The benefit cap tackles a real problem from the wrong end

A cap on the total amount of benefits that people receive begins rolling out across England, Wales and Scotland today. The cap applies to those aged 16 to 64 and means that couples and lone parents will no longer receive more than £500 a week, with single people limited to a maximum of £350 a week.

A cap on the total amount of benefits that people receive begins rolling out across England, Wales and Scotland today. The cap applies to those aged 16 to 64 and means that couples and lone parents will no longer receive more than £500 a week, with single people limited to a maximum of £350 a week.

Extraordinarily popular, the policy is supported by some 70 per cent of the electorate, meaning one risks the charge of elitism in pointing out that in this instance the mass is probably of lower intelligence than its constituent parts.

The fact the benefit cap is popular in fact makes it all the more likely that it is bad policy; for what politician can resist pandering to the crowd when it chimes with their political leanings?

The problem is that the cap tackles a real problem from the wrong end.

Clearly it is undesirable for people to be claiming large amounts in benefits rather than earning their keep through a job. But when commentators and politicians wax lyrical about the amount of benefits being paid to individuals and families they are in reality talking about something quite different.

We, the taxpaper, are often not subsidising claimants at all, but rather handing large sums of money to private landlords who don’t particularly care whether it is the state or the individual who pays their rent – they know that benefit claimants will be conveniently on hand to take the flack which should by rights be directed at them.

Just this morning a new report came out detailing how a third of Britain is now effectively off-limits to lower income families because of the increasing cost of rent. This being the case, it shouldn’t be a surprise to learn that the benefits bill has also been increasing – the key point which the government has seemingly missed is that the state is subsidising landlords, rather than tenants.

Another non-sequitur is the idea that driving down the living standards of the unemployed is what makes work pay.

Ministers insist on repeating those three precious words: “making work pay”. It’s a clever rhetorical trick but it’s also an inversion of the truth. Reducing the living standards of the unemployed is not the same as ensuring that job pay what they should; and declining living standards for those without work is more likely to have a downward effect on the wages of those in work than it is to make anything pay.

In this sense, ‘making work pay’ is a bit like snatching away a homeless person’s cardbox box and claiming that in the process you’ve made mortgages more affordable for everyone else.

The benefit cap will also punitively hit families with lots of children; or more accurately, it will hit children who are unfortunate enough to be born into large families.

In the pilots for the cap around 80 per cent of those hit were single parent families. The idea that it is possible to put a set cap on how much money a family requires regardless of how many children there are also defies logic. More children cost more money, obviously.

It goes back to politics, though. It’s popular to be seen to be ‘cracking down’ on the entitlements of poor people with children, probably not unrelated to the fact that our society has always been terrified of the poor breeding too much.

We should, however, stop trying to think that there is some easy solution on child benefits. You either provide adequate money for parents to feed and clothe their children or you don’t. By paying less money to parents the government may think it is punishing them but it is in reality punishing their children.

The question then is this: is it ok to punish children for the behaviour of their parents or isn’t it?

Don’t hold your breath in waiting for the correct (and no doubt unpopular) answer.

One thing that is clear from all this is that the Tory view that rich people will not work unless they are given money whereas poor people will only do so if they are not is now a majority one.

In combating this the left has to be honest – it is a bad thing for people to be on benefits when they could be in work – but it also mustn’t sacrifice principles for popularity: the benefits bill is a consequence of much larger failures and won’t be significantly reduced by indulging narratives about “fecklessness”.

44 Responses to “The benefit cap tackles a real problem from the wrong end”

  1. Insolito

    I’ve been on here a couple of times to criticise posts, but fair’s far: this is a great piece. It’s considered, well-argued and also, vitally, correct. Thanks for saying it. Now all we have to do is do something about it…

  2. OldLb

    private landlords who don’t particularly care whether it is the state or the individual who pays their rent

    =========

    It’s the individual. You’re behind the times Benefits claimants get the money from the state. It isn’t paid to the landlord directly.

    =========
    Reducing the living standards of the unemployed

    =========

    Direct result of Labour’s policy of getting 5 million migrants into the UK. Most are low skilled, so they compete for housing and jobs with the people you profess to want to help. In reality, you’ve screwed them.

    If we take that 26K median wage level and look at the other disaster, pensions. If that worker had invested their NI, 627K after 40 years. State pension costs 152K. You’ve spent 475K of their cash. You’ve made them poor.

    ========

    The benefit cap will also punitively hit families with lots of children; or more accurately, it will hit children who are unfortunate enough to be born into large families.

    ========

    Correct. Now interestingly, they are the cheap options. Philpott. 3 adults 17 kids, is cheaper than 10 adults 10 kids. By a long way. That’s the disaster. Philpott creamed the money, and its not just the 26K. Free schooling – 6K each child. Free health care 2K each. Free pensions. … The cost is vast, and its coming at other people’s expense.

    So why omit the effects of Labour’s policies on the poor? Why omit the true cost of people on welfare? Why omit the effects on others rather than just your client state?

    I know the reason, if you were to confess to the state of affairs, that 70% would be even higher. People have tweaked that the Ponzi game is up. So they will insist they get paid, and those on welfare can sing. Direct result of running such a scam.

  3. Jacko

    What we need to do is to stop these people being born in the first place.

    I favour a mass sterilisation program of all poor people who’ve had two children. They haven’t got the money to look after any more, there aren’t the jobs for the children to do, they have a greater propensity to commit crime and are a net drain on society’s resources. In short, they are useless to society and simply create negative social externalities. Without them, there would be more money to go around and we can then concentrate that money on improving the lives and opportunities of the fewer poor that we do have.

  4. John

    Nice bit of eugenics there. More to the point history shows many of the most successful people come from humble begginings, I would suggest their begginings is what drove them to success!

    Sterising the poor isn’t going to solve the problem, though it may patch it somewhat. Livings standards need to be raised and immigration controlled. Those are two seperate issues neither of which has anything to do with mass breeding of the poor.

  5. John

    It’s the individual. You’re behind the times Benefits claimants get
    the money from the state. It isn’t paid to the landlord directly.

    =========

    you’re missing the point; the money may go to the individual but do you think they DON’T pay the landlord!? The money being charge is too high; which is why people are being priced out of the South. I should know; with two jobs totalling over 40 hours I still can’t hold down a place of my own in any half-decent area of the SouthEast.

    =============

    Direct result of Labour’s policy of getting 5 million migrants into
    the UK. Most are low skilled, so they compete for housing and jobs with
    the people you profess to want to help. In reality, you’ve screwed them.

    If we take that 26K median wage level and look at the other
    disaster, pensions. If that worker had invested their NI, 627K after 40
    years. State pension costs 152K. You’ve spent 475K of their cash. You’ve
    made them poor.

    ========

    Whom have you made poor? There may be a high number of low-skilled migrants into the UK (frankly given the conditions in some of the East European countries I can’t blame them for wanting to leave) but THEY STILL pay NI. Unless they’re working off the record, but if a UK citizen had taken that job they’d STILL be off the record and the money STILL lost.

    Is you’re point there are more people in Britain than there otherwise would be? It’s possible, but they spend money in our shops, pay our taxes etc etc. If the system works the way it should then it wouldn’t matter. If the system ISN’T working the way it should then you should fix the system, not the kick the person who exposes the situation out! Don’t shoot the messenger.

    ========

    Correct. Now interestingly, they are the cheap options. Philpott. 3
    adults 17 kids, is cheaper than 10 adults 10 kids. By a long way.
    That’s the disaster. Philpott creamed the money, and its not just the
    26K. Free schooling – 6K each child. Free health care 2K each. Free
    pensions. … The cost is vast, and its coming at other people’s
    expense.

    So why omit the effects of Labour’s policies on the poor? Why omit
    the true cost of people on welfare? Why omit the effects on others
    rather than just your client state?

    I know the reason, if you were to confess to the state of affairs,
    that 70% would be even higher. People have tweaked that the Ponzi game
    is up. So they will insist they get paid, and those on welfare can sing.
    Direct result of running such a scam.

    ==============

    If I recall correctly this site was swimming in critique’s of ‘New Labour’ at the time so, again, I’m unclear as to your final point. We shouldn’t offer free schooling? This country illiterate enough as it is! We shouldn’t offer free healthcare? I can agree with that one partially; the NHS is unsustainable and the longer we don’t tackle the issue the worse it gets

    To which policies are you refering? Labour started trying to address this issue and the fallout from that led to David Cameron claiming he’s the ‘heir to Blair’. Warning bell right there. If that is to be believed, then, Cameron thinks Blair was doing the right thing. So yes; Labours policies were, in hindsight, wrong. But then you should concede so are this governments as they are continuation of the same ideological view. Labour doesn’t equal Left. It’s a party not a political standpoint.

    Indeed I could argue the last labour government was more right-wing in some areas than the Thatcher Government. Handing power over to the Bank of England? Madness! (Good idea though; allows for plausible deniability)

  6. John

    The problem with the benefits system of the past is simply this; It paid money in propertion to the number of kids you had. Yes, more kids cost money, but if you were working you, to be blunt and politically incorrect, kept your legs together.

    People on benefits are going to have to learn that one; if you can’t afford kids don’t have them. Sadly, as with most government policies, it has a human cost and that WILL BE the kids whose parents lose money because of bad decisions and bad timings.

  7. OldLb

    The money being charge is too high; which is why people are being priced out of the South

    ==========

    It’s not too high or too low. It’s the market price. That’s set by supply and demand. Demand is so high because of 5 million migrants. Even students coming here demand housing. End result because supply has gone up, but not as fast, the price goes up. That’s economics 101.

    ==========

    I should know; with two jobs totalling over 40 hours I still can’t hold down a place of my own in any half-decent area of the SouthEast.

    ==========

    Yep, its supply and demand. The way to deal with it is to cut demand. There is another factor. What matters is take home pay. You’re paying for property out of take home pay. Increase that and you might be able to afford it. That means cutting taxes. I suspect your biggest expense is the state. Total up all your taxes, employer’s NI too, IPT, VAT, Income tax, Council tax, … That will be your biggest expense. How about capping that?

    ========
    We shouldn’t offer free schooling?

    =======

    OK, its free. Lets not pay for teachers, they must be free. Schools maintenance happens by magic. No need to fund. Get real, education has a cost. 99.3 billion. It’s coming out of people’s pockets. So whose pockets? its not coming out of welfare claimants pockets is it? Other people are funding their kids education on top of fund their health care and all the other things too. When the left claims they are only get 60 quid a week, they are in fact costing other people tens of thousands.

    The end result is they are bust. 1,2 trillion borrowing. 6.5 trillion pensions. 0.4 trillion PFI, ….

    They can’t pay that on income of 0.6 trillion and spending of 0.722 trillion.

    Ideology doesn’t matter. They have defrauded people out of lots of money.

  8. Andrew

    ‘. . . the behaviour of their parents’? James, being unemployed and in receipt of benefits is not a consequence of personal behaviour, unless of course you are in agreement with the nineteenth century bourgeoisie, or the contemporary Conservative Party for that matter. Unemployment is a systemic problem and not a reflection of personal failings—the word itself (unemployment) emerged as a consequence of such a recognition. It seems you cannot shake off the very same toxic narrative (of fecklessness) you purport to combat. In fact, it seems you’ve swallowed it whole. Drop the facade and at least be honest with your contempt for the poor.

  9. blarg1987

    So lets look at yourself, if you had kids are you saying that if your life took a turn for the worst say, your employer went bust, and a large scale recession and you were unable to get a job you would be willing to be sterilised as you would be considered poor?
    There are many factors that contribute to the poor in society, some has to do with luck and circumstance not all to do with personnal motivation.

  10. Matt B

    The thing we all need to change is the way Landlords are able to treat people. Then The cost of housing benefit can fall to more natural levels. This is just another side effect of the “housing crisis”.

  11. Kathryn

    My rent is more than the amount I contribute in taxes, etc. The state takes a quarter (bargain if you ask me), and my rent is about 40% of what I have left over from that.

  12. OldLb

    Are you sure?

    Employer’s NI is just a hidden tax

    What about council tax?

    What about VAT?

    etc.

    You will be paying more than 20%.

  13. OldLb

    But you’re just arguing about symptoms.

    1. Landlords will be wary because there are tenants out there who do more than take the piss. ie. Trash places, not pay the rent for months, and run up legal aid bills in the process.

    If you want to get better landlords, the state needs to clamp down on rogue tenants as well.

    2. The core problem remains. Demand outstripping supply. It’s migration that’s the issue.

    3. Interest rates. Try raising them.

  14. OldLb

    Beveridge all over again.

  15. John

    You think Employers would give NI to the employee if they didn’t have to pay it? To quote you, yourself ‘Get real’

    What about Council Tax? Thats tax paid to the local council for council services and little to do with national government. Unless westminster increased their contributions to local councils. Since your arguments seem to be premised on cost-cutting measures I’ll go out on a limb and assume you, too, doubt they would do this. Sure, it’s a cost to an individual but I wouldn’t use it in a comparison of taxation vs income to estimate percentage gross of rent.

    VAT is direcly related to money spent; the less you spend the less VAT you pay. It stands to reason, therefore, that if Rent was, say 20% of income then VAT is, as a random figure, 15%. If Rent was doubled to 40% then VAT would be halved, in this instance to 7.5% of remaining income.

    So yes, you can say that with all of the costs taken together tax is probably more than rent. I am well aware that we are one of the most heavily taxed countries in Europe. I know why too, which is why we have to control net migration and create jobs in areas OTHER THAN the SE.

    The other point I would raise is the other costs you mentioned are already taken care of in Income. In most areas of the country income, as it stands, is sufficient to establish someone in a rented property. Only in the Southeast is there such a lack of housing. I agree that more cheap housing should be constructed but I don’t think slashing housing benefit helps the situation any, which is the original point. It’s like upping road tax to encourage people off the road without putting in the infrastructure to give them a credible alternative.

  16. John

    t’s not too high or too low. It’s the market price. That’s set by supply
    and demand. Demand is so high because of 5 million migrants. Even
    students coming here demand housing. End result because supply has gone
    up, but not as fast, the price goes up. That’s economics 101.

    =====================

    Yes. Another thing which is economics 101 is people go where there is work. Yet… they’re all in the SE. What does that tell you?

    The article makes the comment that the SE is pricing out of Low-income families. Yet rent is meant to be the alternative to buying your own home. These are working people in some, if not many, cases. While still working they cannot afford their rent. Either, then, rent is too low, whether due to economics 101 or the fact landlords feel they can get away with it, or due to abnormally low wages or, more likely, a bit of both. The point is something must be done about it, and this government is unwilling to invest. Therefore the problem will become only more acute. It will not ‘work itself out’ any more than the skills gap our schools is producing ‘will work itself out’. In all likelihood this country will have to encourage skilled migrants to immigrate in order to fill the vacancies our own education fails spectacularly in creating a supply for.

    So what does it matter if its economics 101? The price is too high. Market forces are, yet again, failing to address the underlying problem and, yet again, outside intervention is needed. Perhaps we should stop worshipping at the alter of capitalism and introduce a dose of common sense to the equation.

    ==========================

    Yep, its supply and demand. The way to deal with it is to cut demand.
    There is another factor. What matters is take home pay. You’re paying
    for property out of take home pay. Increase that and you might be able
    to afford it. That means cutting taxes. I suspect your biggest expense
    is the state. Total up all your taxes, employer’s NI too, IPT, VAT,
    Income tax, Council tax, … That will be your biggest expense. How
    about capping that?

    ========

    Oh dear. well lets look at last years YTD totals shall we? I’ll round the figures since I don’t want to post my finances publicly

    Total YTD NI Net for two jobs: £1,000 (Low income band)
    Total YTD IPT Net for two jobs: Nil
    Total YTD VAT Net: I have very few ways of calculating this, but I’ll estimate it around £1,500
    Total Income Tax: £1,750 (thanks to Freepay)
    Total Council Tax: Nil

    Biggest expense personally? NOT Council tax. I live with my parents, I don’t pay it. Since I don’t buy food I don’t pay VAT on that, SLASHING my VAT spending. I can, indeed, afford a place to rent however where I to do so I couldn’t afford anything else. Not Council tax, Not even food. Forget council tax, I couldn’t afford to feed myself.

    You can claim, with accuracy, that costs are too high, supply is too low, but reducing the assistance given to those who struggle with those two simple facts, coupled with the third fact of wage freezes/reduction almost across the board does NOT help. Not anyone, including the government as it will, ultimately, reduce their tax income.

    Thats economics 101
    ==============================

    OK, its free. Lets not pay for teachers, they must be free. Schools
    maintenance happens by magic. No need to fund. Get real, education has a
    cost. 99.3 billion. It’s coming out of people’s pockets. So whose
    pockets? its not coming out of welfare claimants pockets is it? Other
    people are funding their kids education on top of fund their health care
    and all the other things too. When the left claims they are only get
    60 quid a week, they are in fact costing other people tens of thousands.
    ========================
    So only the rich get schooling? Einstein thanks you. As do many more geniuses I’m sure.

    So you’ve enumerated the cost of education. Lets flip that round and look at the profit of education. A skilled worker earns (and pays tax) on salaries well in excess of £25k. I, myself, should be earning far more than that and would if the recession hadn’t stalled my career by 7 years. As it is I, like many others, are earning far less than I should. That doesn’t change the point that my education has raised my worth and my potential tax contribution.

    So, make people pay for education. Especcially in the Southeast where so many are struggling to pay the rent this will inevitably lead to people simply pulling their kids from school. Can’t afford. They legally need to be in school? Well someone has to pay. Oh wait. Thats us again. So little has changed there. If we don’t have skilled workers increasing our tax contributions those who ARE skilled will pay a greater and greater proportion of their income, reducing their own tax contributions as a result.

    Lowering the standard of education hurts everyone. Making people pay for education will simply reduce that amount of people getting a high standard of education.

    Yes, education costs money. I never claimed it didn’t. I just don’t think making people pay at the point of delivery helps anyone. Quite the reverse. Once again, however, it is the system which is broken. Education should, as the name implies, educate people. Leading them to become productive members of society generating an ever greater amount of tax revenue. Rather than penalising them for being in education and not learning perhaps we should look at why they aren’t learning. Is it a cultural thing? Do they believe an education not a thing worth having? Is it a idealogical thing? Is it that, contrary to the theories of many a socialist, all children can NOT be taught equally the same and be equally as educated as a result? Is it a legistlative problem? Are we asking too much of our teachers, forcing them into focusing on the weakest members of their classes to raise their grades rather than encouraging the brighter children? What?

    Again, you seem to like shooting the messenger

    ========================

    The end result is they are bust. 1,2 trillion borrowing. 6.5 trillion pensions. 0.4 trillion PFI, ….

    They can’t pay that on income of 0.6 trillion and spending of 0.722 trillion.

    Ideology doesn’t matter. They have defrauded people out of lots of money.
    =============================
    Oh indeed. They cannot continue to run at a deficit. I’m sure this current government is working hard to redu… oh. Well, maybe if we give them a few yea…. oh.

    This government is either incapable of reducing said deficit or unwilling to attempt to do so. Either way reason is ruining this country. As for defraud… We voted them in. Unless, of course, you voted Labout. in which case your vote was wasted. Although in many wards your votes are wasted anyway as it’s always the same party voted in time and again due to the demographic delineation of the areas. But our voting system is a whole seperate issue.

    Defrauding. How? The legislation is clearly announced, publicly available and up for discussion both with your local MP and in forums such as this one and likely many other ways I’m not aware of. Or do you mean that the this government misleads people? Well yes. Of course they do. This article, which sparked our debate, clearly states that this is so.

    Clearly then the government needs either to reduce costs or increase revenue. Reducing housing benefits will not, I suspect, reduce costs any more than reducing unemployment benefit did. It just meant people could (and did) claim other benefits instead. Benefits which require people to administer (increasing costs). It’s the whole point of the universal credit system; have it all in one single, simple system as it requires less manpower. It’s a good idea. I just hope they don’t use it to reduce the amount of money awarded to those who need it as, sure as Politicions lie, they will simply claim on something else.

  17. John

    1. True. Bad tenants are something that needs to be addressed.

    2. Thats far and away the sole cause. Why do so many stay in the SE? Why aren’t more houses being built? Why is there an excess of large multi-bedroomed properties?

    3. The economy. Interest rates being raised increases the cost of borrowing money for the government. Financial crash nearly inevitable.

  18. blarg1987

    Beveridge?

  19. OldLb

    It’s simple. Just legislate.

    Employer’s NI to be paid to the Employee, who then pays the state.

    So the Employer is in exactly the same place.

    Employee is in the same place.

    State is in the same place – almost.

    I say almost, because when people see the extent of taxation, they will get alarmed.

    Council tax is the cost of the state. It’s a tax.

    Add up all the taxes, and I bet Katheryns biggest expense will be government, and you’ve agreed. That’s just the point I was making.

    So here are some choices for making housing more affordable.

    1. Cut taxes. Then she has more money to spend on housing.

    Entirely within the government’s control. No need to force anyone to do anything. They could do this tomorrow.

    2. Regulate rents.

    Force councils, housing associations, and landlords to cut rents. You have to do this to all landlords – EU law.

    Look at regulated tenancies in New York for some of the consequences. End result, it will favour the rich renter in Knightsbridge more than the poor.

    3. Increase supply.

    Build lots of houses. Or force councils like Southwark to do something with the Heygate estate. Expensive and difficult. Remember the state is bankrupt.

    4. Decrease demand.

    The easiest. Remove low paid migrants and stop them coming. That creates jobs for the unemployed. Reduces demand on housing. The simple option. Reduces demand on government services. ie. Do you pay more tax than the average government spend? 12K a year. Yes – you are welcome. No, you are not and you have to leave. Simple non racist test.

  20. OldLb

    He was in favour of controlling the breeding class. H was a eugenicist.

  21. John

    ‘Just’ Legislate? You’ve seen the House of Commons?

    Well even if it was a case of ‘just’ legislate the government isn’t stocked with complete imbeciles. They will not surrender a stealth tax allowing them to recover money without a huge hue and cry. More to the point you are, once again, addressing symptoms not cause (like the government). Economics 101 would say that prices would adjust to once again be just affordable enough that people can just about struggle by if they cut back on, say, eating. A new, equally damaging, equilibrium would be established. After all, the landlords price their houses based not on their costs, but on supply and demand.

    But the state never sees council tax. Only the local councils. It’s nothing to do with ‘the state’ as you seem to use the term. Like claiming you should reduce the amount of money schools charge for school meals to reduce the ‘taxes’ the ‘state’ recovers.

    Indeed I do. I also agree the taxation is relatively too high. We differ on the solution. You seem to feel that less taxation is the way forward. I say seem as at one point you argue for less tax, and in the next greater governmental investment. I’m guessing you think they should borrow more? Yet you want interest rates to rise?

    Perhaps you shouldn’t address each point seperately.

    All right, lets look at those point by point suggestions

    1. Cut taxes; marvelous idea! Lets take a government you agree is broke and reduce it’s income. That couldn’t have any negative consequences!

    This countries finances are only just recovering somewhat, not nearly as much as the headlines lead you to believe. With China slowing down, EU imports still down to a trickle and a shaky US economy now is NOT the time to be playing with the taxes.

    2. Regulate rents. Oh, I agree. Legislating the rental rates would be a disaster.

    3. Yes. The state IS bankrupt. A point you should also bear in mind for some of your arguments.

    Building is done by more groups than the State. It wasn’t the state who built the shard, nor the associated ‘cheap’ housing (a legislative solution to the lack of cheap housing). Perhaps some legislative encourage to further property investment would be a good way forward?

    4. Decrease demand

    I suspect this means you are anti-eu? We can’t just chuck the people we don’t like in our country out under EU law (nor under international law, but thats harder to enfore). We CAN discourage low-skilled immigrants, but under EU law, if they are EU citizens we can’t completely stop them.

    Race doesn’t come into. EU citizens have the right to roam. We are, essentially, paying the price for English (thanks to the British Empire) being the most widely spoken language in the world. Otherwise I suspect everyone would be in Germany; an economically far stronger country at the moment.

  22. OldLb

    Local government is part of the state. The key word is government. It’s council tax. Its a tax

    1. That couldn’t have any negative consequences! Cut taxes.

    It has lots of beneficial effects too. People like Katheryn can then afford more things like housing, or do you ignore the huge negative effects of tax on people?

    2. We’re in agreement.

    3. Bankrupt.

    I doubt you realise by how much its bankrupt. Debts are over 8 trillion when you include the pensions.

    Now the problem that arises there, is that by and large, the debts are pensions. Either directly, such as the state pension and civil service pensions, or indirectly via pension funds.

    Defaults there are disasterous.

    4. I’m not anti free markets, I’m anti the corrupt EU. It won’t reform so its time to leave.

    “”””””
    We can’t just chuck the people we don’t like in our country out under EU law

    “”””2”

    Oh yes we.can. What you are referring to is this bit.

    Freedom of movement of people, goods, services and capital. Hence your claim, we can’t stop the movement of people. Except its not enshirned in EU law is it? Look at Cyprus. Freedom of movement of capital? Nope, EU Troika stopped that. So its optional under EU law.

    The UK needs to accept people who are beneficial to the UK, and reject those that are not. ie. Those who don’t pay 12K plus in taxes (24K a year if you include pensions)

  23. blarg1987

    if that is a general comment about the above fair enough, howeevr I did not say or imply beveridge in my comment.

  24. OldLb

    It was Jacko who commented on Beveridge’s ideas of mass sterlisation of the poor.

    Now I think that’s wrong.

    What should happen is that people should be forced to save for bad times and their retirement. Their NI should go into a fund in their name. Then if they need benefits they have to spend that first. If they run out of cash, then we all help but at levels way below current welfare. The exception being those who are genuinely disabled.

    That way the get a kid to get a council flat doesn’t work. And before you say it doesn’t exist, I’ve seen it first hand on multiple occasions.

  25. John

    Oh it exists, although I think in most cases it’s not they get a kid to get a flat, it’s they have no reason to NOT get a kid, so don’t worry about it either way.

    Addressing your idea, it seems like you are advocating an increase in NI contributions overall; one part to go to the government, one part to go into legislated and enforced savings administrered by the government. Is this accurate?

  26. John

    Only inasmuch as Schools are part of the state system; their income, cashflow and lines of power are seperate to westminster, their authority isn’t derived from westminster; they’re seperate elections.

    It IS a tax, I grant you, but seperate to the governments. LIke a charge on having a bank account. We HAVE to have one, one of Thatchers legacies, so the charge on our Bank account could be seen as a type of tax. The government doesn’t set the tax, doesn’t get the money nor has any control on how it is spent yet they have mandated we need to have an account, with a bank, which has a charge for their services

    1. Positive consequences? Government can’t meet it’s debtors, debts are called in, government has to slash spending on order to service the growing debt-pile. What savings reduced taxes would bring would pale in comparison to the hugs social and economic unrest unleashed by the economic collapse of our country. I do NOT want to live in Greece, which is what this country would mirrir if taxes were cut and income not raised elsewhere.

    3. I’ve seen the figures. The government ones don’t include things like the assets the government is garunteeing or the pension liability. I wonder what the governments balance sheet would look like if it’s own laws were enforced on it.

    But how is this in any way related to my point? The state can’t afford to build. Fine. Use it’s legislative power to encourage OTHERS to build; the market for it is clear, it could provide a huge return on initial investment.

    4. I didn’t even MENTION free markets in this point. As to your point about the EU, leaving would impose huge costs on exporting into the EU, which is still one of our primary exporters. It would cut down in investment into this country (both from inside the EU, as it would be harder and more expensive and outside the EU, as the fact they can easily export to other EU countries from ours is a draw) and all it would do is allow us to halt the influx of immigrants.

    No. No we cannot. We need a reason. ‘We don’t like them’ is not a permissable reason. ‘They cost us money’ is ALSO not a permissable reason. I’m no lawyer, but I honestly can’t think of a good reason to get rid of the low-income people who have already entered the country.

    So you’re suggesting we declare an emergency as acute as the cypriates in order to stop the movement of capital from our country? I doubt the Troika will buy that. It actually IS enshrined in EU law, same as privacy and free speech laws are enshrined in ours. Government have a tendancy to ignore inconvenient laws when it suits them, and it’s up to the judiciary to hold them to account when they do. Or rather us, the electorate, to bring a case forward TO the judiciary. Which is exactly the way to appeal against an EU amendment which contradicts it’s own laws, it’s not as if the EU is unaccountable. Just lacking a popular mandate. Much like most of our governments technically speaking.

  27. OldLb

    No.

    First you have to ask the question, what would a median wage earner have got in the fund, if their NI contributions had been invested over the last 40 years. Well I’ve done detailed calculations, and I’ll give you a link if you need it. It’s 627,000 pounds. The state pension costs 152,000. They have lost 475,000. Or another way of putting it, 475,000 is the cost of the insurance elements to NI. Bereavement benefit, JSA. etc. In practice, the money has been siphoned off for other things, plus no compound interest.

    Now, what I would propose springs from that.

    1. Your NI goes into a fund in your name,

    2. If married half goes to your spouse and vice versa, and this fund is not part of any divorce. You’ve already got half of those assets.

    3. If you die early, the fund is split between your heir’s funds. This benefits the poor and their offspring, because they tend to die young. It’s also an incentive for the people who claim they won’t live to see it etc.

    4. On retirement you go into drawdown. Rate to be agreed.

    5. If, and only if, the money runs out, do we all help.

    Now since that fund is going to generate 19K a year indexed linked joint life, and the guarantee is for 5K (SP), its a very cheap guarantee over the long term.

    6. So, state pension is abolished. It’s replaced by the guarantee.

    So consider someone with 1 year to retirement. They will have for the sake of argument, 2K of NI plus a bit of growth. That runs out fast, so they get the guarantee. At no point then are they worse off than now.

    However, for people with longer to go, that fund starts to build up. End result, they will be better off.

    You also get the knock on effects. Lots of money, 100 bn a year, gets invested. Not in negative return HS2 projects. That creates lots of jobs.

    So no increase at all. Everyone gets to keep their NI. After all they earned their money.

    Now you may ask, how are people never worse off. It’s quite simple. It’s back to what the state is doing with NI. It’s diverting it to other things. In effect its a tax on people’s retirement and on the insurance parts.

    So the follow on to that is the question, how much does the insurance part of NI cost in reality. Well, again its quite easy to work out. 10% of NI goes to the non pension parts. Another 5% goes in annual charged. [Way more than any private pension many times over]

    So the 627K pension would drop by 63K for the insurance coverage. That mean 417,000 pounds is effectively tax and charges from the state. Enough to make most people better off many times over.

    Couple that with the state not being able to pay its pension promises and its the right thing to do.

  28. OldLb

    Not true. Succesful people are more likely to be the offspring of the better off.

  29. OldLb

    I do NOT want to live in Greece, which is what this country would mirrir if taxes were cut and income not raised elsewhere.

    =========

    Neither do I. However its going to happen. Its all down to the debts, as it is in Greece.

    UK state owes 8,000 bn. That debt is increasing at 850 bn a year. [Pensions included]

    Taxes 600 bn, Spending 722 bn. They can’t pay.

    Councils, Westminster are all government. It’s tax that pays for them. It’s tax that is making most people poor.

    ===========

    I’ve seen the figures. The government ones don’t include things like the assets the government is garunteeing or the pension liability. I wonder what the governments balance sheet would look like if it’s own laws were enforced on it.

    ===========

    Or even the accounting standards such as GAAP and FRS17. I can tell you. 8,000 bn on the liability side. So what about assets? Difficult selling off hospitals etc. Then you have the citizens are the property of the state argument. If only we could book people as assets (see slave owner’s books), then we could book future tax receipts as an asset. However, that logic also means you have to book the expense of keeping the slaves. So revenue in, 600 bn, expenditure out, 722 bn. Oh dear, the average British serf is a liability.

    =======
    They cost us money’ is ALSO not a permissable reason. I’m no lawyer, but I honestly can’t think of a good reason to get rid of the low-income people who have already entered the country.

    =======

    It is. Here is how. If you are a migrant, introduce a law that you need a work permit. Perfectly allowable under EU law. See Cyprus. EU law says freedom of movement of people, goods, services and CAPITAL. However the EU said you don’t have the later in Cyprus. So there is a precedent. Freedom of movement of people is optional.

    Now you just set the conditions on work permits to mean you can come, so long as you aren’t a burden on others.

    ‘We don’t like them’ – Agreed. It would be in my view racist.

    “They cost us money” – Disagree. It’s a financial test. Its non-racist and its simple to understand. I would even say that its good for race relationships. The whole BNP way of thinking is that there are migrants are getting something for nothing. They then go and generalise and state wrongly that means all migrants must be doing this, so no migrants. Pure racism. However, given the rule, you can’t come if you need a subsidy, then the BNP can’t make any such argument.

    On leaving the EU. If we leave, we save lots of money. On top the EU then has to decide. It could retaliate and say you can’t trade with us freely. The UK could then retaliate and send back immediately all those migrants from EU countries that don’t meet the threshold. Pretty dire for the EU countries, too as they have a trade surplus with the UK. So they won’t.

    You might have missed Merkel’s statement. We won’t allow the UK to leave and gain a competitive advantage. That let the cat out of the bag. The EU is damaging UK competitiveness. Time to leave.

    On the Troika, again you give the game away. Ruled from Brussels by the unelected. The law is optional. Cyprus is clear. The rule on capital is the same rule as movement of people.

  30. John

    Sadly this is true. Money buys a better education. That doesn’t mean better off people are more intelligent however. Australia proves that one.

  31. blarg1987

    The trouble with the idea of putting NI on the stock market is that a very simular thing was down with mortgages as you are well aware and of course you are aware in the end people did not get out what they paid in.

    this again was on a very large scale over several decades so whats to say that will not happen again?

  32. OldLb

    Wrong.

    Over the last 40 years for someone on median wage, if their NI had gone into the FTSE, they would have a fund of 627,000 pounds.

    So what do they get back from the state?

    152,000 and all the talk is about how to cut the pensions bill which means even less back.

    So lets see. 25% is a great deal, and 100% a bad deal?

    475,000 lost is a good thing for people?

    Blarg you have a bonkers view of risk.

    Losing 475,000 compared to what you claim is risky, means your view of risk is completely screwed. Pure and simple.

    Give people their 475,000 pounds back, Ah yes, you can’t because its been spent.

  33. OldLb

    Does it?

    Lets see. We have the pupil premium. That’s more money. Er, but the results in a school with lots of pupil premium are dire. Money doesn’t buy results in the state sector.

  34. John

    Doesn’t it? Results in schools withOUT the premium were also pretty grim.

  35. OldLb

    I suspect if you take the record of schools receiving PP, they will be worse than the average. ie. Cash doesn’t buy results, in the state sector.

    I agree on other schools. There are other schools with dire results too.

    The aspirational target of 5 GCSE with English and Mathematics is a pathetically low target. Lots of schools miss that aspiration by a long way. That’s the pupils being failed. Awful for them.

  36. John

    I suspect you’re wrong. However I haven’t scrutinised the numbers well enough to state this definitively. I DO know that when we DIDN’T have state education money DID buy results. The historical precendents are clear.

    Indeed it is and, time and again, it seems the solution governments arrive at is harsher targets for both teachers and pupils. These seem to be having the exact opposite effect to their intended one. Perhaps we should look at why this is before we start changing the system yet again.

  37. OldLb

    Yep, yet another, it was worse in Victorian, or the times of the plague argument.

    What we have here is a good test.

    Within the state system, we have one group, that get extra funding. The rest don’t.

    So does that extra cash buy better results?

    We’ve this school

    http://www.telegraph.co.uk/education/leaguetables/9821842/GCSE-league-tables-compare-your-schools-performance.html?SCHOOL=122092&LOCATION=Northamptonshire

    3% – not a typo – achieving the aspiration of 5 GCSE including maths and English.

    Money doesn’t buy you an education in the state system. 6K a year on average, for 14 years, and the kids are screwed for life.

    That makes me physically sick. Huge amounts of money pumped in, and dire results.

    So if money buys education, care to explain what’s going on here?

  38. blarg1987

    So you are saying endowment mortgages was a large scale fantasy that never failed then I like you to say that to everyone who lost money on them.

    Please do not say I am wrong when you know the point I am making is right, and could potnetially happen again if there was a large volume of people entering the FTSE.

  39. OldLb

    You’re still avoiding the question of risk. Risk is the potential or the reality of losing money.

    So a loss of 475,000 pounds for a worker who ended their working life on 26,000 a year, is and was a major risk. I would even extend it to being a catastrophic risk. They are now dependent on the very people who robbed them of that money.

    Stop trying to say the FTSE 627,000 pounds is risky and the state who deliver 152,000 isn’t risky. Even the 152,000 pounds is at risk.

    Or are you one of those taking the 475,000 quid off median wage earners? ie. Public sector worker, or a crony?

  40. blarg1987

    I explained my bersion of risk when it came to endowment mortgages whcuh you have glossed over, it is not bonkers to flag that up, it is bonkers to not accept that you can potentially loose money as with endowment mortgages which i noticed you have not answered.

  41. John

    You still haven’t demonstrated this school would be better off if it didn’t receive the funding yet my key point, then, remains. Indeed all the stronger

    If increased targets don’t fix the system, and increased funding doesn’t fix the system perhaps we should scrutinise the system itself for its failings rather than slapping a piece of political showmanship on top of it, hoping the problem will resolve itself.

  42. OldLb

    I’ll address any question.

    The problem with endowments was mis-selling. Namely your financial spiv saying that the endowments would pay off mortgages. What they should have done is stuck with the clear guidelines and told people the truth.

    So what’s the truth. Some products are more risky than others. If you want certainty, then you have to go with the higher cost of a fixed rate mortgage.

    From all the figures I’ve seen, no one has lost money over the term of their mortgage. No one. What has happened is they haven’t made as much money as they were told they would have.

    Now, for my question. I’ve answered yours.

    Risk. Define it.

    e.g 627,000 pounds as an investment or 152,000 pounds for the same amount of money put in.

    Which investment turned out to be the riskiest?

  43. blarg1987

    Well again, it dpeends, if it gores thrugh a fund which it likely woll and therefore the possibility of being mis sold it then it may necessarily not be a good deal. Also I think people did loose momey if you take into account the money they invested was the same as a capital repayment mortgage so by the end of the term it should be clearedat the very least. Fir a few people they were told they would have to pay in more to cover the mortgage.

  44. OldLb

    they invested was the same as a capital repayment mortgage so by the end of the term it should be cleared

    ==========

    You’d have a problem proving that. It’s back to the the question of what were they told, and that’s another thing entirely.

    However, to quote you.

    You haven’t answered my question of what definition of risk you take.

    1. 475,000 less in payouts for a 26K a year worker? If you don’t think that loss is a risk, its very strange.
    2. Sharpe Ratio?
    3. Variance of returns?
    4. Maximum drawdown?

    5. Delta of the portfolio (or Beta, or PV01)

    Lots of measures. At the end of the day, the state pensioner is down 475,000.

    OK, some of that is down to the insurance element. That’s 10% or 63K explained.

    Then there are the charges. Another 5% of payouts, per year going to the DWP staff. I don’t know of any private insurers charging that much.

    So follow the cash. Where’s it gone?

Leave a Reply