By David Williams
18 June 2010
The government should exhaust every form of progressive taxation before reducing public spending, or it will risk passing a disproportionate amount of pain on to people on low incomes, a think-tank has said.
In a report released on June 18, the Resolution Foundation, which specialises in policy for low earners, also argued that the best way to protect the worst-off was to return the economy to sustainable growth.
What’s the damage compared various methods of cutting the fiscal deficit and the effects they would have on the poor. It acknowledged that while some would be necessary, spending cuts hurt those on low salaries the most.
It also warned against ring-fencing entire departmental budgets, arguing instead to protect programmes that would promote future growth.
Raising Capital Gains Tax to the same level as Income Tax would generate £3bn, the study found, which would protect low earners better than raising the same amount through removing VAT reductions on items such as fuel.
The foundation also said that savings could be made by reducing tax credits for high earners, while preserving them for those that need them most.
The recommendations come ahead of the June 22 Budget, in which Chancellor George Osborne is expected to press ahead with cuts in departmental spending in an attempt to reduce the fiscal deficit.
Resolution Foundation acting director Sophia Parker said: ‘No one disputes that cuts need to be made but how, when and where are questions that need to be carefully answered. A package that understands the overall impact on different income groups will stand the best chance of helping low earners stay financially independent.
‘Everyone will have to bear some burden but this should be proportionate and with the goal of keeping as many people in work and off benefit dependency as possible.’
18 June 2010
The government should exhaust every form of progressive taxation before reducing public spending, or it will risk passing a disproportionate amount of pain on to people on low incomes, a think-tank has said.
In a report released on June 18, the Resolution Foundation, which specialises in policy for low earners, also argued that the best way to protect the worst-off was to return the economy to sustainable growth.
What’s the damage compared various methods of cutting the fiscal deficit and the effects they would have on the poor. It acknowledged that while some would be necessary, spending cuts hurt those on low salaries the most.
It also warned against ring-fencing entire departmental budgets, arguing instead to protect programmes that would promote future growth.
Raising Capital Gains Tax to the same level as Income Tax would generate £3bn, the study found, which would protect low earners better than raising the same amount through removing VAT reductions on items such as fuel.
The foundation also said that savings could be made by reducing tax credits for high earners, while preserving them for those that need them most.
The recommendations come ahead of the June 22 Budget, in which Chancellor George Osborne is expected to press ahead with cuts in departmental spending in an attempt to reduce the fiscal deficit.
Resolution Foundation acting director Sophia Parker said: ‘No one disputes that cuts need to be made but how, when and where are questions that need to be carefully answered. A package that understands the overall impact on different income groups will stand the best chance of helping low earners stay financially independent.
‘Everyone will have to bear some burden but this should be proportionate and with the goal of keeping as many people in work and off benefit dependency as possible.’
