Tag Archives: CSR

Nick’s Fag Packets & Their Role in Your Future

There’s a reason why Nick Clegg has admitted to his smoking habit. It’s because littered throughout Whitehall are packets of Lambert & Butler with the government’s policies scratched on the back and someone was getting suspicious. Admittedly, they are piling up in the Department for Work and Pensions in particular, but turn a corner and you are just as likely to find them scattered in the Justice Department, the Home Office, the Defence Department and all around Michael Gove’s desk in education.

Let’s take a few examples found recently:

Discovered at the Tory Party Conference: “Cut Child Benefit for rich – ANNOUNCE FAST!!!”

Dropped outside IDS’s front door: “Housing Benefit – Check D. Mail for facts about claimants”

And standing to attention at the Defence Department – “NO PLANES!! Speak to Sarko (nb strikes!!)”

I estimate Nick must be on at least 40 a day, the rate the badly thought-through policies are emerging from this government.

The cut in Child Benefit for richer parents sounds like a sensible idea in a time of austerity. Why should better of people receive money they don’t need? Well, I support the principle of universality because it offers everyone a stake in our welfare state and if it’s eroded, then people begin to question why they should contribute at all. However, aside from this, it’s cheap and easy to administer. If you have kids, you get the support.

The coalition’s first run at changing this wouldn’t even have required a pack of 20 to sketch out, so flimsy and rushed was the announcement. The plan was to cut CB for families where there was single higher rate tax payer in the household. The press leapt on the fact that two earners with salaries below the higher rate threshold, but with a combined income far in excess of a single earner family, would retain the benefit, whereas the other family would lose out. “It’s too complicated to do it any other way”, we were told.

Now in transpires that not only is the new system unfair and frankly, a touch ridiculous, but it’s almost certainly unenforceable. Why? Because usually the woman claims the CB, and this new approach would require her to declare if her partner was a higher rate tax payer. The benefit is not linked to the salary of the higher earner and so HMRC doesn’t know who should get it and who shouldn’t.

Never fear, Nick chained another pack and Danny Alexander (fast becoming the poster boy for promotion above one’s abilities) sketched an idea to write to everyone to ask them if the partner earns higher rate. Poor Danny, more at home among the spruces of the Cairngorms, forgot that a) people lie, b) it’s virtually impossible to force people to ask their partners to disclose information and c) people’s incomes change over time.

The only effective way to administer this is through a wholesale change in the way income tax is calculated for couples, which would undoubtedly cost much more than the cut will save. It also rather begs the question why, if you are effectively means testing the benefit anyway, you don’t take the opportunity to iron out the mad inconsistencies in the policy as it was originally devised.

So, by all means debate universality and what we can and can’t afford, but perhaps Nick can do us all a favour and take up smoking Havanas, which would at least give his bumbling colleagues a little more space to plan their announcements before they are made.

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The Grim Reality of Osborne’s Sense of “Fairness”

I will post in more detail on the CSR in due course, when I’ve waded through the political double-speak and read between the lines, but for now, let’s look at the “fairness” assessment provided by the Treasury itself. There is a graph in the back of the CSR document which shows where the burden of the report’s measures fall hardest. Osborne, Alexander and co have been claiming the CSR is fair. Nick Clegg suggested it had “Liberal Democrat principles running through it like a stick of rock”.

Looking at the figures in Chart 5b on p.99 of the full CSR report, the analysis is this:

The bottom 10% of earners will suffer a hit of 1.6% of their net income, whereas the top 10% will lose out by 2.2%.

Ah! Fairness, you see! The rich proportionately lose more.

But consider this. The second hardest hit group is that poorest 10%. These are the group who rely on Housing Benefit (cut), disability benefits (cut) and the other £18bn which is being removed from the welfare budget. To illustrate, let me paint you a (simplified) picture.

A man needs to find some money to pay a debt, so he approaches two people. One man is very rich, a millionaire. “Can I have £100,000 please?”, asks the debtor. “Why?” says the rich man. “Because I need money and we are all in this together.” The rich man reluctantly agrees, after all he still has £900,000 and some money tucked away in the Cayman Islands, which the debtor doesn’t really care about.

The debtor then approaches a poor man. One of the poorest in the country with only £10,000 to his name. “Can I have £900 please?” “Why?”, says the poor man. “Because we are all in this together and besides, the rich man gave me £100,000, which is 10% of his money. I am only asking you for 9%.”

The poor man hesitates. ” But I really need all my money. For food, for clothes for my kids, for my house. When you take all that away, I don’t have £900 to spare.”

“Sadly”, says the debtor with a smile, “because we’re all in this together, you don’t have any choice” and he grabs the £900 and heads off to meet the millionaire for a drink. Well, they used to go to school together, you see.

I don’t think we should put up with living in a country where this becomes the definition of “fairness”.

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Filed under Coalition, Economy