Hello,
With politicians falling over themselves to tell us what they intend to do about poverty and welfare dependency in the Glasgow East scrap I thought I'd provide you with an illustration of how the government has failed to do either and provide an example of how we make life for the low paid needlessly difficult.
On Tuesday I had a lovely young chap in my office who'd got himself in a spot of financial bother after foolishly but understandably in my view running up a debt of £2000. I should point out that he hardly blew it on living the high life having spent it to pay off some other small debts totalling approximately £750, clear two months rent arrears, three months council tax arrears and er.... take his girlfriend on holiday. To be fair when he took it out he'd managed to wangle some regular overtime in work which has subsequently dried up -hence his current difficulties.
Anyway lets have a look at this very pleasant young fellow's current monthly finances.
Net Earnings
£770.42
Outgoings
Rent £290.00
Council Tax £95.00
Electricity (includes amount towards arrears) £80
Pay as you go mobile £15.00
Prescription costs £6.85
TV Licence £11.60
Bus Fares £58.50
Food, Household, Toiletries, Leisure and Clothing £210
Total Outgoings £766.95
Surplus £3. 47
After obtaining details of his income I realised that he was entitled to benefit that he wasn't claiming and assisted him to apply for Working Tax Credit which will take his monthly surplus income to £55.47 each month and almost cover his loan payments. In any case it represents an offer more likely to be accepted by his creditor than £3.47 each month.
Supporters of our wonderful Labour government will be leaping up and down claiming this chap as someone they've managed to lift out of poverty or some such nonsense. However let's not forget this chap is one of many hit with a tax increase after the abolition of the 10p tax rate.
Speaking of tax, am I alone in wondering why this chap is paying any tax or national insurance at all? If the government did away with tax credits, excluded low earners from income tax and paid their national insurance contributions for them (as they do with benefit claimants) my client would have an income of £913 per month.
£913 is by no means a fortune and the surplus income of £146.45 would be ploughed back into the economy and via increased taxable business profits find it's way back to the treasury at least in part. The Glasgow East constituency and areas like it need all the folk with disposable income they can get to retain and attract useful stuff like shops within walking distance. Add that to the savings made from the costly administration of tax credits and I start to wonder if I'm missing something?
I'm sure some dog breathed bore is reading this tutting and muttering that the chap concerned should stop whining and get a better job. Well firstly he isn't whining because he really enjoys his job and has a great laugh with the folk he works with, he likes the company he works for and hopes to progress within it. In any case he's doing nothing wrong, low paid jobs exist -someone has to do them, his work is perfectly legal why should he be penalised for doing it? We can't all be MPs with thumping great wages and bottomless expenses accounts now can we?
Government reforms of the benefit system are nothing more than a stick to beat people into getting off out of work benefits and the tiny carrot of tax credits to encourage the taking up of low paid work. In other words the poorest among us are being bought cheap to allow the government to fiddle statistics. The only political agenda being served by this is the governments. Whether you believe in dishing out benefits like sweeties, the total abolition of the welfare state or are somewhere in between, if you accept the government statistics as a sign of progress you are being conned.
Shipyards and manufacturing are gone. The jobs open to unqualified workers are in the low paid service industry. People who take up these jobs deserve a living wage. The case for the vultures in parliament who live fat off their drudgery is somewhat less compelling. There is no John Lewis list for the poorly paid. You don't have to be even mildly left leaning to see the inherent obscenity in representatives of areas like Glasgow East trousering enormous expenses whilst their working constituents can barely afford a night at the pub. If I were in charge each MP would be paid the average wage in their constituency to give them an insight into how their constituents live and give them an incentive to get off their fat arses and attract decent jobs to their constituency.
Cheerio
9 comments:
Are you saying 'get rid of Working Tax Credit and use the money to raise the tax threshold' or 'get rid of all tax credits and use the money to raise the tax thresholds'?
If scrapping all tax credits, then you'll leave most low earners who have kids worse off, because they get more in tax credits then they pay in income tax + NI.
If just scrapping working tax credit, then some low earners would gain and some would lose depending on exactly how much they were earning. So it's not a magic solution to poverty or the problems that low paid workers face.
(The amounts that some people would lose from the abolition of tax credits are many, many times greater than the amount they lost out from the 10p tax rate abolition).
Of course there's no reason why you could keep tax credits (modified so that they work more effectively with more flat rate payments for different bands of income), *and* raise tax thresholds, with higher earners paying a bit more. Whether or not you agree with this personally, it's the sort of thing that a Labour government should support, right?
Excellent post! I don't think there is any one answer, but raising the income tax threshold and paying NI for the lower paid is surely the best place to start.
As for tax credits, the real problem I have with them is that they don't help the very poorest in society, many of whom either aren't eligible or if they are receive the kind of amounts you've detailed whilst concentrating on families higher up the earning scale who shouldn't need that state assistance. I suspect one of the solutions lies in investigating that part of the tax credit system and how to move away from it.
I like the MP salary idea though-sweet!
BG
Clairwill,
It has always struck me as an inegalitarian idea that taxing the poor would cure our social ills. It seems to me that raising the threshold - as you suggest - and perhaps targetting the extremely rich in compensation - which you do not, would lead to a more equitable society.
Love your blog.
It is an excellent idea indeed to raise the tax threshold, & reform/abolish WTC so that incomes actually stay the same (or in the case of those who don't recieve tax credits, go up).
The benefit would reach those who are single & under 25. You know as well as I do that such people get a very raw deal, probably because they are less likely to vote than other groups & if they did they'd be Labour anyway!!!
Savings would be made on admin costs, & also those who currently are scared off claiming/too ignorant to claim would be laughing. The only losers would be the statists who are trying to make such unfortunates as your client worse off.
Interestingly enough, my time at the CAB had made me far less socialist than I once was. Funny how things happen, isn't it?
Clairwil:
Tax credits are nothing to do with economics. They exist only for one reason- control. Tax credits help to ensure that people feel indebted to the state, so that any reform to try and reduce the scope of the state is fiercly resisted. The state then becomes more than a safety net to help the poorest and weakest, and turns into a necessity for millions of people.
They should raise the income tax threshold to £13,400, and pay for it by abolishing large swathes of government.
"Tax credits help to ensure that people feel indebted to the state, so that any reform to try and reduce the scope of the state is fiercly resisted."
No, this is paranoid libertoonian bollocks - the explanation, as always, is crude politics not sinister conspiracy theory.
Tax credits exist because only 1/3 of people eligible to take them up actually do so - so the government can *appear* as generous as if it cut taxes on the poor, but only actually loses 1/3 of the revenue it would lose if it did so.
(and the people who're too disengaged/challenged to claim the credits don't vote or get involved in political discussion, so in terms of electoral calculation they don't matter)
You've hit the nail pretty much on the head.
I mentioned some time ago on your blog that Scotland should be made independent, and England shoulf be independent for London - these two simple things would do more to lift the mass of the population out of poverty than all this messing around with tax credits and such like.
btw
We recently went to look at a flat, the rent was near enough £100 a week and were told that it was ok because we were getting housing benefit - to which I replied, what happens when we get a job?
It's a scam.... a total fucking scam - there were forty flats in that block and the company that runs them are supposed to be a non-profit making charity.... my arse.
They have been raking it in by letting them out to OAPs but now the rules have changed they are stuck.
What actual incentive is their to work?
And you can bet your life that the collapse in the property msarket will not affect the scam charities who have been set up to run social housing.
Fucking Labour government!!!!!!
Spot on, Clair, I agree with you completely. Shouldn't a working class lad be allowed to enjoy doing a simple job, without worrying about being on the poverty line? Not everyone has the aptitude or the inclination to work in an office and climb the greasy pole.
Raising the tax threshold would be one idea, but really, the problem lies particularly with housing, there just isn't enough affordable houses out there to rent. A single man looking for council accommodation can forget it - he is dead last behind the other more needy groups.
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