Cameron's Not For Turning

David Cameron the UK's Primer Minister (well actually only the English PM, because you have to exclude Scotland, Wales and Northern Ireland as they have their own first ministers - agitprop ed), has just stated that the deficit reduction plan that is playing out in the UK is going to be stuck too come what may.

It sounds close to the, "You turn if you want to, the lady's not for turning", that PM Margaret Thatcher famously said at the Conservative Party Conference in 1980 in the depths of the worst recession (in living memory up until that point, the current recession is even worse - economics ed) of her leadership.

In my opinion Mr. Cameron's was a fairly well balanced speech, but there were a few parts that caused me to do a little finger waving and mild expostulations at the TV. What really got my goat (thanks (?) to Ralph the Alaskan for the latest picture of  what appear to be you skinny dipping in a lake) was the idea that the coalition has cut "in-half" the amount of income tax that "hard working families", on minimum wage pay .

But, but but, why on earth are people on minimum wage paying any income tax at all? The minimum wage is not a living wage anywhere in this country and particularly not in the southern half of the UK.

Some quick, back of the spreadsheet calculations show that a minimum wage earner grosses £11,884.80 per year and actually takes home (after tax), £10,442.66. (See below for hopefully correct calculations - maths ed)

'Da Government' (tm) own definition of poor is, "A family is considered to be officially poor if they are living on less than 60% of Britain's median (average) level of household income."

Britain's gross median (average) income in the year 2011-12  was £26,312 giving a post tax amount of £20,254.16. So anyone with a net income, of 60% or less of this figure, £12,152 is officially classified as poor. 

So figures for the tax year 2011-12, I have demonstrably shown that people on minimum wage even though they are deemed as officially poor, are paying not only income tax but national insurance as well.

How on earth have we got ourselves in this situation where those defined as and actually poor are paying any taxes at all? (answers on a postcard are not accepted - marketing ed)

Calculations
Minimum wage in the UK (2012) for over 21's is £6.19 an hour.

Take a working week as 40 hours.

Let say 240 working days a year.

So, given the above, the minimum wage earner doing one job, would have a gross income before tax and national insurance of 240 * 8 * 6.19 = £11,884.80 per year.

Now, taking into account income tax (using 2011-12 year for tax rates) of £881.96 and Employees National Insurance of £559.18 (an income tax by any other name is still an income tax - economics ed) . Lead us to a total of £1,441.14 of tax.

So the net income of this minimum wage earner is £11,884.80 - £1,441.14 = £10,443.66

Thanks to thesalarycalculator.co.uk for working out the tax and NI costs for tax year 2011/12. What a handy little tool you are.

Other assumptions: a single wage earner doing only one job. They get paid for the 8 Bank Holidays a year.

Afterthought

To be fair, I thought that this was a no brainer of an argument, that those on low pay should obviously not pay any taxes on income as they were too poor.

But it comes down to a "one size doesn't fit all", type of problem. Given the disparity in median income across the regions of the UK, if all of those on 60% or less of national median income did not pay any income tax, then this would disproportionately benefit some regions over others (up North in particular - ed)

However, those in work and on low wages (and paying income taxes) are at present eligible for various working tax credits to help boost their low income. So you have to ask yourself why is the government is taxing (clawing money from the poor - agitprop ed) them with one hand, then giving it or more back again in the form of working tax credits with the other (and causing a lot of cost in working it all out, overpaying, underpaying etc - ed).

You have to ask yourself, surely there is a simpler way than this?