Reform of Tax Credit - Lords

[bluewolf]

Thinking out loud, was the idea behind cutting the tax credits a round about way of trying to encourage people to work, or just a way of cutting 4 billion off the bill?

The general rhetoric was that they wished to remove the responsibility from the Taxpayer, and place it back onto the employer..

I've not had a chance to really look at the proposals, but I suspect that they'd attempt to justify it by giving tax cuts to business and then expecting Employers to pass on these savings to the employees in the form of higher wages..

And we all know that Employers would definitely pass on these savings to the Employees.. Big Business is well known for its adherence to its Social responsibilities ...

Most likely it would just end up as another bonus for the already wealthy off the back of the Working Classes.....

 

[delc]

The general rhetoric was that they wished to remove the responsibility from the Taxpayer, and place it back onto the employer..

I've not had a chance to really look at the proposals, but I suspect that they'd attempt to justify it by giving tax cuts to business and then expecting Employers to pass on these savings to the employees in the form of higher wages..

And we all know that Employers would definitely pass on these savings to the Employees.. Big Business is well known for its adherence to its Social responsibilities ...

Most likely it would just end up as another bonus for the already wealthy off the back of the Working Classes.....

As far as I can see, the salary of a CEO in a typical Footsie top 100 company is inversely proportional to how badly they pay their employees! Just increase the minimum wage to a level where employees don't need tax credits to survive and the problem is sorted. Also complies with the Keynsian principle that workers are also consumers, and boosting their incomes helps the economy. The Tories are still trying to prove that Adam Smith economics still work, even though they discredited many years ago!

 

[pendodave]

Not to be too picky DelC (because I agree with your general point), but I believe Smith, Keynes (and Marx) were actually coming to the same conclusions in a way that reflected the economic and social systems of their times.

Namely that if too much money is concentrated in the hands of the few, there is not enough left to sustain an economic/social system over the medium/long term.

Where all of them (not through any fault of their own) were 'wrong' is that they could not envisage seismic shifts in the 'way things are' that, at least temporarily, alleviated this natural tendency of capitalism. Specifically, the overthrow of dynastic monarchy, the ability of governments to print money, and (most recently) the widespread availability of personal debt.

Unfortunately all of these have now pretty much run their course and the money continues to leak from the many to the few with obvious consequences but no new obvious solution.

 

[bluewolf]

Not to be too picky DelC (because I agree with your general point), but I believe Smith, Keynes (and Marx) were actually coming to the same conclusions in a way that reflected the economic and social systems of their times.

Namely that if too much money is concentrated in the hands of the few, there is not enough left to sustain an economic/social system over the medium/long term.

Where all of them (not through any fault of their own) were 'wrong' is that they could not envisage seismic shifts in the 'way things are' that, at least temporarily, alleviated this natural tendency of capitalism. Specifically, the overthrow of dynastic monarchy, the ability of governments to print money, and (most recently) the widespread availability of personal debt.

Unfortunately all of these have now pretty much run their course and the money continues to leak from the many to the few with obvious consequences but no new obvious solution.

Agreed. The fact that Smith's book was apparently Thatcher's favourite only goes to highlight how misunderstood Smith was.

In contrast, I would argue that what is currently being pushed is more "Friedman-lite". A Chicago boys style gamble by a Party who are confident enough to push a ethos that even Thatcher shied away from when Pinochet was ramming it down the throat of his own people.

 

[SwingsitlikeHogan]

All in all it's a pity for the government that many (most?) of the new jobs that have been created on their watch and that they trumpet loud and clear - have been low wage jobs (and many zero hours contract jobs) - and hence precisely the jobs that require wages to be topped up by tax credits. It's hardly surprising then that on their watch the bill for tax credits has soared - it's the jobs silly.

I'll also note that I'm not hearing too much from the government at the moment about how useful they feel zero hours contracts are for those who wish to limit their hours worked as a way of balancing their life and work - and to help them manage such as childcare.

 

[delc]

All in all it's a pity for the government that many (most?) of the new jobs that have been created on their watch and that they trumpet loud and clear - have been low wage jobs (and many zero hours contract jobs) - and hence precisely the jobs that require wages to be topped up by tax credits. It's hardly surprising then that on their watch the bill for tax credits has soared - it's the jobs silly.

I'll also note that I'm not hearing too much from the government at the moment about how useful they feel zero hours contracts are for those who wish to limit their hours worked as a way of balancing their life and work - and to help them manage such as childcare.

As the old adage goes "Pay peanuts, get monkeys", with no disrespect meant to monkeys. If you go into a retail store these days it is quite rare to find an assistant who actually knows very much about what he is selling. Work for many has been dumbed down and de-skilled to justify the low wages paid. 'The computer says no' syndrome! The low paid are subject to some very high marginal rates of tax increases if they get promoted and earn more money, because working tax credits are withdrawn almost equally quickly and they may start paying income tax. If they are University graduates (and many of them are) they may also have to start repaying student loans as well. So where is the incentive to get on? Like anything to do with Gordon Brown, the whole system is ridiculously complicated, bureaucratic, and full of stealth taxes. So far the Tories have failed to reform it in any sensible way. George Osbourne's recent attempt made him look like Ebenezer Scrooge!

 

[ColchesterFC]

Interesting to see the figures that show that the cost of fraud and mistakes in the benefit system actually cost more than the £4 billion that Osbourne is trying to save from the benefit bill.



The quote from the government is that "We have taken significant steps to reduce fraud and error in the benefits system. Tax credit fraud and error has halved and overpayments in the benefits system continue to fall, dropping by £350m this year to a record low". That's great but the amount paid out due to fraud or error in that year was still more than £4.5 billion. Even being (extremely) generous and saying that one third of that figure is due to fraud (I'm sure it is far less in reality) how can an organisation possibly be considered as fit for purpose when they pay out over £3 billion per year in error?