Dismantle perverse tax and welfare system

A letter from Bruno Prior, Freedom & Responsibility's Policy Director, setting out the rationale behind our proposal to replace large amounts of our complex and perverse tax and welfare system with a Basic Income + Flat Tax was published in The Maidenhead Advertiser today. The full text of the letter follows:


We recently had an opportunity to create a part-time job of one or two hours a day. But the amount that anyone who took the job would have lost in benefits was more than the job was worth. So instead we operate less effectively than we could, and someone who could have taken their first step on the employment ladder remains stuck on the dole.

Your interview with my father (Peter Prior) treated the figures for taxes and benefits in isolation, when what matters in the real world is the combined effect of the two. Means-tested withdrawal of benefits is effectively a heavy tax on the lowest-paid, destroying jobs and trapping people in poverty and dependency. There is growing recognition of this reality, but all the main parties have to offer is minor tweaks to the system.

The only real solution is to scrap means-testing. We don't need it. We already have a system to take more from people as they earn more – it is called Income Tax. A flat Income Tax combined with a universal Basic Income creates a progressive tax system without the bureaucracy and complexity, and reduces the disincentives to work that are inherent in the current system and the proposals of the main parties.

Consider what a Flat Tax of 43 per cent and a Basic Income of £5,500 would mean to someone earning £15,000 a year. Offsetting the Basic Income against the tax, they would pay under £1,000, less than half what they would pay in Income Tax and National Insurance at present. And if they earned a bit more, they would keep over half of the extra, whereas benefits withdrawal would mean that they would keep only 30p in the pound under the current system.

There are many other benefits to our proposal. As the current system is so complex, we have created a calculator on our website (freeresp.org.uk) so people can compare what the different systems would mean for them.

We could cut bureaucracy and get Britain working again, if only we had the courage to dismantle the perverse tax and welfare system that our mainstream parties have conspired to inflate, until it now consumes almost one-sixth of our GDP. But what radical thoughts do we hear from Theresa May, MP for Maidenhead and shadow minister for Work and Pensions?

MPs are legislators, not glorified councillors. It is time for an MP who will grasp the fundamentals.


Bruno Prior