The Futility Monster

He'll pointlessly derive more enjoyment out of your resources than you

The 96% Problem

Posted by The Futility Monster on October 22, 2009 @ 09:00

Celery is 96% water, apparently. Will celery help to end the cycle of welfare dependency?

Celery is 96% water, apparently. Will celery help to end the cycle of welfare dependency?

In Cameron’s conference speech, there was plenty to get your teeth into on benefits and welfare dependency.

Or so it seemed. There was much anger about the state of the welfare state… but there appeared to be little in terms of solutions.

The biggest point that stuck in my mind was his argument about an effective 96% “tax rate” on people who choose to get a job rather than survive on a plethora of benefits. It was a good line, and well argued. There is definitely something wrong about the fact that there is a perverse disincentive to work harder, or work more, when you know that the vast majority of it is going to be taken back off you in terms of your eligibility for benefits.

But let’s just stop for a moment and think of the alternatives. Because something like this very easy to attack, but the answers are incredibly difficult.

Scrap all benefits

Obviously this is never going to happen. But is that what Cameron wants? It would, after all, give rise to a much lower effective “tax rate” as there is nothing to clawback. Every extra pound earned could be yours, as you have nothing to lose.Naturally, that isn’t what he was arguing for, but there are, of course, some libertarians who argue such a situation is desirable in principle. Anyone who can work should, and should not be paid to remain an idle labour resource.

Claw back benefits at a much slower rate

Seems sensible, doesn’t it? Instead of taking back, say, 70p of every extra £1 earned, maybe only take back 30p. That way you get to keep more of the benefits you had, and the extra income is worth it. An added motivation to looking for more work, more hours, or promotion. That’s clear as day

Problem. Major problem. If you reduce the claw-back rate, you increase the level at which benefit can continue to be paid to go higher and higher up the income scale. And, considering that Cameron has pledged to abolish tax credits for families at the higher end of the income scale, there seems a logical inconsistency here. It would also be incredibly un-Conservative. Thatcher would be turning in her grave (hang on, she’s not dead yet…) if she knew that the plans were to keep subsidising people earning 20, 30, 40k a year. Talk about a client state. Everyone dependent on the government. Isn’t that what the Tories traditionally accuse Labour of?

Don’t claw back benefits at all

Well… that would be socialism, surely? Aren’t things like Child Benefit, universally available, seen as a bit of a waste by the right? But how would this work in practice? Would it mean everyone is entitled to a minimum standard of living? That would be revolutionary. And totally un-Conservative.

Unless I’m being particularly stupid, I can’t see what other options there are here. Either people are helped to survive periods out of work or they aren’t.

Perhaps what we’re actually being set up for, in line with all the other complaints about excessive public spending, is a major slashing of the benefits available. After all, it would be right in line with extreme Conservative philosophy:  to destroy the welfare state. It would be everything that Norman Tebbit ever dreamed of, and all with the perfect excuse to implement it thanks to the economic crisis.

Wouldn’t it be extraordinary if that’s where we were heading, without Osborne or any other Tory top brass actually admitting it.

But I just can’t imagine it. There would be uproar. I suspect people may suddenly rediscover their urge to vote. It may even be Cameron’s Poll Tax.

Yet… if none of the above proposals work to solve the welfare trap, what does? Increasing tax allowances for the poorest?

That works… but it totally dodges the benefits question. In fact, that would cost even more to the country in lost tax.

One rather suspects that Cameron isn’t going to say too much more on this issue. Otherwise, he might need some answers to the above can of worms…

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2 Responses to “The 96% Problem”

  1. Welfare and Pensions

    Our welfare policy paper sets out a radical programme of reform that will provide ladders of opportunity for millions of British people. It will be the biggest shake-up of the welfare state for 60 years:

    Every claimant potentially able to work will be engaged in welfare to work activities aimed at helping them back into work as quickly as possible (“A”)

    For those unable to find work there’ll be long-term community projects to help them get back into a working environment (“B”)

    Those not willing to take part will face tough sanctions (“C”)

    Our welfare programme will be delivered by private and voluntary providers, who will only be paid when someone gets and keeps a job. (“D”)

    Combined with our commitment to end the couple penalty in the tax credits system, our radical welfare plans will help lift almost half a million children out of poverty.(“E”)

    The con-servatives have no idea… this is a quote from their website (above) I have lettered the points to explain below:

    “A”) There are a small percentage of people who have recovered from a disability and can go back to work but choose not to. This is a point zero of a percentage of benefit claimants. Most are genuine. What this means is kicking most people off disability benefits and assuming they can enter the workplace. Certain people with disabilities can do adapted work however are not on par with the typical vacancies in the jobs market. Such as standing up all day doing factory work or even the community schemes.

    “B”) Workfare isn’t community projects (which sounds very soft and optional) – but more like community service, forced labout, for benefits

    “C”) Nice, refuse to be a slave then get a 6 month sanction.

    “D”) You could never run a scheme like that. Most people on the schemes don’t secure employment so where are the capital requirements to deliver the courses? most people wont keep in the jobs anyway as they are forced into unsustainable jobs. The rpoviders would never get paid. Community service like community projects wouldnt give people the opportunity to secure employment anyway.

    “E”) Why keep the tax credit scam system? Lower taxes and do away with it!

  2. […] The first point is tired, old partisan hackery. The second has some truth to it. His plan, if implemented properly, will cost money in the short-term, and that’s before you even get into the minefield of how to withdraw benefits from unemployed people who then start work. I’ve had no good answers on this issue. […]

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