Oh come on now - do play fair!

Guardian Headline: Jobseekers challenge benefits block

Guardian sub-heading: Lawyers say Iain Duncan Smith undermined jobseekers' rights with legislation allowing DWP to ignore court judgments

Iain Duncan Smith and parliament have conspired to undermine the basic rights of hundreds of thousands of jobseekers by enacting retrospective emergency legislation, according to the contents of a legal filing sent to the Department for Work and Pensions (DWP).

Lawyers acting on behalf of three jobseekers including Cait Reilly – the unemployed graduate forced to work unpaid in Poundland – are hoping to overturn a controversial law introduced by the DWP in March which allowed the department to ignore court judgments awarding more than £100m in benefits rebates to a quarter of a million jobseekers.

DWP eh?  Iain Duncan Smith eh?   Say no more!   Er, hang on a minute though...

With support from Labour, the jobseekers (back to work schemes) bill was rushed through parliament in just three days in order to strike down a ruling from three appeal court judges who found that half a dozen of the government's employment schemes, which made jobseekers work unpaid under threat of having benefits stripped, were operating outside of the law.

With support from Labour? Surely not!

Well duh!

Work Programme staff struggle to help unemployed when 'jobs aren't there'

Well, slap me down with a wet fish, who would have thought it. Think it we might but what we must remember is that various really clever people holding important positions in governments present and past had an inkling that that might be the case, which is why they set up highly expensive because they are so really clever special schemes operated by the people with the right sort of proven expertise and skills and connections to just bypass that and get at least 3 unemployed people into "long term" work for every single job vacancy declared … Clever or not, the article seems to suggest that “all is not going well” and things are being made oh so difficult by the absence of...

Social Justice: Transforming Lives

Is the title of the new magnum opus from the DWP:
...........................................
53. But we also know that past government policy across a range of areas, from welfare to the legal system, has exacerbated the rising trend in family breakdown:
• The couple penalty in the welfare system: The way that benefits and tax credits are paid in the current welfare system means that many couples are better off living apart than if they choose to live together.
• Treating symptoms not causes...
...........................................
We can ignore that second bit, the underlying cause is taxing earned income not the rental value of land or other government monopolies, and focus on the couple penalty, which is a maths thing. What does the DWP suggest..?
...........................................
Supporting family formation: the couple penalty

57. Currently, there are different benefit payment rates for couples and single people because the rate set for couples assumes that they will have reduced outgoings because they can share the expense of some living costs.

58. The couple penalty exists in the current welfare system because the way that benefits and tax credits are calculated means that many couples are better off living apart than if they choose to live together.

59. The introduction of Universal Credit will reduce the couple penalty where it is likely to have the greatest impact – among low earning couples. It will do this by providing an enhanced earnings disregard which will, along with the reduced taper, allow couples to keep more of their income in work. Couples will also receive the higher personal allowance available in the current out-of-work benefits within their Universal Credit, to ensure they are not disadvantaged relative to working singles.
...........................................
57. Is true, but that is not what makes the big difference. Income Support is £67.50 per week for a single adult over 25 and £105.95 for a couple. So a couple can make themselves £29 better off by splitting up. That'd be easily fixed by making it a flat £60 per adult, in which case a single person is £7.50 per week worse off and a couple is £15 a week better off.

58. Is the big one. What makes the really big difference, and why couples can make themselves significantly better off by splitting up (or by not getting together in the first place), is when one parent is working and the other isn't. If both are working or neither are working, yes, there is an inherent bias against couples, but it is not enormous.

The calculations might be slightly different if and when the Universal Credit comes in (i.e. as soon as the DWP bureaucrats have worked out how to make it as complicated and ineffective as possible, it's their jobs on the line if it were actually simple and worked), but based on the current tax/Tax Credit system (using the TBMT for 2011-12, the last ones available, rather sadly), the maximum which a couple can gain by splitting up is about £200 per week, and that maximum is reached at wages of about £400 (which is below average wage but still equates to a full time job on nearly twice the National Minimum Wage).

Broadly speaking, a single mum, two kids gets her rent paid and £200 cash in hand benefits and about 65p of those benefits are taken away for every £1 net income her partner earns (if she officially has one).

If her partner earns £400 and they keep quiet, they bank £200 extra a week; if they are foolish enough to tell the DWP, or if the DWP find out they are £200 a week worse off. The level of means testing is so savage, that by that stage it hardly makes a difference whether the partner packs in his job, that only loses them £80 a week, and probably enables them to wangle their way out of repaying all the over claimed benefits which tips the balance in favour of not working at all.

59. Nope. The couple penalty arises largely because of the means testing - it is embedded in the whole system and the Universal Credit will do absolutely nothing to fix it. Of course, the same applies to a couple where both are out of work; if one of them finds a job, they lose nearly all their benefits so it's hardly worth bothering - unless the couple officially split up, of course - the only way to escape the poverty trap legally is if both can find a job at the same time. Only with such couples, the effect of the means testing is referred to as the "poverty trap" and not the "couple penalty".

Awesome spreadsheet

The DWP have changed the format of their (most useful) Tax Benefit Model Tables. Instead of just showing the results, they now publish the spreadsheet so that you can see the underlying formula (and bodge them to your heart's content).

My favourite is the formula for calculating Housing Benefit:

=IF(Rent30-HBtaper*MAX(MAX(F37+G37+H37-IF(Adults=1,IF(chn=0, IF(WTCamt30>0, Rates!$F$58+Rates!$F$61, Rates!$F$58), IF(WTCamt30>0, Rates!$F$60+Rates!$F$61, Rates!$F$60)), IF(WTCamt30>0, Rates!$F$59+Rates!$F$61, Rates!$F$59))-IF(Chcost>0, IF(chn>0,MIN(Chcost, IF(chn=1,175,300)),0),0),0)-HBapp30,0)0, Rates!$F$58+Rates!$F$61, Rates!$F$58), IF(WTCamt30>0, Rates!$F$60+Rates!$F$61, Rates!$F$60)), IF(WTCamt30>0, Rates!$F$59+Rates!$F$61, Rates!$F$59))-IF(Chcost>0, IF(chn>0,MIN(Chcost, IF(chn=1,175,300)),0),0),0)-HBapp30, 0

But the most important figure is the 'replacement ratio':

Replacement Ratios are the net income after housing costs if out of work and reliant upon benefits as a percentage of net income after housing costs when the head of the family is in full-time work. A replacement ratio of less than 100 per cent indicates that the family has a higher net income when the head of the family is in work than if unemployed and in receipt of benefits.

The replacement ratio for a family with Dad, Mum and two kids (assuming that one parent is working at least 30 hours a week, i.e. using the 30-hour Table) starts at 79% and doesn't drop to 50% until the working parent is earning £938 a week (nearly double the UK average wage).

At that level of gross wages, the family's net income (£482) is double what it would be were they just on benefits (£241), so it still woefully understates the average marginal tax/benefit withdrawal rate - even though the working parent earns £938 a week gross, the family is only £241 better off, which is a marginal tax/benefit withdrawal rate of 74%.

And remember that this rate does not include Employer's National Insurance or VAT (which add 'about' twenty per cent to the true tax rate), so when I generalise and say that people in the UK have an average tax rate of 50%, it's just as likely that I am understating as overstating the real horror of all this.

Universal Credits/Single Unified Taper

I did some charts and workings to support my response to the DWP's consultation paper. I suggested replacing more-or-less the entire welfare system, means testing, Uncle Tom Cobley and, with 'Universal Credits' of £65 for the first adult per household, £52 for the second adult and £50 per child (the rates are to some extent arbitrary) and a 'Single Universal Taper' rate of 50%, collected via PAYE using K-codes.

Social rents/council tax would also get collected via PAYE using K-codes (so there would be an automatic abatement for lower earners - no need for Housing Benefit/Council Tax benefit). The same would apply to Housing Benefit for tenants of 'private' landlords, only I recommended we scrap that and build more social housing instead, that being a much better deal for taxpayers, the construction industry and society in general (and one in the eye for the Home-Owner-Ists).

Here are the four charts, comparing net incomes (after tax, benefit withdrawal and housing costs) for four basic household types living in social housing, under:
a) My suggested system (the thick black line), and
b) The current tax/welfare system. There are three separate dotted/dashed lines for the current system, as the precise level of net income depends on whether a household claims out of work benefits, 16-hour tax credits or 30-hour tax credits, taken from the corresponding tables in the DWP's Tax Benefit Model Tables.

As you can see, you can replicate the whole welfare system pretty accurately with a really simple system as outlined above, while doubling the net income from work for most claimants (i.e. marginal withdrawal rate goes down from between 70% and 100% to a flat 50%).

The biggest winners would be couples with two kids and low-to-average wages, apart from that, winners and losers more or less cancel out on a static basis. And yes, not only would my system be fiscally neutral (the workings are tortuous, you'll have to take my word for it), but it'd produce large (but difficult to quantify) wider social and economic benefits. Click to enlarge.








PS, thanks to whoever linked to this from The Guardian :-)

Labour Government to offer cohabiting parent-couples £224.56 per week!

"Wot?", I hear you cry, "For doing what?"

Ahem, they can get that money if they ... er ... split up. Or at least pretend to split up.

So here are the figures from the DWP's updated Tax benefit Model Tables, as promised a couple of days ago:

1. A cohabiting couple with two kids, one parent (let's assume Dad) earns £500 a week gross (all figures in this example are weekly), Mum is at home with the kids so there are no childcare costs, living in council housing have a net income after tax, benefits and housing costs of £345.59 (Table 1.6b).

If Dad 'moves out' ...

2. The newly single single mother with two kids, no childcare costs living in council housing has a net income, i.e. benefits minus housing costs of £190.39 (Table 2.1a)

3. Newly single Dad has a net income after tax/NI of £379.76 before housing costs (Table 1.1b) of £379.76. In practice he doesn't have any housing costs, because he stays in the family home - the couple just have to quickly hide all his gear should council snoopers pop round.

Total income of newly 'separated' family = £570.15. That's £224.56 more than what they were on before. I rest my case.

Rising star? Rising star?

I've got a one word reply to that sort of nonsense*:

Photoshop.

* I am afraid I couldn't find a link to today's articles that still refer to him as a 'rising star'.