POLITICS

Ukip's 'Blue-Collar' Tax Plans Would Actually Help The Rich Most, Experts Warn

21/08/2014 13:28 BST | Updated 21/08/2014 17:59 BST
FREDERICK FLORIN via Getty Images
Leader of the UK Independence Party (UKIP) Nigel Farage attends a statement by the centre-right European People's Party (EPP) group candidate designate for the presidency of the European Commission on July 15, 2014 in the European Parliament in Strasbourg, eastern France. The EU's newly-elected parliament decides on July 15 whether to name the EPP's Jean-Claude Juncker of Luxembourg as next head of the powerful European Commission, who called for a 300-billion-euro investment plan for Europe as he laid out his vision for the future if elected. AFP PHOTO/FREDERICK FLORIN (Photo credit should read FREDERICK FLORIN/AFP/Getty Images)

Ukip's new "blue-collar platform", offering policies like raising the point at which the 40p rate income tax kicks in to £45,000, has been panned as "windbaggery and spin" that would end up helping the rich most.

Tim Aker, Ukip's head of policy, said that the party wanted to "stop George Osborne's fiscal drag for middle earners". He also indicated that Ukip would abolish income tax for those on the minimum wage.

However, experts told the Huffington Post UK that the rich would benefit more than "blue-collar" workers and that the proposals would cost up to £20 billion, resulting in deeper spending cuts or tax rises being needed to pay for them.

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Former Treasury official James Meadway, now senior economist at the New Economics Foundation, said the proposals would be a "social catastrophe" if implemented.

"Moving the top rate threshold up will clearly benefit those at the top: for comparison, if you earn over £45,000 a year, you’re in the top 11% of earners. So they will be the only ones benefitting from this," he said.

"However, they will also benefit from moving the threshold at the bottom, since this will affect the tax that everyone pays – except the very poorest, already below the threshold, who obviously already do not pay any tax!

"What they’re proposing is a hugely expensive means to make the tax system even more unfair. The “blue-collar” stuff is just so much windbaggery and spin – this is a tax proposal that will benefit the richest most, whilst slashing the amount of money available for the public services we all need."

Scrapping income tax for minimum wage earners is estimated to cost up to £13.75 billion, while raising the 40p tax rate to £45,000 could cost as much as £5.5 billion.

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A spokesperson for the liberal think-tank Centre Forum said: "The biggest beneficiaries of the 40p proposal will be the richest 10% of earners, not the "blue collar middle earners" that Ukip says it wants to help."

*We calculate the cost of lifting the 40p income tax threshold from £42,285 to £45,000 (assuming 2015/2016) would be around £3 billion.

The think-tank has previously produced research showing that the top 10% would be most helped by the 40p tax threshold being lifted to £44,000, so Ukip's proposal would go even further.

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James Dowling, who used to work at the Treasury before moving to PR firm FleishmanHillard, said: "These changes would be hugely expensive and in no way self-financing – costing up to £20bn if they enacted both at once.

"Increasing the personal allowance to the level of the minimum wage - around £12.500 – is the Liberal Democrat policy. However, the Lib Dems have promised to do this over the course of the next Parliament, at an estimated cost of £3.5bn. If UKIP wanted to do this in the first year instead, the immediate public finance hit would be as high as £13.75bn.

"The changes to higher rate tax would be less expensive because only 4.3 million people pay it. But if UKIP made these changes all at once, it could still cost up to £5.5bn.

"Given that the UK’s deficit sits at over £100bn, the big question is whether UKIP knows from where they will source the revenue to fund these changes – or whether they are instead making it up as they go along."

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