Nigel Farage sat next to the pervy plumber and announced a new policy of removing Income Tax on overtime for workers earning less than £75,000 per year.
It's a good policy in terms of grabbing headlines, but it's an absolute bin fire of a policy from an economic perspective.
Here are just some of the problems:
Unfairness 1 (self-employed) If you're self-employed then you don't have set hours and overtime, so this policy won't benefit self-employed workers at all, while salaried workers doing the same long hours, in the same industry, will make all the gains.
Unfairness 2 (the cut-off) Having a cut-off at £75k, rather than a taper, means that a worker on £74,999 after overtime might benefit to the tune of a £6,000 tax reduction through this policy, while a worker on £75,000 would lose it all. Six grand in extra taxes for one pound of extra income!
This would immediately become the UK’s biggest tax "cliff edge".
Unfairness 3 (contract variations) If you're a plumber who is contracted to work 50 hours a week and work a few hours more than that, you'll feel almost no benefit from this policy, if you're a plumber on a 40-hour contract and work the exact same hours, you'd benefit to the tune of thousands per year.
Unfairness 4 (multiple jobs) This policy favours people who work one single salaried job, and discriminates against anyone who works various different jobs to make ends meet.
Perverse incentives 1 (contract fixing) Why earn £25 per hour, when you could have a contract that pays Minimum Wage (£12.71) for 40 contracted hours, then £516.60 for the first hour of overtime? It'd cost your boss exactly the same, but you'd save thousands of pounds per year in tax.
Reform would be creating an incentive for huge numbers of workers to redefine their contract hours in order to maximise the tax they can avoid, while those who don’t fiddle their contracts get economically penalised. We used to be known as “a nation of shopkeepers”, Farage wants to turn us into “a nation of tax-fiddlers” (which is actually quite fitting given where Reform get so many of their donations from).
Perverse incentives 2 (Personal Service Companies) What if a whole load of the self-employed people who would be getting absolutely shafted by this unfair policy decide to set up Personal Service Companies, so they can pay themselves salaries, and maximise what they can claim via this tax break? You can't really blame people for setting up tax fiddling vehicles if the government actively incentivises them to do it, right?
The true cost Reform have come up with an estimate of £5 billion for what this would cost, but they've not bothered to factor in how people's behaviour would change. They've not factored in re-labelling of previously contracted hours as overtime or other forms of contract fiddling, and they've not factored in the mass creation of Personal Service Companies. It's as if they're so economically naive that they imagine the economy as a static thing that doesn't change once they create large financial incentives for people to change their behaviour!
This refusal to consider people's changing behaviour is the difference between their £5 billion estimate, and a likely £14 billion cost.
Enforcement It is theoretically possible to try to police this policy, but it would be complex. There's not even tax definition of "overtime" today, so all the rules would have to be drawn up from scratch. And how much would it cost to enforce these new rules? Reform have no answers, because they haven't bothered to think through the actual consequences of their policy before announcing it.
Poor priorities According to Tax Policy Associates the economic benefit of this policy would be a paltry £0.07 for every £1 it costs. That's an abysmal return on investment. Reform say they're going to pay for the policy with another savage round of cuts to the welfare budget, which is almost entirely composed of pensions, in-work benefits, and disability benefits for people who simply cannot work.
What are the economic returns on the unspecified social security payments Reform say they're going to slash to pay for this policy? Reform haven't done the calculations, but it seems highly unlikely they could be as low as 0.07.
Evasiveness Reform have refused to say exactly which social security programmes will be slashed to make up the £5 billion they say this policy will cost. They're not likely to go after pensioners, given that the over-65s are way more likely to vote Reform than working age people, so that leaves disabled people and in-work benefits.
Assuming they're planning to cut in-work benefits, how many workers are going to gain a bit from the Income Tax cut on their overtime, only to have more taken away because of cuts to in-work benefits?
It's impossible to say, because Reform won't tell us where they're planning to make these cuts.
Alternatives There are countess other adjustments that could be made to the tax system to benefit ordinary workers, without creating such a mess of unfairness; perverse incentives; and hidden costs.
Raise the Income Tax threshold; cut Income Tax; cut National Insurance; increase Child Benefit … all of which would cost less, and generate more economic benefit.
Conclusion It's back of a fag packet economics from Reform, which is hardly surprising since they poached the Tory pillock Robert Jenrick to be their economics guy.
Instead of just giving a tax cut that benefits everyone, like raising the threshold before Income Tax kicks in, they're intent on creating a deeply unfair system that privileges some workers; disadvantages others; and creates perverse incentives for people to start fiddling with their contracts and employment statuses to avoid paying tax.
Reform haven't done their sums properly; they haven't considered all of the unfairness and perverse incentives they'd be creating; and they're outright refusing to be honest about who they're going to economically sanction with social security cuts to pay for their severe under-estimate of what this policy would cost.
Unfortunately though, some people will be inclined to vote for this economically incoherent nonsense anyway, because they'll imagine themselves better off because of it, without considering that stuff like raising the Income Tax threshold, or an Income Tax cut, could make them better off too, without being so grossly unfair about it.
It's populist politics in a nutshell. Lazy, economically illiterate policy that is designed purely to win votes from the very particular demographics who stand to benefit from it.Clio the cat, ?July 1997-1 May 2016 Kira the cat, ??2010-3 August 2018 Jasper the Ruffian cat ???-4 November 2021 Georgina the cat ?2006-4 December 2025 Toni the cat ?2005-25 March 2026
Re: Reform's new overtime policy is a bin fire of unfairness and perverse incentives
nmClio the cat, ?July 1997-1 May 2016 Kira the cat, ??2010-3 August 2018 Jasper the Ruffian cat ???-4 November 2021 Georgina the cat ?2006-4 December 2025 Toni the cat ?2005-25 March 2026
on May 25, 2026, 7:30 pm