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IFS explains why raising taxes may be tricky

Reality Check

Anthony Reuben

This morning I heard one of those lines that's obvious when you think about it, but hadn't occurred to me before.

It came from Robert Joyce, a tax expert from the Institute for Fiscal Studies, which held a briefing on the parties' manifestos.

He was talking about raising taxes for high earners.

If you have somebody currently paying the 45p tax rate, you raise that to 50p and there is no change in behaviour then the excequer gains an extra 5p in the pound.

But if they decide to try to reduce their tax bill by saving more into their pensions, for example, or indeed decide to work fewer hours, then you lose 45p in the pound as well as some National Insurance.

So you only need one person in 10 to change their behaviour and you don't make any money from raising the tax.

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