In Wednesday’s Budget we saw the personal allowance threshold rise again; starting April 2016, earnings up to £10,800 will be tax-exempt.
The coalition knows that raising the personal allowance is a politically popular idea (not to mention good public policy). It’s great to see them inch slightly closer to taking minimum wage earners out of income tax all together.
But given how in-tune they are with the tax relief this policy provides to low earners, it’s hard to make sense of their decision to ignore the National Insurance threshold, which currently sits well below the personal allowance threshold at £7,956/year.
Especially when it would be politically popular to address it.
A pre-Budget poll from YouGov asked Conservative, Labour, Lib Dem and UKIP respondents which policies they would support or oppose if the Chancellor were to announce them on Wednesday. The policy that received the most support (83%) was raising the personal allowance threshold to £11,000, followed by “raising the National Insurance threshold, so it is no longer paid by the lowest earners”, which received 71% support.
It gets even more interesting if you break it down by party. On NI, both Conservatives and Lib Dems supported the policy with a 75% majority, followed closely by Labour at 72%. UKIP brought the average down slightly, but with a significant majority still favouring the policy at 68%.
Getting the poor out of tax has strong cross-party support and the Chancellor should, in theory, be able to implement changes to the NI threshold without extreme push back from any opposition parties. Yes, the coalition should be credited for their reforms to the personal allowance, but now is hardly the time to go soft on a bad tax that continues to hit the poor hard.