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FRAYNE James

James Frayne is Director of communications agency Public First and author of Meet the People, a guide to moving public opinion. The focus of this column is Theresa May’s conservatism for “ordinary working people”.

Issue

Increasing the disposable income of those just about managing.

Background

The mass of C1/C2 voters who make up the majority of the electorate in England’s marginal seats aren’t poor but certainly aren’t rich. Home ownership is normal (with a decent second hand car) but declining: young C1/C2 voters are much less likely to own. As rents and mortgages have become pricier, even outside London, their disposable income has dropped. Now many aren’t saving at all and their wealth is declining. Their position is precarious and worsening relative to those in the upper quartile.

As discussed before, this picture is reflected in their relationship with the state. The lower middle class get back what they put in – their taxes on average equate to the value of the benefits and services they receive. This means small changes in disposable income make a huge difference – as Dickens said, the difference between happiness and misery.

What can seem like trivial tax changes to the elite are therefore enormously significant. My Policy Exchange report on those just about managing – which included extensive opinion research – found that five financial policies would secure particular support: raising the personal allowance; reducing VAT to 17.5 per cent; freezing energy bills; reducing taxes on petrol; and reducing the cost of public transport.

These all have something in common: they’re all highly visible, easy to understand and would be felt by families immediately. Options like reducing stamp duty, cutting Air Passenger Duty and reducing the cost of fines polled much less well. Cuts in these taxes and charges would only be felt irregularly, if at all.

What next

It’s rare for Ministers and Civil Servants to construct economic policy thinking primarily about the everyday lives of ordinary people – and it is notable that most of the recent conversation on relaxing borrowing has focused on Government spending (particularly on infrastructure). Government always prefers to spend more than cut taxes but reducing taxes also has an impact on the economy and would immediately help those just about managing.

The Government should take a look at significant, targeted VAT cuts to help ordinary families. The most obvious place to start is by abolishing VAT on domestic fuel. The Government hasn’t yet adopted any of the very popular policies developed by the Leave Campaign during the referendum (most obviously, on the NHS). But this one would be easy to promise on leaving – and therefore demonstrate an advantage to Brexit (it is currently prohibited under EU rules). Others would help those just about managing – for example, a cut in VAT on housing renovations and repairs or on holiday accommodation where British tourism currently faces a higher rate than many European countries.

Policy by polling is frowned upon. But where disposable income is concerned, the Government could do a lot worse that asking the public what they think will help them most.

19 comments for: James Frayne: How to increase the disposable income of those who are just about managing

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