A pledge which Cameron looks set to break
Peter Hoskin 1:29pm
In its preview of Cameron's speech, the Sun highlights the Tory leader saying that "...in a Conservative Britain, if you put in the effort to bring in a wage, you will be better off." The implicit reference, here, is to Labour's combined tax and benefit system, which frequently acts to disincentivise extra work. All too often, effort isn't met by reward - so what's the point?
As the Centre for Social Justice's recent Dynamic Britain report showed, this effect impinges, above all, on the least well-off in society - and with tragic consequences. It's all to do with effective marginal tax rates, which measure what proportion of a small rise in earnings would be lost to both tax and the withdrawal of benefits. For those looking to get off benefits and back into work, the marginal tax rates are dauntingly, disgracefully, high. On the journey back into full employment, many claimants receive only 5, 10, 15 pence from every extra pound they earn. Again, the same question springs to mind: what's the point?
The story is told by this graph from the CSJ report, which plots the marginal tax rates faced by a single person, aged over 25 and without children, against their journey from benefit dependency to employment:
The different colours represent the points at which different benefits are withdrawn, but the top line tells you all you need to know. At the start of the journey, 100 percent of every extra pound earned is lost to the withdrawal of Jobseekers' Allowance. It then goes through 90, 80, 70 percent - with that daunting mustard-coloured spike - before finally settling at 31 percent when this person is earning a wage of around £13,000 a year. You can see why people think they shouldn't bother to work more. The system, quite literally, encourages benefit dependency.
So what's Mr Cameron going to do about this? The CSJ have proposed an answer: a simplified, dynamic benefit system, which flattens out the marginal tax rate, and makes sure that claimants always receive around half of any extra money they earn. But while David Freud, the Tory welfare adviser, is said to be receptive to this type of thinking, the Tory leadership aren't. They're concerned about the upfront costs - roughly £3 billion - of the plan. And I hear, too, that there are worries that Labour might spin any benefit simplification as the "nasty Tories" cutting benefits.
Instead, the Tory leadership are minded to leave the benefits system alone for some time to come. It's a "post-election aim" we're told, whenever the topic arises. And we haven't heard anything more about it in Machester, despite this being set up as the "Get Britain Working" conference. It's a great shame. The current set-up is, quite simply, a moral and economic failure. If Cameron doesn't fix it, then that will be at least one pledge in his speech today that will be broken.
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DavidDP
October 8th, 2009 1:43pm Report this comment"They're concerned about the upfront costs - roughly £3 billion - of the plan."
So now cuts in spending aren't important.......
oldtimer
October 8th, 2009 1:59pm Report this commentYou seem to be remarkably hasty is saying Cameron will break a pledge. There is nothing new about this silly benefits structure - it was clearly highlighted by the Forsyth led commission set up be Cameron a few years ago. Changes will only make sense as part of wider changes to the tax system. I am sufficiently encouraged, by what has emerged so far, to believe we make expect radical change here too.
DavidDP
October 8th, 2009 2:04pm Report this commentThe pledge Cameron should break is the IHT one. It's stupid as it gives Labour a perfect rebuttal to the "we're all in this together" line.
Ian Walker
October 8th, 2009 2:14pm Report this commentI may be being over simplistic, but why not have no personal allowance at all, and make benefits taxable as income? Make JSA/IS an hourly rate for a nominal 35-hour week that is below the minimum wage, and scrap all the other Labour rubbish.
Then if someone takes part-time work for 10 hours a week at the minimum wage, they'll be automatically better off by (minimum wage - JSA/IS) x (1 - tax). Simples!
London Calling
October 8th, 2009 2:36pm Report this commentThe devil is in the detail, well done Peter for putting your specs on a taking a closer look , the reality is truly daunting.
The chart you present here for a single person is Only part Skimming the surface of the overall picture of the difficulties claimants face When returning to work only to discover they are worse off financially however I know many do return to work and consequently struggle.
If you consider the high rent here in London, council tax, utility bills, travel expenses etc, its easy to understand why a £13000 pa wage = empty pockets, however in contrast £60 a week job seeking allowance out of which utility bills, food and living expenses much be drawn from
It is no picnic either, your dammed if you work and dammed if you don’t, and this is the real trap that needs serious consideration if a realistic solution is to be found and any thoughts of making it harder for claimants by giving them less will not resolve welfare dependency either, extreme poverty would follow.
We need real answers to the real problems and confront them head on.
PaulC
May 13th, 2010 4:04am Report this commentI have Asperger Syndrome (autistic tendencies) along with severe sleep apnoea (I can suddenly fall asleep day or night and often I can't concentrate on anything because of it), plus I have depression and also other illnesses, but I'd want help back to work as I've been stuck on Incapacity & DLA for years which has made my depression worse, but the Job Centre haven't helped in the slightest. I've attended Ingeus (formerly Work Directions) and I've asked to attend training programmes Etc, but they've refused ALL HELP because they say I won't be fit for work within 6 weeks so there's nothing suitable for me to attend. I've now got to attend a further 3 mandatory work focused interviews out of 6 at Ingeus where the employment advisor simply talks for a few pointless minutes asking me if there's any change before promptly giving me the next appointment date as they continue to refuse to do anything for me even though I've asked repeatedly for help and support to no avail. Saying they're offering me any support or help to get back into work is a complete and utter lie. It's a complete waste of money sending me to somewhere that won't help, so much for helping people back to work with disabilities and illnesses.
I'm now extremely concerned that things will be even worse under the Tories as I'm worried that I could be targeted by people who don't understand my disability as this is the story of my life and many of it's failures. Asperger Syndrome is one of the least understood disabilities and I'm often put in situations of extreme anxiety where people don't accept me on a regular basis and I need a lot of support because of it. I do get some support from my Housing Association for help with living Etc, but I only get a fraction of what I'm supposed to be entitled to and I struggle to survive alone. I can't simply just walk into any employment as I won't be accepted by employees and the employer. There will be numerous problems as I've experienced in every work place or anything else I've ever attended to in my life, plus I now have illnesses on top which in themselves made me lose my last job which I held for over 12 years (this was almost 5 years ago now). It took over 9 months of initial problems when I got appointed to my past long term employment position because of social skill problems where I was nearly sacked on numerous occasions , often because personal complaints were made against me for shouting (a symptom of Aspergers) and many other exact symptoms of the disability which people didn't understand. In fact people didn't understand my disability at all and believed I was extremely rude Etc, but I had a 1 on a Million employer that eventually understood and supported me. After slow integration I eventually got accepted by colleges as eccentric, but I still found situations very difficult and I still struggle to do things like use a phone for instance.
It is now extremely difficult to find an employer that understands my disability again and now with added illnesses, finding work is almost impossible without plenty of support which I'm not getting. The employer would also need to understand my illnesses too and be prepared to work around them. Will I eventually get any help that I've asked for or will I simply be punished under the Tories when I fail to be-able to do what they expect of me despite trying my absolute hardest? The very nature of Asperger Syndrome is to be anxious over new things and situations, constantly worrying and I'm now very worried about the Tories getting into government.
To me the welfare plans are all about saving money and this is all governments care about, I doubt if they really care about people with disabilities and/or illnesses or their needs, only pressure of revolt and loss of popularity stops them from slashing or stopping our benefits completely, while forcing us into slave labour that isn't suitable where people like myself would be bullied by people who don't understand our disability at all. I simply wouldn't survive or cope, then I'd be punished further when I lose my job. I hope I'm wrong, but I really don't trust Iain Duncan, David Cameron or the Tories.
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