Reform UK tax cut pledge raises doubts
Reform UK’s tax cut pledge for workers doing overtime hours is facing criticism from economists across the political spectrum amid doubts it would boost productivity.
The party said it would scrap income tax above a 40-hour week for workers on less than £75,000, costing around £5bn a year and paid for through cuts to welfare payments.
Treasury spokesman Robert Jenrick said it would save workers doing overtime more than £1,3000 a year while Nigel Farage said it would “finally make work pay, drive up productivity and restore the appeal of a strong work culture once again”.
But economists have raised questions over the economic effects of the proposal.
Former Capital Economics chief economist and Institute of Economic Affairs fellow Julian Jessop said the policy would not “work as intended” and was a “bad idea”.
“Incentivising some people to work even more hours is likely to damage productivity and harm welfare,” Jessop said.
“Some firms might also spread the same total amount of hours among a smaller number of workers, meaning some lose their jobs.
“The Trump administration has introduced a similar scheme in the US and it is already backfiring. For example, some firms are offering more hours at lower pre-tax rates, rather than boosting pay across the board. The US scheme is also proving to be a nightmare to administer.”
The Institute of Fiscal Studies’ Helen Miller also said the policy was “problematic in principle and practice”, suggesting the incentives would lead to distortions.
Tax pledge criticised by Labour and Tories
Tory advisers have also claimed that the policy would increase the risk of tax avoidance and evasion, with results in France proving to be costly.
Shadow chancellor Sir Mel Stride said the policy lacked “serious thinking” and would not be able to be delivered.
Lucy Rigby, chief secretary to the Treasury, said: “If Reform want people to take their unfunded, back of a fag packet plans seriously, they should come clean about where their £40bn of cuts would fall and which public services would pay the price.”
Reform has estimated that there are around 3.2m workers receiving overtime pay.
As part of the proposal, the party committed to changing EU law on working time to ensure the tax break could be taken advantage of.
The party also made other commitments on Sunday to replace the Cabinet Office with a new Office of the Prime Minister and to scrap the role of the cabinet secretary, who heads the civil service.