Monday, 4 October 2010

Benefit Fraud!

Chancellor George Osborne must have one of the most original views of fairness I have ever come across. Today he has announced major changes to child benefit, that seem set to penalise a large proportion of families in this country, especially those who would consider themselves middle class citizens.

His first decision is to remove entitlement at the level at which people start to pay the higher rate of tax, which after allowances works out at around £44,000 a year. At first glance this sounds fine, you are talking about a weekly amount of £846, and even after tax, you would still be left with a healthy salary.

Yet, whilst allowing that there are always winners and losers on the margins when benefits are not universal, this means a lot of people both above and below the threshold will lose out.

This is because the change is being brought in in an absolutist way. So if you have one earner only on £44,001 a year, you will lose, whereas two on £43,999 will still get their child benefit. Okay, this is at the extreme end, but a family with a total income of £60,000 would still get the allowance.

Indeed, the Think Tank, the Centre for Social Justice, which was established by Iain Duncan Smith, has asked Osborne to rethink the proposal, and saying that alternatives should be explored more thoroughly first. I wonder if this is IDS using a sideways method, to say he's not overly happy, without directly challenging the treasury?

There is also another aspect, which many people perhaps won't have thought of.The benefits agency will have access to everybody's records, whether working or not, which would mean that records would be more accessible to people, who aren't entitled to see them.

The second element, which will cause even more controversy, is to cap the amount of benefits a single family can claim. This is to be set at the supposedly average income of £26,000 (and it sounds to me to contradict the first element on here. After all, how can you set a cap, whilst allowing those below £44,000 to claim child benefit?).

£26,000 is not a lot of money, and a lot of people earn much less. It is not the real average in Britain, it might be in the south and south-east, but in Scotland, Wales, Northern Ireland, Corwall and many parts of the north, they would love to earn £26,000 a year.

The cap would also include befnefits such as carer's allowance and industrial injuries disablement benefit. So in effect, people in this position would be being penalised, as they would lose things like housing and council tax benefit.

This is the big problem with this cap! By restricting it to a certain amount, it means that people will have to start paying housing and council tax, out of the cash allowance they get. With the VAT increase, and inflation, as well as any increases being fixed against CPI, which is expected to fall, as opposed to RPI, many will find themselves in poverty.

The governemtn say they are trying to make it so that no one has a better standard of living on benefits, than in work. But they are aiming for the lowest common denominator, and it is those at the bottom once again who will suffer the most. In the next year or so, a lot of people are going to lose jobs, and unless new ones are created quickly for people to fill, then a lot of families will be in dire positions.

No one is asying reform of the system is not needed, but these changes are ill thought out, and if you are going to means test, then it is best to do it properly. As it seems here, they will means test child benefit, but not whether the cap comes too low for some people. These proposals fail the fairness task massively, and the government urgently needs to rethink.

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