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Labour Representation Committee
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24 January 2008
What would you do with £8.8bn?
Andrew Fisher, Editor and Co-ordinator of LEAP, considers the National Insurance Contributions Bill.
The Government is taking its National Insurance Contributions Bill through the Commons to iron out the anomalous way in which tax rates and the national insurance (NI) ceiling do not coincide.
However, another anomaly is why there is a ceiling so that the wealthy only pay 1% NI on their higher earnings (over £40k approx). John McDonnell MP has tabled an amendment to this Bill to remove the NI ceiling so that everyone pays 11% NI on all their earnings over £100 per week.
This would only affect those earning over £40,000, and would mean an increase of around £19 per week for those on £50,000 salaries. To put this in context just 6.7% of the population earns £50,000 or more. For the over 90% or so of the population that don't earn such salaries there would be no effect on their take-home pay – but there could be changes in the public services on which they rely with the revenue it raises.
This change would raise £8.88bn in public revenue. So LEAP and the LRC are asking 'how would you spend £8.8bn?'
For children, we could increase child benefit for the eldest child by £14 per week, lifting an estimated 400,000 children out of poverty, and increase Government spending on childcare by 50% and all for just £8.3bn.
For pensioners, we could make personal care free for the elderly, double the winter fuel allowance (which would cover two-thirds of the average pensioner's fuel bills, immediately restore the link to earnings, and still have £4.8bn remaining to give an inflation busting rise in the basic state pension (to raise the basic state pension to the Pension Credit level, a longstanding policy of the LRC, would cost £21bn according to the DWP).
In housing, we could bring all council houses up to the decent homes standard (based on ODPM estimate of £7,000 per home) and still have £3bn to invest in new build. In health we could give the NHS budget a real terms increase of 10% and still have enough left over to halve prescription costs.
In education, we could remove all university fees, double Sure Start funding and give the education and universities budget a real terms increase of 10% - and with enough money left over to fund an additional 20,000 teachers.
We could double the amount the UK gives in aid (to over 1% of GDP), and still have enough left to give Iraq and Afghanistan £1bn each per year in reparations for the devastation we have brought on those countries.
A directly redistributive alternative would be to raise the income tax personal allowance by 20% - which would benefit any paying income tax by about £230 per year.
Email info@l-r-c.org.uk to let us know how you would spend £8.8bn or to ask us if we can cost any policies you'd like to see implemented? Post your ideas and comments below.
A version of this article first appeared in Labour Briefing
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