They couldn't run a sweet shop

To expand on the Kind Tooth Fairy/Wicked Tooth Fairy analogy, see bullet 2. of my earlier post, let me try and explain the sheer and utter deliberate stupidity of trying to claw back 45.8 pence from every £1 earned via the PAYE system and clawing back 44.2 pence via means-testing by using another analogy (which came to mind when I left the paper shop, having bought myself the latest copy of VIZ, a packet of Wrigley's Extras for the lass and some 'penguin cards' for the lad).

1. Let's imagine the Tooth Fairy (the DWP) runs a sweet shop and dishes out a fixed number of sweets to each person who visits the shop (the Universal Credit, or welfare payment). The price that 'customers' have to pay is 90 pence for every £1 they earn. It would be simple enough for the Wicked Tooth Fairy (HM Revenue & Customs, who man the tills and run security) to collect that when people 'leave the shop' (i.e. when your employer does the payroll), by asking employers to hand over 90 pence and to give the worker 23.8 pence. Workings below*.

2. The only opportunity for fraud is working cash in hand, and with such a high tax rate, it is hardly surprising that a lot of people do this; or even worse, people will simply not bother working. But this isn't good bad enough for the civil servants whose main aim in life is to keep the bureaucracy as bloated as possible, so they go one better:

3. The WIcked Tooth Fairy at the till takes 45.8 pence from you, and compiles long lists of which people 'owe' the Kind Tooth Fairy another 44.2 pence. The Kind Tooth Fairy then sticks these lists in a computer and tries to match it all up, and then sends its 'customers' a bill for the 44.2 pence at the end of the month or the end of the quarter, by deducting it from the sweet ration that the 'customer' gets in the next month or the next quarter.

4. The admin and faff involved will be stupendous of course, and the admin burden on the employer will go up by a factor of twelve - instead of just sending off one cheque for PAYE every month and then doing a PAYE summary once a year which breaks down the total PAYE and NIC deducted from each 'customer', it will have to submit all these lists every month.

5. And the bills for some customers - usually small amounts of tens or hundreds of pounds - will be delayed or lost, or they might accumulate and then after six months, the entire arrears will be deducted from future sweet rations in one go, long after the customer has assumed that is was all sorted out and paid for, thus leading to further hardship and write-offs down the line.

6. To cut a long story - if you were running a sweet shop, would you demand payment from your customers when they go though the till, or would refuse to accept full payment and just take half, telling them that they'll receive a bill for the rest at some vague unspecified point in the future, which will require the services of as many people again sending out the bills as you already employ manning the tills and running shop security?

* For £1 of wages, the Employer pays 13.8 pence NIC and the employee pays 20 pence basic rate tax + 12 pence NIC, assuming that the basic rate does not change and the Tories merrily press ahead with Labour's 'tax on jobs', which I have every reason to believe is the case. That makes 45.8 pence collected via the PAYE system.

The DWP then also reduce the worker's Universal Credit by 35% of their net wage after PAYE of 68 pence (£1 minus 20 pence minus 12 pence), i.e. by another 44.2 pence. So the net wage is 23.8 pence for every £1 earned.