There is a better solution. This might be surprising, coming from the UK\’s biggest children\’s charity, but the case for abolishing child benefit while using the tax credit system to ensure poor families do not lose out is economically and morally overwhelming. And the savings generated should be specifically targeted at the most vulnerable.
Yes, agreed, getting rid of such universal benefits is a fine idea. If we\’re aiming to stop the poor being poor then of course we should be spending what money is available on those poor, not the rich.
However, we\’ve another problem that we also need to solve. Quite how much weight you put on the various bits and pieces of this problem is up to you of course, but at least consider this.
The marginal tax and benefit withdrawal rates faced by those working poor. There are those (a small number but in the tens of thousands) who face marginal rates of over 100%. There are millions who face rates of over 60% (see budgets passim).
Moving from a universal to income based (ie, means tested) benefit will increase both those rates and those numbers.
Now, I believe (as you are quite at liberty not to) that the greatest problem the working poor face in our society is that they face entirely perverse incentives in trying to work their way out of poverty. Those marginal tax rates: yes, I really do believe that tax rates of 60, 70, 80% will stop the rich from working and thus raise less money for the exchequer. But I am consistent in that I believe that such tax rates will discourage the poor from marginal work too.
But marginal work, those few extra hours, is exactly what the poor do need to be doing in order not to be remaining in poverty.
So, while I agree that universal benefits probably should be attacked I don\’t agree with how that £5 billion should then be spent.
For that is just about the sum that IDS requires to \”make work pay\” by reducing the marginal tax and benefit withdrawal rates. A much better place to spend that money I submit.
And just one little note:
But, right now, a dad, working fulltime on the minimum wage and with a partner and two teenage children, and after receiving every possible benefit, has to raise his family with £100 a week less than the amount the Joseph Rowntree Foundation claims is necessary for an acceptable standard of living.
And £63 of that gap is the tax and national insurance that we charge to someone working on the minimum wage. If we were to construct a sensible incentive system for people in that position we wouldn\’t be charging them that money, would we?
A possibly sensible system would be that minimum wage earnings do not attract NI or income tax: that is, a personal allowance of around £12,000 a year. And for this two adult family, under such a system, to move up out of that JRT defined poverty, the \”partner\” will need to pick up one shift a week stacking shelves.
No, really: using the numbers you\’ve given, a family of two adults and two children, given the current welfare state but a change in the tax system, would be out of poverty with 44 hours of minimum wage labour a week. That\’s 44 hours between the two adults you understand, not for each of them.
Now you can call me a baby eating Tory bastard if you like but I really do not think that that is a particularly heavy burden to ask that they lift. Given that, with all the benefits that are on offer, we, the rest of us, are doing about 50%* of the total lifting.
*Totally guesstimated number.