‘Make Work Pay: A New Agenda for Fairer Taxes’ puts forward fully costed proposals to reshape the tax system around a simple principle: to make work pay.
It proposes that the Government builds on the successful increase in the personal income tax allowance by raising National Insurance thresholds to create a universal working income, which would see the first £1,000 earned every month (ie £12,000 a year) be completely free of income tax and National Insurance.
This would be a £459 tax cut for anyone earning more than £12,000 a year, and take 2.4 million low-paid workers out of taxes on earnings altogether.
The tax system should also ensure every worker, keeps at least 51p in every extra £1 they earn, which we term the ‘work guarantee'. This would be delivered by reform of various pinch points in the tax system – the marriage allowance, the high-income child benefit charge, and the 62p tax rate as the personal allowance is withdrawn for high earners.
The report also proposes cutting the Universal Credit taper rate from 63p to 50p. This would address the injustice that those moving from welfare into work often face much higher marginal tax rates than the wealthiest Britons.
Exclusive YouGov polling carried out on behalf of the CPS shows these policies are hugely popular:
The report estimates the total cost of its proposals at £13.5 billion. It argues that this can be funded by adopting an ISA-style model for pension saving – previously called for by the CPS – and other savings measures which could be accomplished without impacting frontline public services.