Helping the poorest

Clegg the convulsive, in his party leader's speech this week, claimed that his party is the fairest. I presume he didn't mean blondest.

Give credit to all the parties for being aware of the huge problems faced by the poorest members of our society, especially from leaping energy prices and soaring food prices.

All parties agree that tax allowances start at too low a figure. Being taxed on incomes as little as £6,000 means that someone on minimum wage level, or over £200 for a full week, will pay tax on something like £5,000 of their income. This cannot be right. Most people feel that the tax allowances ought to be raised to at least £11,000.

Differences between the parties appear here. Clegg proposes to sting the rich for much more, in order to raise the tax threshold. Gordon Brown suggests more emphasis on the tax credit system, which is not attractive in view of the administration costs and the frequent mistakes they make. We have yet to hear from the Conservatives, on short term and immediate help, but so far they have made proposals for long term change, involving time limited benefits and help for people to get back into the labour force, the way pioneered by Wisconsin.

There is a further problem for people on low incomes. Calculations were recently made by one of the professional (i.e not a political party) bodies. It pointed out that a couple with one child and with total income of £100 per week, if able to double their income to £200 per week would increase their income by merely £5 per week. The reason is that the Government would extract tax and reduce benefits.

This is an example of the so-called poverty trap, a major discouragement for some poeple to look for work. Taxes are too vicious and/or benefits too generous. It was in a (futile) attempt to deal with this that Gordon Brown brought in the expensive and over-complicated "Working Tax credit".

In the end, however the problem is to be solved, some more money must be found to lift the low income groups out of poverty, either higher benefits and pensions or lower taxes, or both. The trouble is that for the foreseeable future the Government will be short of money, and cannot afford to do this.

The Clegg solution is at least simple (- in appearance). Taxes on people above a certain level should be increased. They are few and do not carry many votes, so their preferences need not be considered. In order to gain sufficient financial resources "the rich" would have to extend down to the not very rich level, and some could decamp and prefer another tax regime overseas.

What effect this might have on incentives to work is difficult to know. It would certainly take a few years to cause many to look for work. Many are unfit or unqualified and have their lifestyle established. In any case job vacancies will tend to dry up in the (near) recession.

It is unlikely that the Brown or Conservative proposals would encourage many back to work quickly, but in so far as they succeed there will obviously be more tax taken in and less benfit paid out, so the Government would have some resources with which to finance higher benefits and pensions.