A typical response to the idea of replacing the entire welfare system (and poverty-alleviating measures embedded in the tax system like the tax-free personal allowance) with flat rate, universal benefits is that it would somehow destroy work incentives, or that there are some people who don't deserve to get anything.
Ho-hum.
If we accept that the existing system destroys work incentives and causes all sorts of distortions (the couple penalty etc), we must also accept that despite this, most people still work and most people are willing to get married, so we know the starting point and it is just a question of heading in the right direction (without knowing the ultimate destination).
More importantly, what most people overlook is that the existing system is nearly universal and there is only really one group of people who are completely left out.
Out of a UK population of 62 million, there are:
12 million people above state pension age;
29 million employees (claiming the personal allowance);
1 million self-employed (my estimate)
13 million children entitled to Child Benefit etc.
6 million working age 'key benefit' claimants (Income Support, Incapacity Benefit, Jobseeker's Allowance etc)
1.5 million full time students, of whom (say) 1 million are entitled to student grants or soft loans.
OK, those categories overlap to some extent, and some employees are part time and earn less than the personal allowance, some people over pension age still work and so on, but if you add up all those groups, we get to 62 million people all benefitting to a greater or lesser degree from some form of redistribution (remembering that, for a required total tax take, the personal allowance means that low income people pay relatively less tax and high income people pay relatively more).
So the only significant group of people* who get nothing are stay-at-home mothers whose husbands are on middling incomes. If the breadwinner is on a low income, the family gets topped up again with the excruciatingly awful Working Tax Credits. Wives of the truly wealthy can use their personal allowance, because hubby just puts all the investments into her name to use up her personal allowance and basic rate band. It's difficult to say how many of these there are - maybe one or two million? Whether we reintroduce joint taxation of husbands and wives or just give the wife the cash value of the tax-free personal allowance is neither here not there.
So replacing the whole shebang with universal flat-rate cash benefits is not that radical, is it? The big difference would be that it is very simple (thus getting admin costs, fraud, error and overpayments down to a bare minimum) and that there would be no means-testing or artificial distinction between out-of-work and in-work benefits, so work incentives would be greatly increased.
So the question is not "How would you decide eligibility?" but "If there were such a system, who do you think should not be eligible?". Commonsense says that there has to be a minimum legal residence period for Johnny Foreigner (which is one of the real drawbacks of the current system); that if somebody has outstanding fines or child maintenance payments that these be deducted from his or her CI payment; prisoners would not receive it and so on, but that's a fairly short and easily identifiable list.
* There are other smaller groups, like students with reasonably well-off parents who don't get any of the means-tested grants, which I find particularly spiteful, seeing as it's the parents of those students paying all the tax to pay for the grants for the not-so-well-off students.
Stormlight
3 hours ago
3 comments:
In many places, Citizen's Benefit has been introduced by default, to judge from the numbers on the dole who also work cash-in-hand and regard the dole exact as if it was a universal benefit.
No doubt the Daily Mail readers would rather the country spent millions finding out these "criminals" and then punishing them in a suitably draconian way, than removing the crime by introducing a universal benefit scheme.
I wonder how many dole bludgers it takes before they've embezzled in a year as much money as a single troughing MP?
B, more excellent points.
As to your question, the max. that a household can overclaim and get away with for any sustained period is about £10,000, so the ratio is about fifteen such households for one MP.
Are you really claiming that "29 million employees (claiming the personal allowance)" are benefitting from redistribution because part of their gross wage is not taxed? That someone earning, say, £20,000 is effectively receiving money from someone earning £100,000 in the form of a higher allowance than would be the case if the higher earner paid less tax?
"Benefitting from redistribution" means "getting more of other people's money than is taken from you".
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