MARTIN TAYLOR'S PROPOSALS ON WORK INCENTIVES
HM
TREASURY
6 17 March 1998
Proposals to improve work incentives, cut red tape and
encourage job creation have been recommended by Martin Taylor.
Martin Taylor's report, published today by the Government,
makes recommendations in three main areas:
- National Insurance Contributions. A range of reforms:
- employee NICs. Martin Taylor recommends turning
the lower earnings limit (LEL) into an
allowance, thereby abolishing the entry fee,
and aligning the LEL with the income tax
personal allowance. The Chancellor has today
announced the abolition of the employee entry
fee with effect from April 1999 and committed
the Government to aligning the LEL with the
personal allowance (HMT 5);
- employer NICs. Following consultation with
employers, who were generally supportive of the
package, Martin Taylor recommends the
abolition of the entry fee and aligning the LEL
with the income tax personal allowance. He also
recommends the abolition of the steps in the
system and, to ensure the package is revenue
neutral, raising the main rate of employer NICs
to 12.2 per cent. This is what the Chancellor
has announced today;
- self-employed NICs. Martin Taylor recommends
the abolition of Class 2 NICs, to be funded by
an increase in the rate of Class 4 NICs along
with alignment of the lower profits limit (LPL)
with the LEL. The Chancellor has said that he
will consider this recommendation;
- progressive alignment of the NICs legislation
with income tax including consideration of
extending NICs to all benefits in kind and
bringing NICs operational and policy functions
into the Inland Revenue. The Chancellor
announced today the move of the Contributions
Agency to the Inland Revenue in April 1999, and
the Government's commitment to transfer the
related NICs policy functions to the Inland
Revenue once agreement on a new entitlement
test for benefits has been reached.
(The Department of Social Security will retain
responsibility for benefit entitlement);
- A tax credit for working families. Martin Taylor sees the
introduction of an income tax credit payable to lower
paid working families as delivering a number of
advantages, including a reduction in the stigma
associated with claiming in-work support and reinforcing
the distinction between the rewards of work and remaining
on welfare. The Chancellor has announced in his Budget
today the introduction of the Working Family Tax Credit
(WFTC) from October 1999 (HMT 3);
- Partners of the unemployed. Martin Taylor argues that in
order to reduce the growing number of workless
households, both partners in an unemployed childless
couple should have to make themselves available for work.
Such a change would not mean that both partners had to
work. Once one of them had found a job, it would be up to
them whether both worked. But it would hasten the return
to work of one partner in a couple with neither working.
The Chancellor has announced an initiative to improve the
employment opportunities available to partners of the
unemployed and will consider Martin Taylor's
recommendations (HMT 4);
In a foreword to the report, the Chancellor said:
"We entered Government with a pledge to examine the
interaction of the tax and benefit systems so that they could
be streamlined and modernised, so as to fulfill our objectives
of promoting work incentives, reducing poverty and welfare
dependency, and strengthening family and community life. Last
May I asked Martin Taylor, Chief Executive of Barclays Plc, to
look at options for reform. This report sets out his
proposals.
"Martin's contribution has been invaluable. He has been
closely involved throughout with the development of our
thinking and I am sure that this report will prove to be an
important milestone on the road to modernising Britain's tax
and benefit system."
NOTES FOR EDITORS
1. Last May, the Chancellor asked Martin Taylor, Chief
Executive of Barclays plc, to lead a Task Force looking
at options for the reform of the tax and benefit systems,
in order to promote work incentives, reduce poverty and
welfare dependency, and strengthen family and community
life.
2. The Task Force has comprised senior officials from the
Treasury, the Inland Revenue, the Department of Social
Security, and the Department for Education and
Employment, and has worked closely with Ministers in each
of these departments.
3. Martin Taylor's proposals have been published today by
the Government. They are available on the Internet.
4. Further details of the NICs package are available in HMT
5.
HM TREASURY PRESS OFFICE
