From The FT:
Sir, Of course, Philip Stephens is right that there is no rational justification for winter fuel allowances and free bus passes for the well-off elderly; and I will happily surrender mine (“Free bus passes will test Cameron’s mettle”, June 8).
However, there is a danger in the removal of benefits from the better-off. Loss of benefits is a form of income tax, but an income tax with a marginal tax rate that jumps up and down in an arbitrary way at different points of the income distribution, adding to the complexities already introduced by the recent ill-considered change in tax allowances for pension contributions.
[If we want the better off to] make a generous contribution to closing the fiscal gap, ... the government should do this clearly and honestly by raising income tax rates. And if the elderly poor are short of money for bus travel and winter fuel*, let's also deal with that clearly and honestly by giving them more money.
Alasdair Smith, Research Professor of Economics, University of Sussex, Brighton.
It's nothing I haven't said a hundred times before, but it's nice to see it in print - benefits withdrawal is like income tax but complicated and dishonest, and the net effect of taking away benefit from those perceived to be 'better off' can only benefit those who really are very wealthy. Maybe you hate universal benefits or higher tax rates, but at least they're honest.
Similarly, it is absolute madness to simultaneously have benefits 'targeted' at the poor (as defined) and a parallel system of contributory benefits for the majority; or to simultaneously apply means-testing while paying out contributory benefits - the two effects more or less cancel out. This isn't politics, it's maths.
* He makes a mistake here - winter fuel allowances are indeed money, a pensioner can spend them on what he likes, unlike a free bus pass which is 'use it or lose it'.
Elevate their cause?
10 hours ago
2 comments:
Good point about the winter fuel. Same is true of the cold weather allowance. That is just a cash payment too.
I share your view, Mr W, that everything should be clear and simple so that everyone knows where they stand at every stage.
Quite apart from the fact that officially describing something as "free" is both a lie and an encouragement to delusion, I believe people like to be told the truth - even if that truth contains matters that are not in their favour. It's the great curse of the age of spin and leaves us all believing we are being lied to all the time, even if we're not.
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