Friday 10 September 2010

FFS. Are they being stupid or 'deliberately misleading'?

From the City AM:

CHANCELLOR George Osborne said he will clamp down on the "completely out of control" welfare state yesterday, and promised to gut £4bn from the annual benefits budget. He said the choice to sit at home "with the blinds pulled down"* is coming to an end, in an interview with the BBC. "The money won't be there to support that lifestyle," he added. The £4bn cuts to come in by 2015 are on top of the £11bn savings set out in the June Budget. Osborne said around 5m people of working age live on benefits, which costs around £192bn a year.

The £192 billion is understated for a start, the cash cost is slightly over £200 billion per year, of which over £80 billion is old age pensions (see page 89 of the DWP report). And we could add on about £90 billion for the value of personal allowances for income tax/National Insurance, which are inherently redistributive (albeit in a good way), about £40 billion for tax breaks for pensions savings (i.e. subsidies to the insurance companies) and £20 or £30 billion for the annual cost of public sector pensions, so the total cost of all this redistribution (upwards, downwards, sideways, whatever) is more like £350 billion (in very round figures).

And out of that £350 billion, how much actually relates to unemployment benefit in the traditional sense, i.e. Income Support; Jobseekers' Allowance; Incapacity Benefit; and Employment & Support Allowance that those five million people are claiming?

Click and highlight to reveal: £20 billion.

Check your answer at Table 3 of the DWP's summary (Excel)

* Hey, Georgie - I've a cunning plan on how to get such people back to work - scrap income tax, VAT etc and tax land/property values instead - that'll hugely increase work incentives and people won't be able to afford to just stay at home (unless they live in a very modest home indeed, in which case, fair play to them).

4 comments:

Anonymous said...

I assume your "are they being deliberately misleading" question was rhetorical ...

Mark Wadsworth said...

Anon, no it wasn't, actually.

Whenever people talk about the cost of the welfare state, they always focus on this relatively minor area, it'd be helpful if people put it into perspective, e.g. "Unemployment costs £20 billion a year - half as much as tax breaks for pension savings and a fifth as much as taxpayer-funded pensions."

AntiCitizenOne said...

and it won't have to be that modest a home either.

Remember it's not just homes that sit on land.

Mark Wadsworth said...

AC1, OK, let me rephrase that: "unless they live in a home which only occupies a small area of land* or is in an area with low land values".

* A 100 sq yd flat in a ten storey block probably only occupies pro rata (say) 20 sq yd of actual land.