A Fairer Welfare System

Due For a Rethink

Am sick at home in bed this morning reading the #tickertapeofbanality ; Tim Montgomerie highlights this scary piece by Wat Tyler at BOM.

Despite all the blustering and big stern words from The Cleggeron and the wailing and knashing of teeth from the Labourious party and it's cheerleaders in the BBC (though it pleased me to hear Evan Davies tear one such idiot a new one this morning on radio 4 with regards to zippy's mooted graduate tax scheme; might've saved himself being first against the wall) the cost of servicing everything the public sector does is increasing by even more unsustainable levels; the figure given being a whopping 6% on the coalition's watch.

Noone expected them to make changes overnight, but I get the distinct impression that settings go their means of dealing with impending budgetary collapse (the type companies have been undergoing where they find they can't meet payroll; when you know your in trouble) is little different to dealing with Labour's plans, albeit just a little faster.

The reason this is a bad thing and why it proves without a shadow of a doubt that the Cleggeron are no less backbiting, no less concerned by infringements on our liberty and property (just look at the communitarian ideas espoused by Cameron in his "Big Society" wheeze; rob "unused", "idle" bank accounts to pay for porkbarrel politics meted out by yet more unelected quangos and wooden tops with spreadsheets in local government) than anything Labour could have imagined.

Which is why I am putting my idea on welfare reform forward again for the coalitions scrutiny; they appear to be only paying lip service to the concept of restoring civil liberties, with Clegg seemingly quite happy to accept minor, inconsequential changes whilst vetoing in advance the larger ones like the smoking ban and 1972 European Communities Act. They are also completely ignoring ideas for real reform offered by the self-same people who will have to endure it.

So my idea is here and is essentially comprised of the following principles:

1. That the state guarantees a working tax allowance that removes those under the relative poverty line completely from the tax system; based on the following graph and info provided that the median salary for a man/women (averaged) is £478.5/week or £24882 per annum; my fagpacket calculations roughly equates this to an allowable untaxed income of ~£15000 (that's right; your in "poverty" by the government standards if you are capable of buying only one playstation 3 a week with your earnings).
2. That you can transfer ownership of your tax free allowance in whole or in part to other parties at any "cost" agreed to (I.e.you can give to your partner/spouse for free and double their tax free allowance to to £30k, or "sell" it at an agreed value lower (or higher?) than it's perceived one to a specialist company who use it to increase someone's tax allowance further.
3. That the tax allowance is interchangeable and exchangeable for other forms of tax (preferably in a simplified tax system which doesn't double tax as much; a prime example being capital gains and income - your taxed when you earn it and when you sell the product of the remainder; this is unethical to me), so it can be exchanged for a reduction in business rates for example.
4. That whilst they don't work and/or have work that can be taxed (I.e. babysiting, household chores, pocket money), children and teenagers have an amount of tax allowance reflective of the amount of public funded used coincidentally (e.g. education and national insurance payments); let's say that after this amount the tax credit comes to £5000, controlled by a parent or guardian till their 16th birthday where they gain control of it's function.
5. There is no upper income limit; as can be seen here the current system of tax free allowances are atrophied and inherently punish success; if you earn over £100k a year it decreases your tax free allowance as you increase your salary and standing- as you will already be paying higher levels of tax this is quintessentially a slap in the face and exhibits a mindset that you keeping your money is predicated on the current governments ability tiger away with stealing it; truly unethical and wrong.

Through this system it would be incumbent on the holder of said tax credit to utilise it as they saw fit; if in work they could use it fully to maintain a minimum chunk of their pay on which to live, stay-at-home parents could donate theirs to their spouse, commanding a larger take home pay packet for one working family member whilst providing a stable home environment for families wanting to be there for their kids (something which only the richest able to "afford" one working parent are capable of at the moment). The unemployed could garner a living income from this, whilst utilising their free time to take up voluntary, unpaid work, further education and training whilst looking for work, incentivised by the reduced monetary value to them offered by the buyer of their credit to seek work to maximise it's use. The elderly could do likewise, using it to supplement their pensions through combinations of voluntary/monetized work and sale of their tax credit.

Too many credits in the market would, as with any commodity, depreciate the total price offered for them, in turn pushing the owners to utilise them through employment; a recession would likewise push more out of work, making the availability of tax credits cheaper leading to lower taxation on businesses able to buy them, enabling them to recapitalize and reconcile for growth, leading to jobs, growth and such like. The tax system would need to be simplified significantly; the Office of Tax Simplification's job would be made considerably simpler and more pertinent with the competing tax credit component reducing the tax take from this direction, realising the goal of not reducing tax revenues but the losses associated with chasing one of the most complex tax systems in the world. HMRC could be reduced massively as well, considering much of it's activity and cost is associate with dealing with red tape it itself has created.

So how much would such a scheme cost? Whilst it will have increased the 2001 census tells us the British populace was comprised of 18% young people (0-14); say that the 0-16 component is ~20% and the mist recent government statistics state the population being currently 61.792 million (taken from here; incidentally this states children 0-16 as 1:5 so 20% best) then the value of the tax credit (set at £5000) would be £62Bn and £742Bn for every adult given a tax credit value of £15000.

Note this is not money the state has to dole out in welfare or outlay to business; it is purely the non-taxable monies in the economy it doesn't have access to - with a GDP last year of £1.42 trillion this means that the taxable income of the UK becomes [1420-742] = £686Bn is now only available to taxation, resulting in a considerably lower amount of revenue available to fund the state activities - even at a flat taxation rate on all activity of 50% only £343Bn would become revenue-available, and any government would have to justify such a massive increase over the odds for such a high tax take; more likely when the more productive would insulate their earnings with tax credits whilst the poorer utilised theirs to spend more time at play that this would incentivise government to lower the income tax rate, probably at a flat rate of ~20%, to incentivise economic growth.

So how much revenue could be collected? Keeping VAT as is (a sales tax) on current trends* would net £78-97Bn (the top value if VAT receipts stay at current trends); that is if the rate of consumption doesn't change - highly unlikely if us simple plebs have more money available to spend rather than government doing it for us.

So on a reduced tax take the total estimate is ~£234.899Bn, accounting only for centrally mandated/collected sales tax replacing VAT and a flat 20% income tax rate above the allowed tax free sum. What can we do without?

According to the website UK Public Sector Spending the following is a breakdown of the current estimates for 2010 spending. I've struck through what can be done without under my scheme in a very rash manner, with a minor comment as to why, though most should be obvious:

[+] Total Spending (in £billions)
Central: 495.7
Local: 173.2
Total: 668.9

Pensions 117.2
— Sickness and disability 33.5 - welfare payments in general would stop as they could be covered by the tax credit, the excess costs of sickness and disability easily met by increased revenues from charitable agencies and individual action.
— Old age 81.9 - this would remain but the amount would not rise with inflation and it would be closed to individuals not yet paying national insurance, being replaced with privately financed pensions and the ability to work shorter, tax free, supplementary hours. Eventually the monies needed would wind down to zero.
— Survivors 1.8 - as above.

Health Care 119.8 - I've deliberately not mentioned this; while there are plenty of libertarian solutions to healthcare I am primarily dealing with the issue of welfare and a fair tax system. National insurance would remain with no upper limits to contributions; simply put if you are utilising more than one batch of tax credit allowances you are more than likely supporting another as it stands. I would envision this changing once people started to take more responsibility and demanding mire accountable healthcare services an choice.

Education 85.6 - again not primary point to deal with here, so remains unchanged. This would also be paid for out of the local council tax take.
— Pre-primary and primary education 0.7
— Secondary education 14.4
— Post-secondary non-tertiary education
— Tertiary education 12.9
— Education not definable by level 56.2
— Subsidiary services to education 1.4

Defence 43.9
— Military defence 31.8
— Foreign military aid 4.1
— Foreign economic aid 5.6
— R&D Defence 0.5
— Defence n.e.c. 1.9

Welfare 109.1
— Family and children 22.2
— Unemployment 7.0
— Housing 4.5
— Social exclusion n.e.c. 23.9
— Social protection n.e.c. 51.5
- All of the costs associated with this portion of spending now met by tax credits.

Protection 34.7 - Policing and the Judicial services will pass to total local control, with democratic leadership (police chiefs and elected judges) to oversee local requirements.
— Police services 5.0
— Law courts 6.9
— Prisons 4.6
— Public order and safety n.e.c. 18.2

Transport 21.5 - paid out of road tax payments

General Government 24.7
— Executive and legislative organs 9.4
— General services 14.8
— General public services n.e.c. 0.5

Other Spending 84.1
— Basic research 0.1
— General economic, commercial and... 10.0
— Agriculture, forestry, fishing an 5.9
— Fuel and energy 1.8
— Mining, manufacturing and constru 0.4
— Communication 0.3
— Other industries 0.1
— R&D Economic affairs 3.5
— Economic affairs n.e.c. 1.2
— Waste management 8.4
— Pollution abatement 0.4
— Protection of biodiversity 0.4
— R&D Environmental protection 0.4
— Housing development 5.3
— Community development 0.8
— Water supply 1.0
— Housing and community 4.7
— Recreational and sporting service 8.0
— Cultural services 2.1
— Broadcasting and publishing services 3.8
— R&D Recreation, culture and religion 0.2
— Other Spending 25.3
- can we really justify such things as "cultural/religious awareness" spending and funding the beeb? It shouldn't be something coerced from our pockets, and all peoples should be bound by the rule of law, anything beyond that, be it honour killings to female genital
mutilation, should be taken to task, not coddled by a diversity awareness officer.

Interest 31.0
— Public debt transactions 31.0

[+] Public Net Debt 771.5

So adjusted for my figures about what would be covered and what wouldn't you reduce the deficit to £110.201, and we haven't even considered winding down the size of a vastly unnecessary and surplus HMRC and the myriad agencies built up to "deal" with poverty. None of this takes into account the potency of giving people more money, to make more informed decisions with it and creating the kind of growth we need to revive this country of ours.

Ultimately the push is for greater individual control of ones destiny and welfare; this I feel is the best way of going about it.

I Have a Problem With This Picture

Seriously, I do. On this point and this point alone I agree wholeheartedly with the premise of the Huffington Post piece; that some of the Teabaggers (tee hee) really do need a good hard slap (the racism and homophobia? Don't really see anything other than a mild, misdirected dislike of some peoples lifestyles or stereotyped remarks; climate change fanatics, maggie-hating labour supporters and Hamas apologists all say stronger worded stuff in their daily rhetoric).

My daughter turns 1 this week; I want to teach her what it means to understand what freedom truly is, to have a healthy respect for a true rule of law and the mockery that sits in it's place and a sceptical view and sense for political ideology masquerading as science.

What I won't do is force her to sit under the baking sun holding a placard to something I subscribe to, be that religion* or politics - if I can't convince her of my feelings on the subject, my passion or the righteousness of my cause then it is my failure, not hers.

So I don't like this and have to question any parent and libertarian who would force their children to do this who is barely capable of not wetting the bed, let alone assembling a credible, informed opinion or choice.

*= yes she will be coming to church with me and MrsRat on Sundays; practicallities of finding her someone to sit with while we worship aside, she is not forced to accept anything- she doesn't have to take communion & as a church we don't believe in baptising children (being an arcane, cruel and cynical ploy developed by the Roman Catholic church to guilt and scare parents into roping their kids into superstitious bilge, just in case they died and went to purgatory or some other patent nonsense). All we ask is for her to follow our lead to a reasonable extent until she is old enough to take charge of her life and autonomy; that is the bargain we ask- we will continue to feed, clothe and house her in return for abiding by our rules until she is old enough to support herself and live by hers.

MPs Need Schooling.

Andrew Gwynne engages in a bit of misdirected "free market" bashing this morning:

‘There is no money’ – this is the message blasted across the Chamber by Ministers every time an Opposition MP (and increasingly, some Coalition backbenchers) condemn a decision to cut a project in their constituency. And to some extent, this is true. The public finances could not grow indefinitely and, given the banking crisis and the global recession, huge deficits followed. Had Labour won the 2010 General Election, there would still have been cuts – deep cuts – though not as severe or immediate as the Coalition’s plans.

Now there are whole shovel-fulls of wrong in this first paragraph that should be put in the context they so thoroughly deserve. First off let's deal with the spending "cuts" - these are not actually cuts but a decision by our new coalition overlords not to endorse an unfunded spending plan put in place before the election by the previous overlords in a contrived bit of scorched-earthing; a veritable "vote for us or this puppy gets it" ploy - now that we didn't vote for them they are saying "well will you look at all those dead puppies surrounding the new overlords collective feet? Terrible". Then lets look at the "backbench revolt" at cuts in their constituency - Gwynne appears to be shocked at the concept of pork-barrel politics as if this is the first time a Laborious politician has ever heard of this; I wonder what would happen if we explained what gerrymandering and electoral fraud where? Then the biggy; the ongoing NuLaborious canard that the crunch was "nowt to do with us init; dem stinking Yanks and Tory donors working in the city" ploy. That's certainly one potential excuse - it was someone else's fault - here's what my reading of the event make me think happened:

1. Greenspan artificially lowered interest rates after the last recession to encourage credit agencies to lend; Fanny Mae and Freddie Mac, both federally sponsored institutions, inflated the mortgage market and encourage home-ownerism- combined with the Community Reinvestment Act, pushed through by far-left groups (to which Obama was a junior member) to enable poor people to get access to loans they could never dream of paying back, generated a stream of toxic debt, re-polished, packaged and sold worldwide.
2. Brown as Chancellor "raid private pensions"; dividends are taxed to pay for his already unsustainable public sector jobs boom which alter private investors behaviour encouraging the "buy-to-let" market to inflate overnight, driving up house prices in an incredibly over-regulated and controlled system where new builds are made ridiculously difficult. At one point the amount of money being "earned" by bricks and mortar overtakes normal wages; Labour nod through lower interest rates to encourage banks to lend more in credit and mortgage amounts.
3. Eventually the number of defaults reaches critical mass and the investment vehicles they are folded into falter; overnight the bubble burst taking with it Fanny Mae and Freddie Mac as well as several major investment banks, mass nationalisation of much of the industry (or part nationalisation); Brown, now the British PM despite facing no popular vote in this country, who panics, seeing the banks most exposed and liable to fold are in in key labour strongholds, bails out the worst hit, thus validating the fears of moral hazard and enslaving future generations with debts as big as they were left post-WW2. "Quantitative easing" is used to inject further cash into the banking industry by buying back bonds from them with freshly printed money.
4. Mass unemployment in the private sector is masked by disingenuous spending splurge in public sector so Brown can debate Cambo in parliament that he is not destroying jobs through all his other asinine laws. Ongoing debate between multimillionaire public school boys does nothing for my daughter, her newly unemployed father agonising over how the house will be paid for, let alone her food.

But no Gwynne your probably right: was dem damn yanks dat dunn it.

However, for Building Schools for the Future, this wasn’t the case. Gove tried to use the mantra that the money wasn’t there, only to be shot down by his own Permanent Secretary who confirmed that Ed Balls was correct to say that full Treasury approval had been given to BSF. The money was there.

No Andrew I think you misunderstand what is meant by the "there's no money left" mantra; it is not a case of what NuLabour placemen have said you can use the coffers for, or that brown removed the purse strings altogether and hid them; there are no coffers - you didn't plan the costs you just stuck them on; dead puppies remember?

We are currently borrowing £1 in 4 we spend hence spending should be cut just to stop us haemorrhaging more money on debt repayment by somewhere considerably higher than this; ask my credit card manager if you don't understand this.

And if the money was there, it must still be there.

See above.

Now call me a cynic but I’ve not yet seen Gove scurrying up Downing Street with his bags of treasure wishing to please his master in Number Ten. So has this all been a cunning ploy to generate a slush fund of capital money for Gove’s ‘Free Schools’ plan? I suspect it might be.

Again: see above- the reason you haven't seen this treasure is because it doesn't exist; it is unfunded.

You see, apart from a small number of middle-class mavericks who may be quite happy to have their Tarquin (apologies if any readers are called Traquin) educated above a shop or in an industrial unit rather than mixing with ordinary kids in the Comp down the road, most parents are not going to buy into that. They want their children taught with the best facilities too, and for ‘Free Schools’ to work, they need to be in shiny new buildings.

Your right Gwynny, because middle class parent definitely don't have Tarquin's (like the class envy poke BTW; very old Labour) best interests at heart; and as for the patent nonsense about the need for "shiny new buildings" it is that kind of nonsense that has got us in so much trouble; besides, if advocates of free school actually agree with him they will accommodate the changes necessary and build his "shiny new buildings", for that is the power of the markets.

The real concern is that this whole policy will be at the expense of the majority of children.

No... 1 in 5 children with functional illiteracy, classrooms out of control, highest teen pregnancy rates in Europe is at the expense of our children.

It cannot be cost effective to create extra capacity in the schooling system when there is just no need for it. And nor can Local Authorities effectively plan for the future when, if parents don’t like a sound strategic decision, they can just declare UDI!
I have very real doubts that this free market approach to schooling will work. I also have very real concerns that in these financially tight years ahead, it will waste public funds on a scale rarely seen; and in the process, will have denied our children of that best start in life that Building Schools for the Future promised so many.

At last we start to see the real reason why they are scared witless at this; the vast client scale and fifth column of teachers unions will no longer be able to sit cosily by while parents demand the bare minimum in vain; schools will have to offer the education the parents or see them walk their cheque to someone who will.

Of course this is overlooking the mindset of Gwynne et al; that this money is not the parents money to be wasted on things like an education they know will cater best to their children- it is for the state to spend, and politicos to waste on whatever flavour-of-the-month educational or social theory is gripping the left by the nipples.

Team America Redux

Now surprisingly I know little about Justin Bieber but this is pure hilarity.

I thought I'd accidentally clicked on the dailymash by mistake but no- aunty's got it on there.

Brilliant - my votes on Kim Jong-il being a massive fan, perhaps even performing a duet with him, or at least telling his loyal underlings how it was his idea to launch what appears to be a midget in a shiny suit on America to undermine it musically.

Gen.E.Us.

Yay!

Cept in my case it's likely to be coinage

Have just been offered a very good job indeed.

Yes I am bricking it, particularly as initially is contract, but it is too good to pass up.

Virtual Trebles all round!

Benefits?

DK provides a succinct rebuttal to Shuggy on the subject of the poor, benefits and choices.

But the money given to the poor is supposed to serve a certain purpose—that is, to allow them to stay alive. Even Beveridge maintained that benefits should only be at a "subsistance level".

If there is a social contract, it is that those of us who work agree to be taxed to ensure that those who have no work are not lying about, starving in the streets. This is a cost of living in a society, and it also answers the demands of basic humanity.

But the money does not belong to the poor to do what they want with it, it is not provided to give them "choices": it is there for a specific purpose—to ensure that they can stay alive. If they want "choices" then they must go out and earn their own cash.

This morning at Breakfast Mrs Tomrat and I discussed the insanity that is out education system; she relayed a story her student teacher told her about one of our youth group members, who's first placement had been at their school- they told us they were one (of many) who was provided with a PE kit whilst the teachers washed and dried their school uniform and any other clothes they had brought. Another needed to be provided with sanitary towels.

In neither case was this a result of financial poverty; were it, the parents could have asked a half dozen agencies for help; no, this was a result of parents not caring- the former being sent in with dirty clothes by work-shy wasters, the latter by a parent telling their daughter to use school toilet roll.

What have we become? I cannot conceive in my head using my child as a meal ticket*. Nor can I fully comprehend the sheer level we have debased ourselves to for a few scraps from our leaders tables, filled ironically from our own pantries.

I've an alternative suggestion that I've mooted before: make the individuals tax free allowance exchangeable, tax-interchangeable and set no minimum/maximum pricing for it's sale (unfortunately requiring an income tax for obvious reasons).

So married couple want to have a stay at home parent/part time worker; this is made easier to achieve by transfer of all/part of their tax credit, leaving more money for them to make more choices.

A NEET uses his to subsidise training and work placements, bartering for accommodation and a living wage whilst doing so via his company, who use it to lower their corporate tax take.

An unemployed middle-aged man cashes his piecemeal at a negotiated rate to a private friendly society who sell it as a commoditised corporate tax subsidy - charities and business alike shoot up to thrive in this environment; businesses carry charity and friendly-society logos on their websites stating they give competitive rates of exchange/services in return for their tax credits.

Their is a natural cyclical nature to how the subsidy works: in a recession the tax take goes down as does the costs of maintaining the unemployed, carried by those surviving businesses building up the necessary capital to be profitable, invest and create jobs. As more people are laid off there is more tax credits competing for less money, incentivising the owners to seek the best use of their voucher, whether by work or by exchange.

You will not fix the problem of worklessness, faux-entitlement and children-abuse with schemes encouraging sucking at the teat of the state; they need to take charge and see the consequences of their actions - that needn't be starving children because of greedy, frankly evil and conceited parents, nor do we need to put them in such an impoverished state they have few places to turn, merely getting people addicted to responsibility and the freedom it affords will be enough.

* = yes as a father I do claim tax credits and child benefit and I do so with a straight face- as far as I'm concerned this is a tax rebate and would swap it tomorrow if I could for a smaller state, lower taxes and less fanning around.

Whilst I'm sure folks like the Popular Front of Judea would balk at the prospect of taking the man's money so regularly I am perfectly content - I become more or less tax neutral at my current salary and I have no problems with the waste coming out of other peoples pockets, after all, if you don't like it, stop voting the twerps in.