Budget 2014: Give self-employed Brits a tax break, think tank urges

14 March 2014 

The government should help Britain's growing legion of self-employed workers in next week's Budget statement, according to CentreForum.

In its formal submission to the Budget, the think tank urges the Chancellor George Osborne to scrap Class 2 National Insurance – a "poll tax" on self-employed people – to ease living cost pressures for the one in seven UK workers currently running their own business.

It is estimated that half of these workers have annual earnings of £12,000 or less. Scrapping Class 2 National Insurance would deliver them with a £143 tax cut and cost the Treasury next to nothing, the analysis finds.*

The Class 2 proposal is part of a package of recommendations for making National Insurance simpler and fairer. CentreForum argues that self-employed workers could be helped further by a rise in the other self-employment National Insurance threshold – Class 4 – so that it matches the personal allowance for income tax.

Additionally, the think tank calls for the removal of the requirement on local authorities to hold a referendum on any council tax rise above 2%. It accuses the government of weakening the link between local finance and local democracy.

Other measures in CentreForum's Budget submission seek to address 'unfair' tax breaks. This includes the subsidy on red diesel which costs the Treasury up to £2.4 billion each year in lost revenue.

The submission also reaffirms CentreForum's longstanding proposal to hand shares in RBS to the British public.

Adam Corlett, Economics Researcher at CentreForum, said:

"George Osborne should make National Insurance simpler and fairer. A good start would be scrapping the antiquated self-employment poll tax which hits the poorest and small businesses the hardest."

NOTES TO EDITOR

* HM Revenue and Customs recently consulted on bringing Class 2 National Insurance within the self-assessment process to cut red tape. CentreForum was the first to argue it should instead be scrapped entirely.

'CentreForum proposals for Budget 2014' by Adam Corlett, Toby Fenwick and Tom Papworth can be accessed here.

Think tank waves red card at English football

7 February 2014 

"Like other publicly prominent institutions, for example politics, the media and banking before them, we don't believe that football clubs and authorities can continue to insist on operating to a different set of standards of transparency and openness" – Supporters Direct

The English Football Association (FA) should be subject to Freedom of Information law, a new report from CentreForum argues.

Backed by senior Liberal Democrat MP Tim Farron, the think tank urges a radical shake up of football's governance structures to make clubs more transparent in their financial dealings and accountable to their supporters.

It warns that the "people's game" has become a closed shop with fans being locked out of decisions that affect their club's future. This is inexcusable, it says, because fans are "co-producers" of the game's commercial and cultural success and cannot be expected to switch allegiance if things at their club go wrong.

Clubs named and shamed in the report include Cardiff City which recently changed its kit colour to satisfy new sponsors; Hull City which is set to have its name changed by the new owner; and Wimbledon which was relocated to Milton Keynes in 2003 and rechristened MK Dons.

Just last week, the manager of Leeds United fell victim to an attempted coup by an Italian entrepreneur who had allegedly taken control of the club – but whose takeover bid had not been approved by the Football League.

As well as the proposal to open up the FA to Freedom of Information requests, CentreForum's report calls for public disclosure of clubs' ownership arrangements, tax affairs and transfers so fans can see what is happening behind closed doors. It also contains plans to increase supporter based representation on the FA Council.

The report says these transparency measures will protect the national interest in the game and the community assets that football clubs represent.

It follows an ultimatum from the Commons' Culture, Media and Sport Committee which warned that English football must reform its governance structures or face legislative intervention. CentreForum believes the time for such action has now arrived.

Sam Tomlin, co-author of the report, said:

"English football has shown time and time again it cannot be trusted to reform itself. While the FA is the appropriate body to govern football for the future, the government must act in the short term to ensure greater transparency and accountability to supporters. This will eventually lead to a more inclusive and well managed game."

Tim Farron MP, President of the Liberal Democrats, said:

"The lack of transparency in English football is alarming and threatens the integrity of our national game. Loyal football fans deserve better."

A spokesman for Supporters Direct, an advocacy group for football fans, added:

"Like other publicly prominent institutions, for example politics, the media and banking before them, we don't believe that football clubs and authorities can continue to insist on operating to a different set of standards of transparency and openness. We're pleased that the debate is beginning to shine a light on these issues, and congratulate the authors on their work to look for concrete proposals."

NOTES TO EDITOR

The CentreForum report 'It's all in the game: proposals for greater transparency in football' by Sam Tomlin and Stephen Lee can be accessed via this link.

Immigrants should pay National Insurance upfront, says liberal think tank

30 January 2014

Migrants should be required to pay a £2,000 ‘National Insurance Advance’ upon first entering the UK, a new think tank report proposes.

In the second of three publications* aimed at setting a ‘liberal’ immigration agenda before the next general election, CentreForum argues that politicians must restore confidence in the immigration system without jettisoning key liberal principles such as freedom and tolerance.

As well as the National Insurance proposal, which would apply to non-EU economic migrants only, CentreForum’s report contains plans to extend the period before EU migrants can claim out of work benefits to 12 months. 

It also joins calls to scrap the Conservative party’s policy of reducing net migration to “the tens of thousands”, describing this target as “perverse” and “unfulfillable”. It instead recommends a broader migration and population change target that would be set at the beginning of every parliament.

Other recommendations in the report titled ‘Migration: a liberal challenge’ include a student loans style scheme for migrants to pay for English language classes and a plan to shift responsibility for asylum cases from the Home Office to the Ministry of Justice.

The report comes as the Immigration Bill returns to the House of Commons for a final round of voting this Thursday.

No contribution, no benefits

CentreForum’s National Insurance Advance is being offered in response to public concern that immigrants are accessing services and the benefits system without having first contributed. Under the proposal, £2,000 would be payable upon entry to the UK by non-EU economic migrants only and refunded once they had made sufficient tax contributions, or left the country without claiming welfare.

The report says that this proposal – together with lengthening the time it takes EU migrants to become eligible for benefits – would provide a clear contributory link and demonstrate that migrants are coming to the UK to work, not claim.**

Taking numbers seriously

The report acknowledges that politicians cannot ignore people’s angst over immigrant numbers. But it says that the net migration target, introduced by the Conservative side of the coalition government, is “unfulfillable” and “is perversely leading the government to clampdown on [students and highly skilled migrants] to whom the public is most well disposed and who provide the clearest economic benefits”.

CentreForum instead proposes that a broader migration and population change target should be set at the beginning of each parliament. Governments would then be required to set out how they intend to mitigate the impact of population change on housing and public services and be held to account for it.

The challenge for liberals

The report says that liberals need to stop blaming the current state of public opinion on some of the many glaring factual inaccuracies in the political debate on immigration, and start to engage properly with people’s concerns.

It warns, however, that moving towards a tougher stance on immigration would not only be bad for the economy but bad politics. Despite the Conservative party’s efforts to reduce migrant numbers, the proportion of the population who believe the Conservatives are best placed to deal with immigration has fallen from 47% at the 2010 election to 25% now, the report points out.

The challenge, it concludes, is “to devise a distinctive approach which addresses people’s concerns in a proportionate and realistic fashion and begins to restore confidence in the immigration system – while preserving the liberal principles of freedom and tolerance to the greatest extent possible.”

Alasdair Murray, report author, said:

“Politicians are engaged in an arms race around immigration policy which appears to have more to do with looking tough than genuinely addressing people's concerns with practical policy.”

“It is possible to restore confidence in the immigration system by making it more transparent, ending the perception that migrants can access the benefits system without first contributing and developing a target that reflects the real social and economic needs of the country.”

NOTES TO EDITORS

* The first in this three part series of publications 'The business case for immigration reform' was launched by CentreForum in December 2013. You can access that report here. The third in the series will focus on illegal immigration and asylum and is expected in June 2014.

** Extending the benefit entitlement period to one year would require a change in EU rules. The report urges the UK government to work with other EU member states to make this a priority for the European Commission due to take office in November. Ministers, including the Work and Pensions Secretary Iain Duncan-Smith and Deputy Prime Minister Nick Clegg, have already backed such a reform.

Taxing poverty is wrong — lift low earners out of National Insurance

16 January 2014 

Whoever wins the next general election can raise living standards by cutting National Insurance for low and middle income earners, a new report from CentreForum argues.

The think tank says that lifting people out of National Insurance is the most progressive form of direct tax cut, as it will provide the most help for low earners and ease living cost pressures for the "squeezed middle".

The report shuns Labour's plan to revive the 10p income tax band. And it says that future increases in the income tax personal allowance — the flagship policy of the Liberal Democrats in coalition with the Conservatives — should come second to National Insurance cuts.

By April, the coalition government will have raised the personal allowance from £6,475 to £10,000 in four years. But Lib Dems are now hinting it should be lifted further towards £12,500 — roughly the annual full time equivalent of the National Minimum Wage.

The report acknowledges that personal allowance increases are fairer, in distributional terms, than reducing the basic rate of income tax or Labour's 10p tax band proposal.

But it says more must be done to target the benefits of the policy on the low paid. It cautions that poorer households will see little benefit from future personal allowance increases because of corresponding reductions in Universal Credit.

Moreover, eligibility for workplace pension auto-enrolment is linked to the personal allowance threshold. This means further increases could harm low paid workers' pension saving, the report warns.

CentreForum also rejects the notion of linking the personal allowance to the National Minimum Wage, suggesting there are more appropriate thresholds that better relate to living standards. A sensible alternative, it says, would be to take the absolute poverty line — which is just over £10,000 — out of all income tax and National Insurance.* 

It argues that raising employee, employer and self-employed National Insurance thresholds to the same level as the income tax personal allowance, and then to the poverty line, would simplify the tax system and cost less than linking the personal allowance to the minimum wage.

Cutting employer National Insurance could even allow for an increase in the minimum wage of up to £600 a year, it adds.

Adam Corlett, Economics Researcher at CentreForum and report author, said:

"It's crucial to get these expensive tax cuts right, and they should be focused as far as possible on poorer workers. The policy case for favouring National Insurance cuts is clear and could take the absolute poverty line out of all direct tax."

* In 2014/15 the absolute poverty line for one adult will be around £10,050

NOTES TO EDITOR

The CentreForum report 'Making allowances: tax cuts for the squeezed middle' by Adam Corlett can be accessed via this link.

CentreForum calculates that raising all National Insurance thresholds to £10,000 will cost £8.8 billion a year. This is less expensive than raising the income tax personal allowance from £10,000 to the National Minimum Wage (currently £12,338) which will cost over £11 billion.

However, the National Insurance policy will carry a smaller price tag if specifically targeted at low income workers. CentreForum's proposal will cost around £2.5 billion (excluding employer National Insurance) as it involves increasing National Insurance rates so that the benefits are tapered away from higher earners.

People on low incomes — around 1.5 million of them — would gain from National Insurance cuts but not at all from further personal allowance increases or the introduction of a 10p band. (Note that raising the National Insurance thresholds would not affect state pension and other benefit entitlements.)

In contrast to the personal allowance of £10,000, National Insurance begins at just below £8,000 and one form of self-employed National Insurance starts at under £6,000. Those on incomes of up to £13,000 currently pay more in employee National Insurance than income tax.