Why George Osborne should be listening to Charlotte Church

‘Hypocritical witch’, ‘uninformed and thick’, ‘soul of the devil’ – that’s just a sample of the vitriol that spewed onto Twitter denouncing Charlotte Church for supporting anti-austerity protests.

Some were so foul it was hard to imagine what sort of people the authors must be.

The voice of an angel’s response was dignified, either ignoring them or deploying an ironic ‘that’s lovely’.

But why do some people reach for the nasty button when a person who’s successful expresses concern for those who are not doing so well? It seems abuse is so much easier than dealing with the substance of what’s being said.

But deal we must. The issue of ever-growing inequality isn’t going to go away – and it’s not just socialist celebrities and people facing poverty who are raising it.

On Friday, support for a compulsory national living wage came from a surprising source – former David Cameron adviser Steve Hilton.

“End the scourge of in-work poverty,” he said, advocating £9.15 an hour. “It’s not going to solve all the problems of poverty and inequality – not by a long way. But it’s a start, and the summer budget offers the opportunity to make that start.”

One of the absurdities highlighted by Hilton is the way in which tax credits for low income families have, in effect, become a subsidy to big companies ‘who simultaneously exploit their workers with poverty pay and make many hundreds of millions in profits every year’.

It would, however, do people on low incomes no favours if the Chancellor cut those tax credits on Wednesday leaving many without a vital lifeline before measures are in place to implement a decent living wage.

Besides, talk of cutting tax credits can give the entirely false impression that people on low incomes are not paying their way tax-wise, when the opposite is the case.

Data published last week by the Office for National Statistics (ONS) shows the poorest fifth of households pay 37.8% of their income in taxes, whereas the richest 20% pay less – only 34.8%.

You may find this hard to believe. In the lead up to the election, much of the media gave the impression that Labour’s proposed 50p rate on earnings above £150,000 was unfair on the well-off who, they claimed, already pay more than their fair share.

The Daily Telegraph, for example, quoted Spectator editor Fraser Nelson asserting that ‘in the last tax year, the richest were shouldering a greater share of the burden than any time in history’.

Of course, ‘the rich man’s burden’ is bound to increase – if earnings-based tax rates don’t change – as they get richer. Nelson is, in one sense, only stating the obvious.

But he is also telling less than half the story. He was talking about income tax and avoiding the inconvenient fact that more government revenue now comes from VAT and other consumption taxes than direct taxation.

The reason the ONS figures show the poorest fifth paying 37.8% is because that calculation includes all taxes and reflects the harsh reality that everyone pays the same VAT rates, regardless of whether they are rich or poor.

But this isn’t just about the injustices of our tax system. The disproportionate tax burden carried by the poorest fifth of the population weighs down on demand in the economy for goods and services from people who most need them.

Austerity, in a nutshell, is not only unfair but it also doesn’t help boost economic growth in the way a conscious effort to spread spending power would.

When Charlotte Church said she would be prepared to pay more in taxes, she wasn’t talking about an individual act of altruism but her willingness, as a wealthier person, to support a more progressive tax system.

Some people on Twitter were quick to say she could give her money to the poor anyway. But that misses the point – one individual giving their money away might help a few people but it isn’t going to reduce inequality and poverty across society.

What she was saying was she would be happy to pay a higher rate in order to protect public services.

I can see why that would make some rich people uncomfortable, but it’s a serious point – and it deserves better than she got on Twitter.

 

This article is Steve’s monthly business column for Walesonline and the Western Mail newspaper.

Steve Howell is also the author of Over The Line, a novel telling the story of a coach whose star athlete becomes embroiled in a drugs controversy.

Follow him on Twitter @fromstevehowell

Over The Line is available on Kindle via Amazon and in paperback at Waterstones, W H Smith and other bookshops or via this website – ORDER

 

 Photo credit: 1000 Words / Shutterstock.com