Thursday 6 February 2014

I read it as far as far as the first glaring error and decided that he was a twat.

From City AM Forum:

BRITAIN’S tax credit regime was introduced by Gordon Brown in an attempt to boost the living standards of the low paid. But by topping up pay, this effective state wage subsidy has worrying long-term implications for the worst off and the economy.

Tax credits suppress natural market pay rises, encourage overmanning (particularly in non-growth sectors), and thus depress productivity growth. And they cost a fortune. Few employers would increase pay when the state effectively does this for them. Tax credits also discourage people from improving their skills when it makes little difference to their take-home pay…


OK, yes, Working Tax Credits mean significantly higher marginal tax rates on low earners, whatever your political persuasion, that must be A Bad Thing.

This was precisely what happened under the “Speenhamland System” in the early nineteenth century. Agricultural workers’ incomes were topped up out of the poor rate, encouraging over-employment in the sector. When the system was abolished in 1834, a substantial movement of labour into the new industries of the day followed, leading to an economic take-off over the next 20 years…

No, as badly designed as the Speenhamland System might have been, what drove people into shit jobs in factories was The Enclosures and the withdrawal of the Speenhamland System, i.e. the choice between just about staying alive and starving to death.

Tax credits have had similar results.

Case not proven. It's a shit system, nobody's disputing that, the "depressing wages" is a minor irritant compared to all the other faults.

The cost has ballooned (to £28.7bn in 2012-13), wage increases have been suppressed, and productivity growth has been poor.

Oh fuck off.

If you actually bother to read HMRC's Annual Report & Accounts 2012-13 note 10 on page 118 (it took me three minutes to find as it's a searchable pdf) you learn that the £28.8 billion can be broken down into Working Tax Credits (wage top-ups) of £6.4 billion and Child Tax Credits (which is mainly a bung for unemployed single parents) of £22.4 billion.

We also learn that £2.8 billion out of that £28.8 billion is treated as 'negative taxation', i.e. some marginal people have PAYE deducted with one hand and Tax Credits given back with the other, which is surely a sign that the personal allowance is too low; bump that up a bit and there would be less need for Tax Credits in the first place; and if withdrawal rates for actual unemployment benefit were lower, there'd be no need for them at all.

Twat.

9 comments:

Bayard said...

I think that Working Families Tax Credits and Child Tax credits are a bad thing, but I really don't need people like this agreeing with me.

Mark Wadsworth said...

B, they are a bad thing, I've never said anything else, nobody who knows about this stuff has said anything else. But people who know about this stuff wouldn't overstate the amount paid out by 300%.

DBC Reed said...

Some people think that the Speenhamland system which made the big enclosing landlords pay for the now landless farm labourers had some elements of LVT about it. (Me mainly since you ask: there was a Net reference to the element of redistribution in Speenhamland which I cannot, now, find.But I may make a habit of defending Speenhamland as well as the Corn Laws to annoy KJ who gets very stern when you question the merits of the agricultural and industrial revolutions -if not personally insulting.)

Mark Wadsworth said...

DBC, the system might have been badly designed, but the very basic general Georgist principle was sound.

Derek said...

Absolutely. The big problem with Speenhamland was that it was below subsistence level. As a result it acted as a subsidy to employers but not much else. If it had just been large enough to survive on, it would have been an effective cure for poverty. In principle it was the right approach.

DBC Reed said...

Reading up on the Ely and Littleport riots in May 1816 ,it looks like the Speenhamland payments to the unemployed did not keep up with the rising price of bread post Napoleonic War.Presumably the Corn Laws kept the price of bread up: if the Speenhamland payments had been indexed , the rich farmers, whom the pissed-up rioters had taken to beating up on sight, would have paid more poor rates but got a lot back in milled corn sales.Their resistance to paying a fair whack must have made ordinary people anti-farmer and anti- Corn Law so willing to listen to the Manufacturing Interest's anti-Corn Law complaints which as Marx predicted led, on abolition, to industrial wage cuts and a decline in agricultural employment, then ,because we were reliant on importing food and exporting manufactures to pay for them we became locked into a Free Trade which was really death spiral Imperialism.Or some such. Very different from what we were taught.And are still being told.

Bayard said...

DBCR, isn't there a chapter in Tuchmann's "March of Folly" called "Persuance of policy contrary to self-interest" or some such?

Kj said...

DBC: as usual the personal characteristics is your field of expertise. So you have a policy (corn laws), that benefits landowners and slightly disbenefits factory owners in the fight over who can screw the workers the most, do we cheer it? You tell me.

DBC Reed said...

KJ
I am anxious to take offence at what you've said but I can't understand it, so can't get started.
Do I think it better that the landowners screwed over the workers more than the mill-owners? Yes because i) the landowners had to pay the poor rate on the Speenhamland system and millowners did n't ii)the millowners started by employing child labour to process plantation crops raised by slaves;iii)the UK lost its food security in downgrading agriculture and had to rely on imports so during World Wars we starved particularly in WW1;iv) we ended up in 1901 with 23% in rural areas-France had 59% rural in 1901,31% in 1982;it is difficult to maintain a large industrial population with world cheap labour competition;v) the distinction between industrial and agricultural rich bastards was blurred back then because a lot started out as slave dealers who then invested in both land and mills.