Sunday 14 November 2010

There's an outrageous lie at the top of page 11

From the DWP's Universal Credit: welfare that works:

The Government spends a further £3.5 billion each year on administration. The Department for Work and Pensions and its agencies spend around £2 billion a year, Local Authorities spend a further £1 billion to administer Housing Benefit and Council Tax Benefit, while HM Revenue & Customs spends £450 million administering Tax Credits. Multiple agencies use valuable resources to gather and manage essentially the same information.

Nope.

The DWP's own accounts show that it will spend £10 billion on administration costs (Total resource budget DEL) this year, page 89.

And as far as I remember HMRC admitted that administering Tax Credits costs 3p for evey £ paid out, and as they pay out £27 billion or something, that puts their admin costs at something like £810 million a year. Para. 1.2 on page 10 of this by the National AUdit Office says HMRC spent £581 on administering tax credits in 2007-08.

Tot that all up and stick on the very low estimate of £5.2 billion for fraud and error from the previous page and that comes to a nice round £17 billion a year. There are about ten million households claiming benefits and/or tax credits, so that works out at administration/fraud and error costs of £1,700 per claimant household, or £34 per week.

5 comments:

Jill said...

Ok. Right. I know this is such a tangent as to be almost OT, but tell me how the following is stupid!

One aim of this is to reduce welfare dependency, right? What IDC really wants is to get as many people as possible out of the system altogether, so he wants to smooth out transitions. This kinda ties in with the LibDem goal of upping the Income Tax thresholds.

I agree with this. The further people are from the benefits system, providing they can actually get by, of course, the more self-reliant and better-off they will be. And so will their/the cheeeeldren, and so will the rest of us.

Not a fan of the NMW, but as it's a given, why can't we up that? According to the Greens manifesto, going for the proposed living wage of £8ish per hour instead of NMW's £6ish per hour would save £6bn in tax credits.

We can't put up wages by that much for fear of stalling a private sector recovery. So why couldn't we make it fiscally neutral by reducing employers NICs to the tune of £6bn? No cost to employers. More money to the poor. Fewer people claiming benefits.

I'm so far from a bean counter it's scary. No good with numbers, which is why I read this blog! So, am I stupid?

Mark Wadsworth said...

Jill, I don't believe in NMW any more than I believe in fixed exchange rates, import or export quotas etc.

The point is, if you want lower earners to have more money, just reduce the amount of tax they have to pay, or benefits that they lose!!

I'll do some workings on this later. It would be fiscally neutral (from the point of view of the government) and a huge boost to lower earners.

I completely agree on Employer's NIC, which is the second worst tax after VAT.

James Higham said...

That's so right. For every new scheme, even cutbacks, there are the admin costs to add. This government has turned out to be everything we feared.

Mark Wadsworth said...

JH, which is why I keep wailing on about how we could do all the means testing via PAYE codes (K-codes), which would cost £0.00 to implement.

Scott Wright said...

Jill: "Not a fan of the NMW, but as it's a given, why can't we up that? According to the Greens manifesto, going for the proposed living wage of £8ish per hour instead of NMW's £6ish per hour would save £6bn in tax credits."

The Green's manifesto at the last election must have been written someone freshly graduated from Economic Incompetence 101

Whilst the Greens favour a move to LVT, their short-term plans were complete lunacy. They wanted to get rid of the higher earnings threshold for NICs where the employee contribution drops to 1%, on top of that they wanted to keep Labour's 1% rise and also bring back the 50% threshold to £100,000, anyone earning above £100,000 would pay 62% on that income. If the gummint keeps more than the citizen, the citizen gets pissed off!! Citizens with that type of earnings potential generally would be able to find work overseas where they would not suffer such punitive rates of taxation. Punishing the most mobile section of the labour force in order to "compensate" those at the bottom of the ladder who stay at the bottom of the ladder as a direct result of government policy and "means-testing" is not the right way to go about things.

The Greens are idiots.