Sunday, 28 June 2015

Welfare reform: wilfully misleading reporting by the BBC

From the BBC:

But ministers claim that the welfare reforms, far from pushing people into poverty, are helping them escape it by encouraging them into work. The number of workless households is at a record low and the proportion of lone parents in work is at a record high of over 63%.

We will have to take those statistics as a given; the flip side is that terms of employment (low wages, zero hours contracts etc) at the bottom end are worsening.

It won't have been easy for many, but the offer of working tax credits if you are employed for more than 16 hours a week has encouraged tens of thousands of lone parents into jobs. That is what welfare-to-work policy is all about.


1. Labour introduced Working [Family] Tax Credits back in 1999. Why would it suddenly start working now?

2. The extra you can receive if you work 16 hours a week is not necessarily the headline figure of £1,960 a year, because it is reduced by 41p for every £1 you earn over the first threshold of £6,420 a year.

For example, 16 hrs x £10 x 52 weeks = £8,320.
£8,320 minus £6,420 = £1,900
£1,900 x 41% = £779
So in this case, the WTC you get is £1,960 minus £779 = £1,181 = £22/week.

3. Your Housing Benefit and council tax rebate is also reduced, probably by more than £22 a week, plus hours of hassle filling in the forms, minus the expense of travelling to work, organising child care etc.

4. And all this compares to £73.10/week Income Support a lone parent can claim if not in paid employment, plus probably most of their rent and council tax paid for them.

5. What also riles is the notion of "tens of thousands", there are five million working age households claiming some benefits or other (as well as seven million pensioner households, of course), "tens of thousands" is not statistically significant.

"Work is the best route out of poverty," the Prime Minister has said. But David Cameron is not the first PM to make such a claim…

6. It's a truism.

7. Fair play to the Tories for increasing the personal allowance for income tax to alleviate the poverty trap slightly, but they haven't increased the threshold for National Insurance, which is just as important, so this is a gimmick.

8. For some reason, the Tories appear to have singled out Working Tax Credits as something which they'd like to reduce significantly.


Bayard said...

One of the snags with WFTCs as they currently stand is that only your monthly income is assessed to see if you are entitled to them. If you are the diretor and of a limited company and you and your fellow directors own all the shares, it is tax-efficient to take most of your income as dividends and pay yourself a minimum monthly salary. However, regardless of your actual yearly income, you will be entitled to WFTCs based on your monthly salary. I know someone who is in this position and who checked quite closely to make sure it wasn't an error by the DWP.

I wonder if this also applies to salaried workers who are also landlords. I wouldn't be surprised if it did. WOL!GUM!

Rich Tee said...

The strongest opponents of the welfare state are usually the "working poor", people who go out to work on low wages but have neighbours who seem to live an easier life on benefits.

The conspiracy theorists believe that WTCs are intended to weaken this opposition to benefits by working people by basically getting them hooked on benefits as well, although this is disguised as "tax credits". I have to say, I think there is a lot to this. Like a drug dealer gets people hooked on drugs. After all, it would be simpler and cheaper to just reduce tax rather than going to all the trouble of taking it and then refunding it. I think this is why the Conservatives want to reduce WTC, but it also has the effect of making them look "nasty" for doing so. It is a mean but very clever trick. Lenin would be proud.

Random said...

RT, human nature I am afraid.
This is why I support the JG.

Mark Wadsworth said...

B, yes indeed, I read the usual tax magazines and go on courses, and occasionally they mention that you can right royally take the piss if you own a company or are self-employed.

RT, maybe, but i see it the other way round.

I support a "Citizen's Dividend" for all because everybody gets it and hence it ought to be a popular kind of welfare system. The low-wage 'hard working family' gets it the same as the 'lazy scroungers' next door, the same as they can both use the local public library or be treated by the NHS free at the point of use.

Similarly, I suspect that the most vociferous anti-welfare people are old age pensioners, who of course are the biggest welfare recipients of all - so it is important to explain that old age pensions are just welfare payments, same as anything else.

R, nobody has ever explained how a JG would work in practice or what the knock-on effects would be, unlike a Citizen's Dividend which is dead easy and has no knock-on effects (unless set at a ludicrously high level).

Random said...

A JG is an open job *offer* at a fixed wage open to anyone. The Job is fitted to the person rather than the other way round. It also establishes a wage floor.
Basically JG takes place of unemployment in NAIRU.

"The existing unemployment or pension payment systems can be used to pay the wages. In the UK they are all part of the Department of Work and Pensions structure. Starting and stopping jobs is the same as starting and stopping unemployment benefit with the same PAYE implications and National Insurance registration requirements. HMRC is already into a pilot programme collecting 'Real Time information' about PAYE records to support the new Universal Credit. So those systems are there already, pay millions of people and can be adapted relatively quickly given that they are already half way through the process.

Minimum wage is already enforced by HMRC, so they would get the job of dealing with the 'Mr Donald Duck' applications. That may involve a slight increase in expenditure on rubber gloves and Vaseline"
In terms of practical inplementation, Bill Mitchell has written a lot about this and jobs programs in developing countries such as the Jefes programming in Argentina.

Random said...

"nobody has ever explained how a JG would work in practice or what the knock-on effects would be, "
You can think of it as a wage floor basically. It sets minimum pay and conditions.
So if the JG is at £8, then capitalists have to offer something better than this to hire workers from the JG pool.
The JG will be set near the minimum wage to avoid disrupting the private sector too much to start with.

Random said...

Random said...

Detailed report on the JG.

Random said...

Some Homey in the US has said:
"This reminds me of a local controversy. I once shocked people by suggesting that, for most of the year, the heat should be turned off in public housing projects in San Francisco. Oh, the outcry! But, why, exactly? I keep the heat off in my private, privately worked for and paid for single family home for most of the year, first, because it isn't necessary for life-preservation purposes (it just doesn't get cold enough around here that you actually NEED central heating - just use sweaters and blankets), and thus I can save some portion of my hard-earned income on my utility bill; and second, because of pulmonary problems, I find it easier just to live without the dry heat my house offers."