Autumn Statement: Middle Britain is in dire need of Chancellor Philip Hammond's help
AS WE have come to expect from all such events, tomorrow’s Autumn Statement has already been given a theme.
We have been primed by aides to Chancellor Philip Hammond that it will be about families who are “Just About Managing” – the JAMs.
Virtually every politician, of course, has tried to use some form of spin to claim ownership of middle income groups.
George Osborne always used to talk of “hardworking families” while Ed Miliband claimed to represent the “squeezed middle”.
Trouble is, neither seemed to know where the middle lies in Britain’s population.
In his bizarre contribution to the Remain campaign Osborne once claimed that the “poor” would suffer most from Brexit because house prices would fall – oblivious that even well-paid people have been pushed out of the property market in many parts of the country.
As for the Left, a pressure group called Policy In Practice yesterday claimed that families who are “just about managing” stand to lose out from the reduction in the welfare cap – which will cut the maximum that a family outside London can receive in benefits from £26,000 a year to £20,000.
The cap excludes disability benefits. To describe someone receiving £20,000 a year in benefits as “just about managing” stretches credibility.
It is bizarre to have an income tax that only affects people who work
People who are so dependent on the state are not really managing at all.
I am all for a benefits system to prevent the poor falling into destitution but welfare-dependency should be recognised for what it is – a state from which everyone should be aspiring to climb.
It should not be portrayed as a condition in which people should be happy to live.
If “just about managing” means anything, surely it means those people who are getting by without benefits but who find little or no money left over for luxuries and who find it impossible to save.
There are millions in Britain who will recognise this as a description of their own circumstances and yet their interests have too often come second place in the minds of governments more interested in representing voters among the well-off or among the benefit-dependent.
The one change which really has helped people in the middle over the past few years is the increase in the income tax threshold, which has risen from £6,475 in 2009/10 to £11,000 this tax year.
The coalition deserves credit for that. Otherwise, the middle has become a very uncomfortable place to be.
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The UK median disposable household income, according to the Office for National Statistics, is £26,400 a year.
At that level you are likely to find yourself a little too well-off for most state benefits and yet a little too poor to take advantage of many tax incentives.
Earn that sum and you are going to be a long way down the list for social housing.
You are unlikely to be able to afford to buy a home, thanks mostly to high house prices but also to stamp duty.
You are unlikely to qualify for much in the way of housing benefit to help you with your rent, and none at all if you have managed to amass savings of £16,000 or more.
You might qualify for Child Tax Credit but much less than you would have done a decade ago.
Yet at the same time you don’t have much money to save and so are unable to take much advantage of the generous tax reliefs available on pensions or Individual Savings Accounts.
George Osborne’s reforms of inheritance tax are unlikely to benefit you.
Any money that you do manage to save will be earning next to no interest.
You will have been hurt by rises in National Insurance contributions during the Gordon Brown years.
You will be suffering from the increase in VAT to 20 per cent in 2011, and paying the green levies on your heating bill but be unable to benefit from feed-in tariffs on solar panels and other green energy.
In other words, you will have been hit by most of the tax increases in recent years but without enjoying any of the perks targeted at the rich or very poor.
A little further up the income scale – though still far from wealthy – people with household incomes of £50,000 have lost their child benefit, as well as finding themselves pulled into the 40 per cent tax bracket.
But they, too, have gained little from the giveaways. However, there are signs that Theresa May does understand the JAMs.
There is talk that the threshold for the 40 per cent tax rate will be substantially increased, taking many teachers, nurses and middle managers out of a tax bracket which was never supposed to be designed for them.
I can add a few more suggestions to that: how about removing stamp duty on all properties below £500,000 bought as main homes?
The Chancellor, too, should do away with the Community Infrastructure Levy on low-priced properties – an absurd tax that forces buyers of starter homes to subsidise infrastructure used by everyone.
Above all, he should announce the phasing out of National Insurance contributions.
It is bizarre to have an income tax that only affects people who work for a living and not, for example, wealthy people living on investments.
With a stubbornly high deficit the Chancellor is not in a position to offer giveaways tomorrow and it would be irresponsible if he did.
But he should take what chance he can to indicate that the tax and benefits system will be tilted in favour of the JAMs.