Hard Working Tax Payers - weve all heard the phrase that normally follows the vilification of, what is considered, a lower group. At first glance todays news from the Chancellor hits all the buttons. Cut benefits on one hand and leave people to enjoy their hard earned cash. If I was to ask for a show of hands most of you would have your hands in the air so lets look closer. The reduction in the benefits bill isnt a cut but a freeze in In Work Benefits. Note the name of these benefits In Work! These benefits are paid to people who really are working. Now I dont know what constitutes Hard Work in the governments eyes but how do you differentiate between someone working 40 hours or more for the minimum wage and, say a banker or multimillionaire government minister. The thinking behind this freeze is that it has been increasing at 1% pa whereas wages have been averaging an increase of only 0.6%. Please forgive my ignorance of the maths here because the chancellor obviously know more about this subject than me, him being a historian and me just an architect and IT person but if you have a recession in which many are made redundant who are then vilified and forced to take low paid unskilled work which have to be subsidised by benefits, wouldnt this have the effect of artificially lowering the average wage of Hard Working people, which then appears to be a lower inflation rate than benefits hence the people who are doing what the government want ie Working are hit by a double whammy. Now look at the figures for the individuals. I have no idea how much these benefits are, which is my good luck, but if they were to pay say £500.00 pm, the increase that the government is saving with todays measures is £5.00 or £60 pounds pa. Voting time again! Put your hands up if you have seen your weekly shop go up by more that £5.00 per month. Given that the out of work benefits are probably much less than £500.00, it sort of puts the freeze into context. So lets leave the poor but Hard Working to their own devices for a moment and look at the Hard Working people who save for their pensions all their lives. Sympathy for these poor souls. After all we fall into this category dont we? So the new rule is that if you die any surplus pension will not be taxed on death but on receipt of the inheritance ie at the rate of tax of the recipient. Hear hear I hear you say but dont forget that the stiff has benefited from tax relief probably at the higher rate but if the surplus pension pot is passed to say the grandchildren they could receive £11000 tax free alternatively it could go to a lower paid tax payer and taxed at 20%, the amount it could have been taxed when it was earned by the deceased so even taxed at the standard rate we hard working tax payers lose years of interest or use of capital. Now even without shopping around you can get 1% interest on capital so if we were to take £10000 of tax free capital it could have been invested to make £100 pa. Given that we are talking here of surplus pension pot, lets have one more show of hands. Hand up all those who know anyone who saves up sufficient to give a surplus. The loophole to spot here is that very rich people could salt tax free excess money into their pension pots in order to leave children large amounts tax free(again). I hope you are rich enough to do this, if not consider the reality behind the populist announcements at todays conference speech. Please think again when you think that the chancellor is doing the right thing. He is looking after his rich buddies and we are paying for it. The real reason for this hot air is to pacify the UKIP waiver era in the Tory part!!!
Posted on: Mon, 29 Sep 2014 23:26:35 +0000
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