Marginal tax rates of more than 90 per cent that David Cameron highlighted yesterday in his conference speech may sound like some horrible throw back to the 1970s, but they are the sad reality for many people in modern Britain – and perversely they are levied only on the lowest earners.

Of course, marginal tax rates should not be confused with income tax bands. At present, the highest income tax band in the UK is 40 per cent (rising to 50 per cent next year). Marginal tax rates actually refer to the extra tax you pay in proportion to every extra pound you earn as your income rises. As income rises for the lowest earners, they not only pay more tax but they also lose benefits, which is why it is often pointless to work extra hours. Economists call this the poverty trap.

It is impossible to know exactly how many people actually face the marginal tax rate of 96 per cent that David Cameron highlighted. The specific figure he quoted is based on a hypothetical scenario of a working single mother with two children under the age of eleven who earns exactly £150 a week, lives in local Authority housing, claims tax credits, housing and council tax benefit, and pays for childcare at a cost of £50 a week. In reality, this specific scenario probably only affects a few hundred people, but tens of thousands of lone working parents face marginal tax rates of more than 70 per cent. Only when earning move above £500 a week or more do marginal tax rates fall back to reasonable levels for working single parents.

Perhaps a worse indictment of this Government is not that this poverty trap exists as all developed countries grapple with the same problem but that the tax credits and benefits regime in the UK is so fiendishly complex that even those whose job it is to run the system are often left bewildered.