Britain’s New Budget: Alleviating Poverty Through Incentivizing Hard Work MARCH 18, 2016 BY TOM ROGAN

The British government has released its latest budget. And taking root in two key principles — fostering aspiration and disincentivizing welfare dependency — it’s one that American conservatives could learn from.

Consider the details.

First, the budget embraces tax reform to foster aspiration. It does so by raising the individual income tax deduction from $15,118 to $16,408. The understanding here is simple: to incentivize work for those starting out on the economic ladder, a demographic made up for the most part by younger citizens. This is a conservative counterpoint to the idiocy of the minimum wage: instead of raising the marginal cost of an employee; we should incentivize the greater marginal benefit of employment.

While $16,408 is obviously not itself a large number, raising the deduction will mean at least $258 in annual savings for those on lower incomes. But Prime Minister David Cameron’s budget also raises the starting point for higher-rate taxes (40 percent in the UK) by $3,727, from $60,396 to $64,123. That equates to an annual saving of at least $745 for lower-middle income earners, enough to contribute towards a car payment, new computer or a vacation. Put another way, that’s enough to contribute towards the individual pursuit of happiness.

By providing lower-middle earners with more of their own money, the budget matches a little more work with a lot more rewards. But the budget also lays the groundwork for opportunity by incentivizing entrepreneurial activity and rapid capital flows. It does so by lowering the corporate tax rate to 17 percent by 2020; the highest capital gains tax rate from 28 percent to 20 percent; and the lower rate capital gains tax from 18 percent to 10 percent.

This kind of conservative leadership is bold and wide ranging. It invites inevitable liberal stick-man arguments that capital gains feed the rich, but takes confidence in economic reality. In a global economy defined by moveable capital, it will make Britain an increasingly favored location for investment that fosters productivity, new jobs and real, sustained gains in earnings.

BY PROVIDING LOWER-MIDDLE EARNERS WITH MORE OF THEIR OWN MONEY, THE BUDGET MATCHES A LITTLE MORE WORK WITH A LOT MORE REWARDS
Indeed, in that regard, the budget here is a wake-up call for the United States. As I recently explained at Opportunity Lives, our punitive corporate taxes are a huge weight on the economy. Unless we wake up to global competition, we will simply price ourselves out of the market.

Cameron’s budget also discourages welfare dependency. Welfare reform is critical for three reasons: long term individual well-being, social harmony and economic growth. Today, however, too many Britons are on welfare. These citizens see a system in which the merits of employment are outweighed by the opportunities of welfare. Speak to any objective Briton and they will tell you a story of someone who has spent many years on welfare because they would rather relax than work. And while many of these individuals are simply lazy, the real tragedy is the culture of dependency under which they bury their children. Life is worth more than eyes on a TV screen.

In recent years, British TV networks have aired documentaries that examine this culture of dependency and how it sucks children into poverty, addiction, hopelessness and criminality. This challenge is especially problematic in Britain’s public housing projects, where the hopelessness is palpable. Yet one of the key drivers of this dependency has been the increasing manipulation of the system by those who claim they are disabled and cannot work.

The scale of the problem is clear: in 2016, the UK will spend 15 percent of its total government budget — approximately $77 billion — on welfare, not including pensions. Correspondingly, the UK Treasury Secretary, George Osborne, is using this latest budget to ensure that benefits are re-focused towards those who are actually disabled and unable to work, and away from those who are playing the system.

It’s true, were similar reforms applied here, the American Left would copy the British Left in condemnation. They would say the budget is immoral: that it forgets those at the bottom in favor of those at the top. But as in so many areas, they would be completely delusional. History proves that the best way to alleviate poverty is education joined to opportunity. It is in this understanding that American conservatives should take a lesson from Britain’s new budget. After all, it offers a roadmap on empowering individuals as the best servants of society’s better future.

Tom Rogan is a Senior Contributor for Opportunity Lives and writes for National Review. He is a panelist on The McLaughlin Group and a senior fellow at the Steamboat Institute. Follow him on Twitter @TomRtweets.