To all intents and purposes, the UK already has a UBI system

Here's a list of the main benefits and how many million claim each.

The categories overlap to some extent (some pensioners still do paid work, lower paid employees get WTC etc). The total number of claimants/recipients must be less than the total UK population, not more! And clearly there must be a million or two people who get nothing, but I struggle to think who they might be or why they are singled out.

The cash value of most of the working age benefits to one individual is in the order of £3,000 - £4,000 per year (transferable personal allowance is a lot less, SM/PP is much more, but for a shorter period, disability-related payments are much higher but those would be in addition to UBI, that's a job for the NHS not the DWP). Each has its own rules, rates and allowances, but they all come to the same thing. Seriously, why do they keep up the pretence, apart from creating jobs for civil servants?

Click to enlarge.

Idiot Of The Day: Gregg McClymont

From The Daily Mail:

In a further blow, hundreds of thousands of women coming up to retirement will not be eligible for the new flat-rate pension – although men who are the same age will be.

Around 430,000 women born in 1952 and 1953 will not be eligible for the new pension since they are due to retire before 2017, before the reforms come into effect. Men born during the same period, however, will qualify because their State pension age is currently 65.

Shadow pensions minister Gregg McClymont said: "Ministers have been caught red-handed hiding the truth on pensions reforms. Almost half a million women will be nearly £2,000 worse off compared with men, but instead of being honest with the women that will lose out this government tried to bury the truth."

The article doesn't say how he calculated that £2,000 (is that per annum or over a lifetime?) and like most people he gleefully ignores the existence of the Pensions Credit, which tops up single women's retirement income to a minimum of £142.70 anyway. The Pensions Credit could very easily be re-jigged into a Citizen's Pension, giving our starting position, this would be the simplest way of doing it.

But what he merrily overlooks is the fact that those women will be retiring five years earlier than men born at the same time, so they are still ahead by five years' worth of old age pension, even if that's only £100 a week, that's still £26,000 in total, isn't it? If you like, you can add on another five years' worth because women live longer.

And there is nothing to stop them from working for another five years, the same as men (the old age pension itself is not means-tested). If we take those earnings into account, then we have ourselves a meaningful comparison and from where I'm sitting, women still come out miles ahead.

My letter to Iain Duncan Smith

13 January 2013

Dear Mr Duncan Smith

Introducing the Citizen’s Pension of approx. £140 per week

It strikes me that your civil servants are giving you the real runaround on this!

Actually implementing it would be administratively very simple; in fact it would be much simpler than the current system, which is basically the Pensions Credit Minimum Guarantee (currently £142.70 per week for a single pensioner).

Let’s assume that you want every single pensioner to receive at least the Minimum Guarantee level from the “government” (whether that’s the DWP or a public-sector occupational pension). All you would have to do is:

1. Get rid of the means-test for savings and the Savings Credit entirely (which merely reimburses pensioners for the amount of Minimum Guarantee they lose if they have savings, I’m not sure what the point of that is).
   
   
2. Get rid of the means-testing for private pension income or a private-sector occupational pension entirely.
   
   
3. The existing 23 page form could be stripped down to one page, claimants just have to give their National Insurance number and list which pensions they get from the “government” (most will get no more than two or three different ones, so this can easily be cross referenced and checked).
   
   
4. If these add up to more than £142.70 per week anyway, that is the end of the matter, no entitlement to Citizen’s Pension.
   
   
5. If these add up to less than £142.70 per week, then the DWP just pays them the £142.70 in place of all their existing entitlements and non-DWP payments can be cancelled.
   
   
6. For sure, the dividing line between public and private sector is not entirely clear (e.g. privatized utilities; teachers who worked at private schools but receive a pension from Teachers Pensions; private pensions funded by contracted out NIC etc), but somebody just has to draw a line somewhere saying what counts and what doesn’t.
   
   
7. Funding this will be a doddle, it will cost barely more than the existing Pensions Credit in terms of cash paid out; the administrative savings will be enormous, apparently the system requires 18,000 civil servants to administer. If push comes to shove, just get rid of the Winter Fuel Allowance or something.
   

Yours sincerely etc.

If you ask the wrong question, you'll never get the right answer (2)

UKIP's press office asked me if I could respond to HM Treasury's Consultation Document on merging income tax and Employee's National Insurance. I set aside last Sunday afternoon for a bit of fun with numbers, but didn't get very far: the document itself kicks off with this (click to enlarge):
I duly responded as follows:

Dear Sirs

Your Table 1.A suggest that you are not taking the matter at all seriously:

Against 'Entitlements provided' you state that Employee's National Insurance gives 'Entitlement to contributory benefits, such as state pension; also helps fund the NHS'.

You know as well as I do that Employee's NIC raises less than £50 bn a year, but the state pension costs about £70 billion a year and the NHS costs over £100 billion a year. So there's a bit of a mismatch there.

Not only that, but Iain Duncan Smith proposed - quite rightly in our view as this was a key part of UKIP's Pensions Manifesto for the 2010 General Election - that the contributory principle for the state pension should be scrapped and the state pension and Pensions Credit be merged into a flat rate Citizen's Pension.

As to the substantive question 1, we agree wholeheartedly that there is no difference in principle or in practice between income tax and National Insurance, and that the two should be merged into a flat-rate tax on all incomes as soon as possible.

Regards [etc]

Pensions myths and other assorted stupidity

Exhibit One, from The Daily Mail:

The number of private sector workers with a company pension has fallen to its lowest level since the Fifties. Of the total private sector workforce of 23.1million, only 3.3million – a paltry 14 per cent – are in a company scheme. This contrasts starkly with the public sector, where almost nine in ten will receive a gold-plated pension. (1)

Joanne Segars, chief executive of the National Association of Pension Funds, warned that Britain’s ageing society is on ‘a collision course with its own retirement’ as it fails to save enough. (2)

The basic state pension is currently worth a little over £100 a week, (3) although many are not eligible to claim the full amount. The typical public sector worker enjoys a pension of £7,841 a year, or about £150 a week. (4) If a private sector worker happens to be in the minority that gets a company pension, the average payout is about £1,300 a year – just £25 a week.

1) I'll return to these factoids in points (5) and (7) below.

2) Vested interest, irrelevant.

3) Lie. There's been an outbreak of commonsense, and the current government is going to replace a whole mish-mash of taxpayer-funded old age pensions and benefits with a flat rate Citizen's Pension of about £150, as well as harmonising pension age for men and women. Which is what I was recommending all along.

4) Aha! The magic figure of £150 a week again. If the government plays its cards right, what it could do is follow through my proposals to their logical conclusion and treat public sector pensions as just another taxpayer-funded pension, i.e. you get the higher of [whatever your weekly taxpayer funded income would have been under the existing rules] and £150 a week, which would be an enormous cost saving without allowing too many people to end up in poverty.

Exhibit Two, from The Guardian:

Lord Hutton of Furness will warn of a "serious" risk of a mass exodus from the local government pension scheme – which is funded and has 3.5 million members – if contributions are raised too high and no other compensation is provided... (5)

Ministers have acknowledged the risk of the welfare system being left to pick up the pieces (6) after a mass opt-out from public sector pensions.

5) If the employee contributions are set 'too low' relative to potential benefits, then everybody will opt in; if nearly all public sector employees who are eligible (not all of them are) opt in, then clearly the employee contributions are much 'too low'. I'd guess that if half opt in and half opt out, then the terms are 'about right'.

6) What 'welfare system'? Why do authoritarians on left and right constantly wail on about "encouraging people to save to ease the burden on the welfare state"? Are they completely stupid, badly informed, lazy or corrupt?

If everybody gets their Citizen's Pension (or existing State Pension + public sector pension) then we don't need any more welfare on top of that, do we? The total cost of the Citizen's Pension would be about £75 billion a year (i.e five per cent of GDP, seems fair enough) as against the cost of tax/NIC breaks for private pensions saving of about £43 billion and implied taxpayer subsidy to unfunded public sector pensions of about £30 billion.

Out of these two items of expenditure, which do you think does more to alleviate poverty in old age? And for comparison, the entire cost of the other old-age related benefits (primarily Pensions Credit and Council Tax Benefit) is only about £20 billion a year, it's chicken feed, so this is spending a pound to save a penny.

Exhibit Three, from The Telegraph:

The funding gap faced by local government pension schemes in England has grown to £71.5bn, (7) new research has revealed, despite a rally in equity markets boosting returns on investments.

7) Remember that this is like a 'funded' (i.e. slightly underfunded) company pension scheme, local governments actually take the contributions and invest them in stuff. The article suggests that we can increase the £71.5 billion by £10 or £15 billion, call it £80 billion all in. Right. £80 billion deficit divided by about 4 million members is a shortfall of about £20,000 each.

Compare and contrast with pension schemes in the private sector, which had a deficit of about £148 billion a year ago and £79 billion now (from here). Take a mid figure of £114 billion and divide by 3.3 million (from (1) above), gives you a deficit per member of £34,000.

So local government is doing pretty well, by comparison.

No doubt some mal-informed commenter will mention 'Gordon Brown's pensions raid', which, as much as I enjoy(ed) Brown-bashing, is yet another stupid myth.
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Please note: unfunded civil services schemes are a completely different topic, these are pure and utter complete fraud and extortion.

If you're going to reform pensions, why not go the whole hog?

From The Daily Telegraph*:

Discussions have begun at the Treasury over the move which would see the axing of tax relief currently paid out on pension contributions by people who pay income tax at the higher rates of 40 per cent and 50 per cent. The money saved could go towards cutting the budget deficit or – in what would be a more politically popular decision – be used to provide a significant increase to the value of the basic state pension...

Some Conservative MPs expect the axing of higher-rate relief to be merely the first stage in a more extensive and radical plan which would end up with all tax relief – including on contributions made by people paying the basic 20p rate of income tax – being abolished, saving £22 billion a year in total. Such raids, which could be announced in next year’s Budget, would be greeted with howls of protest by the pensions industry.

However, experts estimate that abolition of all tax relief on pension contributions – except employer rebates which would be likely to be retained – could be used to boost the value of the basic state pension by up to half.

OK, how about this for a plan?

It's not £22 billion, for a start. HMRC's Table 1.5 gives the total cost of income tax relief for pensions contributions and tax exemptions for pension funds as £20.3 billion and relief from Employer's NIC as £7.9 billion. Contracted-out rebates cost £9.5 billion. There's no figure for the 'cost' of relief from Employee's NIC, so let's guess another £6 billion for that, total £43.7 billion.

Let's then split that £43.7 billion into four chunks of £11 billion and see what we could do:

a) Increase the proposed Citizen's Pension by £20 a week.

b) Reduce Employer's NIC's from 12.8% of wages to 10%. Even better, scrap the lower threshold and apply a flat rate of 7% or 8% to all wages.

c) HMRC's Table 1.6 tells us that getting rid of the 50% additional rate tax would cost £0.7 billion, and reducing higher rate tax from 40% to 20% (i.e. scrapping higher rate tax) would cost £12.6 billion, but let's factor in some Laffer effects and call it £11 billion as well.

d) Increase the income-tax personal allowance and Employee's NIC threshold by £1,500 a year.

What can possibly go wrong?

* Spotter's Badge MBK.

Fun Online Polls: Lost Causes and EU propaganda

Thanks to everybody who took part in last week's Fun Online Poll, excellent turnout of 169 in only four days. I deliberately didn't have a 'none of the above' option because I was depressed enough. Results as follows:

Which of the following "lost causes" do you support?

Above the line (more than 85 votes):
Allow smoking in pubs and cafes 122 votes
Leave the EU, the UN etc. 121 votes
Legalise cannabis 111 votes
Legalise brothels 108 votes
Allow fox hunting 105
Replace entire welfare system with a Citizen's Income 93 votes

Below the line (fewer than 85 votes):
Replace old age pensions with a Citizen's Pension 78 votes
Replace as many taxes as possible with Land Value Tax 75 votes
Use Proportional Representation 69 votes
Turn off the traffic lights 59 votes

The Citizen's Pension was the joker in the pack as Iain Duncan Smith is going to do it anyway; I'm obviously disappointed about lack of support for LVT; proportional representation is a secondary issue; and I'm particularly surprised about the lack of enthusiasm for turning off traffic lights.
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And lo, to this week's Fun Online Poll.

We've established on several occasions that the readers of this 'blog would vote to leave the EU in an In-Out referendum, and it's just about conceivable that if there were a snap In-Out referendum next week that a slim majority would vote for "Out" but that's not really the issue.

As we have learned from the No2AV campaign, you can get any result you want if you pump out enough propaganda; and I imagine that if They announced that there'd be In-Out Referendum in six months' time, then we would be subjected to a 24/7 barrage of a few simple - but somehow plausible - lies for those six months and the result would be "Stay in".

So this week's Fun Online Poll is whether you think that They would be able to pump out enough propaganda to swing the vote their way.

Vote here or use the widget in the sidebar.

Fun Online Polls: AV and Lost Causes

Thanks to everybody (nearly two hundred votes in four days!) who cast a vote in this week's Fun Online Poll, which I might as well shut down now that polling has closed. Results as follows:

How will you vote in Thursday's referendum?

Yes to AV - 51%
No to AV - 37%
I won't bother - 12%

I doubt whether the official result will be as favourable. Ah well.

This does not bode well for an In-Out Referendum on the EU. All They need to do is choose a few simple lies and stick to them, such as Three million jobs depend on our membership of the European Union (scroll down to the end of Channel4's Fact Check service) and that will be the end of that for a few decades
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Which brings me back to my favourite topic of "Lost causes". It seems that pretty much anything I campaign for (actively or otherwise) is pretty much a lost cause, so out of interest, how many of my favourite "Lost causes" do you support?

Vote here or use the widget in the sidebar, multiple answers allowed.

More Citizen's Pension Fun

There's much a-weepin' and a-wailin' over at The Guardian over IDS' eminently sensible flat-rate £140 a week Citizen's Pension, I commented thusly:

Woo hoo! Seeing as he's offering £140 a week, no questions asked, rather than the hideously complicated means tested 'minimum income guarantee' (or 'Pensions Credit') that was under offer when Labour are in power and had a correspondingly lousy take up rate, I fail to see how this is worse?

Most of the following comments are quite sensible but there's always somebody prepared to apply The New Maths:

"RATHER THAN THE HIDEOUSLY COMPLICATED MEANS TESTED PENSION CREDIT", which you fail to add had lifted many dirt poor pensioners out of the poverty they had under the previous tory govt. The scrapping of the pension credit will leave the poorest pensioners poorer.

That comment would make sense if the Pensions Credit level were above £140 a week. It's not, it's £132.60 a week. Presumably under New Maths, £140 < £132 or something?

It's good to see that they read each other's press releases

There's an article in the FT explaining that Lord Hutton is going to lift more ideas from UKIP's pensions manifesto and curtail the generosity of public sector pension schemes a bit (lower salary increases, higher contributions and career-average rather than final-salary etc) all good stuff, but what troubles me is Hutton recycling the old canard:

... it is in no one’s interest for large numbers of staff to opt out and end up on means-tested benefits.

1) So what? If means-tested old age benefits cost the taxpayer less than final salary pension schemes, that's not an issue.

2) As it happens, IDS took another leaf from UKIP's book and proposed merging the State Pension and the Pensions Credit into a flat-rate Citizen's Pension of £140 a week anyway, so in theory there won't be any means-tested benefits*.

Whether public sector employees should get their public sector pension in addition to the £140 is a separate debate (I would argue not, of course).

* Means-testing (being a brutal form of taxation) is as much anathema to me as 'contributory benefits' (which is an excuse for higher taxes while you're working), and in any event the two are more-or-less opposites so we can rule them out. This leaves us with the sensible middle-ground of universal flat-rate benefits (we can argue about the rate in £ per week, whereby £nil is an option worth considering, if only for the fun of ruling it out again).

More Pensions Tomfoolery

Anthony Hilton makes some more excellent points in an article headed Nest is a tax on jobs in all but name..., but misses the killer blow here:

... the basic idea of Nest is to help the lower paid save for their old age so they don't have to depend on means-tested benefits from the state. But every pensions expert in the country says that the contribution rates of 3% from employer and employee plus a bit of tax relief will be totally inadequate to deliver a decent pension.

By far and away the largest means tested old age benefit is the Pensions Credit, which the current government, in an outbreak of commonsense, decided to scrap and roll in to a higher, flat rate Citizen's Pension of £140 a week (an idea merrily lifted from UKIP's manifesto, ah well). So if there were no means-tested old age benefits, this supposed argument in favour of a semi-compulsory pensions saving scheme (out of which most people will opt, and I suspect that people on lower incomes are far more likely to opt out because they can't cope with a 4% fall in income) completely falls away.

The other means-tested benefits which pensioners get are Council Tax benefit, which at a minimum income of £7,280 a year for each pensioner would be entirely unnecessary (if all else fails, they can move into a Band A or Band B property, on which the full Council Tax is less than £1,000 a year), and Housing Benefit, about which enough has been written recently.

Fun Online Polls: Flat-chested Celebrities & National Employment Savings Trust

Thanks to everybody who took part in last week's Fun Online Poll.

Who is your favourite flat-chested celebrity?

Keira Knightley 32%
Natalie Portman 28%
Sienna Miller 10%
Kate Lawlor 7%
Zhang Zhi 7%
Paris Hilton 4%
Fearne Cotton 3%
Paula Radcliffe 3%
Mena Suvari 3%
Kate Hudson 2%
Shell Jubin 0%

Well done Keira!
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The government's new brain-dead scheme to 'encourage pension saving' is to automatically enrol every employee into the scheme, and there'll be extra forms and hassle if you want to opt out. I can tell you right now that I'll be opting out. As I've said before, the only people I trust less than the government are insurance companies.

From the NEST website:

It is proposed that NEST will initially have a combination charge made up of an annual management charge (AMC) of 0.3 per cent* and a small contribution charge of around 2 per cent.

If you compound that over a few decades, you'll find it will eat away a large chunk of what you think you've saved

Don't forget - if you're a basic rate taxpayer, you can effectively invest in shares income tax free, even outside your ISA allowance, because there's no income tax on the dividends (these are after corporation tax, of course, but so are dividends received by a pension fund) and it's not too difficult to ensure that you never exceed the capital gains annual exemption of about £10,000.

And if you're a higher rate taxpayer, the best thing you can do is pay off your mortgage as quick as possible. Either way, the additional flexibility of having instant access to your money usually outweighs the net value of the tax breaks (which you are paying for via the income tax and NI on the rest of your earnings).

So that's this week's Fun Online Poll: "Will you opt out of the National Employment Savings Trust?"

Vote here or use the widget in the sidebar.
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* It's also instructive to compare that 0.3% annual charge with the costs of administering the State Pension (see article in Daily Mail), which is stated as £5.40 per pensioner per year, or about 0.13% of the average amount paid out - which by definition includes the costs of maintaining records throughout your working life and paying it out again after you retire.

That article also tells us that the average annual cost of paying out the means-tested and thoroughly objectionable Pensions Credit is £54 per pensioner per year, or about 1.8% of the amount paid out. By definition, the costs of adminstering a Citizen's Pension would only be half as much as the cost of administering the State Pension, i.e. next to nothing (£30 million a year or something).

"Should"

Right-wing authoritarian, Philip Booth (of the IEA, not to be confused with devoutly libertarian Phil Booth of No2ID), displays a surprising naïvety in his comments on Iain Duncan Smith's proposals for a Citizen's Pension:

There are problems with the current system, but sustainable reform is possible. The contributory principle should (1) be strengthened and the two state pensions merged into one. Individuals should (2) earn an entitlement to a fixed amount of pension each year when they pay their NICs with that fixed amount being indexed until retirement. Once pension is accrued it should (3) neither be added to nor taken away by the government.

The pensions of all the elderly would then be determined by the entitlements they earned throughout their working lives. If a particular generation wanted higher pensions, then that generation would pay for it with higher NICs. (4)

The problem with the proposed “citizens’ pension” is that the pension will be decided by parliament and not be dependent on contributions (5). No fewer than 43 per cent of active voters are aged 55 or above. The government will thus not do anything to undermine the financial position of the elderly. (6) A citizens’ pension will be forever increased under pressure from a greying electorate...(7)

The Lib Dems say they do not like the contributory approach because carers and the disabled might be left out. Such people would not pay NICs and so they would not get a state pension. But if it is desired to fix this problem, the solution is easy: the government just gives credits to such people; it happens now and the system works. (8)

1) He who says 'should' has just lost the argument.

2) And again.

3) Three strikes and you're out.

4) The state pension has always been 'pay as you go'. It's the simplest and cheapest way of doing it. The fact that people believe it to be 'contributory' is a separate issue. And any discussion of state pensions that ignores the Pension Credit is pointless.

5) Who decides on the age at which you qualify for a state pension? Who decides the level thereof and how it will be indexed? Who decides on the level of the Pensions Credit (which makes a mockery of the whole 'contributory principle')? Who decides the level of the super-tax on employment National Insurance contributions?? That wouldn't happen to be, er, the self-same Parliament, would it?

6) Sort-of-true. This pandering to the over-55s primarily manifests itself as Home-Owner-Ism, which is a far greater drag on the economy than the 5% of GDP we spend on state pensions and Pensions Credit.

7) Also sort-of-true. But if things were as simple as he said, by now the state pension would kick in at age 55 and be £300 per week. It clearly isn't, so there must be equal and opposite counter pressures from somewhere that decide how mean or generous the state pension system is.

8) If he approves of this approach, has he not just driven a horse and cart through his own argument?

Imitation is the sincerest form of flattery (1)

From The Daily Mail 25 October 2010:

The state pension system is to be given the biggest shake-up since its inception more than 50 years ago. Ministers are planning a simplified payment which will see everyone receive the same amount – around £140 a week, far more than at present.

The proposal, to be detailed in a Green Paper before the end of the year, would benefit women and married couples. It would also end the indignity of means testing and, say coalition sources, will pay for itself, largely by reducing bureaucracy...

Work and Pensions Secretary Iain Duncan Smith and Pensions Minister Steve Webb are suggesting a new ‘single tier’ state pension which would replace all existing payments. If paid at the expected £140 a week, that would mean an income of £7,280 per year or £14,560 for a pensioner couple...

The payment would be based on citizenship or residency, with British citizens or anyone who has been living in Britain for a fixed number of years qualifying.

From UKIP's Pensions Policy Paper, April 2010:

In summary, the current system is shambolic, with a complicated system of form filling, means testing and requirements to apply for benefits and assistance. Many older people find this process demeaning, complicated and some as a result fail to claim everything they are entitled to. This has the effect of worsening their economic situation. The current system clearly needs a radical overhaul.

UKIP therefore proposes a radical simplification. We feel that every pensioner aged 65 or over, whether single, widowed, married or cohabiting, should have the choice between:

• Continuing to claim their existing BSP/S2P (and various other minor benefits), and;

• Claiming a non-taxable, non-means tested “Citizen’s Pension” of at least £130 per week, equivalent to the current Pensions Credit level (plus value of free TV licence and Winter Fuel Allowance). A couple, who are both over 65, would be entitled to at least £260 per week.

• The important difference between the Citizen’s Pension and The Pension Credit will be its simplicity. It will not be means-tested and will be paid out at the higher of a) £130 per week; and b) the total of an individual’s existing taxpayer funded or public sector pensions (information which the Pensions Service and the various government departments should be able to compile relatively easily), so it will not be reduced if a pensioner (or their spouse or partner) has a private pension or other savings and investment income...

There has been some anger over the perception that recent arrivals to the UK are getting the same entitlements as people who have lived here all their lives. The Citizen’s Pension will therefore also be based on the length of Citizenship. The amount will be reduced pro rata if the claimant has not lived in the UK for forty years prior to retirement.

Spotter's badge: Tim Aker.

Ten Years Gone

Here's my 26-slide crash course in everything you need to know. Cross posted at Nourishing Obscurity.:

Simplifying the tax system

View more presentations from MarkWadsworth.

Blue Plaque Of The Week

Via Paul Lockett:

Asquith on Universal Benefits

Just to get the crowd warmed up for my next post on welfare reform, I'll take the liberty of cutting and pasting the excellent comment which Asquith left on The Nameless Libertarian's post on cutting welfare fraud:

Reduce means-testing to a minimum for reasons that I cannot be arsed to articulate as I had a big dinner & we all know already.

As many benefits as possible should be universal, it may be silly that well-off old c***s still get a pension but there's a lot worse in this world than silliness, such as the state going out of its way to encourage people to do the wrong thing, which is all that means testing is.

They were also right to scale back these maternity grants & means testing child benefit is an especially fucking woeful idea which has hopefully been stamped upon.

I don't especially like the idea of state child support at all as I think having babies is a CHOICE which should only be made by those who are certain they will be able to provide financially, emotionally, & in terms of putting in the work with reading etc. etc. But it exists, & should be universal because the last thing we want is for people to be worried about accepting a pay rise in case they lose their benefits.

In terms of support to children & pensioners, the means test has been malignant. I would be in favour of raising the basic state pension & reducing pension credit, even if this made some people worse off* that would on aggregate be made up for by the encouragement for those who can to save for their own retirement, whereas now & even more so in the recent past it has been a case of discouraging them from doing anything for themselves.

At the time when the income tax threshold was raised (an excellent policy for which I think we have Clegg to thank) c***s objected that it wouldn't benefit the poorest because the poorest don't have jobs. But if it makes it worth their while to work then it f***ing does. This is what c***s don't appreciate, that the government doesn't have to be wiping people's arses for it to have a good effect, sometimes it can do less.

I do not support any more state support to "private sector" f***ers whose aim it is to push unemployed & otherwise poor people around. In my view it is a mistake to give taxpayers' money to all these "private sector" f***ers, which the last government did, but so did its Tory predecessors.

A mate of mine has never had a job & is often sent on waste of time courses. I'd rather pay for his benefits than for the sort of twat who is employed on these make-work schemes & trousers £20-30,000 a year for doing nothing of any worth.

I don't vilify people on benefits if they are just people who haven't got jobs, or are disabled. They only become reprehensible if the go on to have kids that they have no means of supporting, & will grow up without a half-decent upbringing.

PS- I know this is long but I got pissed off in the course of writing so I randomly went on.

* That's the only bit I'd disagree with. IMHO we ought to merge the Basic State Pension (a miserly £98 per week for a single pensioner and based on contributions, but at least non-means tested) and the Pensions Credit (a more generous £130 per week and non-contributory, but savagely means-tested) into a least-bad-of-both-worlds flat rate, non-contributory, non-means tested Citizen's Pension.

Killer arguments against LVT, not (53)

An eternal fall back argument against Land Value Tax is that 'pensioners would be forced to sell their homes'*, which Winston Churchill dismissed as 'The Poor Widow Bogey' over a century ago** when he was still mates with Lloyd George (PS, that speech is worth reading in full, ninety per cent of it still applies today). A secondary argument is that 'I want to be able to leave the value of my home to my children', which slots in neatly at point 8. below.

1. People use this to argue even against the most modest kind of property tax, such a having income tax on the notional rental income (formerly known as 'Schedule A taxation' scrapped in 1963 or thereabouts, see famous quote by Dearieme's father) or, in my terms, a flat 1% tax on residential property values (which could and should replace Council Tax, Stamp Duty, Inheritance Tax, TV licence fee etc).

A modest tax such as this would leave most households slightly better off on an annual basis (as compared to Council tax and TV licence fee), and for those that pay more, they can either ask their heirs to pay (as a quid pro quo for one day inheriting the house - the value of which would be boosted by up to 5% if Stamp Duty were scrapped) or be allowed to roll up the unpaid tax to be repaid on death (which is why Inheritance Tax would have to go as well). In the long run, these families would be no worse off either. The people who would be worse off are non-doms who own huge villas and are exempt from Inheritance Tax anyway.

2. This argument clearly doesn't hold against a modest property tax, so let's examine what might happen if we scrapped all taxes on incomes and production (from worst to 'least bad': VAT, Employer's National Insurance, higher rate income tax , Employee's National Insurance, corporation tax and basic rate income tax) and just raised as much as we could from a tax on land values (whether residential or commercial).

3. Before we put numbers on this, let's look at the justification for the Basic State Pension or Pensions Credit (which ought to be rolled into a non-means tested Citizen's Pension, of course) - surely it is there so that people who are beyond working age (as arbitrarily decided) have enough to support a certain standard of living (as arbitrarily decided).

4. Let's not forget that I am a UK resident Englishman who has not the slightest intention of moving abroad again (I once lived in Germany for nine years, that's enough for me), who has every intention of surviving well into pension age (or dying in the attempt), so I have to come up with some sort of plan.

5. Assuming we don't just cop out and give owner-occupying pensioners large discounts or exemptions (and I wouldn't be totally averse to this as an interim thing for the next couple of decades), let's imagine we had full LVT without exemptions, and the tax on each property were around 7% of its current market value (which sounds like a lot, but don't forget that the downside of scrapping taxes on incomes and production is that most of the benefit would merely boost rents or selling prices), the LVT on a median home would be about £11,000 per annum (it could be anywhere between £nil on a small flat in a high tower block in an undesirable area up to £100,000s for a mansion in West London, of course).

6. So the basic state pension would have to be increased so that the average pensioner household can still afford a certain standard of living. In practice this would mean that the Basic State Pension/Pensions Credit would be approx. doubled for pensioners who do not receive additional public sector pensions. I guess that a Citizen's Pension of about £250 a week would cover it (i.e. pensioner couple with no other sources of income in a median house still has £10,000 a year net income from the taxpayer).

Doubling the Basic State Pension/Pensions Credit would 'cost' an additional £50 billion per annum or something, i.e. a large part of LVT receipts from pensioner households would be divvied out again as an additional Citizen's Pension (and some of it used to pay for non-cash benefits such as their healthcare costs and long term care etc).

7. This still wouldn't be enough to pay for the tax of A Poor Widow In A Mansion, but hey.

I guess politically it would be impossible to actually repossess the homes of Poor Widows Who Don't Pay Their LVT Bills, and politically necessary to them with at least £100 a week to live on after deducting the LVT from their Citizen's Pension, so a Poor Widow In A Median Home would get £13,000 a year Citizen's Pension and the amount of LVT collected would be restricted to £8,000 a year, and the shortfall of £3,000 would just be rolled up for later.

If the annual shortfall is huge and the Poor Widow lives for decades, then the arrears might exceed the value of the house (which would probably have gone to rack and ruin because the Poor Widow can't afford the upkeep), but hey, in that case the family comes out slightly ahead.

8. Those people who genuinely 'want to leave the value of their home to their children' have a simple choice, of course. Assuming a single or widowed person retires at 65 in a very nice house worth £200,000 (rebuild cost) with a higher-than-average LVT bill of £20,000 wants his or her children to inherit as much of that as possible, what they'd do is trade down into a nearby very nice flat costing £100,000 (rebuild cost) on which the LVT is only £5,000; that frees up an extra £100,000 to be left to the children or grandchildren; and they can also squirrel away some of the £8,000 a year net income they receive from the taxpayer. What could possibly go wrong?

9. A slight variation of 8. is the mantra that 'The Family Home should stay in the family'. Again, this is easily fixed: instead of a pensioners rattling around in The Family Home while their children or grandchildren are priced out of buying a house and starting a family themselves, the pensioners could simply give The Family Home (and the corresponding LVT bill) to whichever child or grandchild wants it, and ask that child or grandchild to buy them somewhere smaller in exchange.

* For every seller there has to be a 'willing buyer' of course. And I'm guessing that most of those willing buyers will be today's 'priced out generation' who are currently 'forced' to either live in a very small home or vastly overpay for one suitable for bringing up a family. Boot, other foot etc.

** A lot of LVT opponents solemnly quote Adam Smith, who said that a tax should be payable when convenient; but he said this two centuries ago when there was no such a thing as a state/public sector pension system which is now the main source of income of about a third of voters; and at a time when most people were tenants (i.e. the tax would be payable by landlords). A tax on rents would not result in an increase in rents, of course - the only way to increase rents is to subsidise them, for example via Housing Benefit.

I have no idea whether Adam Smith would have supported the state/public sector pension system in its present size; or guessed that one day a majority of households would be owner-occupiers; but I am pretty sure that he would not have approved of the idea that the tax would only be applied to tenanted property and not owner-occupied property, as that would be taxing form over substance - it's the same people in the same houses.

Citizen's Income round-up

The idea is behind replacing the entire welfare system (including, with a Citizen's Income-style welfare system is rabid simplification. The only hurdle would be being a legally resident citizen (the clue is in the name). We can argue hotly over how long foreigners would have to have lived here before they qualify, but once a decision has been taken, we can see how things pan out and then lengthen or shorten the waiting period. The administration costs would be next to nothing, of course, as with Child Benefit (not to be confused with Child Tax Credits!).

I spotted three stories this week which illustrate what happens when you deviate from the Path Of True Simplification-ness:

Story One: The government is urging anyone who voluntarily cares for a friend or relative for more than 20 hours a week to take advantage of a new scheme to build up their state pension entitlement. It says up to 4.7 million people could benefit from the Carer's Credit, which launches in April.

What's the point of that, then? If your contributions record is patchy you might not qualify for the full Basic State Pension (currently £95.25 per week), so if you're caring for somebody (heck knows how they will police this) then superficially you'd think this is a good thing. Only it isn't, because however much basic state pension you get (assuming you have no savings when you retire), you are still entitled to the Pensions Credit, which 'tops up' your income to £130 a week. Sure, there will be marginal situations where filling in all the forms to get the extra Carer's Credit will be beneficial to you, but by and large, this is a shameless gimmick.

How about being honest about it, and having a flat-rate Citizen's Pension of £130 a week for men and women over age 65 (or whatever amount and age you pluck out of the air. Sure there will have to be transitional measures for those whose existing taxpayer funded pension entitlement exceeds this amount, that's just details) and have done with it?

Story Two: Draft legislation has been passed by a committee of the European Parliament to extend maternity leave across Europe to 20 weeks on full pay. Current European rules give women 14 weeks leave fully paid. In the UK, women get a year off, with the first six weeks on 90% pay, followed by 33 weeks on Statutory Maternity Pay. The rest is unpaid.

The 20-week proposals will now go before the full European Parliament in early March. There are concerns that employers could discriminate against women of a child-bearing age if the rules are passed...

Again, why push the hassle and expense of all this onto employers (who in turn will be wary about employing young women and/or offer them lower salaries, thus being in trouble for breaching equal pay legislation)? The only reason I can think of is that large employers, with hundreds or thousands of employees can cope perfectly well if at any time a small percentage are on maternity leave, but for smaller employers this is a real killer, and as we know, the EU tends to favour large employers who have the most generous lobbyists.

So how about just allowing women who stop working to claim the same Citizen's Income as anybody else (about £60 a week, in practice) to tide them over while they are at home with baby? Surely she and the father will have planned for this, saved up a bit and so on, so with her Citizen's Income and the baby's Citizen's Income (of say £30 a week) they should do OK and there's no need to burden her individual employer.

Story Three: The European Court of Justice has said some migrant families can stay in the UK and claim benefits - even if the main worker has left the country.

The court, which deals with EU law, said some families must be allowed to stay when their child was in education. A child's education was paramount, so parents could not be told to leave if they could not support themselves... The judgement could lead to more foreign national families claiming a right to remain, even if they are not working and have no ties here other than children in education.

Like I said, there will have to be a cut-off point, you can't deny long-term residents benefits on the basis they weren't born here, but we could go on the safe side and start with a minimum residency period of ten years and busk it from there. Of course, applying that logic, the 'right' to a free State education is another kind of universal benefit, and you could argue that a child should only be entitled if the parents had lived here and paid their way for ten years before the child started school, but that's a different debate.

In the case of the two women mentioned in the article, the first one, being a Somali with an ex-husband with a Danish passport would have another three years to wait before she qualified for a Citizen's Income, but the Portuguese woman would already qualify, end of discussion, there's no need for hugely expensive court cases to decide this.

UKIP's Pension Reform Proposals

Trusty Statcounter tells me it's time to highlight a new policy in the sidebar, so this week, let's have a look at UKIP's pension proposals. The full pdf document is here (worth a read if you are interested); and the summary (lifted straight from the website) is as follows:

* To end discriminatory and over complex means testing on pensions, UKIP would roll all existing State pensions, Pensions Credit, the Winter Fuel Allowance into a flat-rate non-means tested, non-contributory and non-taxable “Citizen’s Pension” of £130 per week for all pensioners aged 65 and over.

* In order to better target the value of the tax reliefs for pension contributions on low and average earners, to reduce the annual limit for tax-relievable pension contributions to £10,000 gross from £235,000 now and reinstating the dividend tax credit at 20%.

* To allow more flexibility in the use of the final value of a pension fund.

* To scrap the statutory Pension Protection Fund and the National Pensions Savings Scheme as they are costly and counter-productive, and encourage industry wide funds to reduce administration costs.

* To bring the generosity of unfunded public sector final salary pensions back into line with typical pension provision in the private sector to avoid potential liabilities of £1,000 billion.

* To leave the EU to avoid massive liabilities in supporting unfunded EU pensions that would wreck the UK economy (UK has c.74% of GDP invested in pensions, Germany just 5.8%, France 5.6%, Italy 3%).