Thursday, 4 February 2016

Sneaky!

From the BBC:

Although Chancellor George Osborne abandoned cuts to tax credits in the Autumn, cuts to UC announced last summer will still go ahead.

From this April the amount that anyone on UC can earn before their benefits are cut will be reduced. This so-called Work Allowance will be £4,764 for those not claiming for housing costs, or £2,304 for those who do.

Once claimants earn above that amount, they lose 65p for every pound they are paid.

11 comments:

Bayard said...

The War on the Poor rages on.

Graeme said...

This is truly baffling. Why not set the limit at the tax-free allowance?

Mark Wadsworth said...

B, yup. With WTC there are too many claimants so they had to back down, there are only a few thousand UC claimants, so they will probably get away with it.

G, it would be good to align welfare and tax systems, so setting the limit at the tax free allowance is too high. That would give an insane overall taper rate of 98% for earnings over £10,600.

The sensible approach is to say that the basic amount of UC (or IS or JSA or whatever) should be tapered to £nil once you reach the tax free personal allowance, so you are EITHER losing benefits at about 30% - 40% of what you earn OR paying tax/NIC at 32% on what you earn BUT NOT both.

Having got that far, you can just have a single withdrawal rate of 32% and deal with all benefits clawback via PAYE in other words, benefit claimants get a BR tax code (no personal allowance) which inevitably leads to a Citizen's Income or Negative Income Tax or whatever you want to call it.

James Higham said...

The social ramifications are going to be interesting.

Random said...

Off topic but I can't see how we can win Mark. This is an excellent if depressing summary from commentator "Blissex":

"Most swing voters in marginal seats in the South of England (where elections are won) are so-called “aspirational” voters and their aspirations mean mainly two things:

* Ever higher asset prices with ever lower interest rates so the capital gains they enjoy can be cashed in tax-free with cheap remortgages.

* Ever lower wages and reduced rights for workers, because cheap hired help is hard to find today.

This is because 'neoliberal' governments have made speculating on assets, in particular housing property, much more profitable than fighting for better wages and work conditions, and a lot of property owners don’t work or work part time (for example middle aged and older women who got their property via divorce or inheritance).

The numbers are startlingly clear. I'll use an example from the UK:

http://www.bbc.co.uk/news/business-19288208

"In 2001, the average price of a house was £121,769 and the average salary was £16,557, according to the National Housing Federation. A decade on, the typical price of a property is 94% higher at £236,518, while average wages are up 29% to £21,330"

The above involves a pretty modest two-up-two-down terraced house and middle income people like plumbers, nurses, bookeepers, etc.

That is £12,000 a year of extra tax free income via property capital gains on top of an after-tax income from working of perhaps around £14,000.

Of course this is an average of South and North, and dosen't really apply to North, and it is even more in London.

They reckon that no trade union, no raise, no strike, no worker rights have given them an extra £12,000 a year effort and tax free without raising a finger other than to vote smugly for 'neoliberal' parties every several years."

Mark Wadsworth said...

R, that's the clever bit.

Trick people into thinking that a £12,000 land price increase is as good as a £12,000 extra earnings.

Extra earnings are good - earning it does not make others poorer and you can spend it annually.

Land prices are bad - you can't spend it unless you trade down and if you do, your gain is just somebody else's loss. So making a windfall gain makes others poorer and you can't spend it annually.

But in Blissex example does anybody outside London and the south east vote for either wing of the Home-Owner-Ist Party?

Dinero said...

Why did they call it Credit. Unless used as a Verb or in accounting the term usually means a loan or similar.

Bayard said...

"Having got that far, you can just have a single withdrawal rate of 32% and deal with all benefits clawback via PAYE in other words, benefit claimants get a BR tax code (no personal allowance) which inevitably leads to a Citizen's Income or Negative Income Tax or whatever you want to call it."

Nah, too simple. Not enough bureaucrats required.

Mark Wadsworth said...

Din, Gordon B copied the name off the Australian tax system. And grammatically it is not wrong.

B, yes, there is clear evidence of that. Personally, I'd rather give five claimants £5,000 a year each and let them get on with their lives than give one DWP person £25,000 to make five claimants' lives a misery.

Random said...

Mark, right the idiots are voting to asset strip themselves and pay for the privilege.

Bayard said...

"Personally, I'd rather give five claimants £5,000 a year each and let them get on with their lives than give one DWP person £25,000 to make five claimants' lives a misery."

There seem to be a lot of people who think precisely the opposite. It's the principle, innit.