Tax Breaks For The Over 50s?

Just another Bung for Boomers

Without a doubt, The Thick of It is one of the greatest comedies ever made. It still holds up incredibly well, but scenes which seemed farcical and far fetched 10 to 15 years ago could now actually be true. One of the very best concepts was an episode in the final season where the government’s spin doctor takes a group of ministers and advisers on a retreat to brainstorm policy ideas. Ideas include free thermals for pensioners and getting the unemployed to drive ambulances.

Despite the current wave of industrial action, we are probably still some way away from Universal Credit claimants being forced to fill in for paramedics. However, in a bid to get people back to work the government does seem to be entertaining some pretty ‘interesting’ ideas.

Increasing the labour supply is generally a good thing and some of the policies are actually very sensible (we’ll discuss them later). Unfortunately, the government is also suggesting that people over 50 returning to work will be exempt from income tax for one year. This is a terrible idea.

The first issue with it is that the government is missing out on some low hanging fruit. As I wrote just the other week, if we want to boost workforce participation then we need to make childcare much more affordable. I won’t rehash the arguments here (don’t be lazy, click the link and read the article), but essentially such a move would help get highly skilled and productive people who want to work get back to work. It would also bring other benefits (seriously, just click the link, I’m not running a phishing scam).

It would also add further complexity to the tax system. We already have an incredibly complicated tax system in the UK. In the words of one of the greatest philosophers of our age, ‘Why do you have to go and make things so complicated?’ Avril Lavigne would surely be singing this to Jeremy Hunt if he were to create yet another bizarre tax exemption.

It’s also really bad politics. The government is claiming that we simply can’t afford to give public sector workers a pay rise. Their argument is pretty spurious in my opinion, but is surely undermined if they’re happy to forgo tax revenue. At the very least it’s ‘bad optics’ as the management consultants might say.

It also makes very little sense. The country is experiencing labour shortages, but part of that is driven by the fact that many of these roles were previously filled by low skilled migrants. Does the government really expect Janet to risk her manicure or mountain of free time to go fruit picking or put in a few shifts down the local pub? We have a relatively liberal immigration system when it comes to high skilled workers, but the government needs to face reality and be honest with the public about the fact that we need much more low skilled immigration.

However, probably the biggest issue with it is that it is deeply unfair. One of the main themes of this blog is about what a rough deal young people get. They have experienced stagnant wages and living standards, cannot afford to own a home, sacrificed some of the best years of their lives to protect older people, and are then patronised by that generation because they have the audacity to enjoy a night out and the occasional avocado on toast while watching Netflix. The people who would benefit from this proposal have already lived through a period of sustained economic growth and have been able to afford their own home. Such a move would represent yet another Bung for Boomers.

Not everything suggested by the government is a terrible idea though. It should be commended for pledging to ensure that those in receipt of disability benefits will be able to keep them if they return to work. This is a good thing. Nobody with a disability should feel compelled to return to work and it is a sign of a civilised society on how we treat those who simply cannot look after themselves. Many people with disabilities would love to return to work but fear losing their support. As such, it is very encouraging that those who both can and want to will be able to do so.

I’ve written before about the absurdity and cruelty of our current benefits system. I’ve long argued that the best system would be a form of Universal Basic Income as I feel that would provide a true safety net while also bringing about a number of other benefits. However, I’m a realist and I don’t see that happening anytime soon. Any policy change which helps vulnerable people while treating them with dignity is a step in the right direction.

The government is right to focus on increasing the labour supply and should be applauded by its commitment to help people with disabilities. However, it should not be giving bungs to boomers and should instead focus on making childcare more affordable.