation’s welfare bill. 

If I was that cleaner who was fired by that trendy West Londoner, I would find it a simple choice.