Our recommendations here are radical: we are committed to strong, progressive taxation. That means we believe that as income rises the proportion of the total income that a person pays in tax should rise as well. It is a principle of tax justice, usually described as vertical equity, that few would wish to dispute. However, the UK tax system does not deliver vertical equity in a great many cases. It is our opinion that this is best addressed by a complete redesign of the Income Tax, National Insurance and benefits systems: nothing less will do if we are to tackle institutional impediments to idleness.
Our proposed system is based around two simple components:
- Basic income payment – Minimum Income Standard All families would receive an unconditional, tax-free basic income payment that would be set at levels sufficient to alleviate poverty.
- Unified Income Tax (UIT) The current Income Tax system and the entire National Insurance Contributions system would be replaced by a single Income Tax structure which would be clear and progressive.
In 1942 Beveridge said the war provided a revolutionary moment and as he noted “a revolutionary moment in the world’s history is a time for revolutions, not for patching”¹. We agree. The global recession is now providing another revolutionary moment in which new thinking is required and that is what we have sought to offer in this paper.
Financing the Social State