As Nick Clegg is pushing for an increase in personal tax allowances to £10,000 a year, on the basis that it’s a way of protecting the lowest paid workers, it’s worth pointing out that it’s not.

The 2012 Income Tax personal allowance increase that’s already in the pipeline will be worth £2.42 a week to those earning £100,000 a year but £0.37p to the poorest workers as it reduces their Housing Benefit (HB) and Council Tax Benefit (CTB).

The mechanics are simple; as net earnings rise, HB and CTB are reduced.

65% of the £2.42 increase in net earnings is taken off Housing Benefit – £1.57p
20% of the £2.42 increase in net earnings is taken off Council Tax Benefit – £0.48p

That’s £2.05 of the increase clawed back leaving just 37p, while those who have income too high to need HB or CTB keep the whole £2.42

If the £10,000 level he is calling for was introduced in April then the same things, or worse, would happen.
Net earnings would increase by £9.71 for those without benefits but those receiving HB and CTB would see most of it clawed back.

65% of the £9.71 increase in net earnings would be taken off Housing Benefit – £6.31p
20% of the £9.71 increase in net earnings would be taken off Council Tax Benefit – £1.94p

That’s £8.25 of the increase clawed back leaving just £1.46, while those who have income too high to need HB or CTB keep the whole £9.71.

The end result is to give the better-off £8.25 more than the little given to those the change is meant to protect.