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9 November 2018

The Rt Hon Theresa May MP joined the Centre for Policy Studies to launch the first in a series of major new reports, ‘Make Work Pay: A New Agenda for Fairer Taxes’.

The Prime Minister was generous in her praise of the CPS, and its Chairman Lord Saatchi, stating that its work is as necessary today as it was over 40 years ago and that it was 'great to see the CPS going from strength to strength'.

She added that 'the new intellectual thought, the new thought about our politics and our future is all on the centre-right. We are the ones who are coming up with the ideas about how our society and our economy should be progressing'.

She added: 'It is so important that as we see what Jeremy Corbyn has done to the Labour Party, we are very clear that we cannot allow him to do that to our nation. And it is our duty as Conservatives to ensure that he never can.'

Lord Saatchi wrote about the CPS's new policy agenda in the Daily Mail on Monday, and also appeared on the Today programme to discuss it. Robert Colvile, CPS Director, wrote about 'Make Work Pay' today for the Sun and Times Red Box, and Tom Clougherty, Head of Tax and author of the report, outlined its central proposals on ConservativeHome.

The central proposal of the report, which is available online here, is to reshape the tax system around a simple principle: to make work pay. This means that it should always pay you to work at every point in the tax system, no matter how much you already earn.

It proposes that the Government should build on the successful increase in the personal income tax allowance (a policy first proposed by Lord Saatchi and the CPS) by raising National Insurance thresholds to create a universal working income, which would see the first £1,000 earned every month (ie £12,000 a year) be completely free of income tax and National Insurance.

This would be a £459 tax cut for anyone earning more than £12,000 a year, and take 2.4 million low-paid workers out of taxes on earnings altogether.

The tax system should then ensure that every worker keeps at least 51p in every extra £1 they earn, which we term the ‘work guarantee'.

This would be delivered by reform of various pinch points in the tax system – the marriage allowance, the high-income child benefit charge, and the 62p tax rate as the personal allowance is withdrawn for high earners.

The report also proposes cutting the Universal Credit taper rate from 63p to 50p. This would address the injustice that those moving from welfare into work often face much higher marginal tax rates than the wealthiest Britons.

Exclusive YouGov polling carried out on behalf of the CPS shows these policies are hugely popular:

The public support the universal working income by 76% to 9%
They support the work guarantee by 61% to 18%
They far prefer a universal working income to a universal basic income
They endorse the principle of Universal Credit, but agree that it must be more generous

The report also argues that while the personal allowance has been an economic success, voters have not given the Government due credit: 58% say they have not noticed its effects in their own finances. This may be why the polling also reveals scepticism about the Tories’ undoubted credentials as the party of low taxes – one of the many problems these proposals would solve.

The report estimates the total cost of its proposals at £13.5 billion. It argues that this can be funded by adopting an ISA-style model for pension saving – previously called for by the CPS – and other savings measures which could be accomplished without impacting frontline public services.

For more information, please contact:

Centre for Policy Studies
57 Tufton Street
Tel:  +44 (0) 207 222 4488
Fax:  +44 (0)207 222 4388
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