Monday, 1 April 2013

Todays Benefit Changes: Destined to Fail.

Right, where do I start regarding today's benefit changes?

Well, lets just take them as a lump and examine the effect they are supposed to have on the benefits bill and the movement of people on benefits into work.

First off, the target of making savings on the benefit bill. Well, on face value, you would expect a saving, because benefits are being reduced. However, nothing in government is ever as it seems. Someone will have to administer the changes. Whenever I hear the phrase "means-tested", I what I actually see is "job-creation-scheme". The government will fail to save the money they think they will principally because the cost of administering benefits will go up.

Its possible the cost will be moved from central government to local government, but essentially there will not be the saving the government are claiming.

All that will happen is the demand for one-bedroom flats will substantially increase. I predict a lot of stories of housing associations being pressured to put inappropriate tenants in sheltered housing for the elderly, for instance. After all, that's probably the biggest sector involved in single-bedroom housing stock. Either that or canny neighbours will start to take in each others children as lodgers, with the government paying the "landlords" rent bill.

For me its all smoke and mirrors. There's still no work being done to bridge the financial gap between welfare and work. We're spending huge amounts administering the child and work tax credits systems, when we could simply raise the threshold for income tax. I still find it obscene that those on the minimum wage pay tax. The first rung of the working ladder should be tax free, which would narrow the gap between welfare and work. Taking the bottom rung out of tax will reduce or eliminate the need for tax credits and reduce the administration bill.

That's the way you begin to save real money: by removing government from the equation all together.