The tax-free personal allowance, which rises to £12,500 in April, should be scrapped and replaced with a flat payment of £48 a week for every adult, according to radical proposals welcomed by shadow chancellor John McDonnell.
The proposal, from the New Economics Foundation thinktank, is for a £48.08 “weekly national allowance,” amounting to £2,500.16 a year from the state, paid to every adult over the age of 18 earning less than £125,000 a year. The cash would not replace benefits and would not depend on employment.
The policy idea has been welcomed by the shadow chancellor, John McDonnell, and the Green MP Caroline Lucas, and would mean that as many as 88% of all adults would see their post-tax income rise or stay the same, helping to lift 200,000 families across the country out of poverty.
The weekly payments would be fully funded by the abolition of the tax-free personal allowance, which has seen inflation-busting increases under the Conservatives over the past 10 years, but which NEF said had benefited richer households most.
For someone on £25,000 a year, the personal allowance means that the first £12,500 of their earnings, from this April, are not charged basic rate tax at 20%. This is worth £2,500. But if the same person is paid £48 a week instead, they will receive £2,496 a year, so they will be no better or worse off.
Alfie Stirling of the New Economics Foundation said: “The persistent increases to the personal…
