Hey big spender – the growth and growth of DWP

 

             For the next few days I am going to look at a range of departments to see how they are getting on with controlling public spending. Let us begin with the biggest of them all, the Department for Work and Pensions.

 

               In the original Coalition spending review they proposed increasing current  spending from £158 bn in 2010-11 to £171 bn in 2014-15.  2010-11 turned out to be £160 billion, and last year spending reached £166.7 billion. This was  £3.3 billion or 2% more than the 2010 plan for that year.

              So why has it proved so difficult to keep to plan?  The main reason for the increase was the substantial uprating of pensions. The state retirement pension accounts for 44% of the total spend. The Coalition made the policy more generous with the triple lock pledge for better upratings. Higher inflation did the rest, requiring a larger increase.

                The second highest area of spending is housing related benefits. Housing benefit, Council Tax benefit and rent rebates added up to £27 billion last year, or 16% of the total. This year should see the first impact of the new housing cap at £26,000 per home. This remains high, so it will not do much to cut the rate of climb of housing benefits. Upwards movements in rents, especially in London, and the failure of most Councils to cut Council Tax mean continuing upwards pressure on the costs of this benefit.

                The department has made a substantial reduction in its running costs. These have fallen from £9 billion in 2010-11 to £7.7 billion in 2011-12. Staff numbers are down from 126,272 in March 2010 to 104,182 in March 2012.   It has not yet achieved a break through in the inherited high levels of fraud and error. These are still estimated at 2% or around £3.3 billion. The Coalition government thinks policy change, bringing in the new universal credit, should cut this fraud and error rate substantially.

                 As more people get jobs benefits to unemployed people will fall, but these are a small proportion of the total budget. Disability Living allowance is expected to rise as a cost over the life of the Parliament. The falls in unemployment benefit  cannot offset the higher pensions and disability benefits, so this budget will continue to rise.

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117 Comments

  1. Alister Cyril Blanc
    Posted July 26, 2012 at 5:29 am | Permalink

    Austerity is necessary, but highly undesirable, so how to cushion the blow? Perhaps by marrying tax relief with spending cuts by letting politicians lead, in the same way that billionaires led the escape from taxation, with a view to then allow “regular citizens” to follow course in the not too distant future. For example, a policy could be enacted whereby every Department head could keep 50% of every £100,000 his Department stops spending. The relevant Department head might elect to keep all the benefits from reduced spending for himself, or alternatively share the proceeds with his fellow employees to incentivise grander & more efficient cost-cutting schemes. Simultaneously, massive amounts of tax relief could try & attract foreign capital, while more importantly freeing up resources to allow local communities to self-organise private replacements for the various “public services” coming to an end.

    • APL
      Posted July 26, 2012 at 6:28 am | Permalink

      Alister Cyril Blanc: “Austerity is necessary, but highly undesirable, .. ”

      What you mean is living within your avaliable income is prudent, but it means we cant steal from the future to pay for the luxuries we want today.

      Forced Austerity, like we see in Greece, that’s just a result of the Greeks borrowing and spending yesterday what they couldn’t afford to fund out of their own income.

      Now that they have to pay the price, it’s a bit rich that they should blame the Germans!

      • Jerry
        Posted July 26, 2012 at 10:00 am | Permalink

        What you mean is living within your avaliable income is prudent, but it means we cant steal from the future to pay for the luxuries we want today.

        You mean like those people who use credit to fund their lifestyle? Hands up all who have either credit card debt or a mortgage!…

        Now that they [Greece] have to pay the price, it’s a bit rich that they should blame the Germans!

        Is it? Isn’t it a bit like those who are blaming ‘bankers’ for the deficit etc, had there not been the easy credit (so that the Greeks would, hopefully, buy German made goods) there would not be the debt.

        • alan jutson
          Posted July 26, 2012 at 6:04 pm | Permalink

          Jerry

          Self Control ?

      • lifelogic
        Posted July 26, 2012 at 10:07 am | Permalink

        It is quite reasonable that they should blame the Germans and the EU they put in place a system that allowed the governments to borrow and waste vast sums. This they duly did. Without the EURO the Greek government would have been unable to do this.

        • zorro
          Posted July 26, 2012 at 5:34 pm | Permalink

          The Euro is a mechanism by which the Germans could extend credit lanes to the peripheral nations to buy their goods. It will now allow German banks to buy up cheap peripheral national assets on the promise of sustaining the Euro and keeping these nations within the EU fold……

          Speaking in London, Mario Draghi said that the bank would “do whatever it takes to preserve the euro” and added: “Believe me, it will be enough.”

          This could be interpreted as a ‘print’ signal and is ultimately what they will do to keep their Euro dream alive and keep a viable European hinterland (in their eyes)…..

          zorro

        • alan jutson
          Posted July 26, 2012 at 6:06 pm | Permalink

          Wrong.

          It was the Greek politicians telling lies to the population, who were too dim to realise it was too good to be true.

          Yes the germans and the Other EU country’s facilitated it, but it was the Greeks who cooked the books.

          • Jerry
            Posted July 27, 2012 at 6:49 am | Permalink

            But shouldn’t the Germans (and other creditors) have asked better questions of Greece and the other PIIGS?

            This blame game is fun, isn’t it…

          • lifelogic
            Posted July 27, 2012 at 7:27 am | Permalink

            Indeed the Greek politician behaved like well – politicians – but it was the absurd Euro mechanism that made their abuses possible and so pointlessly damaging to the Greek people.

          • zorro
            Posted July 27, 2012 at 1:29 pm | Permalink

            So who is in the power relationship?…….The drug pusher or the addict?

            zorro

  2. Jon
    Posted July 26, 2012 at 5:36 am | Permalink

    Its good that a cap is being introduced on housing benefit but £2166pm net still seems very high. Was it set at that level as MP’s can claim upto a similar amount if they are outside London. Expect the press would have jumped on it like a ton of bricks.

  3. Daniel Hewson
    Posted July 26, 2012 at 5:42 am | Permalink

    For the universal credit to work the taper needs to be at least 30/70 not the 20/80 Osbourne has demanded, all the evidence and statistics used whilst caluculating the universal benefit pointed to it needing a more generous taper than the one we’re gonna get, it amazes me that right wingers like yourself John make the unpopular case for lower levels of taxation to gain more revenue but I don’t hear people talking about how an improved taper, ie letting the jobless keep more of their money as they earn will lead to less overall spending in the long run as people take up more work, why won’t you and other argue for a taper of at least 30/70, preferable 40/60 or ideally 50/50, that would get people back to work because they’d be significantly better off, let people keep more of their money and lose less of their benefits and they’d be much more inclined to work, it would improve our country no end.

    • APL
      Posted July 26, 2012 at 8:05 am | Permalink

      Daniel Hewson: “ie letting the jobless keep more of their money as they earn ”

      Ugh?

    • Caterpillar
      Posted July 26, 2012 at 9:58 am | Permalink

      Has this changed? I thought the taper rate was going to be 65% (on earnings net of income tax + NI).

    • Mark
      Posted July 26, 2012 at 1:02 pm | Permalink

      I agree. Too much is wasted on raising the basic tax free allowance, rather than improving the effective tax rates of those subjected to benefits withdrawal. Part of the funding will have to come from being less generous in some benefits too. Housing benefit is the obvious candidate, since the real beneficiaries are landlords, not their tenants.

      • Bob
        Posted July 26, 2012 at 5:46 pm | Permalink

        “benefits withdrawal”

        Otherwise known as cold turkey for bludgers.

    • Mike Stallard
      Posted July 26, 2012 at 3:19 pm | Permalink

      The cry on the left is that the rich are ripping off the State.
      The cry on the right is that the poor are ripping off the State.
      Do you know what?
      They both are.
      That is why we are broke.

    • outsider
      Posted July 26, 2012 at 4:29 pm | Permalink

      Agreed. The disincentives of high marginal tax and withdrawal rates apply equally at the bottom and the top.
      As Mr Redwood says, without elaborating, excessive inflation has been the main cause of the buoyancy in DWT spending. Excessive inflation when benefits are index-linked and working people’s incomes are stagnant or frozen is bad for public finances, as many said two years ago.

    • Robert Taggart
      Posted July 27, 2012 at 10:30 am | Permalink

      The taper which already exists – for savings – acts as a disincentive to save more…
      £6k+ we lose £1.00 per week for every £250.00 over that limit up to £16k.

      How does £100.00 Universal Credit per week with savings up to £11k sound ?

  4. Mike Stallard
    Posted July 26, 2012 at 5:57 am | Permalink

    Actually, I must say, I am surprised at this excellent news. The fact that the number of bureaucrats is decreasing markedly cannot be all that bad. As an OAP, I am pleased the pension has gone up, although it might actually be better for the country if taxes were cut instead. Housing benefit is something which seems to be being reformed at a snail’s pace.

    MORE! MORE! MORE!

    • zorro
      Posted July 26, 2012 at 4:03 pm | Permalink

      This is because the government is propping up the ‘rentier’ class, and will not allow houses to find their true market value. If they did, things would become cheaper and we would have more disposable income to spend or invest in productive activity…

      zorro

      • stred
        Posted July 27, 2012 at 5:45 am | Permalink

        Don’t forget the ‘rentier class’ includes anyone with investments. It also includes the many landlords who, encouraged by TV programmes, have invested in property instead of being ripped off by the pension and fund industry. In fact they do not just sit back and take profits, as the Marxists would have it. They have to put a lot of effort and reinvestment into maintaining property, unlike other ‘rentiers’ such as holders of gold or shares.

        If the government allowed the property market to sink, then private debt would soar and the UK as a whole would look even more shaky. One of the best ways of doing so would be to drastically cut housing benefit, so that investors who bought at the top of the market were bankrupted.

        • zorro
          Posted July 27, 2012 at 1:35 pm | Permalink

          It sounds a bit like George Orwell with his ‘dividend drawers’…..People who invest their money in industry and productive capacity have also worked hard for their money and are facilitating economic activity.

          The trouble with the property market is that it has been ridiculously subsidised. I have no problem who buy properties, and do them up spending money from companies to buy products and ultimately selling on a house. However, I do have a problem when that activity is implicitly subsidised via a Ponzi scheme and has literally knocked a 20 foot hole in the hull of HMS UK PLC and has effectively sunk her in a sea of debt facilitated by loose credit.

          zorro

          • zorro
            Posted July 27, 2012 at 1:38 pm | Permalink

            People who invest in gold are sensibly trying to protect their purchasing power, which is eminently sensible when it is clear that the world’s central banks are engaging in diaretic QE……

            zorro

          • stred
            Posted July 27, 2012 at 6:43 pm | Permalink

            Gold is also a Ponzi, inversely exploited by Gordon Brown. Values fall and rise like property.

          • zorro
            Posted July 28, 2012 at 5:23 pm | Permalink

            Stred – How is the physical possession of gold a Ponzi? Yes, the price of gold is allegedly manipulated. But, I’ll give you a clue, it’s not manipulated on the high side….

            zorro

        • uanime5
          Posted July 27, 2012 at 3:27 pm | Permalink

          Those who get housing benefit don’t live at the top end of the market. They tend to get the cheapest housing in their local area. Just because housing benefit is £27,000 per year for a flat in Chelsea doesn’t mean it’s £27,000 for a flat in Leeds.

          • stred
            Posted July 27, 2012 at 6:53 pm | Permalink

            My tenants, 60 miles from Chelsea, pay around 10k pa council tax, TV licence, insurance, maintainance and soon licensing). But they are looking after my budgie while I enjoy a 10 day holiday. London is just mad. Let’s close it and save the rest of the country a fortune.

            Just watching another £27 million being blown on cheering up unfortunate people who live in Stratford and like watching foreigners running fast.

  5. lifelogic
    Posted July 26, 2012 at 6:48 am | Permalink

    Generally spending to encourage people not to work or not to work much or too hard as after tax and reduction in housing and other benefits it is not worth it.

    • lifelogic
      Posted July 26, 2012 at 8:10 am | Permalink

      So the further decline in GDP we see an economy smaller than when Cameron lost the election in 2010. The last thing we need is anything suggested by Mr Vince Cable and the insufferably complaisant Lord Oakeshott – the government has not tried any austerity in government whatsoever. We need some lending to real business, lower taxes on business, sensible employment laws and austerity in government, reducing it to about 30% of GDP maximum.

      What a bunch of complete socialist idiots we have in charge – no progress and nearly half way through the term already. Even worse (perhaps only just) Labour to follow.

      • zorro
        Posted July 26, 2012 at 5:38 pm | Permalink

        ‘Even worse (perhaps only just) Labour to follow.’……In reality, it is just continuity of policy. The PC, Common Purpose brigade have a stranglehold on national policy making…..

        zorro

      • Bob
        Posted July 26, 2012 at 5:58 pm | Permalink

        Labour would have cut further and faster.
        They would have succeeded because the BBC would have backed them all the way.

        They said they would cut the deficit in half over the term.

        In my opinion, welfare payments and MPs remuneration should have been cut by five percent per annum and there should be no money for foreign aid until the budget is in surplus.

        • zorro
          Posted July 27, 2012 at 1:40 pm | Permalink

          Indeed, they even proposed passing a law to enforce the halving of the deficit!….which is rather cute bearing in mind their responsibility in creating it…..

          zorro

      • uanime5
        Posted July 26, 2012 at 7:01 pm | Permalink

        Given that Osborne’s attempts to reduce the number of people in the public sector has lead to a double dip recession and possible a depression it seems that the private sector can’t survive without a large public sector.

        • Bob
          Posted July 27, 2012 at 7:32 am | Permalink

          @uanime5

          That’s like saying a dog can’t survive without fleas!

          The problem we have is too much public sector, which bleeds the lifeblood out of the economy.

          Gordon Brown has left the coalition with a huge white elephant of a problem, and sadly the coalition appear to lack the backbone to sort it out.

        • lifelogic
          Posted July 27, 2012 at 7:32 am | Permalink

          How can reducing the number of people in the public sector lead to a double dip recession?

          Releasing people from usually doing nothing useful and being over paid by taxes on the productive can clearly only have a positive effect. No one sensible could think otherwise.

          Perhaps you think we should all dig holes and fill them in again paid for by the state but where would they get the pay from a money tree?

    • Disaffected
      Posted July 26, 2012 at 1:12 pm | Permalink

      There is still a huge incentive for 19 year olds to get pregnant so they receive a house and living for free all their lives and an increase if they have more children, which in itself is a greater burden on the taxpayer through dysfunctional children. No incentive to work at school if your living is provided for free. Social engineering by Cons, Lab and Libs will also help them get best places at university- so it does not pay to work hard at school as well. It will cause higher education to race to the bottom, just like the current school system. Why work hard to get good grades if others are given the place for mediocracy or a living for free?

      This year all welfare lifers got a 5.2% pay rise. Most workers did not get the same increase and the average wage is £26,000 while these people get £26,000 for housing without having to work. At the end of your working life you have to sell your house for elderly care while they get it for nothing and you can sit next to them in the same care home! The current welfare system is worse than communism. No wonder mass immigration is out of control (both inside and outside the EU).

      Under the current government thinking there is not a coherent strategic plan where all departments are working towards the same goal. The country appears to be governed on a weekly basis depending on what focus group was commissioned. Trivia such as visiting the US president a week before the budget, gay marriage, Lords reform, HRA ( before the election did Mr Cameron promise a grieving father he would get rid of the HRA for a British Bill of Rights?). It goes on and on. There is no focus by present incumbents- they are way out of their depth in competence.

      As for moral judgements by MPs- what an affront. How about second homes not attracting stamp duty? How about MPs expenses not attracting tax liability, paid whether they attend Westminster or not, pensions still based on RPI etc etc.

      Clean up Westminster in the first instance, install people who are capable of running departments (not presenting what civil servants tell them) and have a grasp of daily life for ordinary working people who are being squeezed for every penny of tax the government can legally steal.

      • alan jutson
        Posted July 26, 2012 at 6:09 pm | Permalink

        Dissafected

        Much to agree with here.

      • lifelogic
        Posted July 26, 2012 at 6:22 pm | Permalink

        It is hardly appropriate for most MPs to lecture us on Morality. I read, however, that the Prudent now return to boom and bust Gordon Brown has however claimed his former prime minister’s “special allowance” of only £114,998. I suppose we should be grateful he did not claim the full £115,000 that he is allowed. What on earth is he doing with it? Fortunately I have seen nothing of him since he left the country in such a great mess – due to his huge incompetence as both Chancellor and Prime Minister.

      • uanime5
        Posted July 26, 2012 at 7:07 pm | Permalink

        Universities offer the best children from poor performing schools access to their courses even if they don’t have the required grades because you have to be far brighter and more determine to get a 3 B’s at one of the worst schools in the UK than 3 A*’s at the best private school money can buy. Also this is something universities are doing in order to get better students, not because they’ve been forced to.

        Given that those earning under £26,000 can claim housing benefits it’s grossly misleading to claim that only the unemployed can claim them.

        • lifelogic
          Posted July 27, 2012 at 7:40 am | Permalink

          Universities already adjust for this potential rightly so.

          I agree that a students with the same grades from a good school probably has less potential than one from a bog standard comp. Let the universities make the judgements and look at the outcomes at degree level.

          Anyway we need some bright plumbers, drain engineers and car mechanics too – indeed I think we need rather fewer bright lawyers.

          • Electro-Kevin
            Posted July 27, 2012 at 5:46 pm | Permalink

            Lawyers can’t be that bright, Lifelogic.

            50% of them are wrong 100% of the time in UK courts.

        • Disaffected
          Posted July 27, 2012 at 5:46 pm | Permalink

          Rubbish. Socialist babble.

        • lifelogic
          Posted July 28, 2012 at 6:43 pm | Permalink

          Surely the whole point is that the more they change their minds on any issue as it goes through the multi level vastly expensive court system and the outcome is random/uncertain the more the legal profession makes out of the racket.

          Perhaps lawyers are not that dim after all just looking after their own?

  6. Glenn Vaughan
    Posted July 26, 2012 at 6:53 am | Permalink

    The UK has become a country of dependence rather than self reliance with frequent chants of “where’s mine!” £1 in every £3 of government expenditure is spent on state benefits.

    Does anyone know what percentage of the UK population under 65 is receiving a state benefit of some kind? By comparison, my understanding is that the figure for the USA is 35% of the population (currently over 100 million Americans).

    • zorro
      Posted July 26, 2012 at 4:01 pm | Permalink

      I should think it must be a majority by now if child benefit is included. If child benefit is excluded, and with the prevalence of child tax credits/working tax credits/housing benefit, it must be close to 50%…..Crash Gordon’s strategy almost worked….If they get another chance, it will be all over. It’s probably easier if they confiscate everything and just give everyone £150 pocket money a week to live on, and forget the pretence of living in a free, open, democratic society which strives to advance human society….

      zorro

      • alan jutson
        Posted July 26, 2012 at 6:11 pm | Permalink

        Zorro

        How about only letting earning income taxpayers vote, given they pay for everything.

        Food for thought.

        • alan jutson
          Posted July 26, 2012 at 6:11 pm | Permalink

          well nearly everything.

        • lifelogic
          Posted July 27, 2012 at 7:44 am | Permalink

          Perhaps exclude all who are paid by the state sector (or quangos or the BBC) – either as pay or as benefits as they always have a vested interest in an ever larger state sector. In effect they are bought votes.

  7. Electro-Kevin
    Posted July 26, 2012 at 6:58 am | Permalink

    I wonder how much road tax has been diverted to this.

    • David John Wilson
      Posted July 26, 2012 at 9:59 am | Permalink

      Vehicle Excise Duty is hardly relevant in these calculations. For any reasonably efficient car it is less than £200 a year, usually a lot less.

      • Electro-Kevin
        Posted July 26, 2012 at 5:17 pm | Permalink

        Fuel duty ?

        We have been discussing recently how revenues raised from roads do not get spent on roads.

        • David John Wilson
          Posted July 26, 2012 at 11:13 pm | Permalink

          Why should you expect fuel duty to be spent on the roads? The government’s problem is the amount of money it has to spend on benefits and pensions etc. It needs to raise that money from a variety of sources of which fuel duty is just one.

          • Electro-Kevin
            Posted July 27, 2012 at 5:50 pm | Permalink

            My point here is that our host recently juxtaposed rail subsidy with road taxation.

            In fact road taxation goes on all manner of expenditures so why be so selective about what to compare it with ? At least the rail subsidy benefits road users in that it takes commuters off of them.

  8. Joe
    Posted July 26, 2012 at 7:25 am | Permalink

    Housing benefit should be capped lower, my parents and i were looking with a veiw to rent out this house we purchased, the estate agent said hmm your looking at around 800£ a month for it, then he said, well if you rent it to housing benefit recipients you can get about 400£ p/w, i live in the north of england this is almost double what people recieve as a wage, how on earth can this be right estate agents are all too ready to take advantage.

    • Electro-Kevin
      Posted July 26, 2012 at 5:25 pm | Permalink

      It is contributing to house prices.

      At £45k salary (using 3x plus 1 – as was the limit) one can afford a part share in a flat in London in a none too salubrious area.

    • zorro
      Posted July 26, 2012 at 5:43 pm | Permalink

      Exactly, as I have said elsewhere, it bucks the market and just subsidises prices and the ‘rentier’ class, and diverts investment in productive capacity…..It is truly the ‘British disease’…..

      zorro

      • stred
        Posted July 27, 2012 at 8:26 am | Permalink

        It seems to have spread to the US, Canada and Europe too, where many people have decided to invest in property as an alternative pension. In Canada, I was talking to a butcher who had decided to avoid property, as some of his friends had ecountered problem with tenants and unfavourable tenancy law. As in the UK, many property investors are not wealthy, but from trades and professional classes who just want security.

        In Germany, for example the private rental sector is higher than the UK. However, the responsibility of the tenant is much more strictly controlled and the landlord is then happy to have longer tenancies. Prices have also risen greatly on the continent where different economics apply. Perhaps the main reason was the availablity of cheap and easy credit.

  9. Amanda
    Posted July 26, 2012 at 7:34 am | Permalink

    Over at the Telegraph, there are several ‘think tank’ authors who are advocting more house building as a way out of our economic woes.

    None of them tell us why building more shoddy houses by volumn builders over green fields (because brownfield is not profitable) where the infrastructure is already overstretched, would help. But, they all tell us we need more ‘social housing’ aka known as ‘affordable housing’. Now, forgive me, but does not more social housing mean more ‘housing benefit’?

    They also say that more houses will bring down the cost of them. Now forgive me again, but if you bring down cost will that not leave a great many people in negative equity, and will that not have an affect on the asset base of many of our fragile banks?

    I also understand that to build more social housing, the housing associtions are having to fund them with more ‘risky’ financial instruments . Forgive me, but wasn’t this basicially what caused the sub-prime mortgage issue and kicked off the fiancial crisis in the first place? Only our lot of ‘think’ tankers, want to add housing benefit to the deadly mix of cheap, shoddy housing, funded through risk investments, as well.

    Have I got the wrong end of the stick? I thought if we could kick start innovate industry, jobs and self reliance, we might do a lot better. Are we attracting more immigration because of our fast growing, dynamic economy offering life chances? Or are we attracting immigration because of our free hand outs and housing benefits?

    Should these ‘think’ tanks, drop the word think?

    • Anonymous
      Posted July 26, 2012 at 5:29 pm | Permalink

      I am suspicious when house building is proposed but with no new jobs – other than building the new houses.

    • zorro
      Posted July 26, 2012 at 5:53 pm | Permalink

      Well said…

      zorro

    • David Price
      Posted July 27, 2012 at 12:15 pm | Permalink

      Agree with all you say.

      The problem I have with housebuilding is that it only really benefits the developer that one sale whereas most of the resources are imports as most liklely are the building contractors.

      However, putting money into a exporting industry would tend to compound to a degree over time. EIS, VCT etc are one way to encourage such investment but rather than the government trying to pick winners it would be better to free up more investment by lowering taxes and regulatory related costs, paying off debt and reducing the defecit.

      WRT social housing, won’t there be a lot of MOD properties coming on to the markets soon?

  10. alan jutson
    Posted July 26, 2012 at 7:56 am | Permalink

    So inflation is the biggest cause for The Department of Works and Pensions to have to increase its budget.

    They why does the government not get hold of Merv by the short and curlies, and stop him printing money, and failing to hit the inflation target.

    Control, what control ?

    The left hand does not understand what the right hand is doing !.

    Given 20,000 people fewer now work for the Department, has the service reduced ?

    If not, it just proves it was at least 20% overmanned, how many other Departmnets are similar. ?

    • Disaffected
      Posted July 26, 2012 at 5:54 pm | Permalink

      Is the back room staff at the MoD being reduced at a higher rate than military personnel? Most businesses have fewer back room staff than delivering the front line service. What of our government departments? What about local authorities, police, NHS etc. Of course huge cuts could be made. When is the bonfire of quangos going to take place?? Cameron announced another six to be implemented in the Queen’s speech!

    • uanime5
      Posted July 26, 2012 at 7:11 pm | Permalink

      The Government won’t stop Merv printing money because they need qualitative easing to ensure the UK retrains it’s triple A credit rating, so it can borrow money as cheaply as possible.

      • Lindsay McDougall
        Posted July 29, 2012 at 12:56 pm | Permalink

        But the UK government is spending much more than it should so there is no real sense in which it needs to borrow as cheaply as possible. Cut government expenditure – and I mean really cut current expenditure, not just pussyfoot around – and the “need” for cheap money disappears. Low interest rates and QE serve HM government and people who have bought overvalued property on borrowed money; they penalise business and pension funds.

        When are neo-Keynsians going to get it into their heads that cheap money does not produce real economic growth, just stagflation. How many years of real time data do you want before the obvious is accepted? Our vast army of neo-Keynesians keep saying that without cheap money things would be even worse. It’s total bullshit.

  11. Paul Danon
    Posted July 26, 2012 at 8:05 am | Permalink

    In real life, if you spend all your budget, you have to stop spending. In government it seems that, if you overspend, your Bank of England cheques still keep clearing. This makes a nonsense of budgeting.

  12. Brian Tomkinson
    Posted July 26, 2012 at 8:12 am | Permalink

    Is it not the case that there has never been a UK government that has reduced its spending? They may have shown a reduction as a percentage of GDP, but even that little trick won’t work with shrinking GDP. You told us early into this government that their figures showed that deficit reduction was always planned to be by increased taxation. I have given up asking about Osborne’s pre-election pledge to achieve it by 20% tax increases and 80% spending cuts. No doubt he believed his own, and the OBR’s, fanciful projections for economic growth. Remember your slogan: “All you need is truth”.

    • uanime5
      Posted July 26, 2012 at 7:16 pm | Permalink

      The Government’s plan was firing hundred of thousands in the public sector to create millions of jobs in the private sector, have a private sector recover produce 2% growth in GDP per year, and gain additional tax revenues from all the extra people employed in the private sector.

      So far all they’ve managed is firing hundred of thousands in the public sector, which has caused the private sector to contract because hundred of thousands of people can no longer afford to buy their products. Due to low job creation (barely enough for the hundred of thousands who were fired but not enough for all the new school leavers and migrants) and sluggish growth in the economy tax revenue have barely increase. So every year the Government is having to borrow billions more than they planned. Plan A has clearly failed and Osborne need to be replaced.

      • David Price
        Posted July 27, 2012 at 8:37 pm | Permalink

        No, the plan was to cut costs by reducing public sector headcount with the hope that the private sector could grow to absorb some of that headcount.

        Why is it you are happy that Brown & co could take 10 years (97-07) increasing the punlic sector by 1m but you expect the private sector in a period of recession to increase employment by the same amount in a matter of months?

        • Lindsay McDougall
          Posted July 30, 2012 at 12:51 pm | Permalink

          Because he is a Socialist (bias-ed) protecting his own interests.

          I’d love to know what uanime5 actually does/did for the public sector. Was he / is he aware of the Ryrie rules?

  13. Ben Dixon
    Posted July 26, 2012 at 8:27 am | Permalink

    Hi John it would be interesting to hear your thoughts on the rise of housing benefit payments. Since January 2010, a large majority of new claims have been from working households (http://www.insidehousing.co.uk/tenancies/majority-of-new-housing-benefit-claimants-in-work/6521183.article) who would therefore not be affected by the £26k pa cap for workless households. I wonder whether you think this is more due to a disparity between wages and rents rather than an underlying problem with the benefits system?

  14. william
    Posted July 26, 2012 at 8:43 am | Permalink

    DWP budget £166.7 billion,cf the UK government borrowing requirement of north of £ 120 billion.The Coalition government’s giant ponzi scheme equates to reining in defense expenditure,throwing money at the NHS,paying child benefit to the children of East Europeans working here,axing the road building programme,and expecting growth to emerge from an economy where the state spends more than 50 percent of GDP.The welfare state,as it is constituted, is unsustainable.

    • Bob
      Posted July 26, 2012 at 6:13 pm | Permalink

      George Osborne is the political equivalent of Bernard Madoff.

  15. ftumch
    Posted July 26, 2012 at 8:45 am | Permalink

    Two words: Citizen’s Income.

    If everyone was guaranteed £65 a week*, then there would be no use for Job Centres. There would be no use for Job Centres because there would be no stick to threaten the unemployed with; JCs do not perform a public service, their prime purpose is to make unemployment as miserable an experience as possible.

    The figure of 104,182 DWP employees amounts to £2.6 billion in wages at average of £25k. This figure is likely higher. If we assume that half DWP staff work in JCs, then that’s £1.3 billion. In my (albeit limited) business experience, employment costs account for around a third of all running costs, the rest being taken up by rent, rates, electricity, insurance etc… So total costs of JCs: £3.9 billion. Let’s round it upto £4 billion for convenience.

    There: introduce Citizen’s Income, scrap Job Centres, save £4 billion.

    Next!

    Department for Culture, Media and Sport…….. Axed! Next!!

    .
    .

    * If anyone seriously thinks someone can live the Life of Reilly on £65 a week needs their head examining.

    • zorro
      Posted July 26, 2012 at 5:55 pm | Permalink

      Citizen’s income is an option but it should be limited to UK citizens….

      zorro

    • JT
      Posted July 26, 2012 at 7:05 pm | Permalink

      Add to this — a fixed formula on housing payments — which never increase over time (ie will not accomodate more family members)
      Have all payments calcluated and paid locally.
      People in need – get there money to tide them over until better times

      and a job centres gone — and housing benefits teams slashed

    • JT
      Posted July 26, 2012 at 7:05 pm | Permalink

      Add to this — a fixed formula on housing payments — which never increase over time (ie will not accomodate more family members)
      Have all payments calcluated and paid locally.
      People in need – get there money to tide them over until better times

      and a job centres gone — and housing benefits teams slashed

  16. A different Simon
    Posted July 26, 2012 at 9:06 am | Permalink

    It all boils down to the same thing .

    – The financial services industry has appropriated all the wealth from the real economy
    – Due to impoverisment of society by the financial services industry and ridiculously high accomodation costs , most people end up paying far too much in interest/rent . Consequently they cannot earn enough to provide for their old age and retire with next to no savings
    – The aged need approximately double what the state pension provides so we end up using benefits .
    – The shortfall caused by the financial services industry and high cost of accomodation is socialised .

    Well the sums don’t add up John and trying to cut the payments or increase pensionable age doesn’t work .

    It’s time your profession faced up to reality .

    Will we ever hear anything from you about pensions provision for the ordinary citizens ?

  17. David Price
    Posted July 26, 2012 at 9:51 am | Permalink

    I applaud the headcount reduction.

    However, the housing benefit cap is a joke – a net £26,000 is significantly more than the average private sector wage (£24,180 in April 2012 according to ONS).

    Hasn’t anyone considered that reducing housing benefits significantly might actually act as a downward pressure on rents?

    • Bob
      Posted July 26, 2012 at 6:17 pm | Permalink

      “Hasn’t anyone considered that reducing housing benefits significantly might actually act as a downward pressure on rents?”

      Apparently not.

    • JT
      Posted July 26, 2012 at 7:06 pm | Permalink

      the number that claim this figure is not significant.
      the bulk of housing subsidies are paid to working people

      • David Price
        Posted July 27, 2012 at 6:07 am | Permalink

        Regardless of what you label it, £27b a year with a cap more than an average wage while landlords double the rent for benefit recipients suggests something is very warped. State subsidy of rented housing needs to be significanly reduced.

        BTW the onus is not on the net tax payer to figure out how the reduction should be made, the onus is on the politicians and civil servants to first stop spending so much then to figure out how to fairly address those in desperate circumstances. Throwing increasingly larger amounts of money at the problem is not a responsible or effective solution and such a simplistic approach does not justify the large salaries of civil servants.

    • uanime5
      Posted July 26, 2012 at 7:19 pm | Permalink

      Given how high the rents are in London I doubt reducing housing benefits even more will have any effect.

      • David Price
        Posted July 27, 2012 at 6:08 am | Permalink

        It will reduce the drain on public funds and help reduce the defecit.

        • uanime5
          Posted July 27, 2012 at 3:33 pm | Permalink

          Unless the people who get housing benefit are all able to get jobs that pay their current salary + housing benefit expect thousands of people to become homeless. Something that will be a significant drain on public funds if they turn to crime in order to survive.

          • David Price
            Posted July 27, 2012 at 8:32 pm | Permalink

            Not everyone who receives housing benefit works and they could as easily not work in a place with cheaper housing.

            You assume if housing subsidies are cut across the board that everyone will turn to crime, seriously? I suggest instead that landlords may stop charging double an economic level of rent for those on benefits if the benefits won’t support that level of rent.

          • Lindsay McDougall
            Posted July 29, 2012 at 6:31 pm | Permalink

            So let me get this right. Immigrant families can collect maximum benefits, sleep seven to a room if they have to and sent lots of money “back home” (and don’t you dare try to deny that it happens frequently).

            Meanwhile, indigenous families on maximum benefits allegedly cannot cope at all. How so? Surely shome mishtake.

      • Bob
        Posted July 27, 2012 at 7:37 am | Permalink

        @uanime5
        Your analysis of cause and effect is seriously flawed.

  18. The Prangwizard
    Posted July 26, 2012 at 11:20 am | Permalink

    As I understand it the State pension is an entitlement in that the recipient needs to clock up a number of contributions in order to be receive it; does that mean the figures on expenditure are neutral over time. This may be an extremely simplistic analysis on my part but could anyone explain how it works, in other words how much if any of the 44% of £160bn is a ‘loss’ to the exchequer. I favour an entitlement system for all state payments – you ‘pay in’ before you ‘get out’. I receive the State Pension and I’m very happy to receive it. I am under the impression I earned it, but maybe not?

    • Iain Gill
      Posted July 26, 2012 at 6:39 pm | Permalink

      plenty of folk enter as immigrants in their late 50s or 60s and go onto get state payouts through their old age having never contributed

    • alan jutson
      Posted July 26, 2012 at 7:50 pm | Permalink

      Prangwizard

      Successive governments have reduced the number of qualifying years for full pension entitlement.

      Men used to have to contrubute for 49 years now it is down to 30 years which is the same qualification number of years as women now also need.

      You may think it crazy that with all of our debts, with all the moans about how uncerstainable pensions are, that any government would want to reduce the number of years contributions and so would I, but this was the wizdom of a certain Mr Brown, who put forward the last reduction.

      Crazy especially as you get no extra if you make more contributions than the 30 years for full entitlement.

      • uanime5
        Posted July 27, 2012 at 3:37 pm | Permalink

        They probably reduced it because most people are not longer able to work for 49 years (16-65). It seems the Government is either factoring in high levels of youth unemployment (35-65) or the difficulty in the over 50’s remaining in employment (21-51).

  19. forthurst
    Posted July 26, 2012 at 11:39 am | Permalink

    No patriotic Englishman would wish to take £26,000 from his fellow countryman in order to accomodate those of (from abroad)to a much higher standard than the average working English family can afford, and what proportion of the higher rental owning landlords are also (recent migrants)?

    Meanwhile, “Mr del Missier, the bank’s former [Barclays] chief operating officer who resigned three weeks ago, is understood to have negotiated the [£9M payoff] deal with Barclays’ outgoing chairman Marcus Agius in the days before he quit.”

    Of course, when it comes to ‘morality’, the notionally Christian English, being a bunch of neanderthals, object to ‘gay marriage’.

    In most of the world, any concept of English ‘fairness’ would be considered bizarre. What our country has become is entirely as a consquence of allowing foreign influences to cap our own inate sense of right and wrong. Instead of adopting ours, they are foisting their own ….amorality on us.

    • zorro
      Posted July 26, 2012 at 5:57 pm | Permalink

      It would indeed be interesting to know, but somehow, I don’t think that the authorities will release those figures….

      zorro

    • outsider
      Posted July 26, 2012 at 6:37 pm | Permalink

      Dear Forthurst,
      Your last two paragraphs seem a little contradictory.
      You are right that others consider the English sense of fairness “bizarre” because it is a fine but odd thing: not based on justice or a a rigid interpretation of right and wrong, but on common sense reasonableness, on give and take and “live and let live”. It is against absolutes and is therefore being crushed out of us by absolutist laws and court judgments.

      • forthurst
        Posted July 27, 2012 at 7:55 am | Permalink

        “Your last two paragraphs seem a little contradictory.”

        The first was intended to refer to the ‘morality’ of the Frankfurt School.

  20. David Langley
    Posted July 26, 2012 at 12:37 pm | Permalink

    Like most big companies the government is just taxing to pay current pensions, there are no pensions savings. Profits are eaten up by keeping the pension pots full, the government has no profits so a massive ponzi scheme is currently keeping our pensions paid but it cant go on can it?

  21. Conrad Jones (Cheam)
    Posted July 26, 2012 at 1:10 pm | Permalink

    I would agree that Housing Benefits are a complete waste of public money and contribute to higher housing costs to those that do not receive it.

    It could be argued that if Housing Benefits were cut, the number of people who would be dependent on this Market Manipulating Benefit, would reduce as Housing Costs would reduce.

    A lot of Housing Benefit goes from Tax Payers to Landlords.

    Many Pensioners are suffering as a direct result of Financial Market Failures and Monetary instability. Their savings (for which they worked hard all their lives – well most of them) are being eroded and the Banks and Building Societies are punishing them with negative interest rates (in real terms). Pensions have gone up and it is fair that they have.

    You famously steer well clear of discussing the Implicit Subsidies that Banks receive – the Bank of England has estimated that Private Banks receive in excess of £100 billion – through Government Deposit Insurance, Bailouts and loss of Seigniorage.

    To not discuss Bank Subsidies is like arguing that people on the Titanic should use cups and saucers to remove water pouring in, without fixing the gaping whole in the side of the Ship where the water is getting in.

    You need to start to look art the route casues of our Financial System – puttng sticking plaster on gunshot wounds is not going to work.

    • Iain Gill
      Posted July 26, 2012 at 6:37 pm | Permalink

      state subsidy of council housing and housing association housing stock is also a waste of money, and perpetuates too much housing in areas where the local economy does not merit it, and discourages folk from moving to other areas where there are more likely to be jobs, perpetuates poor schooling

      would be much much better to subsidise those in real need rather than the houses, and let the folk take their subsidy where they want

      on the other hand the T & C’s available on the rented sector need a careful going through, there really needs to be private provision for folk wanting to rent long term who need guaranteed place to live at least through a year of their kids education and not the 6 or 12 month tenancys which dominate at the moment. the rest of europe has long term tenancys i dont see the harm it would do here.

    • uanime5
      Posted July 26, 2012 at 7:21 pm | Permalink

      Why not have the Government control rents? That will prevent landlords overcharging people.

      • David Price
        Posted July 27, 2012 at 6:27 am | Permalink

        The simplest way they could control rents would be to remove all government subsidies leading to lower rents. This would also reduce the number of civil servants required to operate this gravy train, a double saving.

        In a free market rents would adjust to find tenants, they would only be as much as someone is prepared to pay. Provision would have to be made for those in truly desperate circumstances, but provision doesn’t mean £1m mansions for immigrants or Sky TV and desperate doesn’t mean just off the boat or people who chose to be baby factories.

        • Lindsay McDougall
          Posted July 29, 2012 at 6:36 pm | Permalink

          Sounds logical. Subsidise people, not particular properties. Why is there any “social housing” at all? Large “sink estates” only encourage poverty, fecklessness and bad schools. IDS should be told to sell off Easterhouse etc.

  22. zorro
    Posted July 26, 2012 at 3:56 pm | Permalink

    http://www.dailymail.co.uk/news/article-2178849/War-veteran-lay-dying-street-bank-account-drained-sick-thieves-stole-wallet.html

    What a lovely country we live in….? I wonder which ‘shoulder surfers’ took advantage of him?

    On a separate point, John, it is good that you are analysing aspects of departmental spending….It would, of course, be better if some of your Parliamentary friends acted on your advice………But then, of course, you could be wrong and the economy might be doing very well. Indeed, perhaps we might be living in a parallel universe, as Mr Cameron is clearly more interested in the successful delivery by 2015 of…..’gay marriage’. If that is what he is successful in delivering, it will surely be an apt witness of his abilities…

    John, I hope as well that your religious beliefs have the approval of ‘Cast Elastic’ as he seems to know what you should and shouldn’t believe. It makes things so much easier if you don’t have to think….It’s not as if he is ever wrong on anything and is clearly resolute in his beliefs (not conservative ones of course)….

    zorro

    • zorro
      Posted July 26, 2012 at 4:27 pm | Permalink
      • Bob
        Posted July 26, 2012 at 7:10 pm | Permalink

        @zorro

        I was going to leave a comment on the website but someone beat me to it. They took the words right out of my mouth.

        “Less than 2% of the UK population is gay. Of that 2% a small fraction of it are concerned about having gay weddings pushed through so just why at this moment in time, when the country is going through a really bad time is this clown wasting his time, money and effort pushing through something that very few people actually want ? YOU PEOPLE ARE MAD !

        – Duncan W, Samui, Thailand, 26/7/2012 1:28

        Read more: http://www.dailymail.co.uk/news/article-2179032/Ill-legalise-gay-marriage-2015-PM-Cameron-warns-opponents-Church-lock-people-out.html#ixzz21l0Y9BJA

        • stred
          Posted July 27, 2012 at 6:21 am | Permalink

          Ex- public schoolboys like Dave, probably think more like 30% of the population is gay or half gay. It seemed as though this was the case when I had to go to one, and turned down the money offered by the high proportion of boarders, who seemed to think buggery was normal. Not that sixpence seemed much of a temptation anyway. Many ex-victims of the public school fagging system continue their habit in later life, even when reaching the heights of their professions. No wonder they think homosexuality and gay marriage is a conservative value.

        • Francis King
          Posted July 28, 2012 at 5:47 am | Permalink

          If something is right, it should be done. Allowing homosexual people, made that way by God, to get married should not be controversial. Unfortunately the churches have decided that they should have a right to discriminate against homosexual people. This is wrong.

          • stred
            Posted July 28, 2012 at 9:23 am | Permalink

            God does not decide who is homosexual, bisexual or heterosexual. It is brought about by natural variation of the species, necessary for evolution, and also personal experience. However, religious people tend to follow the writings of their faiths. Why should these beliefs be overruled by the State? Many atheists and agnostics also find the idea of gay marriage in church very strange. The civil partnerships seem to be working well and enjoyed by all. So, why stir up trouble?

  23. Iain Gill
    Posted July 26, 2012 at 5:35 pm | Permalink

    how much are we spending on senior civil servants who are politicall appointees in all but name? liam maxwell and co? go on give us a clue. why do so many ex eton folk end up on the state payroll if they are so good surely they could make it in the free market economy? what pension liabilities are we building up for them?

    why pick on the disable/sick/old when there are so many eton folk on the take from the public purse wide open to question?

    ill donate some money to charity if you actually post on this

    • zorro
      Posted July 27, 2012 at 1:45 pm | Permalink

      It’s far easier to pick on disabled and crippled people and kick them out of their REMPLOY jobs than pick on my old school chum Biffo from Eton….

      Dave Cameron

  24. Atlas
    Posted July 26, 2012 at 5:48 pm | Permalink

    The DWP seem now to be generating more time and resource consuming paperwork and repeated medicals for those who have been ill for a long time.

    Perhaps John, as part of your analysis, you could find out from the DWP the cost of each of these medicals which ATOS do for them?

    I know that DWP is under instruction to cut the payout to those who are genuinely sick, but it would be interesting to know exactly how much this ‘cost-cutting’ exercise is actually costing!

  25. zorro
    Posted July 26, 2012 at 6:01 pm | Permalink

    Indeed, I see that Mr Cameron has seen another opportunity to grandstand/justify and waste some more taxpayers money…..a ‘Hunger Summit’ (including such luminaries as David Beckham)……more money for lear jets and land rovers for ‘charitable’ organisations…

    zorro

  26. zorro
    Posted July 26, 2012 at 6:04 pm | Permalink

    Another Kim Il Dave initiative….(courtesy of Lin Homer’s HMRC)….http://www.telegraph.co.uk/finance/personalfinance/consumertips/tax/9426761/HMRC-tells-school-children-Tell-your-teacher-if-a-neighbour-is-evading-tax.html

    Setting children against adults – informers everywhere – isn’t this Mao/Pol Pot territory getting children to denounce adults for ‘crimes against the state’…….We are becoming East Germany…….your lives depend on state approval.

    zorro

  27. Alte Fritz
    Posted July 26, 2012 at 6:30 pm | Permalink

    We should start from the bottom up by making unemployment no option for the school leaver and by taking a hard line on immigrants with less than, say, ten years contributions to the system from claiming anything including healthcare.

  28. uanime5
    Posted July 26, 2012 at 7:27 pm | Permalink

    The UK’s recovery has not got well. Below is a list of countries and how their current GDP compares to their GDP from 2008.

    Germany: 104.2
    France: 97.7
    EU average: 97.5
    UK: 93.5
    Spain: 91.9
    Italy: 90.9
    Greece: 72.7

    So Germany has increased their GDP beyond what it was in 2008, the average EU country has recover 97.5% of their GDP, the UK is one of the EU countries experiencing a below average recovery, and Greece has lost over a quarter of its GDP.

  29. Robert Taggart
    Posted July 27, 2012 at 10:33 am | Permalink

    How much wasted expenditure goes on the Work Capability Assessment, subsequent appeals, followed by a re-application for the same benefits if, as usual, the appeal takes more than six months ?
    That is not to mention the unmentionables – ATOS !

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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