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June 29, 2012 / politicsbitesize

Reduce tax benefits for the rich

David Cameron at Bluewater in Kent

For football and summer sun fans the weekend was a little bleak. The England side put in a very poor performance in the quarter-final match on Sunday and the sun soon disappeared behind a blanket of clouds. So what better way to kick start the week than with a speech by our Prime Minister? At Bluewater in Kent on Monday, David Cameron delivered his essay on welfare reform in which he outlined the need for welfare cuts and how he proposes to make them.

The impetus of the speech centred on a call to ‘end the culture of entitlement’, which is derived from those on benefits having a higher income than those that work. The Prime Minister gave the example of:

… a couple living outside London. He’s a hospital porter, she’s a care-worker. They’re both working full-time and together they take home £24,000 after tax. They’d love to start having children – and they know they’d get some help from the state if they did so. But with the mortgage and the bills to pay, they feel they should keep saving up for a few more years. But the couple down the road, who have four children, haven’t worked for a number of years. Each week they get £112 in income support, £61 in child benefit, £217 in tax credits and £141 in housing benefit – more than £27,000 a year. Even after the £26,000 benefit cap is introduced, they’ll still take home more than their neighbours who go out to work every day. Can we really say that’s fair?

The obvious answer is, no! Of course it is not fair that someone who chooses to work for a living gets less than someone who chooses not to. What is fair, though, is that those who have no choice but to seek assistance from the state receive it. It can be argued that under the coalition government public spending cuts to reduce the deficit are taking precedence over and above the welfare of those in need.

After all, there is another way to plug the deficit and that is by collecting taxes from those who can afford to pay them. The recent attack by the Prime Minister on Jimmy Carr’s participation in K2, a tax avoidance scheme based in Jersey, highlighted the prevalence of such schemes amongst the rich and famous. These tax avoiding methods lose the Treasury an estimated £4.5bn a year.

If the Prime Minister really thinks that the types of tax avoidance scheme used by people such as Jimmy Carr are morally wrong then he should make a speech that calls for an end to this ‘sense of entitlement’ too. On Monday, David Cameron was keen to make clear that the ideas set forward in his speech were not policy proposals and that he wanted to have ‘a real debate and ask some searching questions’. Well, Mr Cameron, let us have that debate, but let it be weighted equally.

***

38 Degrees have set up a petition calling for a change to the tax laws and to further stimulate the debate. They state: ‘Tax-dodging costs the rest of us billions of pounds – money that could be spent on hospitals, schools, policemen. But whilst David Cameron talks tough, the truth is he could be doing much more to stop it. Leading tax experts say what we really need is a legally enshrined “general anti-avoidance principle” – giving courts tough new powers to force dodgers to pay up.’

Please take 30 seconds to add your name to the petition demanding a strong tax-dodging law: https://secure.38degrees.org.uk/bantaxdodging

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