Tax-obsessed Labour won't like it... but my radical plan to stop the poor paying any tax AT ALL would benefit every one of us, by LORD SAATCHI

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Labour isn’t working. Those are the words used back in 1979 when – in the grip of a failing government and soaring unemployment – we masterminded an advertising campaign to propel the Tories back to power.

It was the slogan my firm, Saatchi & Saatchi, chose – plastered on the now-iconic poster of hundreds waiting in the dole queue. Clearly it worked, propelling Margaret Thatcher into No 10 for the next decade.

But, 45 years on, how depressingly relevant that poster remains.

Today, 4.5 million adults aged 18 to 65 are not in employment, education or training. They cost the country billions in benefit payments every year.

Labour’s undeclared dream is for the majority of people’s income to be taken in tax

And the worst part? Labour prefers it that way. Sir Keir Starmer and his Cabinet believe that tethering people to State handouts will keep their government in power for longer. It is a cold political calculation – with terrible social and economic costs.

Don’t suppose for a minute that the ‘economically inactive’ population consists merely of stupid or lazy people. On the contrary, any professor at the London School of Economics will tell you that very many have made a rational, financially sound decision not to work.

They know there is no incentive to get out of bed in the morning because, after paying income tax and losing benefits, they would be worse off than staying on the dole.

Working for a low salary that is taxed is pointless.

My decades in business taught me that incentives are imperative – for customers, for the workforce and for employers. We all need sound reasons, including financial ones, to get out of bed.

But in Britain today, there are countless compelling incentives to remain workless.

Chief of these is income tax, which is payable above a salary level of £12,570. Any income above this threshold is subject to taxation, initially at 20 per cent.

Yet the official ‘poverty line’ is below half of average earnings: £17,000 or less. It is utterly unjust – not to mention economically insane – that some of the poorest people, who earn £12,570 to £17,000, are forced to pay income tax. Even more perversely, in the vast majority of cases, they are then ‘reimbursed’ with benefits.

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This situation has grown steadily worse. This year alone, the Government has pilfered £6 billion from the poorest by not raising the starting threshold for income tax in line with inflation. This trick is known as fiscal drag and it is doing a cruel job.

The scandal is worsened by the fresh injustice of Chancellor Rachel Reeves’s increased National Insurance levies on employers – another anti-work tax. How can these injustices be corrected? One obvious answer is for the lowest earners to keep more of their money before they start paying tax. That would immediately make it more worthwhile to work for a living.

Among the 2.6 million benefit claimants who do work, a high proportion earn less than £17,000. Clearly, they’d be no worse off if their benefits were reduced, provided, of course, their income tax was cut by the same amount.

In other words, the cost to the Treasury of raising the income tax threshold to £17,000 (estimated at £4 billion to £6 billion) would be cancelled out by the saving in benefits. Government spending would decrease and millions of people now caught in the bewildering complexity of the welfare system would be freed. 

Consider the ludicrously complicated mass of benefits, exemptions, credits and so on – which the citizen has to navigate. Some benefits, such as Universal Credit, are means-tested; others are not. Iniquitously, estimates suggest thousands of households are paying a marginal tax rate of up to 95 per cent on parts of their income – a figure approaching the 98 per cent levy on unearned income that was in place when Mrs Thatcher became PM.

The solution to this shambolic mess must be radical reform.

Raising the tax-free threshold would not only cut administrative costs but also reduce pressure on the NHS. After all, benefits claimants are more likely to suffer from health problems stemming from being isolated at home.

The fact is that a rapidly expanding workforce would drive the economic growth that Labour has promised – and which the country desperately needs.

Lord Saatchi says it’s time for a radical new approach and greater independence for all

And, perhaps most notably, there would be a dramatic fall in immigration. Such reforms would mean less need for immigrants to take the jobs that those who already live here have little incentive to fill.

All this can happen only if Britain returns to traditional Conservative values: hard work, enterprise, fair pay and meritocracy. Those ought to be Labour values, too. But the Starmer government won power on the back of a cold calculation: the State buys popularity through benefit payments of one kind or another.

Worse, Labour’s undeclared dream is for the majority of people’s income to be taken in tax. Eventually, that could get to the point where almost everyone is obliged to call on the State for assistance.

This is little more than economic enslavement – in which the Government makes itself master by using the tax benefit system as a whip.

The result, of course, isn’t economic growth, despite all the promises Reeves has made to business leaders.

Instead, there is demoralisation. All surveys confirm that Britain has felt ‘worse off’ since Labour came to power – and very few people expect things to get any better in the next five years.

But how can the national picture improve – when millions feel working will make them even poorer?

A report by former Labour Health Secretary Alan Milburn found that in the Yorkshire town of Barnsley, 70 per cent of people claiming sickness benefits said they wanted to work – but only ten per cent were actively in contact with employment services.

How frustrating for them, and expensive for the rest of us. This madness suits nobody except self-serving Labour politicians.

There are three million people of working age claiming sickness benefits, up by one million in just five years.

A Channel 4 Dispatches documentary this month, Britain’s Benefits Scandal, spoke to people in Hull trapped on welfare benefits.

A man called Michael said he’d applied to train as a plasterer but had to withdraw when told that, as soon as he began his apprenticeship, his benefits would stop. He wants to earn a living in a much-needed profession – but how is he supposed to eat or pay the rent while he learns?

Gavin, a taxi-driver, contacted the Department for Work and Pensions to say he no longer needed sickness benefits. He was told to wait for reassessment. Three years later, he is still waiting... with the money still pouring in.

This chaos cannot go on.

The tax system should be a social glue – a means of binding the country together while enabling people to live better lives. But now it is little more than a political weapon.

It’s time for a radical new approach and greater independence for all.

The power of taxation can be used to the benefit of everyone – before that dole queue starts forming again to remind Sir Keir Starmer that he is not working.

• Lord (Maurice) Saatchi was chairman of the Conservative party from 2003 to 2005.