Cutting the deficit more

   Yesterday’s speech by the Chancellor rightly identified the need for more spending reductions compared to current plans, to eliminate the structural deficit during the next Parliament, following some reductions in this Parliament.

    The prelude to the speech was the Prime Minister’s statement that the triple lock will continue for another five years if a Conservative government is elected in 2015. This provides for an uprating of the State pension by prices rises  or wage rises  or 2.5%, whichever is the higher. As a result Ministers were naturally asked if the Pensioner benefits like free tv licences and heating allowances were also safe, and effectively confirmed they would stay.

     This leaves the Treasury with its aim of getting more of the reductions from welfare benefits having to do so by tackling non pensioner benefits. The Chancellor points out that the  big savings on pensions come from raising the retirement age, which needs to be done as people live longer.

            So today I want to ask for your opinions on what more could and should be done to curb the ever rising welfare bill? It has been going up by more than wages this Parliament, despite the fall in unemployment, as a result of upratings that have exceeded wage growth by a considerable margin, and by the continuing eligibility of a large number of people for various kinds of benefits.

           There are two big issues to consider. The first is eligibility. I would still like to see a longer time period that a new migrant has to complete before qualifying for UK benefits. I think more of the benefits should be contributory, where people have to demonstrate they have a contribution record to UK NI for a sufficient period, or have been in full time education in the UK as British citizens in the past to cover individuals who have been unable to get a job or who are incapacitated and unable to work.

           The government can also consider what range of benefits should be available to young people. At what age or point in their lives should young people qualify for state  financial and housing assistance to have a home of their own?

            The second issue is the rate of increase in benefits in payment. This government has upgraded benefits by inflation at a time when real wages were falling. Was this the correct approach?  Should benefits in future continue to  be protected against inflation?  I am not myself in favour of cutting the real value of benefits, but should there be any upper ceiling? Is a £26,000 cap fair, or is that too high?

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.

223 Comments

  1. Mike Stallard
    Posted January 7, 2014 at 6:54 am | Permalink

    This government had as its main aim the reduction not just of the deficit but of the massive and burgeoning debt. Since election they have supervised a massive increase in debt and they have even outdone Mr Brown’s borrowing and expenditure. That must be said.
    The EU wants more Europe which means a free labour market. The government – LibDems and Conservatives and Labour – have bought into that and so they must agree in Europe to allow equality of movement and welfare. Unlike several other European countries where things are agreed in Europe and then not put into practice, we do things right and we keep our word. So we can hardly restrict our Welfare. I know a charming Portuguese family with two little girls. Would any of your readers say that the mother dies on the street because the NHS is denied her? She has been here two months.
    We all know that the Comprehensive Schools are preparing everyone for University instead of useful jobs in fracking, in the new carbon technology and in the very exciting world of IT. Investment is, of course, handled by the government since there is little or no return for adventurers.
    So the two problems of access and the young rather pale into insignificance: it is really a question of willpower.

    • Posted January 7, 2014 at 1:28 pm | Permalink

      Given that the real or inflation adjusted rate of interest we pay on the debt is about zero, what’s the big problem with the debt?

      Those £20 notes in your wallet are a liability or debt of a sort owed by government / central bank to you. You get no interest on them. I don’t see what’s wrong with government supplying everyone with the stock of £20 notes they want. Nor do I see anything wrong with government supplying the private sector with the stock of “debt” it wants – just as long as government doesn’t pay any significant real rate of interest on that debt. Money and debt are little different in nature.

      • Posted January 9, 2014 at 1:35 am | Permalink

        I’d just make the point that the private sector doesn’t want the debt. Money is actually an asset /liability pair. Just like an IOU. I have the liability. U have the asset.
        Government money allows those holding it to acquire an asset. The Governments therefore have to accept the liability. That’s why they are in debt. All governments who issue currency are. They have to be.

    • lifelogic
      Posted January 7, 2014 at 2:59 pm | Permalink

      Agreed, but are the comp and other schools doing anything much?

      Having recently looked at GCSE & A level maths and physics past papers for my children they seems absurdly simple and not even well thought out. They are also very on message on the green issue, insulation etc. Worryingly the setters seem to think “renewable energy” has a real meaning in science. So coal, oil, nuclear are not “renewable”, but solar and wood – if you catch it before it becomes coal (all made from the Sun’s nuclear fusion) are renewable it seems, as are geothermal, wave, wind, tidal.

      In fact non are renewable, as any sensible scientist can tell you. “Renewable” is a political concept it is just supposed to mean good/nice/cuddly/clean.

      Perhaps Mr Gove should worry less about Baldrick and school history and a little more about the dreadful & low standard of maths and physics papers.

      Non are renewable, as any sensible scientist or just a little thought can tell you.

      I wonder if the A level economics papers have questions about why we use wind energy when it costs 3 times more than coal or gas and is also intermittent so worth far less? But then that might be too off message.

      • Kenneth R Moore
        Posted January 7, 2014 at 4:52 pm | Permalink

        Quite right – Modern A-level maths and Physics papers are comparable in difficulty to advanced level pre GCSE O-level papers as any veteran teacher will tell you. But I doubt the calibre of modern teachers would be high enough to teach to the old O-level standard

        • Richard1
          Posted January 7, 2014 at 9:07 pm | Permalink

          They probably are somewhat easier, but what is your basis for making this extraordinary claim?

          • Lifelogic
            Posted January 8, 2014 at 1:06 pm | Permalink

            Just look at recent past papers on the exam board web sites. There is very little that requires any thinking at all. Nothing really beyond a little memory regurgitation or plugging numbers in to a formula (a formula given to you with the exam paper).

            The exams are far too simple to separate the good candidates from the rest as there is nothing a bright candidate could get wrong – other than by a silly mistake or perhaps not putting it in quite the right way for the often silly marking schemes!

            One (A level I think) question asked something like how much does it cost to run an escalator for 8 hours, six days a week, using a certain power and given the price of electricity. Three mark for the right answer £28.60 or something and even two marks for the wrong answers of £2,860 or 2860.

            So all you need to do is multiply some numbers and get the right units – I assume with a calculator too!

      • Bazman
        Posted January 7, 2014 at 5:25 pm | Permalink

        You see, 666 is a doubling of 33. And 33 is pi and pi is the basis for all computers.
        Renewable means sustainable, so what you are saying is that you are against any form of sustainable energy? Renewable by definition means that it can be replaced as fasts as it is used. Like fish or vegetables. Rather depends on how fast you are using or eating it and can the the pollution be sustained by renewal? Wind, solar, geothermal, hydro are all renewable and sustainable. How ‘green’ or pollution free is another question. Massive amounts of fossil fuels are not sustainable in world terms and not renewable, though could be used more efficiently as part of renewable sustainable energy until they can be used for more useful things other than burning. These are the facts from someone with little education.
        Give some examples of the wording in these papers as you are hardly sustainable in you credibility.

        • lifelogic
          Posted January 7, 2014 at 6:44 pm | Permalink

          Have a look at the past papers on the exam board websites aqa or edexel and the marking schemes. Quite funny and sad I thought.

          Questions like write out 1802 in words!

          What is the advantage of switching things off when not in use?

          • Bazman
            Posted January 7, 2014 at 9:02 pm | Permalink

            Your scatter brain point was about renewable energy, a point you have just ignored like you do not have to answer as you own the facts.

          • lifelogic
            Posted January 8, 2014 at 8:47 pm | Permalink

            My point is that renewable energy is simply not renewable. It is a bogus concept a political/religious BBC think construction.
            It is also hugely expensive and destroys jobs, growth and even with bio fuels peoples lives.

          • Bazman
            Posted January 9, 2014 at 10:13 am | Permalink

            Renewable energy is renewable. How is it not? If you had a generator that run on waste from farming the source would be renewable. A Phone recharged by solar power is is using renewable energy. How is it not? Read what I have wrote and stop ranting and harrumphing. Look at the facts.

        • Leslie Singleton
          Posted January 7, 2014 at 7:21 pm | Permalink

          Bazman–Can you prove (from a Victorian Children’s Arithmetic Exam in my possession) that if a number is divisible by both 2 and 3 it is divisible by 6? I have asked this before with no comment and I am not sure whether that is because it is too easy or too hard. Proof takes about 10 seconds. You cannot possibly believe that standards haven’t dropped.

          • Posted January 8, 2014 at 12:48 am | Permalink

            We are talking about any number which can be factorised 2 x3 xN =6 xN ?
            Isn’t the proof trivially obvious? Mind you, knowing how rigorous mathematicians can be with their proofs I’m wondering if there’s something more to it!

            Leaving that aside, measured IQ has risen markedly since Victorian times. Just Google ‘rising IQ’. I sometimes think that many mainstream economists are still somewhat lacking though. They just don’t get that their theories must be wrong if they don’t fit observable facts!

          • Leslie Singleton
            Posted January 8, 2014 at 10:57 am | Permalink

            Reply to Peter below–I would say that your trivially obvious proof begs the question, that question being whether it is true that one can multiply factors and know that their product is also a factor. I am not a mathematician (and just found this in an old book of exams as I said) but that question-begging is easily disprovable because, take 4 and 6 (product 24) for instance. The number 12 has factors of 4 and 6 but is clearly not divisible by 24. The original, full, question (to Victorian children I repeat) if you are interested was in fact, Show that one of the numbers either side of a prime is divisible by 6.

          • Posted January 8, 2014 at 8:04 pm | Permalink

            I should have said that N had to be an integer. I knew I had overlooked something.
            The 6 thing is interesting. It took me a few minutes to figure out the answer. I’d be interested to know how many MPs would cope with the problem and I’d be even more interested to know how those who are supposed to be experts in the country’s finances would cope with it too.
            I’ll not write out the answer to avoid giving it away unless challenged to do so!

          • Paul Denver
            Posted January 9, 2014 at 10:10 am | Permalink

            Peter – It is not clear to me whether you’ve quite understood Leslie’s point. Stating that N is an integer isn’t enough to fix your proof. The “difficult” bit is proving that a number (say X) that is divisible by both 2 and 3 can be written as 2x3xN. While it is true here, it doesn’t have to be. For example 12 is divisible by 4 and 6, but 12 cannot be written as 4x6xN. While this is very intuitive to work out, a rigorous mathematical proof (which I don’t expect Victorian children would have been expected to use) is a fair bit harder.

            As for the second question, it actually isn’t true. For example 2 is a prime number, but neither 1 but 3 are divisible by 6. And similarly for 3. Whilst I am slightly amused by your challenge to MPs given this, it is really just a technicality, and the statement would be true if restricted to primes > 3. I’d actually argue that the 2nd question is easier to prove rigorously, although the intuitive proof essentially uses the first question.

          • Posted January 9, 2014 at 3:32 pm | Permalink

            Paul,

            Yes you’re right. It’s only true because 2 and 3 are prime? I knew I should have left this one alone!

            Yes, the condition for the second part to be true is that the prime has to be greater than 3 as you say. So, to carry on, I would say that all primes above 2 have to be odd numbers. So both numbers either side of the prime must be divisible by 2. And of three consecutive numbers at least one must be divisible three. That can’t be the prime itself, so must be one of the other two.

            Very smart kids these Victorians if they remember all the provisos necessary for a rigorous mathematical proof.

    • uanime5
      Posted January 7, 2014 at 4:49 pm | Permalink

      We all know that the Comprehensive Schools are preparing everyone for University instead of useful jobs in fracking, in the new carbon technology and in the very exciting world of IT.

      What education could schools give people that would help them work in fracking? Also due to IT companies using ICT to import Indian workers there’s very few IT jobs available for UK IT experts.

      • zorro
        Posted January 7, 2014 at 8:00 pm | Permalink

        Uanime5, your homework is to write to the PM and tell him to spot ICTs immediately!

        zorro

      • Posted January 8, 2014 at 8:33 pm | Permalink

        Comprehensive Schools are preparing everyone for University ?

        Well I don’t know about everyone. But, I’d agree that schools generally should widen their definition of success in life. Making it to university at the age of 18 is just one option that should be considered.

        It’s not just Comprehensive schools who are making this mistake. Some of the most expensive private schools think the same way too. Its all about how many of their pupils make it to Oxbridge for them!

  2. Brian Taylor
    Posted January 7, 2014 at 6:55 am | Permalink

    Yes bring the £26000 cap down to £20000.
    Yes increase to 6months the time before migrants can claim.
    Yes to making the under 21 year old do work such as street cleaning to get out of work benefits.
    ALSO the Aid Budget should have a cap on it NOT a percentage of GDP or whatever measure you at the moment!
    ALSO any pensioner who is paying the 40% or above tax rate should not get any other benefits!

    • Arschloch
      Posted January 7, 2014 at 2:05 pm | Permalink

      Yes you cannot beat the foreign aid budget for making the UK taxpayer look like a mug. We give millions to Argentina, get a load of crap in return about the Falklands and in the meantime my daughter just gets into her desired primary school with its 200m catchment area and the kid next door can take a 30 minute car trip across town to somewhere else. Oh yes and we have a PM who awards his barber an MBE and you think things are getting better?

    • uanime5
      Posted January 7, 2014 at 4:52 pm | Permalink

      Yes bring the £26000 cap down to £20000.

      Why?

      Yes to making the under 21 year old do work such as street cleaning to get out of work benefits.

      So you want all the paid street cleaners to be fired and replaced with slave labour. How exactly is increasing unemployment going to improve the economy?

      • alan jutson
        Posted January 7, 2014 at 7:37 pm | Permalink

        Uni5

        Why make the existing street cleaners redundant, keep them all on to teach the new ones the job, and the combined labour can sweep more streets, or the same umber of styreets more often.

        Most streets could be improved if cleaning undertaken more often.

        Then at least we have some benefit for our money, and those who work learn the discipline of work and are more likely to be able to compete in the job market..

      • Posted January 8, 2014 at 1:51 am | Permalink

        I might be open to an accusation of right wing opinions by agreeing with Alan! There are some who do favour the idea of maintaining a large pool of unemployment to act as a ‘reserve army’ of labour which can be used to keep wages in check.

        This might work for a short period but the unemployed do rapidly become the unemployable.

        So payment for work is always preferable to payments for doing nothing. This is not an argument for workfare. Neither is it an argument for the State to pay the wages of those working in the private sector, so any repetition of the controversy caused by government subsidised workers stacking shelves in supermarkets needs to be avoided.

    • Bazman
      Posted January 7, 2014 at 7:40 pm | Permalink

      What happens when they cannot afford to feed their children or pay the rent in your Dickensian fantasy world? Just roll over? I bet they don’t. Who would and your car would be first and justified.

      • Mark B
        Posted January 7, 2014 at 9:18 pm | Permalink

        One man’s pay rise is another man’s cost.

        • Posted January 8, 2014 at 8:22 pm | Permalink

          “One man’s pay rise is another man’s cost.”

          It can also be another man’s livelihood! If I’m a builder, for example, I would expect that I’d have a much better chance of getting work from those who have had regular pay rises rather than had their pay frozen for the last several years.

      • APL
        Posted January 8, 2014 at 1:59 pm | Permalink

        Bazman: “What happens when they cannot afford to feed their children ..”

        A reoccuring theme among the Lefties here, is that there should never ever be any repercussions for bad decisions.

        So for example, somebody who has gone through the state funded education system and come out without any qualifications, should then go on and be exhonorated from producing various children with numerous mates.

        To answer your question ” what happens when they cannot afford to feed their children “, I would answer, perhaps these people should consider if they can afford children before they have two or three. It’s not as if contraception is difficult to come by, so I’m not even advocating abstention. Simple considered control.

        • Bazman
          Posted January 9, 2014 at 10:17 am | Permalink

          Meanwhile back in the real world. You think the poor should now not even be allowed children and if you somehow find yourself in that position due to factors beyond your control then to bad? It does not work like that. How do you propose to stop this. By starvation in one of the richest countries in the world? Or disincentives as you would call them? If there are undeserving poor then by default there must be undeserving rich.

  3. lifelogic
    Posted January 7, 2014 at 7:24 am | Permalink

    The promised “uprating” of the State pension is little more than a promise it will just keep paces with inflation and not be cut in real terms. They may well of course means test it or just keep increasing the age at which it becomes payable. They have done this already and reduced the 20% tax band to tax it more.

    Cameron actually refused to promise that pensioner benefits like free tv licences and heating allowances were also safe next terms he did not “effectively confirmed they would stay” he refused to commit, not that he is likely to have any say in the matter after 2015. They have already removed personal allowances and child benefits for very many. They have also ratted on the popular £1M IHT promise, even for next term.

    Clearly giving people similar standards of living, regardless of their earning through the benefits system is totally absurd destroying incentives. Why bother to work or work harder for no additional benefit.

    It is not even good for the recipient of the benefits. Someone earning even £120K, with children and losing nearly 50% in tax and NI with the cost of getting to work, child care etc. can be little better off than some one earning £10K or even nothing in the UK.

    The benefit issue should have been sorted by Cameron/Osborne back in 2010 it is rather too late now to be making these noises. I cannot really see why Osborne is making these pain tomorrow promises so near to an election, the Tories will be out in 2015. Surely he will just ensure an even fewer Tory MPs retain their seats. He will not be in a position to deliver anything, so he could promise whatever he wanted it is largely irrelevant.

    I also read that EU workers can work in the UK for up to two years and yet pay their taxes to their home country (sometimes at only 10%) yet get benefits from the UK (even for children/wives not in the UK). Who agreed to these nonsense rules? How can they be contributing if they do not even pay UK taxes and NI, but take large UK benefits?

    If only Cameron had not thrown the election away in 2010 with his EU ratting and Clegg on TV debats. If only we had had a sensible leader with a working compass and a majority.

    • uanime5
      Posted January 7, 2014 at 4:59 pm | Permalink

      Clearly giving people similar standards of living, regardless of their earning through the benefits system is totally absurd destroying incentives. Why bother to work or work harder for no additional benefit.

      Care to provide any examples of when this has occurred. Make sure you provide evidence that these people won’t get the same level of benefits if they were working in a minimum wage job.

      Someone earning even £120K, with children and losing nearly 50% in tax and NI with the cost of getting to work, child care etc. can be little better off than some one earning £10K or even nothing in the UK.

      Firstly someone earning £120K won’t be paying the higher rate of tax as this only occurs if you earn over £150K.

      Secondly someone earning £120K won’t be paying 50% of their income in tax due to the different tax bands.

      Thirdly even if your tax claims were correct this person would be earning £60K per year, so unless they spent £50K per year in transport and childcare they will still be better off than someone earning £10K per year (who also has to pay transport and childcare costs).

      So your entire example is completely nonsensical.

      • alan jutson
        Posted January 7, 2014 at 7:39 pm | Permalink

        Uni5

        I think LL got carried away !

      • zorro
        Posted January 7, 2014 at 8:01 pm | Permalink

        Uanime5, please tell us how to do it. We need your expertise now!

        zorro

      • lifelogic
        Posted January 8, 2014 at 8:55 pm | Permalink

        On £120K one pays 40% tax plus NI (employers and employee) they also now lose their personal allowances and child benefit.

        The unemployed (or low earner) gets benefits/tax credits and help with rent, council tax, school dinners, prescriptions and does not need to travel to work.

        • Bazman
          Posted January 13, 2014 at 7:12 pm | Permalink

          How do you propose to cut these benefits is the ‘logical’ question Just cut their income and be done with it. Rents and living costs are rising, so how are they to live, bear in mind that most benefits are paid out to those working and pensioners so your fantasy of hitting the feckless and scroungers will not reduce it by much, fraud is a small percentage many people with children would like to work but due to childcare costs this is not possible, even in good paying jobs with two people working if you have two children then it does not make sense for one person to keep working to pay childcare. Like the Tories facts are not what you are about, just mindless propaganda in an idealogical attack on the poor in order to reduce taxes for the rich in one of the most wealth countries in the world. Many of you like a afraid to just come out with this and when challenged just hide as we have seen and as you will do now.

  4. Posted January 7, 2014 at 7:49 am | Permalink

    Mr Redwood,

    The big assumption which needs to be challenged is that the budget deficit responds in a predictable manner to the cutting of spending and the raising of taxes. In other words is the budget deficit an endogenous or exogenous variable in macroeconomic terms? Is it possible to force the budget into surplus or even reduce the deficit regardless of the behaviour of the private sector?

    To answer this question we can conduct a simple thought experiment. We can consider very simple, economy on a completely isolated island. It is ruled by a King with 1000 subjects. Each subject is required, by the King, to pay a poll tax of 1 currency unit per year. The King has previously introduced a fiat based currency system into his economy and employs 10o of his subjects in his direct employ as soldiers, teachers, doctors etc. The pay rate is 10 units per year for each one.

    So in theory the poll tax pays the salaries of his employees. But he has a problem. Some of his employees, and some of the other islanders who can live quite happily from the direct results of their labours like fishing and farming etc like to save some of their income. For the King to run a balanced budget the King need everyone to spend their spare currency units into the economy so that everyone else has an opportunity to earn the one they need to pay their tax. Inevitably, because some of the currency he has issued has been hidden away in piggy banks, the King never gets back the 1000 currency units he needs to balance his budget. He tries to fine the defaulters, but they say they have tried to find a job, but they have failed, they just can’t pay and throw themselves at the King’s mercy!

    How does the King solve his problem? Can he solve it by reducing the pay of his employees to match his income? That could perhaps work for one year but what about the year afterwards? Or does the King really have a problem anyway when he can print as many currency units as he like? If he runs a deficit, to compensate for the desire of some of his subjects to net save, does it necessarily cause inflation?

    • Denis Cooper
      Posted January 7, 2014 at 3:45 pm | Permalink

      For a start the King could decide that he was no longer going to collect all the poll tax on one day each year and then use the money to pay all his employees the next day once a year. If he collected the tax weekly and paid his employees weekly then at any time at least 98% of the money would still be out of his hands and in general circulation, even if some of it was being stored by subjects against a rainy day. So there would be no monetary reason why any of his subjects should be unemployed and unable to pay their taxes. But I know where you are going with this, and my answer is that the government should normally live within its means and not fall into the iniquitous habit of constantly enlarging its means, and thereby eroding the means of others, by the expedient of creating more and more money for its own use. As has been said here before by somebody else, if printing money for the government to spend was the solution to a country’s problems then the inhabitants of Zimbabwe would now be among the wealthiest people in the world.

    • acorn
      Posted January 7, 2014 at 7:57 pm | Permalink

      Give it up Pete. Nobody on this site has got a clue how a sovereign fiat currency economy actually works, particularly Denis. Good for people like me and George Osborne, the less they understand the easier it is to hoodwink them and take their money. I/We are looking forward to a Conservative government in 2015. Government of the stupid, by the rich, for the very rich. Lovely jubbly.

      • Posted January 7, 2014 at 9:09 pm | Permalink

        I’m more optimistic! It’s hard to avoid ‘fallacies of composition’. It’s natural to think that budgets should always be balanced because as users of a currency that’s exactly what we have to do ourselves. However, when we look at it from our King’s POV, who is the issuer of a currency, we can see that things aren’t quite the same.

        • acorn
          Posted January 8, 2014 at 9:32 am | Permalink

          JR, savings do not equal investment in any macroeconomic model!

          Pete, try using the Bill Mitchell identity explanation.
          (S – I) + (T – G) = (X – M) . Which gives an easier interpretation.

          The sectoral balances derived are:

          The private domestic balance (S – I) – Savings minus Investment: positive if in surplus, negative if in deficit.
          The government fiscal balance (T – G) – Taxes minus Government spending: positive if in surplus, negative if in deficit.
          The BoP current account balance (X – M) – Exports minus iMports: positive if in surplus, negative if in deficit.

          These balances are usually expressed as a per cent of GDP but that, doesn’t alter the accounting rules that they sum to zero, it just means the balance to GDP ratios sum to zero.

          So the domestic balance (left-hand side of the equals sign); which is the sum of the private domestic sector and the government sector equals the external balance.

          For the left-hand side of the equation to be positive (that is, in surplus overall) and the individual sectoral components to be in surplus overall, the right-hand side has to be positive (that is, an external surplus) and of sufficient magnitude. This is also a basic rule derived from the national accounts and has to apply at all times.

          Another myth is with QE creating new money in commercial banks reserve accounts at the BoE, in exchange for IOUs. Banks do not lend that QE reserve. If account holders move their deposits to another bank, then an equal amount of “reserve” has to move banks simultaneously. Balance sheets must balance.

          Another myth. Deposits in commercial banks are not used to create loans. It is the other way around. Loans create deposits, the BoE has to create a “reserve” in the commercial banks “reserve” account at the BoE. Balance sheets must balance. The BoE has to make sure that sufficient cash is available should the loan be converted to “sovereign fiat cash currency” by the borrower. That’s the beauty of Fractional Reserve Banking.

          • petermartin2001
            Posted January 9, 2014 at 12:04 am | Permalink

            Yes I’d agree with all of this – except for the use of the term ‘Fractional Reserve Banking’.

            The consensus of opinion of most enlightened economists would be that FRB is yet another economic myth.

      • Denis Cooper
        Posted January 8, 2014 at 12:35 am | Permalink

        Yes, I too wish that he would give it up, although for different reasons.

    • Posted January 7, 2014 at 8:51 pm | Permalink

      Denis,
      I have used one year but you can change that to a month or whatever period you like and the point is still the same.
      The King, being a sensible sort of person, does understand the situation and knows that if 56 , say, currency units have been saved then that will mean 56 people will be unable to pay their poll tax even though they have offered their services to the labour market. He knows that they won’t find any takers. Consequently he offers the ‘unemployed’ a job to enable them to earn their poll tax but that does mean having to print extra currency.
      Yes, there are people like yourself who warn that he shouldn’t do this and mention Zimbabwe and the Weimar Republic as examples of what can happen.
      So will the monetary situation the year after, be slightly easier than in the previous year? There are a now an extra 56 currency units in circulation. But if these 56 stay in their piggy bank they have no effect on the economy and the King will still have the same problem in the next year. He’ll have to offer work to maybe 43 defaulters next time which brings the surplus in the private sector to 99 currency units.
      If his subjects carry on saving that will happen indefinitely. The King will run his deficit and every year the stored wealth of the private sector will increase by exactly the same amount as his deficit.
      However, if his subjects decide to spend some of it at some future time the King might notice some signs of inflation in his economy. He won’t have any tax defaulters. That will be the time to reduce their spending power by adding an extra tax and run a budget surplus.

      Reply This is a strange argument. Savings equals investment, so saved currency units are invested and then spent by those in receipt of the investment money.

      • Posted January 7, 2014 at 9:25 pm | Permalink

        Mr Redwood,

        There are no banks in our simple economy. Our savers could, however, lend out their money directly and if the money is then spent it will have the positive effect you are alluding to.

        In less simple economy, savers do put their money into banks, usually, but if they keep their cash under the mattress it may as well not exist in economic terms. The banks can then take the easy option of lending it back to government via the purchase of gilts so in practice our King would claim to be borrowing to cover his deficit rather than just printing money.

        The banks can also decide to make loans which can of course be used for investment. Or they can decide not to! That is another factor which will affect our King’s deficit and which is outside his direct control.

      • Posted January 8, 2014 at 12:25 am | Permalink

        PS to my above comment. This link discusses the question of investment equalling savings. I am in agreement with the line of argument.
        http://mainlymacro.blogspot.com.au/2012/01/savings-equals-investment.html

        • Denis Cooper
          Posted January 8, 2014 at 11:54 am | Permalink

          I’ve read that article and the comments, and I especially liked this one that both you and Acorn might like to take on board:

          “”You’re ignorant” is not an argument. I think Morgan does know the basics, and has not lost common sense in a sea of socialism disguised as “complexity”.”

          Morgan’s sin seems to have been his assumption that whatever people save will eventually be spent when they want or need to spend it, so in the case of your simple island economy while some of its inhabitants are wisely building up a stock of coins to see them and/or their families through adversity or old age there are others who are already having to spend their stocks.

          I note that the king has not instituted any form of welfare system, but instead believes that in general his subjects should be and are capable of looking after themselves, if necessary helping each other; and being a wise and far-seeing king, and therefore not having been seduced by false socialist doctrines, he has no wish at all to weaken the proud self-reliance of his people and reduce them to a state of dependency. After all, there may come a time when he will have to call upon them to defend their island from external threat, and he wants them to be strong not a bunch of helpless ninnies.

          Of course we know from the discovery of hoards of coins dating back as far as the Iron Age, such as this:

          http://en.wikipedia.org/wiki/Grouville_Hoard

          that it is not 100% true that money which has been saved is always spent later, but it’s a close enough approximation.

      • Denis Cooper
        Posted January 8, 2014 at 1:07 am | Permalink

        Let’s call the currency unit a shilling, a coin.

        To pay his servants the king needs to get in 1000 shillings a year. If he does that once a year, he will have to accumulate 1000 shillings, taking them out of circulation and hoarding them in his treasury, and then put them back into circulation when he pays the annual salaries. Potentially that could be quite disruptive for the working of the island’s economy, depending on the total number of shillings that the king has put into circulation.

        Alternatively he could withdraw some of the shilling coins and replace them with twelve times as many penny coins, and he could withdraw some more and replace them with forty eight times as many farthing coins.

        Now each week except for four which are designated as exceptions his tax collectors could visit every residence on the island and gather in a farthing for each adult, and by the end of the week he would have 1000 farthings or 20 shillings and 10 pence, so he can now pay each of his servants the wages they are due for that week and have a small amount held over to also pay them for those four weeks when he doesn’t collect the poll tax.

        His servants then spend their wages and that 20 shillings a week goes back into circulation, so what’s the problem with that relatively small amount of money passing through the king’s treasury each week? How does that lead to some of his subjects finding that nobody will pay them to do a job?

        • Posted January 8, 2014 at 10:30 am | Permalink

          Denis,

          We can assume there are 48 working weeks per year and 4 weeks holiday when no one gets paid and no one has to pay any tax. Right?
          We now have 1000 people paying a poll tax of 1 farthing per working week.
          The Kings employees, 100 of them, now get paid 10 farthings per working week each.
          They keep 1 farthing per week for their poll tax. If they each all spend the other 9 farthings, 900 in all, then that gives the other 900 people the chance to earn the one each they need for their tax. But if say 10 of the King’s employees save one each in a piggy bank and 40 of the other islanders somehow manage to get more than they need so that they too can save one there will be 50 farthings in piggy banks. Therefore there will be 50 people short of their poll tax after the first week.

          Of course if the King loads up the economy with lots of printed farthings at the start of the year, say he gives everyone 2 farthings, so that the economy isn’t dependent on the money spent by his employees then everyone will be easily able to earn one ( indeed there may be an inflation problem!) but at least there won’t be any problem the King getting his poll tax in the first few weeks. However we need to notice that if 50 farthings are being saved in piggy banks every week by the private sector, and tax exactly equal to the salaries of the King’s employees is being withdrawn in tax the amount of active money in the economy will also fall by 50 farthings every week.

          So after a few weeks the same problem will re-arise unless the King issues new money to compensate for the desire of the private sector to net save.

          • Denis Cooper
            Posted January 9, 2014 at 12:57 am | Permalink

            There is one of my comments, in reply to your comment above giving a link, which JR has not yet published. In that I point out the basic fallacy in your argument, which ignores the reality that while some of the people in the island are saving for the future there are others for whom the future has already come and they are spending what they previously saved. Therefore it is not necessary for the king to keep issuing new money year after year to ensure that he can get the taxes he wants.

            Now to move from this simplified economics to the politics which really lie behind the façade of your economic theory and which can be illustrated by extending your thought experiment as follows:

            Some years ago, after a period of saying that he was satisfied with the level of income he was getting from the poll tax, the king decided that really he wanted to spend more money and so he proposed increasing it from 1 shilling to 1 shilling and 4 pence a year.

            However many of his subjects felt that 1 shilling was already far too much, and he was not spending the money as wisely as they expected. In fact, some said that he was wasting most of it and it should be cut to 6 pence a year not increased to 1 shilling and 4 pence, and there was a serious threat of a revolt against his rule.

            Alarmed by this possibility the king backed down but came up with a different scheme: instead of seeking to restrain his spending to the limit of his tax revenue, 1000 shillings a year, he would “persuade” those of his subjects who had saved a stock of coins to lend him another 333 shillings and 4 pence each year, and in that way he could get money equivalent to the extra 4 pence he had wanted to put on the poll tax.

            This carried on for a time, with the king borrowing a quarter of all the money he was spending, until he ran out of people who could be persuaded to lend him any more.

            And it was at that point when he was about to run out of money to pay his bills, never having grasped the importance of financial discipline or appreciated the virtue of thrift, and having funded his profligacy first by excessive taxation and then by borrowing, that the king turned to your preferred solution and ordered his mint to start stamping out as many coins as he wanted to spend.

            Which in some ways parallels the career of Gordon Brown in government, first swearing that he worshipped Prudence and wanted to marry her, and twelve years later having reduced her to a drudge slaving over a hot printing press to satisfy his uncontrollable appetite for spending money.

          • Posted January 9, 2014 at 9:38 pm | Permalink

            Denis,

            You’re right in saying that if some are spending previous savings then they will offset those who are making new savings. So, that’s why I use the term ‘net save’. In practice, there can be a tendency of everyone to do the same thing. Like after the 2008 crash, for example, when everyone got scared and stopped borrowing and started saving. That inevitably meant a government deficit problem.

            “to the politics which really lie behind the façade of your economic theory”
            I’m not sure my politics are easy to define. I run a business. I’m anti EU particularly the Euro. So on the face of it you’d might expect very right wing views. But I don’t like to see high unemployment. I think everyone should work for their living if they are physically fit to do so. I’m not keen on green energy. I think nuclear power is the only option if CO2 emissions need to be reduced.
            I don’t think the economy is run as well as it might be by either party. Although I think there are those behind the scenes who do know and perhaps would , if they checked that their conversation wasn’t being monitored, and I signed first a non disclosure agreement, agree with me.
            This way the economy actually works isn’t the way people think it works. I don’t think that’s a good thing from any political perspective.
            And of course if aggregate demand was higher my business would do better and we’d make higher profits!

          • Denis Cooper
            Posted January 10, 2014 at 2:01 pm | Permalink

            Ah, that little word “net”, and I have to admit to overlooking that in a way that I didn’t overlook it when the Tory party started to talk about “net immigration”. But then nor did you explicitly include any islanders spending their savings in the original design of your thought experiment, it was all money going one way out of circulation into hoards never to come out again.

            In your closed economy if there is a fixed amount of money then the part which is being held out of circulation, either in private hoards or in the king’s treasure chest, may well vary to some extent, and the result will be that wages and prices will vary; it is not intrinsically a situation which requires the king to keep stamping out new coins ad infinitum.

            Henry VIII ran through the vast store of money his father left him, and then he ran through the wealth he seized from the monasteries, and ended up debasing the currency and earning the nickname “Old Coppernose”:

            http://en.wikipedia.org/wiki/History_of_the_English_penny_(1485%E2%80%931603)

            “The Dissolution of the Monasteries in the 1530s and the ratification of the First Act of Supremacy in 1534 resulted in a huge financial bonus for the king, but by 1544 Henry was running short of money, thanks partially to his own extravagant lifestyle and expenditure. Henry’s solution was to drastically lower the fineness of the third coinage (1544–47) to only one-third silver and two-thirds copper. This was understandably not popular with the people, and it resulted in Henry acquiring the nickname “Old Coppernose” as the silver rubbed off the high-relief part of the coin design.”

            But then Henry was a tyrant and essentially free from any democratic constraints, quite unlike Darling and Osborne who always had to tell MPs after they had authorised the Bank of England to create vast sums of new money to indirectly fund their budget deficits.

          • Posted January 12, 2014 at 8:35 pm | Permalink

            Denis,

            Yes, the orthodox theory of economics would support what you say. If the amount of a money in an economy were to vary, prices and wages would automatically adjust to compensate. Prices would always be a perfect reflection of the market value of a commodity. There’d always be full employment. There would never be any unsold stocks of goods.

            However, in science, the basic pre-requisite for the acceptance of any theory is that it should explain what is observed to occur in the real world. There is no point a Physicist saying that he thinks that light should vary in speed according to the speed of the observer and so any theory has to incorporate his expectation.

            Orthodox economists are just like that, though. Its no wonder they get everything as wrong as they do.

        • Posted January 8, 2014 at 7:26 pm | Permalink

          Denis,

          I did explain why reducing the timescale didn’t work but it doesn’t seem to have made it through.

          Peter

  5. JoeSoap
    Posted January 7, 2014 at 7:50 am | Permalink

    First the contributory factor should be taken into account. If you haven’t contributed to the state on an insurance-type basis perhaps the most that should be offered by the state is a loan. Why are we demanding that students take out loans to pay for their accommodation but everybody else gets housing benefit? Perhaps housing benefit and other benefits could be turned into loans, and in the case of recent immigrants who don’t have the contribution record, perhaps this loan could be guaranteed by their host country?

    • uanime5
      Posted January 7, 2014 at 5:08 pm | Permalink

      If you haven’t contributed to the state on an insurance-type basis perhaps the most that should be offered by the state is a loan.

      Given that the government is planning to write off at least a third of student loans it may be unwise to encourage people who have even less chance of getting a job to borrow huge amounts of money that they are unlikely to pay back.

      Why are we demanding that students take out loans to pay for their accommodation but everybody else gets housing benefit? Perhaps housing benefit and other benefits could be turned into loans

      Why would someone work if they’re going to lose part of their income to pay for their housing benefit loan? All your loan plan will do is give people even less incentive to work.

      • JoeSoap
        Posted January 7, 2014 at 9:29 pm | Permalink

        So you’re condemning people who didn’t go to University to a life on the dole? How callous.
        Why would someone work if they’re going to lose part of their income to repay a loan? Well ask the hundreds of thousands of students who have to.

        Your arguments are extremely poor and you are Cameron-Clegg-Milliband socialist world.

  6. Andyvan
    Posted January 7, 2014 at 7:50 am | Permalink

    All very well for George to “identify the need for more cuts”, why doesn’t he get on with it? If cuts are needed why wait years to do it? I do not believe that there is a single politician in government with courage and the will to actually cut benefits in any meaningful way. The establishment has taught voters that they can expect to be coddled from cradle to grave by a nanny state and now woe betide any politician that dares to change that promise. We’re in a socialist trap whereby everyone thinks they can live at other peoples expense by simply voting for whatever party promises to steal the most from any group that the voter doesn’t belong to. The current system is only held together by fraudulent accounting, massive money printing, debt and plenty of propaganda. At some point economic reality will cut spending because nobody else will.

  7. Mark B
    Posted January 7, 2014 at 8:03 am | Permalink

    John Redwood MP said;

    ” I would still like to see a longer time period that a new migrant has to complete before qualifying for UK benefits.”

    Firstly, they are not migrants, they are immigrants. Only birds migrate both too and from the UK – Not people !

    Secondly, whatever you choose to do to prevent other EU Citizens (thanks Maastricht) from obtaining ‘UK taxpayer’ funded benefits, must also equally apply to UK citizens. The rules of the Single Market / EEA do not allow discrimination between various Member States and their citizens. ie What applies to them, must also apply to us. This is the other side of the coin which you are not telling people.

    If people want ‘UK Taxpayer’ funded benefits, then they must be prepared to do voluntary work. I know people who have done voluntary work for a certain charity, so that they would be able to get references from them, for when they apply for jobs. It also keeps them busy and active, giving them a routine and a sense of purpose. Unemployment can be mentally as well a physically harmful longterm and a added hidden cost to the UK economy. Something you simply cannot put a cost against, so goes unnoticed. Suicides amongst the young are increasing; apparently. If so, this is a terrible indictment on this and previous Governments.

    People being priced out of the jobs market by immigrants, Government and people (shills for pro mass-immigration) telling them that they are lazy Brits’ and are worthless and to the level of low self esteem. In an interview, if you are confident in yourself it will shine through. Yes you do need other qualities, but they are not going to get a chance when you keep kicking them down. Politicians and state subsided ‘intellectuals’, who do not live in the real world, really do need to shut-up sometimes on things they have neither experienced nor an understanding of.

    Reading this piece it suggests to me that the Governing classes have finally, and very late in the day, woken up to the mess that they have created. You created a welfare state yet, you perused an almost open door immigration policy. You cannot have both ! You have created a ‘Pull Factor’ which has lead to people wanting to come here because they know they will get more. In a BBC report a little while back, a Syrian ‘Refugee’ claimed that, despite having been give sanctuary in France, he still wanted to come too the UK because he ‘knew’ we would give him ‘more’ ! The interview with one of these men confirms this.

    http://www.bbc.co.uk/news/world-middle-east-25500634

    This is why I believe that Governments should only be allowed to stick to their core function. ie Govern. You are not some sort of quasi-charity. We give you money to spend on things that are necessary to the upkeep of this nation – nothing else. You have demonstrated to me that you are totally and completely dysfunctional. And that you cannot be trusted to act for and on our behalf. I think it is time for a rethink, don’t you ?

    • uanime5
      Posted January 7, 2014 at 8:41 pm | Permalink

      If people want ‘UK Taxpayer’ funded benefits, then they must be prepared to do voluntary work.

      In the past people were encouraged to do voluntary work to help them get work experience but unfortunately the Conservatives decided that this wasn’t enough. So they now force people to work for 30 unpaid hours a week, in a location of their choosing which may be difficult for the unemployed person to get to, in areas that provide no useful skills; simple so that the Conservatives can declare this person in employment and then claim that they’ve reduced unemployment.

      Suicides amongst the young are increasing; apparently. If so, this is a terrible indictment on this and previous Governments.

      Well they do have a high level of unemployment and fewer savings to fall back on if they get a 3 year long benefit sanction.

      Reading this piece it suggests to me that the Governing classes have finally, and very late in the day, woken up to the mess that they have created.

      They haven’t. They still believe that forcing the unemployed to work for 30 hours per week, in jobs that used to pay a salary, will somehow improve the economy. Until the Conservatives start helping the unemployed, rather than exploiting them, this situation will only get worse.

      There’s a reason why those who aren’t sent on the Mandatory Work Activity have a higher chance of getting a job. It’s because they’re not too exhausted to look for work and have the time to prepare for interviews.

      • Mark B
        Posted January 7, 2014 at 9:38 pm | Permalink

        Us said,

        “There’s a reason why those who aren’t sent on the Mandatory Work Activity have a higher chance of getting a job. It’s because they’re not too exhausted to look for work and have the time to prepare for interviews.”

        Can you provide evidence to support that claim. Because some of the other people in this world who I have come across and, who do not work for a charity but have all the time in the world, do not seem to be looking that hard or at all. And from what I have seen first hand.

        You must accept that in the real world you cannot have full employment and low wage inflation. You could try in a Command Economy, but that has already been tried and it did not work out too well.

    • Posted January 9, 2014 at 3:11 am | Permalink

      Only birds migrate both too and from the UK – Not people !

      Is this really true? There are lots more rich people in (overseas ) dress in London during the summer months. (Some of these are rich people ed) What are the rules for their comings and goings? Which I would expect are timed to allow them to escape the oppressive heat of their home countries.

  8. Bazman
    Posted January 7, 2014 at 8:11 am | Permalink

    As Nick Clegg points out the only ones bearing the burden are the working poor and should reverse their marriage tax and inheritance ta breaks. Tax cuts for the rich whilst blaming the working poor and the poor. Did anyone watch the TV programme ‘Benefit Street’ in C4 last night about a street in Birmingham where almost none work? Imagine if this was on the BBC? You would all be calling for a parliamentary enquiry, but on C4 not a squeak! What does that tell us? It tells us a lot about your red herring licence fantasy. Advertisers are putting forward anti government propaganda and condoning crime in some cheap thrill of watching the lowest in society and you all have nothing to say about how this should not be allowed?! Ram it. The lefty BBC as spreading stories too about record low temperatures in America too, but this is low temperatures and not warming?
    Ram it.

    • alan jutson
      Posted January 7, 2014 at 2:42 pm | Permalink

      Baz

      Yes I saw the programme.

      Funny how I saw another side to it.

      Constant references made by the residents to the Bedroom tax, Benefits, Housing Benefit, and the Government cuts, and thus they did not have enough for them to live as they wanted.

      Also references that people had not worked for 6 years or more (indeed 95% of the Street did not work) and simply had to resort to crime because the Benefits were not high enough.
      People in and out of prison (one man admitting to a past of 200 offences) for shoplifting and other crimes.
      Benefit cheats who moaned that they had been found out falsly claiming £1500 per month.
      People upset because they were being evicted for non payment of rent, even though they had received housing benefit.
      The streets and gardens full of litter, old settee’s, suites and beds, when 95% of the people had all the time in the World to clear it up themselves.
      Drunks clutching cans of larger, or smoking dope and of course the usual array of dogs.

      Clearly this programme may be in some part factual, but I guess some was also romanced up more than just a little for the viewers.

      Simple question:
      If anyone of those people featured asked you for a job, would you employ them ?

      If this is the true State of Britains unemployed and Benefit recipients (I do not think it is), then God Help us all.

      I leave it there.

      But if anyone has not seen it it, and you can afford to waste an hour without putting your foot through the TV, its a series.

      • Bazman
        Posted January 7, 2014 at 4:43 pm | Permalink

        Romanced up to make it palatable, but 100% factual in my opinion. They did clear up some of the rubbish themselves and often the case in these areas they are targets for fly tippers from outside. I lived in an area like this in the early 1990’s in Middlesbrough. Crazy stuff and difficult to solve by any means. Interesting to see the solution to the bedroom tax though. You think they are entirely unresourceful in this brutal world? As if. They find other types of work as you can see. Drugs are very much part of the local economy, non users and children are part of this micro economy too, often by force and greed. A women with children is forced to hide a suitcase, a child pushes a £50 note through her letter box every week. The local shopkeeper ‘taxes’ the large note by a fiver to in effect to launder it. Where would she get fifties from? And so on.

        • alan jutson
          Posted January 7, 2014 at 7:53 pm | Permalink

          Baz

          Certainly agree they are resourceful, and certainly you have to be to survive, shame most of it was chanelled in the wrong direction (against the law and others who were attempting to trade legally) and income was in addition to the Benefits paid.

          Certainly agree that communities should attempt to help each other out as best as possible, and would certainly agree we seem to have lost the community spirit in many areas.

          Thus one is forced to ask if we all behaved as they appear to show, and pay no taxes at all (other than perhaps some VAT on booze and fags) who would fund the Benefits, the State Pensions, the Police, the Armed forces etc, etc.

  9. Martin
    Posted January 7, 2014 at 8:12 am | Permalink

    Making more benefits contributory would relieve a lot of concerns (real or otherwise) folk have about immigration. Council house waiting lists should also have a contributory element.

    As goes those of state pension age it is time that their tax rates were equalised with the working population? Is it right that the minimum wage worker at the supermarket pays a higher marginal rate of Tax & employees’ NI than a retired public sector worker with a higher pension?

  10. Narrow shoulders
    Posted January 7, 2014 at 8:14 am | Permalink

    Yes £26K is too high and with the advent of universal credit it will soon be possible for a worker on minimum wage to bank £36K per annum in working tax credits, housing benefit and wages while continuing to claim child benefit. That is a lot of spending power for those on middle incomes to compete with. These benefits should be subject to tax in the manner of earned income; our housing and other living costs are met out of taxed earnings.

    Many of those eligible for the amount above will have come here from other countries to better their living standards. Whatever the aims of the single market it is not right that those exercising a choice to arrive here should be eligible for tax payer funded wage top ups. If their default earnings are insufficient they should not come. Choice is a marvellous gift.

    JSA costs a mere £7 billion out of the total benefits bill and offers little scope for reduction although it should only rise in line with the lower of wages or inflation and must be included in any figures claiming immigrants make a net contribtuion to the economy. £7 billion plus free health and £4K per child in school is a lot of tax to collect from our migrant workforce before they start making any contributions over and above tax credits received.

    Pensions evidently will only reduce by increasing the age of eligibility. Removing small payments from wealthy recipients would cost more to collect than they save and are merely punitive. This is another area that could be subject to tax.

    Housing benefit is an area of massive potential savings. A law forbidding eviction of jobless tenants until the end of their tenancy where they pay 50% of their rent would put the risk for housing costs back onto landlords and may take some of the heat out of the buy to let market. Government can then reduce housing benefit paid to the out of work by 50% instead of meeting the full cost. Additionally government should also pay landlords direct but charge a 10% premium for the removal of risk. No family on long term benefits requires more than three bedrooms. One for parent(s) one for girls and one for boys and nor does the provided housing need to be in an expensive area. Others move out of area in order to afford housing, those on benefits should not be protected from reality.

    The state should still offer help to those who really need it but the Atos tests (with appropriate appeals) will ensure the taxpayer only helps those most deserving.

    • uanime5
      Posted January 7, 2014 at 8:57 pm | Permalink

      These benefits should be subject to tax in the manner of earned income; our housing and other living costs are met out of taxed earnings.

      Unless you can convince landlords to accept less rent from those claiming housing benefit your tax plans aren’t viable.

      Many of those eligible for the amount above will have come here from other countries to better their living standards.

      Actually the evidence shows that most of the people eligible for this are from the UK as very few people from abroad claim benefits (mainly because they don’t know about them or don’t realise that they can claim benefits).

      Whatever the aims of the single market it is not right that those exercising a choice to arrive here should be eligible for tax payer funded wage top ups

      Why not? If they’re working then they’re also taxpayers.

      A law forbidding eviction of jobless tenants until the end of their tenancy where they pay 50% of their rent would put the risk for housing costs back onto landlords and may take some of the heat out of the buy to let market.

      Expect landlords to get around this by having very short tenancies or by refusing to house the unemployed. The end result will be more unemployed people being housed in bed and breakfasts, which will be more expensive for the taxpayer.

      Additionally government should also pay landlords direct but charge a 10% premium for the removal of risk.

      Firstly the government already does pay landlords directly.

      Secondly landlords won’t offer properties to the unemployed if they can get 10% more money from someone in employment. So expect more unemployed people being housed in bed and breakfasts, which will be more expensive for the taxpayer.

      No family on long term benefits requires more than three bedrooms. One for parent(s) one for girls and one for boys

      Well that’s contrary to the government’s guidelines that allows older children to have their own room. It also doesn’t take into account that families with a disabled relative often require extra rooms.

      nor does the provided housing need to be in an expensive area.

      It does if you want low paid workers to work in expensive areas. Most cleaners can’t afford to live or travel to Chelsea so they have to live there.

      The state should still offer help to those who really need it but the Atos tests (with appropriate appeals) will ensure the taxpayer only helps those most deserving.

      Given that two thirds of Atos appeals have been successful this test is clearly not suitable for determining who need help.

      • Narrow shoulders
        Posted January 8, 2014 at 1:56 pm | Permalink

        “Why not? If they’re working then they’re also taxpayers.”

        Fatuous response that did not address the crux of the matter

        Atos- I would rather claimants jump through hoops to avois one false claim you would rather pay everyone to avoid anyone deserving missing out. My way is more practical.

        Poorer workers can pay to travel just as I have to you do advocate equality for all.

        Private rental needs sorting out so legislating for longer leases would be a start.

        Government guidelines on older children need to change. My children will not get this luxury. Once again equality for all.

        How would you incentivise work without bankrupting company and country

        • Bazman
          Posted January 13, 2014 at 3:07 pm | Permalink

          Spending millions on pointless tests is not the right way and why would you do a job if almost all your wages where spent on travel? How would you pay the other bills? Private rental need sorting out by stopping buy to let landlords buying up council house to then rent them back to the council at inflated rates instead of building more social housing, as would having a decent wage instead of subsidising companies payrolls via the tax system. That would be a start.

  11. alan jutson
    Posted January 7, 2014 at 8:18 am | Permalink

    Just a simple question John.

    Why are some benefits tax free and others are not ?.

    Working tax credits are taxed I believe, as are all pension payments, but why not other State payments.

    If everyone has a personal tax free allowance, why is not all income above that allowance, including any benefits paid, taxed after this limit is passed ?.

    Yes I know its giving with the left hand and taking with the right hand, but why should some have a limit of £26,000 which is Tax free and others have just the Personal tax allowance, which is less than half of that.

    • Alan Wheatley
      Posted January 7, 2014 at 5:15 pm | Permalink

      A good point, Alan.

    • uanime5
      Posted January 7, 2014 at 8:59 pm | Permalink

      Alan you seem have ignored that those in work can also claim these tax free benefits you’re complaining about. Are you saying that an unemployed person shouldn’t have their housing benefit taxed but someone in work should?

      • alan jutson
        Posted January 8, 2014 at 11:04 am | Permalink

        Uni5

        Have not ignored anything.

        Simply asking why all income, benefits and earnings are not included as a total for tax against the standard personal tax allowance.
        That way we all work/live under the same taxation rules.

        If a Company paid its workers rent or housing costs, then they would be taxed under benfits in kind.

        So why is housing benefit tax free, and appears to be outside the taxation/earning/income rules?

        Have I got the rules wrong, happy to admit a mistake.

  12. Narrow shoulders
    Posted January 7, 2014 at 8:30 am | Permalink

    And of course child benefit for only two children who must be resident in this country

  13. Cheshire Girl
    Posted January 7, 2014 at 8:32 am | Permalink

    The thing that really bothers me is the plan to withdraw housing benefit from the under 25 s. If they have no family support and the council is under no obligation to house them, where can they turn? This could lead to many more homeless young people on the streets. It irks me also that the Government won’t consider cutting Foreign Aid at all. I’m not saying that we should abolish it altogether, but to increase it at a time like this is madness! Those promises were made when times were good. There is no shame in reviewing them now. In my opinion when the election comes people will not just vote on the economy but many other factors will come into play.

    • JoeSoap
      Posted January 7, 2014 at 1:18 pm | Permalink

      I guess they turn their hand to getting a job. The other option is a loan, as any student knows only too well when their parents can’t support their accommodation. Why do you support this discrimination pro- non-workers and against students?

      • Bazman
        Posted January 7, 2014 at 4:51 pm | Permalink

        A loan? Like from the TV? Many students need to get a job. What planet are you on? For many have children in their teenage years so 25 is quite far along. They are to live on loans too? Or what do you suggest!? All sound expensive to me like the massive rise in B&B costs to fulfil dogma. Maybe some sort of agency should be set up to chase absent fathers too…

        • Iain Gill
          Posted January 7, 2014 at 9:02 pm | Permalink

          student jobs dont exist in some parts of the country as there is already a massive oversupply of workers able to do those jobs.

    • Iain Gill
      Posted January 7, 2014 at 2:51 pm | Permalink

      I agree nobody in the final analysis should be expected to sleep on the streets (as sadly some seem to be at the moment).

      However teenagers and twenty somethings should not be getting free from the state better accommodation than a typical university halls of residence, and this goes for prisoners as much as those looking for work.

      I agree those coming out of a lifetime in care, or with a parent teminally ill or recently dead, do need extra help.

      And probably for those later in life the divorce laws should be changed so that men are not left destitute on divorce while the wife walks away with the family capital tied up in the house.

  14. alan jutson
    Posted January 7, 2014 at 8:38 am | Permalink

    Yes Benefits should be contribution based with a qualifying period.

    Society and expectations seems to have changed over the years, but with little thought of the cost.

    50 years ago the majority of young people did not move out of the family home until they could afford to rent or buy their own home.
    This usually happened (but not always) when getting married or forming a partnership, thus time in the family home enabled younger people to save up for a deposit or money for a car, furniture or other major expense, because they were living at less expense, even when making a contribution to the family home costs.

    Why do we now have a whole range of benefits which give people a home that they really cannot afford who have never worked.
    Whatever happened to some parental responsibility for your own offspring.

    Would certainly agree we do not want to keep people in an abusive environment, but are there that many evil parents around, that taxpayer support is required for their offspring, before they can realistically support themselves.

    Yes of course we need a safety net, what we do not need is a trampoline where people can just bounce up and down without any personal effort.

    • A different Simon
      Posted January 7, 2014 at 1:04 pm | Permalink

      Alan Jutson ,

      Only a minority of people earn enough to make a net positive effect to the tax/benefits system .

      Everyone else , whether in work or not , receives in one way or another more public services and assistance than they pay for – it’s just a question of degree .

      I can’t remember the exact earnings figure but seem to remember it was somewhere between £50,000 and £60,000 p.a.

      When I was growing up in Wallington near Croydon in the early 1970’s there was a wide variety of people down my street and most were owner occupiers .

      Most of them didn’t appear to work *that* hard and consequently they had time left over for their families and there was a community spirit which we seem to have lost .

      Fast forward to 2013 and the same type of people cannot afford to buy houses whether they are working or not . Three decades of land speculation has turned them into serfs .

      We should be asking why ordinary people have to pay out such a high proportion of their earnings on accommodation and who is benefiting from this state of affairs . It certainly isn’t the disenfranchised at the bottom .

      George Osborne is looking to treat the symptoms .

      No politician has the guts to confront the disease .

      • lifelogic
        Posted January 7, 2014 at 3:04 pm | Permalink

        More houses, relax planning rules, or have fewer people or have expensive houses.

        • Leslie Singleton
          Posted January 7, 2014 at 7:24 pm | Permalink

          lifelogic–Prefabs

        • alan jutson
          Posted January 7, 2014 at 8:00 pm | Permalink

          If more kids lived with their parents until married as in the past, it would relieve present housing (for which housing benefit is sometimes paid) for some families.

          Thus less pressure on the existing housing stock would take some pressure off of prices.

          But I certainly agree house building has fallen dramatically behind demand for decades, hence one of the the reasons why they are so expensive.

          The other solution seems so simple, stop more from coming here from outside, until the balance is right.
          We are after all one of the most densly populated Countries on this earth.

      • Jennifer A
        Posted January 7, 2014 at 5:12 pm | Permalink

        The major change took place between 1997 and 2014. House prices were perfectly affordable in Croydon before then.

      • Mark B
        Posted January 7, 2014 at 10:11 pm | Permalink

        Stamp Duty ! Or, to put it another way, a Tax upon the purchase of your home.

        Can someone here please explain to me the purpose of this tax ? What is its function ? What, by having this tax is the Government hoping to achieve ?

        My reasoning is this. Since Government is a clear beneficiary whenever a home is bought and sold, there is clearly a level of interest in the Government wanting house prices to keep rising.

        Example:

        If you buy a property for £10,000 and pay 2.5% stamp duty (tax) on it, the Government get £250. But, if the same property were sold to you for £100,000 then the Government get £2,500, but for what ? What has the Government actually done to earn this ? Were does it put the money ? Does the money get ring-fenced and used to provide Social Housing for those who cannot afford a home ? No, it just gets taken !

        Therefore I argue, that Government clearly has a ‘financial’ interest in higher and higher house prices. It is Government, of various hews that have encouraged this. Even our kind host has betrayed himself when talking about houses, not in terms of a home but, in terms on an ‘investment’. This is wrong !

        If Government had no stake in this I believe house prices in this country would be more normal.

        • A different Simon
          Posted January 9, 2014 at 9:06 am | Permalink

          Mark B ,

          Look at the relationship between the banks and the govt before the crash .

          All the time the Banks were paying the Govt taxes the Govt couldn’t give a fig where the money was coming from or about the systemic risk to main street .

          They went out of their way to avoid asking any questions .

          In essence all the banks were was a very greedy expensive tax collector , a pound for the Govt and a pound for them .

  15. M Davis
    Posted January 7, 2014 at 8:47 am | Permalink

    Talking of Pensions, I think that the Government should look into the fact that some people, who have left this Country many years ago, can claim a British Retirement Pension. Why should they be able to claim from this Country when they will be getting a Retirement Pension in the Country they have chosen to live in?

    I know people who worked for a few years in England after graduating and then emigrated about 25 years ago and who now have very well paid jobs. They have recently been told, officially, that they can claim a full British Pension when they retire.

  16. Richard1
    Posted January 7, 2014 at 8:55 am | Permalink

    Well with the UK at tax saturation at 38% tax/GDP and the Government still borrowing c. 7% of GDP there certainly need to be cuts. It is clear also that some tax rates are too high to maximize revenues so must be cut. So we need radical cuts, not gestures. Sensible moves would be means testing of all benefits, and preferably of free access to other public services such as healthcare. Politicians talk about those with the broadest shoulders carrying the burden. Well get rid of universal benefits. The quid pro quo should be a huge rise in the threshold for the 40p tax rate, a cut in CGT and abolition of the 45p rate and inheritance tax. Certainly there should be much tighter restrictions on immigrants collecting benefits and the cap on housing benefit should be enforced and in time reduced.

    There is a choice between prosperity and collectivist / egalitarian gestures. Let’s opt for prosperity, we’ll all be happier, except for a few carping leftists.

  17. Posted January 7, 2014 at 9:09 am | Permalink
    • uanime5
      Posted January 7, 2014 at 9:08 pm | Permalink

      Osborne already has and it’s been shown to at best have no effect and at worst make it harder for people to get paid employment. Perhaps the Conservatives should try something that’s been shown to actually help people get a job, rather than something that causes people to remain on welfare for longer.

    • John Hill & Co
      Posted January 8, 2014 at 1:23 am | Permalink

      I urge everyone to read the above paper from the Taypayers’ Alliance.

      A workfare scheme offers the prospect of big reductions in the number of benefit claimants. It would save big money and goes with the grain of public opinion.

  18. David in Kent
    Posted January 7, 2014 at 9:18 am | Permalink

    My cents-worth in response to your questions:
    I also think that benefits should be substantially contributary. I would say that we should not allow in people who are unable to demonstrate that they are able to support themselves for six months.
    As out-of-work benefits help to keep demand in the economy during a downturn and assuming they are contributary I would link them to inflation. All others not. The £26K limit should remain fixed even as average incomes increase.

  19. Posted January 7, 2014 at 9:29 am | Permalink

    1a. Child Benefit restricted to two Children only
    1b. Child Benefit payable for Children under the age of 5 only if they’re resident in the UK.
    1c. Child Benefit payable for Children over the age of 5 only if in UK State Education

    2. Free TV Licences and Bus Passes to be limited to those on other benefits.

    3. Housing Benefit not available for the under 25s.

    4. No Benefits whatsoever for anyone who has not paid NI contributions for 12 months.

    5a. End the ludicrous aim of sending so many inappropriate youngsters to University
    5b. Reduce Student loan costs by cutting most University courses to two years by :
    5c. Putting Universities on a disciplined normal business hours basis, 48 weeks a year.
    5d. Students to be encouraged to take courses related to their job prospects/aspirations

    6a. NHS no longer free at the point of use. Modest charges for GP and A & E visits
    6b. Full cost of attendance at A & E to be charged if caused by drunkenness.
    6c. Tiered treatment available via a voucher system to allow more patients to go private.

    7a. Education to be via a voucher to be used in either state and private schools.
    7b. Education vouchers to be available only after a min of 12months NI contributions.

    8a. State Pensions to rise only in line with the lower of wages or inflation.
    8b. Above restrictions to be jointly averaged over 3 years in arrears to remove anomalies.
    8c. State Pension limited to those with taxable income below, say, 4 x average earnings.
    8d. From some date in future, State Pensions must be transferred to being future funded
    so that recipients have paid for their own pension benefits.

    • uanime5
      Posted January 7, 2014 at 9:18 pm | Permalink

      3. Housing Benefit not available for the under 25s.

      So you want under 25’s to live with their parents even if this makes it harder for them to get a job?

      4. No Benefits whatsoever for anyone who has not paid NI contributions for 12 months.

      So that would mean anyone who has just left school won’t be able to claim benefits, even though there’s 1 million unemployed 16-24 year olds. Expect a huge number of them to turn to crime as a result of this idiocy.

      5b. Reduce Student loan costs by cutting most University courses to two years by :
      5c. Putting Universities on a disciplined normal business hours basis, 48 weeks a year.
      5d. Students to be encouraged to take courses related to their job prospects/aspirations

      How are university tutors and professors going to conduct the research that benefits the economy if they have to teach 48 weeks per year?

      Also how is encouraging student “to take courses related to their job prospects/aspirations” going to reduce how long they have to spend at university?

      6a. NHS no longer free at the point of use. Modest charges for GP and A & E visits

      So you want to charge people who get hit by a car for having to go to A&E. Expect this to be hugely unpopular.

      Also GP visits help diagnose medical conditions early, making them cheaper to treat. So if you want to save money you should be encouraging GP visits, not reducing them.

      6b. Full cost of attendance at A & E to be charged if caused by drunkenness.

      How are you going to prove this? Expensive court cases?

      7a. Education to be via a voucher to be used in either state and private schools.

      So you want the taxpayer to have to pay for children to attend private schools. Don’t expect this to be popular.

      7b. Education vouchers to be available only after a min of 12months NI contributions.

      So you’re going to deny the children of the unemployed access to education. Expect a lot of negative publicity and charges of human rights violations if any party ever tried this.

      8d. From some date in future, State Pensions must be transferred to being future funded
      so that recipients have paid for their own pension benefits.

      This will result in one generation having to pay twice for pensions (one for themselves and once for the previous generation). Don’t expect any party to get re-elected if they inflict this burden on the majority of the electorate.

      • JoeSoap
        Posted January 8, 2014 at 5:31 pm | Permalink

        Very weak arguments to a number of good ideas. if you want to keep things the way they are, why bother to read sites like this? They’re all about changing things for the better
        3. Housing Benefit not available for the under 25s.

        So you want under 25′s to live with their parents even if this makes it harder for them to get a job?
        Why should this make it harder to find a job? Most under 25s find work while living with parents. fact.

        4. No Benefits whatsoever for anyone who has not paid NI contributions for 12 months.

        So that would mean anyone who has just left school won’t be able to claim benefits, even though there’s 1 million unemployed 16-24 year olds. Expect a huge number of them to turn to crime as a result of this idiocy.

        What’s the problem? Students below 25 are given grants or loans depending on parental income. Why not offer the same for 16-24 year olds going into training, and guarantee them a training place.

        5b. Reduce Student loan costs by cutting most University courses to two years by :
        5c. Putting Universities on a disciplined normal business hours basis, 48 weeks a year.
        5d. Students to be encouraged to take courses related to their job prospects/aspirations

        How are university tutors and professors going to conduct the research that benefits the economy if they have to teach 48 weeks per year?
        They don’t teach 40 hours per week, do they?
        Also how is encouraging student “to take courses related to their job prospects/aspirations” going to reduce how long they have to spend at university?
        It isn’t but that misses the point.
        6a. NHS no longer free at the point of use. Modest charges for GP and A & E visits

        So you want to charge people who get hit by a car for having to go to A&E. Expect this to be hugely unpopular.
        By whom? The person hit by the car will likely pay the £10, and for others it has no relevance.

        Also GP visits help diagnose medical conditions early, making them cheaper to treat. So if you want to save money you should be encouraging GP visits, not reducing them.
        Indeed, a small charge would enable more GPs which would give them time for preventative care which they don’t have now.

        6b. Full cost of attendance at A & E to be charged if caused by drunkenness.

        How are you going to prove this? Expensive court cases?
        Breathalyser, you know like the police use?
        7a. Education to be via a voucher to be used in either state and private schools.

        So you want the taxpayer to have to pay for children to attend private schools. Don’t expect this to be popular.
        I think the standard of education is more important than the popularity with taxpayers.
        7b. Education vouchers to be available only after a min of 12months NI contributions.

        So you’re going to deny the children of the unemployed access to education. Expect a lot of negative publicity and charges of human rights violations if any party ever tried this.
        I don’t think this means the children of the unemployed.

        8d. From some date in future, State Pensions must be transferred to being future funded
        so that recipients have paid for their own pension benefits.

        This will result in one generation having to pay twice for pensions (one for themselves and once for the previous generation). Don’t expect any party to get re-elected if they inflict this burden on the majority of the electorate.

        Too much realism, eh?

  20. Graham
    Posted January 7, 2014 at 9:31 am | Permalink

    There should be no reduction to welfare until all the Foreign Aid budget has been cancelled.

    Once again no mention of that from GO – why?

    Graham

  21. Alan Wheatley
    Posted January 7, 2014 at 9:43 am | Permalink

    From what I heard, George Osborn was saying much the right sort of thing but at least three years too late. Learning on the job, it seems.

  22. David Holland
    Posted January 7, 2014 at 9:46 am | Permalink

    “The first is eligibility. I would still like to see a longer time period that a new migrant has to complete before qualifying for UK benefits.”
    What about refugees or EU citizens? In my experience (not complete) the only immigrants who claim benefits are EU citizens or refugees (in many cases completed bogus but they still got asylum.

    The first thing to do is to reduce the amount that single mums get to the EU average.
    They don’t starve in Spain on less money than here.

    • uanime5
      Posted January 7, 2014 at 9:19 pm | Permalink

      In Spain they have a huge black economy and economic problems. Perhaps we should copy an economy that isn’t having so many problems.

      • David
        Posted January 8, 2014 at 9:39 am | Permalink

        I don’t want to copy everything from Spain just the amount they give to single mums, less than here but it doesn’t kill them.

  23. Alan Wheatley
    Posted January 7, 2014 at 10:05 am | Permalink

    As to eligibility to British welfare, there must be a clear distinction between British citizens and everyone else. If you are British you are eligible. If not, then it depends. And there has to be the underlying assumption that we have control of our borders so the only people in Britain are those who we have said can be here.

    Eligibility to British welfare for the non-British probably will vary with circumstances, in particular the basis on which the person is in Britain. For instance, we might have reciprocal arrangements with other countries which would give fully eligibility. At the other extreme, those who have no legal entitlement to be here have no eligibility, and must leave.

    It seems sensible to have particular arrangements for some non-British categories, such as those attending a university. We could say that part of the deal is that they are eligible for the duration of their course, or we could say that part of the cost they have to pay to study here must include “welfare insurance”.

    Those here on work permits, and their families, could probably be looked at favourable, for the presumption is that if a work permit is issued then it has been decided that we are getting a worthwhile benefit from their presence.

    Tourists (those genuinely on holiday) are another category where it might make sense to be generous on eligibility.

    And so on.

    • A differeent Simon
      Posted January 7, 2014 at 2:41 pm | Permalink

      Alan Wheatley ,

      Why shouldn’t a valid travel insurance policy be a condition of visa-less entry ?

      The carrier which brings the person to the UK could be made responsible for confirming the validity of the insurance and a proportion of the costs if it subsequently turns out to be invalid .

      I’m not suggesting that the NHS attempt to claim if the cost of treatment is only in the hundreds rather than the thousands .

      Same for those on work permits – it’s their/their employers/sponsors responsibility .

      • uanime5
        Posted January 7, 2014 at 9:23 pm | Permalink

        Why shouldn’t a valid travel insurance policy be a condition of visa-less entry ?

        Most people who don’t have a visa can’t afford travel insurance.

        The carrier which brings the person to the UK could be made responsible for confirming the validity of the insurance and a proportion of the costs if it subsequently turns out to be invalid.

        That’s the responsibility of the airport or the dock, not the carrier. Also what happens if the immigrant stowed aboard a truck? Should the carrier still be liable? If so expect anyone who finds illegal immigrants to not turn them over to the police in order to avoid this fine.

    • A differeent Simon
      Posted January 7, 2014 at 2:53 pm | Permalink

      “for the presumption is that if a work permit is issued then it has been decided that we are getting a worthwhile benefit from their presence.”

      These people are here for the benefit of their sponsors only .

      Why should Britons subsidise cheap labour being brought in from abroad any more than they already do ?

      • Alan Wheatley
        Posted January 7, 2014 at 5:23 pm | Permalink

        In my vision of the future there are no work permits issued for cheap labour.

        My assumption is that the UK employer has made a case that the person is needed, and if that help the business to be profitable then there is a UK benefit from which we can all share.

    • Iain Gill
      Posted January 7, 2014 at 2:56 pm | Permalink

      Brits living here married to a foreigner who have paid significant amounts in tax would expect their spouse and children to be entiled to benefits if they die. The couple jointly will have paid more than enough into the system. And I dont think we should pressure spouses to adopt British nationality, they mostly do perfectly well here on indefinite leave to remain I see no reason to change that.

    • Iain Gill
      Posted January 7, 2014 at 2:59 pm | Permalink

      Re “Those here on work permits, and their families, could probably be looked at favourable, for the presumption is that if a work permit is issued then it has been decided that we are getting a worthwhile benefit from their presence.” this is a massive mistake. Currently work visa holders are generally not entitled to benefits (apart from free school places for their children and free NHS) and I see no reason to give them it UNLESS they are from a country that gives reciprocal perks to Brits. And I can tell you first hand that lots of work visas are uncapped and in skillls already in oversupply, especially ICT visas, they are simply here because they undercut native workers, so they need no encouragement to be here.

      • Alan Wheatley
        Posted January 7, 2014 at 5:25 pm | Permalink

        What you describe is a failure of the work permit scheme, not of the welfare benefits.

        • Iain Gill
          Posted January 7, 2014 at 6:54 pm | Permalink

          Work visa holders needing benefits are either not being paid enough or out of work. In either case they should go home. When I worked abroad I never expected to pick up perks from the local benefits system or indeed local permanent residency rights. If they are not being paid enough then tough on the employers they need to up their rates or no staff. If the project comes to an end they go home.

          • Alan Wheatley
            Posted January 8, 2014 at 8:05 pm | Permalink

            Agreed, the work permit scheme has to work properly.

  24. Alan Wheatley
    Posted January 7, 2014 at 10:14 am | Permalink

    As to the rate of increase in benefit, I too am not in favour of cutting the real value.

    By far and away the best method of cutting the cost of benefits is to reduce the number of people claiming.

    If much of the energy being expended on the case of improving the lives of those living on benefits were redirected to getting many of those people living happily off benefits, then we would all be much better off.

  25. Iain Gill
    Posted January 7, 2014 at 10:15 am | Permalink

    Well the first thing to say is a good way to reduce the benefits bill is to get more people off benefits. There is much scope to improve things here, I am not thinking of the IDS carrot and stick approach, or should I say stick approach, I am thinking of things like the way the state manipulates housing. So, for instance, I would like to see people empowered to move away from social housing estates where there is no longer a nearby jobs market, not top down command and control telling them to do it, simply allow them to keep their housing subsidy while moving area perhaps into another sector of housing. I would like to see employers have incentives to hire, train, and retain those entitled to be here long term, rather than the current situation where there are lots of tax perks for using workers here on work visas or offshore and other bias in the system against hiring local workers.

    The second thing to say is that the system needs to be set-up understanding human nature. It needs to encourage and reward good behaviours, and not encourage bad behaviour, even when this means some people will get more than the floor level of benefits needed to simply allow them to exist. Only by encouraging good behaviours can you hope to move significant numbers off benefits long term. So for instance those who have worked and paid tax in this country (or the partner of someone who did) the majority of their adult life should be getting more money than those that have not. Those that are bringing up children who have been widowed should be looked after by the state significantly better. Those that want to study or train should be in at least a financially neutral position by doing so, not actively have their only possible means of financial support withdrawn. Those that self finance unemployment by depleting their savings should be in a better position than those that claim benefits from day one out of work. We should encourage people to save and have very high savings limits, so that folk are not prevented from claiming if they have significant savings.

    Obvious things need cutting, the “aid” budget… oh sorry you didn’t mention that. Free state school places and NHS to families here on visas without indefinite leave to remain (or married to a Brit in the 2 years before they become entitled to indefinite leave) who are from countries which do not offer British families equivalent benefits when they are in their home country should NOT be getting free school places or medical cover. If I have to pay medical insurance and for my childrens school places when in their country I see no reason they should be getting it free here.

    Onto bigger cuts, I think when benefits are assessed there is a case for taking a families entire net worth into account. So for instance equity in their house should be considered alongside savings when considering if they are entitled to benefits. So pay folk with house equity and no savings benefits but the state takes a cut of their housing equity to pay for it. This would transform one of the big state housing manipulations and have lots of benefits, helping keep house prices more sensible. I however do not support this kind of activity, i.e. taking away wealth in property from pensioners as goes on currently.

    Immigration here, and gaining indefinite leave to remain, should be a lot harder. And “in work” benefits should be radically curtailed amongst recent immigrants as often it is just helping them undercut local workers. We should ramp up the points based system and only allow workers in where there is a genuine shortage of their skill, and not allow multiple backdoors like ICT visas.
    Those gaining indefinite leave in many categories, such as simply for working here a while, should be expected to pay the back payments of social contributions they would have made if they had been here their entire life. Folk coming here late in life having never paid into our system, going onto get a wide range of benefits in their old age here, are a disproportionate drain on our resources, and my view is we actually encourage it too much, this should be reversed except in cases where reciprocal arrangements are in place with their home country.

    Those gaining indefinite leave to remain, or its practical equivalent, by entering on one of the visas granted by virtue of great wealth should be taxed more for the privilege. I think it’s a fantasy that this country gains by some of these folk coming here, in many cases when you see the transaction in the round the UK is at a net loss, we need to reverse this.

    I would go further and turn all benefits into a negative tax allowance, ie the tax authorities pay you if you dont earn, and manipulate the payments with tax allowance changes. This could be a massive simplification of the system and bring big savings if done properly, those savings would help a lot.

    Benefits (like wages to state employees) are too high in some parts of the country, and too low in others. The state needs to recognise the regional variation in cost of living.

    Etc

    Good luck

  26. ian wragg
    Posted January 7, 2014 at 10:21 am | Permalink

    No-one is going to take your government seriously when you continue to borrow to waste on overseas aid.
    Daily we see examples of countries who should never receive a penny being given money which will have to be repaid by our children and grandchildren.
    Argentina, China, India, Pakistan and a host of African failed states.
    We also see that we are contributing extra to the monstrous EU for overspends of their budget despite Cameroons assurance that spending had been reduced.
    Tackle the low handing fruit first and maybe, just maybe some people will listen to your message.

  27. Paul Wessel
    Posted January 7, 2014 at 10:28 am | Permalink

    May I suggest 3 cuts?

    1. End all child benefit – no other species on Earth needs to be ‘bribed to breed’

    2. Limit the total time over which tax-payer funded benefits can be paid to any one individual to the time that same individual has paid NI. that effectively ends all welfare payments to NEETs and also to new migrants, so reducing the number of economic migrants coming to the UK and meaning an end to the ‘get a baby, get a flat’ unloved teenager mentality.

    An added incentive would be to cease any additional payments to claimants made as a result of any additional children they may have after going on benefits – so having children as a way to get a bigger home ends: either you cope with the home and income you have – of the children go into foster-care until you CAN cope.

    3. It’s a damning indictment of ALL governments since 1950 or so that they have failed to index the State Pension Age to rising life expectancy. The latter has been rising in a linear way since as far back as 1840 (that IS the right date!) at around 3months/year, such that the 65 OAP of 1945 is now the equivalent of an 88 yo.

    So, the correct State Pension Age today should be 88 – and rising steadily, to 90 by 2020(ish), and 100 by 2050 (or so).

    In addition, the idea that you are 100% employee on Friday and 100% OAP on the following Monday is obviously plain nuts, so the Pension should be phased in over a decade: 10% paid at 65, 20% at 66, 30% at…all the way to 1005 payable at 75.

    All on today’s retirement ages – I’d shift them up to 10% at 70 from 2016, rising to 100% at 80 by 2026 (for the same person) – with further rises in those ages as indicated above.

    The up-side is that the pension you DO get will then be far more generous – minimum wage (£13k pa) would seem to be a good starting point, though even more might be the GUARANTEED minimum income, for anyone with a private pension (ie everyone, once the new Pensions Act is fully implemented) would see that hand-out cut on a ‘1 for 2′ basis (£1 cut for every £2 of pension), with an immediate cessation of ALL pensions to those paying higher-rate tax (which should be implemented immediately)

    The end-game is to see the Personal Allowance raised to median Income levels (£27,000 pa today, fully transferable within marriage) in exchange for paying your own way for health, education and Soc Sec – all of which would be mandatory for all in work (as now) BUT you’d not be paying NI to HMRC, but directly to a (range of, all approved) PRIVATE suppliers of those same services.

    That’s essentially the optimum – the taxpayer picks up the bill for those on welfare, but the individual, choosing form a competitive market-place, pays their own way throughout their lives, leaving the State to pay for Tax-Collection, Law & Justice, and Defence. Only.

    HMG currently spends around £720 billion pa. Once that’s cut to under £400 billion pa, it’ll be at roughly the right size.

    • uanime5
      Posted January 7, 2014 at 9:36 pm | Permalink

      1. End all child benefit – no other species on Earth needs to be ‘bribed to breed’

      Expect an increase in child poverty and crime.

      2. Limit the total time over which tax-payer funded benefits can be paid to any one individual to the time that same individual has paid NI. that effectively ends all welfare payments to NEETs and also to new migrants, so reducing the number of economic migrants coming to the UK and meaning an end to the ‘get a baby, get a flat’ unloved teenager mentality.

      All that will do is punish the school leavers because they’ll have had no opportunity to work, thus won’t have paid NI, which by your logic would prevent them claiming benefits. Expect a huge rise in crime as that will be the only way they have to survive.

      All on today’s retirement ages – I’d shift them up to 10% at 70 from 2016, rising to 100% at 80 by 2026 (for the same person) – with further rises in those ages as indicated above.

      Don’t expect a party that does this to get re-elected. Also forcing people to work longer just reduces the number of jobs available to the young, which increases overall unemployment.

      The end-game is to see the Personal Allowance raised to median Income levels (£27,000 pa today, fully transferable within marriage) in exchange for paying your own way for health, education and Soc Sec – all of which would be mandatory for all in work (as now) BUT you’d not be paying NI to HMRC, but directly to a (range of, all approved) PRIVATE suppliers of those same services.

      That has no chance of ever working. The average person cannot afford to pay for their children’s education, any healthcare their family needs, and still have enough savings left over to survive if they lose their jobs. The US has shown exactly why forcing individuals to pay for their own healthcare doesn’t work, which is why Obamacare was so popular among those who couldn’t afford health insurance.

  28. Bill
    Posted January 7, 2014 at 10:30 am | Permalink

    This whole debate is concerned with money but we seem to have lost sight of the underlying rationale for benefits. In Victorian times there was a notion of the ‘deserving’ poor and the hard-hearted distribution of charity we see in Dickens. Then Lloyd-George came along and gave us the dole and there seems to have been a link between what you did for your country and what your country did for you. This was especially so once demobbed troops returned after 1918. Then we had the NHS which came out of the 1939-45 war as part of the post-war settlement. Now, I don’t know how we think about it. It just seems an ‘entitlement’ because… we cannot allow children to die in the street? What values lie behind the benefit system these days?

    • uanime5
      Posted January 7, 2014 at 9:38 pm | Permalink

      In Victorian times there was a notion of the ‘deserving’ poor and the hard-hearted distribution of charity we see in Dickens.

      Something Dickens condemned because this charity was completely inadequate.

      It just seems an ‘entitlement’ because… we cannot allow children to die in the street? What values lie behind the benefit system these days?

      The values that lie behind the benefit system are not allowing people to starve to death in one of the richest countries in the world simply for being poor.

  29. John Eustace
    Posted January 7, 2014 at 10:31 am | Permalink

    The Government meddles in the affairs of the lower paid to a ridiculous extent with tax allowances and a myriad of benefits that often bring perverse incentives. Stop meddling – take less tax off the low paid and pay less in benefits so they are rewarded for their hard work and efforts like everyone else.

    We have created a sub-class of long term welfare dependents and need to tackle that issue. These people are not benefiting from the increase in employment because employers favour hard-working and reliable Eastern European immigrants – and who can blame them.

    Benefits should go to those who genuinely cannot help themselves through sickness or disability.

    • uanime5
      Posted January 7, 2014 at 9:40 pm | Permalink

      Stop meddling – take less tax off the low paid and pay less in benefits so they are rewarded for their hard work and efforts like everyone else.

      As they get more in benefits than they pay in taxes all your plan will do is make hard work no longer pay.

      These people are not benefiting from the increase in employment because employers favour hard-working and reliable Eastern European immigrants – and who can blame them.

      You either give these people jobs or welfare; and if you don’t want to give them jobs stop complaining about them needing welfare.

  30. Mike Wilson
    Posted January 7, 2014 at 10:31 am | Permalink

    In a civilised society, everyone should have a roof over their head. Allowing banks to lend infinite amounts of made-up money into the housing market – inflating prices to very high levels – and then paying landlords who buy expensive properties housing benefit is, clearly, insane.

    Yet it is what the Labour government did and which this government is now making worse by way of its Help to Buy scheme – which, once again, is inflating the housing market.

    So, the answer is to BUILD MORE COUNCIL HOUSES. Never a popular choice with Tories.

    But, why is the government obsessed with the Welfare bill? What about all the money government wastes? Much of it identified by the Taxpayers’ Alliance. What about the layers of highly paid middle management in the NHS and Local Authorities? When are they going to be cut down to size? What about public sector pensions? Why are they sacrosanct? What about sickness and absenteeism in the public sector (SO much higher than in the private sector)? What about the QUANGOs? Largely untouched apart from a few that have been allegedly removed but which, in fact, have been merged into other QUANGOs? Strikes me the ONLY PEOPLE this government is targeting is the poor, ill and unemployed. By all means target the feckless – but there really aren’t enough of them to save 25 billion. If there are – this government and all previous ones should be held to account for the waste of money.

    What about cutting the number of MPs at Westminster – as promised? To provide a symbolic sign that ‘we are all in this together’.

    • Mike Wilson
      Posted January 7, 2014 at 10:33 am | Permalink

      And, while you’re at it, let’s stop packing even more lickspittles into the House of Lords to sign in for 5 minutes to get their £350 a day ‘expenses’.

  31. bigneil
    Posted January 7, 2014 at 10:32 am | Permalink

    any news from IDS on me working 45 yrs and getting nothing after a year of pittance – yet a (recently arrived ed) woman who will contribute NOTHING and getting £28k a year – – just for getting here – -bit of a vote loser isn’t it? – -anyone worked out what the cost of her and her family will be over her lifetime – -because I will GUARANTEE they never go back – -why should they when they get better living standards than anywhere else – and a relative fortune handed to them – -just for getting here. they will soon be driving their taxpayer/benefit funded BMWs out of the showroom while Cameron fiddles as we burn.

  32. John Barnby
    Posted January 7, 2014 at 10:47 am | Permalink

    Working Tax Credits are a way of subventing wages – employers need to pay an adequate or living wage. The taxpayer should not subsidise employers in this way. Similarly companies (names removed ed) should be required to pay a proper rate of tax and the tax dodges they play by cross charging stopped. If (tax avoiding companies ed) pulled out of the UK market local players would emerge to provide the services and would contribute tax revenues. These compaines should also lose their right to be treated as individuals – (name left out ed) Sorting this out before further benefit cuts is much more important.

    • uanime5
      Posted January 7, 2014 at 9:43 pm | Permalink

      Odd how the Government is so willing to cut the benefits of the poor but so unwilling to restrict the tax avoidance of wealthy individuals and companies. Cameron even opposed an EU law that would have prevented £7 billion of tax avoidance by companies every year.

      It seems that only people the Conservatives don’t like have to be punished, while the wealthy are pandered to.

      • Edward2
        Posted January 8, 2014 at 4:23 pm | Permalink

        “Cameron even opposed an EU law that would have prevented £7 billion of tax avoidance by companies every year”.

        Care to explain this allegation Uni?

        Or is it another of your made up stories.

  33. Bill
    Posted January 7, 2014 at 10:59 am | Permalink

    I guess that we now have one moral guideline in the public domain: those on benefit should not receive more than the average wage. That guideline is widely seen as fair. Thus we are attempting to apply a notion of justice to the benefits debate. This is better than a notion of ‘entitlement’.

    • uanime5
      Posted January 7, 2014 at 9:44 pm | Permalink

      I guess that we now have one moral guideline in the public domain: those on benefit should not receive more than the average wage.

      Does you average wage include all the money the average person can claim in benefits?

  34. Posted January 7, 2014 at 11:03 am | Permalink

    Where does one start? In my ideal world we would not have benefits as such. I would rather see a local hardship fund for those who are destitute.

    I guess that the BBC would not allow this and so, being more realistic, I think we should take up all of your suggestions John and, in particular stop benefits for adult offspring who are living at home with their parents.

    I know this may be hard to police or administer, but, as I said above, my preference would be to do away with most benefits.

    • uanime5
      Posted January 7, 2014 at 9:46 pm | Permalink

      In my ideal world we would not have benefits as such. I would rather see a local hardship fund for those who are destitute.

      We already have this for people who have been harmed by the Conservatives’ benefit sanctions. Though the Conservatives are planning to replace this with a loan, even though people are less likely to work if they’ll lose part of their income to repay a massive debt.

  35. Andy
    Posted January 7, 2014 at 11:14 am | Permalink

    I would still like to see a longer time period that a new migrant has to complete before qualifying for UK benefits.

    I can see no reason why the criteria should not be 16 years as a UK citizen as the basis for claiming any benefit.

  36. Leslie Singleton
    Posted January 7, 2014 at 11:16 am | Permalink

    The £26,000 free of tax is simply ridiculous and should be reduced forthwith. The population massively favour a big reduction. On the other hand, my good friends in Belgravia hardly need (magic word) free pus passes, for a start because not many of the very rich would take a bus, or even know how to, with no conductors to do it for them. Puzzles me why the Government should not realise that bus passes (and TV licences and Fuel Allowances) are unpopular, ares a bit of a joke amongst the rich themselves and give the left wing loonies gratuitous and accurate ammunition. The idea of a millionaire being influenced by losing such, to him, small change is barking mad. The Fuel Allowance is just one more thing screwing up his bank reconciliation and I would venture that most would be happy if this embarrassment went away.

    • JoeSoap
      Posted January 7, 2014 at 1:21 pm | Permalink

      It probably costs more to decide who should and shouldn’t get these passes etc. than to hand them out to all based on age. The fact that better off people don’t use them mean they cost nothing, surely?

      • Leslie Singleton
        Posted January 7, 2014 at 3:47 pm | Permalink

        Joe–So you think they pay for their TV Licence even though not billed for same, or give back (difficult to do, so I have read–no way to do under the system, which I can well believe) the automatically credited Fuel Allowance?? I doubt it. Granted that if they (mostly) don’t use the buses there is little cost, but even then some do, perhaps because they have accumulated their wealth by being thrifty or just (as once in my case) so they can boast about the adventure involved.

        • JoeSoap
          Posted January 7, 2014 at 5:18 pm | Permalink

          I think you are falling for the “tinkering at the edges” approach, when actually there are enormous issues such as under 25s being on the dole whilst 60+ year olds retirement ages are being delayed to pay for the u25s

          • Leslie Singleton
            Posted January 7, 2014 at 6:43 pm | Permalink

            Joe–Did I detect a slight change of emphasis there?

    • uanime5
      Posted January 7, 2014 at 9:48 pm | Permalink

      The £26,000 free of tax is simply ridiculous and should be reduced forthwith. The population massively favour a big reduction.

      How is reducing the benefits for those who work going to encourage people to work? Remember those who claim the most in benefits usually have a job.

  37. Man of Kent
    Posted January 7, 2014 at 11:17 am | Permalink

    Welfare expenditure is the biggest slice of our budget ,so must be first in the firing line to achieve some of the big savings necessary.

    The coalition have boxed themselves in by placing the NHS and overseas aid off limits.

    It would seem that a freeze on pensions and benefits is also a non-starter.

    Efforts to reduce the size of government and the number of civil servants had some early success but there is not much enthusiasm for any real progress this side of an election.

    The coalition came to power pledging to eliminate the deficit by 2015 .They limply gave up on that within a year.

    The future for deficit reduction does not look good particularly as the BBC and main stream media constantly push the line ‘public expenditure is good ,savings are bad’

    When did we last have an investigative BBC programme on ‘Are we getting value for money from the NHS /environment/energy policies ?’
    I cannot remember one .

    • Alan Wheatley
      Posted January 7, 2014 at 5:33 pm | Permalink

      Sensation at the BBC!

      Nigel Farage given the 8:10 slot on the Today Programme!!!!!!!

      • Iain Gill
        Posted January 7, 2014 at 6:58 pm | Permalink

        I was still staggered by the lack of knowledge of the facts about immigration in the bbc folk. Disagreement about the conclusions is one thing but simple lack of understanding of the factual reality in a state broadcaster is a bit off.

  38. boffin
    Posted January 7, 2014 at 11:30 am | Permalink

    £26k cap is far too high (save possibly in case of provision of new mobility aids).

    Individual unemployment benefit should be a (realistic) percentage of, say, the last five years’ UK tax+NIC paid, but automatically tapering by, say, 5% each week. This will enable most Jobcentre personnel, presently employed unproductively as benefit police, to receive well-deserved P45s.

    Breeding benefit should require a similar UK NIC qualification, but be tapered by, say, 40% for each successive child.

    • uanime5
      Posted January 7, 2014 at 9:51 pm | Permalink

      Individual unemployment benefit should be a (realistic) percentage of, say, the last five years’ UK tax+NIC paid, but automatically tapering by, say, 5% each week. This will enable most Jobcentre personnel, presently employed unproductively as benefit police, to receive well-deserved P45s.

      Of the 2.4 million unemployed people 1 million of them are aged 16-24. As they won’t have paid any tax while at school all your plan will do is punish the young for being young and increase the number of young people turning to crime.

  39. Timaction
    Posted January 7, 2014 at 11:43 am | Permalink

    Two areas that could solve the problem overnight.
    1. Stop foreign aid of £12 billion until we can afford it and then vastly reduce the amount given and its purpose.
    2. Withdraw from the EU and its £12 billion net costs. £120 billion lost Corporate taxes, £9billion administration costs, 400,000 fishing jobs and associated taxes etc. Just think, we could actually negotiate and sign our own trade deals with the rest of the world.
    Point two would secure our borders and immediately stop the issue of British people having to subsidise EU workers on minimum wages. Pizza chains and other multi nationals would have to pay living wages, perhaps to some of our 1 million unemployed young people.
    After 3 and a half years in office nothing of substance has been done to stop the international health service abuse with people from around the world flying into have their babies and other significant operations and health treatments at no charge. EU and non EU. I’m told this even happens with EU women so that we can apparently pay family allowances for life, wherever they live! This is common knowledge amongst our DWP people (Political correctness being alive and well) but unknown, as always, to our politicos!
    Its reassuring to know that a leading Polish Politician thinks its ok for us to keep paying family allowances to children (real or imagined) living in their country. Its also ok for us to be a net contributor and Poland a significant recipient of EU funds. Why don’t we just miss out the EU and give our taxes directly to Poland to build their roads and infrastructure? Our infrastructure is so brilliant we don’t need any investment.
    Someone said to me recently the Governments approach to immigration policy is like a fool trying to mop up water without having fixed the broken pipe. Is it incompetence or hidden policy to overwhelm us with sheer numbers?
    The Government should first look to stop the foreign expense and abuse of public service provision and then look to its own. But Europhile federalist LibLabCons don’t do patriotism.

  40. margaret brandreth-j
    Posted January 7, 2014 at 11:50 am | Permalink

    £26.000 is a good living wage and many employed would wish for that figure. It depends on what responsibilitis the individual families have and what the rates of renting are.
    We must also think about people who get high benefits and then disappear out of the country for half a year and stay in other continents. Is this fair that the benefits collected here allows them to take expensive travel in and out of the country , when people on considerably less than£26, 000 can’t even have a holiday and work hard every day.

  41. A different Simon
    Posted January 7, 2014 at 11:54 am | Permalink

    There is something distasteful about 1%ers like George Osborne trying to compensate for the consequences of rigging the system so far in their own favour by making the existence of the most vulnerable even more intolerable .

    Furthermore it won’t make a shred of difference to the economy .

    This is extremely bad form .

  42. Posted January 7, 2014 at 11:58 am | Permalink

    Benefits should be capped at the full time minimum wage level (or slightly below) so that work always pays.

    • A differeent Simon
      Posted January 7, 2014 at 3:04 pm | Permalink

      Most benefits recipients are in full time work .

      The problem is that accommodation is out of synch with wages .

      People forget that every mortgage is not only a liability for the householder but an asset for the lender .

      There is surely a positive feedback loop here for banks ; the more they lend the higher asset prices go the richer they get …. the more they lend ….

      Time to implement an annual location value tax to provide a negative feedback to push against above inflation rises in land prices .

      • Iain Gill
        Posted January 7, 2014 at 8:59 pm | Permalink

        worse than that there is a negative feedback loop for the government. if prices dropped to realistic levels, in line with other countries, then guess what… many banks balance sheets look very shakey.

  43. peter davies
    Posted January 7, 2014 at 12:05 pm | Permalink

    I think that given the issue we now have with EU migration in particular the benefits system is going to get further and further under pressure under its current delivery mechanism – I know the govt are reforming it but fear that they do not go anywhere near far enough.

    First of all to draw a line in the sand I think that ANYONE moving to the UK (Including the EU) should not be allowed to claim ANY out of work benefit or be entitled to any social housing for at least 5 years.

    I know that there are people who will scream at this statement but the fact is that parts of the UK already have longer housing waiting lists than there are social houses and there are huge pressures on many public service institutions now and it is only going to get worse – so anyone wishing to move to the UK (apart for genuine asylum claimants) must be able to prove that they are willing and able to support themselves before being allowed in full stop.

    To make the whole welfare system more sustainable going forward I think that it needs to transition over to a “contributory” one in that everyone who works should pay into some sort government approved unemployment insurance scheme to cover them if they are unlucky enough to lose their jobs (pay for it by getting rid of useless red tape and offer tax reductions as incentives) – I’ve seen this working in Canada very well so you are paying into your own pot should it be needed, same as with health care, it works in other countries so why not here?

    The bottom line is that we cant have our cake and eat it – if you want free movement like many of the left and EU supporters think is so great then you simply can’t sustain a free for all health and welfare system – the contributory system in my view can be the only way to deal with this.

    Anyone who wants to argue with me please don’t use the fact that UK residents can move to France, Spain analogy – those types of people tend to be able to support themselves when they move rather than rely on their host countries.

    On the £26k PA CAP – I personally think that in many parts of the UK this is probably far too generous (someone in work would need to earn over £35k PA to have the same net income so I think it should be set regionally according to the average net income for that area).

    In the South East this cap is probably not enough for many but may I ask if I am right in saying that unless you are ill or disabled you should not be out of work in the South East because there are presumably plenty of jobs out there in comparison to most other parts of the UK.

    As for increasing benefits – I have gone for years without having pay increases due to company issues, I’m afraid that is life – its a common issue in the private sector which you have to accept. Increases across the whole public sector should have some alignment to what is happening in the overall economy (apart from the real sick and disabled).

    • uanime5
      Posted January 7, 2014 at 10:18 pm | Permalink

      To make the whole welfare system more sustainable going forward I think that it needs to transition over to a “contributory” one in that everyone who works should pay into some sort government approved unemployment insurance scheme to cover them if they are unlucky enough to lose their jobs (pay for it by getting rid of useless red tape and offer tax reductions as incentives)

      I thought that’s what national insurance was for.

      I’ve seen this working in Canada very well so you are paying into your own pot should it be needed, same as with health care, it works in other countries so why not here?

      This will only work if the young are guaranteed jobs in order to give them an opportunity to pay into this system. Given the 1 million unemployed 16-24 year olds are unemployed this system is unlikely to work in the UK.

      On the £26k PA CAP – I personally think that in many parts of the UK this is probably far too generous (someone in work would need to earn over £35k PA to have the same net income so I think it should be set regionally according to the average net income for that area).

      You seem to have ignored that most low paid workers would also be able to claim £26k in benefits, so your £35K figure is wrong.

      In the South East this cap is probably not enough for many but may I ask if I am right in saying that unless you are ill or disabled you should not be out of work in the South East because there are presumably plenty of jobs out there in comparison to most other parts of the UK.

      You would be very wrong to assume this. Just because there are jobs doesn’t mean that an unemployed person will have the skills to do these jobs or the ability to get to them.

  44. Atlas
    Posted January 7, 2014 at 12:10 pm | Permalink

    John, perhaps you can provide some figures please?

    What percentage of the Welfare bill (excluding pensions) is taken up with “In Work” benefits? Also what is the sum involved.

    I am inclined to a return to a contributory system – except for those who are ill/incapacitated. Also, quite why young people cannot stay at home has puzzled me – if they did it would go some way to solving the ‘bedroom tax’ iniquities!

  45. Kenneth R Moore
    Posted January 7, 2014 at 12:44 pm | Permalink

    Prophet Redwood,

    JR “I am not myself in favour of cutting the real value of benefits”.
    God help us if even JR doesn’t believe the benefits are too generous and trap people in a spiral of dependency and hopelessness.

    Is this what the real John Redwood believes…or just a play to gain the vote of benefits claimants in his Wokingham constituency ?.

    Conservative politician uses the old I have an image of being wealthy therefore I will make a special effort to sound compassionate . Sorry JR we can see through this. Keep it real please as the Americans might say.

    Please explain why you think incentivising people to have large families and not look for work is good for them ?. Perhaps if Mr Redwood watched the Channel 4 series ‘Benefits Street’ he would see my point.

  46. Kenneth R Moore
    Posted January 7, 2014 at 1:02 pm | Permalink

    It’s impossible to have a debate about the Welfare state if no politician dare utter the truth that the real terms value of benefits needs to be reduced.’
    It’s one thing to give a dog a bone, quite another to take it back’.
    Somehow politicians like John Redwood need to speak the truth – we can’t afford the present welfare bill. Family credit should be scrapped and child benefit capped at the 2nd child for a start.

  47. Posted January 7, 2014 at 1:05 pm | Permalink

    Looking back at the days before state benefits when the parish had responsibility for the poor, there was a rule that the overseers used
    “No person in this parish shall get more in relief than the lowest paid working man”. They recognised, even in those days, that if you could get more by not working than by working, there was a strong incentive not to work. You also find in the overseers’ records that they often provided items to the poor, rather than money, the accounts showing items like “pair of working mans boots for xxxx”.
    Perhaps we should look back at the past, and whilst I wouldn’t like to bring back the workhouses, there are strong arguments for providing hostel type accommodation, particularly for single people.

  48. behindthefrogs
    Posted January 7, 2014 at 1:22 pm | Permalink

    All of the pensioner benefits should be made taxable. I would actually go further and replace the winter fuel allowance by a ten pounds a week increase in the old age pension for the winter months. There would e savings in the administration required for the winter allowance.

    Similarly I would replace the TV licence by a comparable increase in council tax for everyone this could be balanced by a cut in government grants to councils. There would be savings in administration costs and no need to chase people without a licence.

    Bus passes should be left alone as these are mainly used by the poorer pensioners and anyway help to take cars off the road for the better off. I am aware of a number of better off pensioners who have bus passes but they rarely use them compared with the almost daily use by poorer pensioners. However they should be taxed.

    I would also review the single occupancy rebate on council tax. This should be at a fixed rate for all bands probably set at the current band C rate.

  49. Posted January 7, 2014 at 1:23 pm | Permalink

    JR, Your first paragraph confuses economics with politics. If it’s appropriate to reduce the deficit “during the next parliament” (and that’s not necessarily the case) that can be done EITHER BY public spending cuts OR increased tax. I.e. any need to cut the deficit is not an argument for public spending cuts: it’s not an argument for a right wing agenda any more than it’s an argument for a left wing tax increasing agenda.

    As to whether the deficit will need cutting, that depends entirely on private sector confidence or buoyancy. If the private sector gets particularly uppity, far from it being necessary to cut the deficit, it might be necessary to abolish it altogether and run a SURPLUS (as Bill Clinton did during his reign).

    In short all assumptions as to what we’ll need to do with the deficit in 3, 4 or 5 years time are completely nonsensical.

  50. PeterT
    Posted January 7, 2014 at 1:29 pm | Permalink

    In my view there should be no benefits, period, so the only question in my mind is how benefit reductions are phased in giving current recipients enough time to adapt – so as to avoid a revolt. Making conditions for receiving benefits more restrictive for new claimants than its is for those already in the system (who can be dealt with in a more ad hoc manner) is effective, albeit unfair.

    Pensions are more difficult since most pensioners would argue that they have ‘invested’ in national insurance contributions and are only now getting their money back. Whilst this is true we should not take this entirely at face value and acknowledge the fact that many pensioners are receiving a lot more than they ever paid in, especially given improvements in longevity.

    • uanime5
      Posted January 7, 2014 at 10:22 pm | Permalink

      In my view there should be no benefits, period, so the only question in my mind is how benefit reductions are phased in giving current recipients enough time to adapt – so as to avoid a revolt.

      Unless you can give everyone a job expect a revolt.

      Making conditions for receiving benefits more restrictive for new claimants than its is for those already in the system (who can be dealt with in a more ad hoc manner) is effective, albeit unfair.

      That will cause a revolt among new claimants, including many people who are now unemployed after working all their lives.

      Whilst this is true we should not take this entirely at face value and acknowledge the fact that many pensioners are receiving a lot more than they ever paid in, especially given improvements in longevity.

      As over 65’s are more likely to vote don’t expect any political party to try and cut benefits this way.

  51. The PrangWizard
    Posted January 7, 2014 at 1:47 pm | Permalink

    I can understand why Mr Cameron wishes to protect pensioners’ incomes as he has indicated, and agree with him on that. And politically he wouldn’t want to risk being called a .75pence PM or similar. The State pension may be part of the welfare budget but I don’t see it as welfare, as it requires contributions, although this has been watered down too far. It must be made more strictly contributory and less easy to obtain in full.

    As for the qualifying period for new immigrants, it should be a least one year, three months is nothing much more than lip service. And on the £26,000 cap, this is far too high. I would be horrified if I heard anyone advocating an increase.

    That’s the present system, it must be pared down as much as can be, good luck to all who try, I am with you.

    As to general principle and the future, I favour a self-reliance approach, based upon contributions only. You don’t get out unless you have paid in. I would like to hear more politicians making the case. Some exceptions will need to be made for the sick for example, but not for the feckless and undeserving.

    A start could be made now for a new method to start at some long future date. Maybe with unemployment benefit, anyone can buy the right to the benefit. Anyone can contribute for anyone. So parents could start to buy units of unemployment pay for their children, these children could then take over if they wished.

    One day I will get round to working it all through in as much detail as I am capable of, but there needs to be change.

    • uanime5
      Posted January 7, 2014 at 10:24 pm | Permalink

      So parents could start to buy units of unemployment pay for their children, these children could then take over if they wished.

      How are parents in low wage jobs going to be able to afford units of unemployment for their children?

  52. David Hope
    Posted January 7, 2014 at 2:25 pm | Permalink

    We should certainly hit the EU budget and foreign aid as low hanging fruit.

    We should not touch defence anymore – this didn’t receive the gains of other departments during the Blair years yet has been cut back disproportionately since.

    The 26000 limit should be reduced – it still strikes me as high.

    Pensions need to be reduced, I don’t agree with the lock. It’s a tough one because people have paid in a long time and were told by politicians they’d be looked after. The reality is though that now we have many people working from say 18 or 21 to 60 to 65 but then claiming a pension from 60-65 to maybe 85 or 90. They also require very expensive health care. It strikes me that the contributions don’t equal the eventual costs. I suspect that the retirement age may need to go up still further (not including anyone who can’t work due to illness) with a smaller pension. This whole situation would have been helped had various governments not raided and damaged pension funds so much over recent years.

  53. Bert Young
    Posted January 7, 2014 at 2:29 pm | Permalink

    I agree with most of the responses today . The benefits that are received seem to be out of all proportion and need to be brought under more rigid control . Nigel Farage made the case in very simple terms today as far as the payouts to immigrants were concerned ; a five year wait before becoming eligible for a benefit would , at least , remove much of the likelihood of exploitation . There should be a ceiling ; I would put it below £26,000 ; £15 – £20,000 would be more realistic . We have become much to lenient in dolling out tax payer’s money ; we should certainly not be cited as ” the soft touch of Europe ” . George Osborne is absolutely right to come out with his ” reduce the deficit more ” speech at this stage of the election campaign ; appealing to the voters with ” give aways ” is a certain vote loser in my book . I also fully support the critics of our generous foreign aid programme ; Argentina should not feature on the list .

  54. Antisthenes
    Posted January 7, 2014 at 2:40 pm | Permalink

    To tackle a number of problems benefits should be on a contributory basis thereby making the UK less attractive to benefit immigrants and create an incentive for people to find work. Which would of course help David Cameron keep his promise on not allowing immigrants to come to the UK and milk the system and as far as I can see will satisfy Brussels. As it stands the promise is an empty one. The national insurance contributions should be itemised in to payments by employers and employees for pensions, unemployment benefits, healthcare and education. These would be top insurances as general taxation would also contribute to the costs. The private sector should gradually take over from the state the top up insurances which could be increased or decreased dependent on the available sustainable tax take. A safeguard would be that the very low paid would have some or all of their contributions paid for them by the taxpayer.

  55. Iain Gill
    Posted January 7, 2014 at 2:47 pm | Permalink

    Another thought, a very popular cut to benefits would be to use benefits to add some carrots and sticks to the repeat offender community. I wouldn’t mind a repeat offender, the typical character bringing misery to neighbourhoods, having their benefit dropped say 10 % until they can show some improvements. Mind not trivial speeding at 5 mph over the limit, or parking, before the anti car brigade jump on this bandwagon.

    • Bazman
      Posted January 7, 2014 at 4:55 pm | Permalink

      Many have drugs/alcohol problems and are illiterate. You intend to spend some money on this or just stop their benefits in some ludicrous hope that this will be deterrent?

      • Iain Gill
        Posted January 7, 2014 at 7:01 pm | Permalink

        I intend to sack the teachers in the school they went to.

        As for drugs I have some sympathy with the Russell Brand approach.

        • Bazman
          Posted January 7, 2014 at 9:04 pm | Permalink

          What makes you think they ever went to school sacking boy?

          • Iain Gill
            Posted January 8, 2014 at 9:58 am | Permalink

            I know plenty of individuals who went to school every day, listened to the teachers, and left at 16 unable to read or write properly. A lot of this is down to rubbish schools.

            Folk who are allowed to go through their school years without attending often give up because they can see their school is rubbish as per the previous sentence.

          • Bazman
            Posted January 8, 2014 at 6:31 pm | Permalink

            You fail to appreciate the problem to put it politely. The quality of the school will be insignificant to the quality of their home life and influences.

          • Iain Gill
            Posted January 9, 2014 at 11:11 am | Permalink

            Bazman,

            I do appreciate it. Sure home life is a challenge, and for many dysfunctional families it is a major impact on the children they bring up. Many of the worst families I would take the children off the families, and stick the children in boarding schools or similar rather than our poor care system. But there are seriously dysfunctional rich families too and their children are largely saved by the quality of the schools they use, a perk poor children should get too. And I repeat I know folk from perfectly decent families brought up in what I regard as a decent manner, who leave school with poor reading and writing, this my friend is a national scandal.

          • Bazman
            Posted January 9, 2014 at 9:13 pm | Permalink

            You would forcibly remove children from the parents by force? This as you say would not apply to the rich or middle classes. The massive cost and social injustice being born by the poor.
            They would just take this lying down along with no housing and no money. As if. You of course would.
            Maybe they could be put to useful work like in laundries or sent to do farming work in the colonies. Ram it.

      • alan jutson
        Posted January 7, 2014 at 8:14 pm | Permalink

        Baz

        Sadly you are right, they will be even more of a problem unless they are put in prison, but then we have a problem with too few prisons.

        I agree education is the key, but this must be supervised 24/7 for a long time before any chance of changing the habits of a lifetime, then of course they will need additional support when they return to society proper.

        • Iain Gill
          Posted January 7, 2014 at 9:22 pm | Permalink

          lots of low level criminals are managed in the community. while id love to see more of the worst locked up, we need to face the fact we cannot build enough prisons for all of them. those being managed in the community should be subject to financial carrots and sticks, they are still human and many of them will react to the incentives put in place.

          • Bazman
            Posted January 9, 2014 at 10:21 am | Permalink

            Will they react in the way you want or think they should? In reality you would like them all locked up or deported instead of tackling the causes no matter how much it cost. Maybe you will be next for this should you find yourself with problems?

  56. Denis Cooper
    Posted January 7, 2014 at 3:19 pm | Permalink

    The problem is that all this was being discussed here five years ago when the government was then having to borrow about a quarter of all the money it was spending, but so little progress has been made that the government is still having to borrow about a sixth of all the money it is spending.

    And apparently the government still thinks that mass immigration is part of the solution, when in fact it has been and continues to be a large part of the problem.

    • alan jutson
      Posted January 7, 2014 at 8:16 pm | Permalink

      Dennis

      Yes really makes you wonder who thinks these so called policies through.

      Clearly no one with any commonsense or knowledge of human nature.

      “Lessons will be learnt” but how many times do we need to repeat them !

  57. forthurst
    Posted January 7, 2014 at 3:21 pm | Permalink

    “So today I want to ask for your opinions on what more could and should be done to curb the ever rising welfare bill?”

    … whilst at the same time permitting a free flow of immigrants into the UK to drive down wages and compete with the idle not-so-poor for jobs.

    …whilst engineering a further house price bubble so that the cost of accomodation subsidised by the taxpayer is artificially increased.

    …whilst at the same time putting further upward pressure on house prices by allowing unlimited numbers of foreigners to come here and others to purchase properties as part of an investment portfolio.

    …whilst artificially increasing the cost of energy and thereby the benefits to purchase it.

    …whilst permitting employers to earn their profits by employing staff on low wages knowing that the taxpayer will fund the balance of the actual cost of employment (whilst at the same time allowing the employers to avoid paying any corporation tax on the profits earned through taxpayers subsidies.)

    …etc

  58. Brian Tomkinson
    Posted January 7, 2014 at 3:50 pm | Permalink

    Osborne is now talking about the “difficult choices” after the election but aren’t there 18 months to go before the election? What does he intend to do before leaving office – nothing? I will never forget that he promised to eliminate the structural deficit by 2015 and reneged on that promise.

  59. Lindsay McDougall
    Posted January 7, 2014 at 3:59 pm | Permalink

    I simply don’t accept that payments to the retired elderly should be ring fenced and I don’t think that you will succeed in your objectives until you recognise this.

    Fortunately, there is some low hanging fruit that can be gathered quickly:

    – Make all pensioner perks subject to income tax. That’s the winter fuel allowance and the ludicrous Xmas bonus and free TV licences. Replace concession fares by a taxable annual transport allowance. Eventually, all of these can then be consolidated into the pension.

    – Press on with plans to raise the retirement age.

    – Charge £10 per visit to a GP or an A&E department. This does not just apply to the elderly.

    It’s best if all this is started now, but at least obtain authority for changes in the 2015 manifesto.

    By the way, the triple lock is too generous and unaffordable. Everyone should remember that by 2030 the number of over 65s will be up by a third.

  60. Rods
    Posted January 7, 2014 at 4:23 pm | Permalink

    When there is a system there will always be a proportion that play it to their benefit and the detriment of society as a whole. This we are seeing where for a significant few it is a lifestyle choice and they will tailor their circumstances to maximise the amount they can get for nothing!

    1. Yes, the £26,000 cap is too high where it represents around £40,000 pre-tax income. It should be capped at an average wage after tax.

    2. Yes, there should be a minimum period where people have to pay into the system before they can draw from it, this should apply to the young and those from abroad coming to work in this country. I’m against an age limit for the young as the circumstances will be very different for somebody leaving school at 16 who is working and paying NI and taxes to somebody who has been in full time education, hence when you can claim should be contributory based.

    3. TV licences, bus passes and fuel allowances should be means tested even though it is penalising those that have probably contributed most into the system on the grounds of affordability.

    4. In cities where there is high unemployment for people to claim benefits their full time job should be looking for a job, so make 40 hour a week, job clubs, training courses and education compulsory for them to receive benefits. This would get those unemployed into a 40 hour a week working routine, help get them back into work and also remove the stigma of being the ‘lazy unemployed’. I appreciate there are cost implications for doing this, but there are also considerable long term benefits for the country and those that don’t have a job.

    4. We urgently need to start moving over to personal welfare account system, where we each build up funds over our working lifetime to cover hospital treatment, unemployment benefits and our pensions in much the same way as Hong Kong and Singapore do as our current pyramid system is unsustainable without an ever increasing workforce. With global birth rates going down and an ever increasing UK population density, this is not sustainable.

    I always judge people by what they do, not what they say, especially politicians, who all too often promise the earth and deliver nothing. In 2010 we were promised that 20% of balancing the government’s books would be through immediate tax rises and 80% though austerity. We know from work by OECD that every 0.5% tax rise as a percentage of GDP there is about a 1-1.5% drop in growth, so the last 3 years lack of growth is no surprise. We also know from the autumn statement taxes are continuing to rise in any area where the pips aren’t squeaking yet, with their £0.5bn CGT grab from property owners. They have done the easy bit of raising taxes, like virtually every other European state in a similar position has. So lets look at the austerity record we were promised. Government spending has gone up every year since 2010 and you know there is no serious intent with austerity when discretionary spending goes up in areas like overseas aid and wind farm subsidies. From what I can see the cuts that have been made to date are there to cover our ever increasing interest from the growing sovereign debts. The next £25bn of cuts will be mainly for just the same, where we have gone from pre-2007 where it cost £16bn to service our debts to about £5obn this year and by 2017-18, where according to the HM treasury 2013-14 report sovereign debts will have risen a further £353bn with an expected 3-4% interest rate for newly issued gilts, this gives an £11bn to £14bn further interest rise to pay, hence the need for further government cuts. This is a very poor record, from a weak government who have consistently shied away from the hard part, but they are in good company because most other European nations have done the same unless circumstances have forced them to. It is easier to kick the can down the road and leave the bill for our children, grandchildren and great grandchildren to pay.

    The only way to bring the deficit under is growth and with the EU green agenda trying to take us back to pre-industrialization at every turn with expensive energy and unrealistic and I suspect unfundable anti-pollution measures with 60mph motorway speed limits the latest turn of the green thumb screws. Those that live in the real world are finding basic living costs and taxes are taking an ever increasing portion of our earnings as a result. The EU is a club we can no longer afford to belong to with their direct funding costs and the further costs of their ever increasing, more onerous regulatory burden, most of which is totally irrelevant and unnecessary for the free trading of goods and services.

    • Iain Gill
      Posted January 7, 2014 at 7:08 pm | Permalink

      Re “there will always be a proportion that play it to their benefit and the detriment of society as a whole” where there is obvious widespread fraud, as there is in folk hiding savings using various means, to avoid means testing deciding they dont deserve benefits, then to help the decent majority not doing such fraud the rules need simplifying. This is one of the key reasons for me means testing puts the wrong incentives in the system.

    • uanime5
      Posted January 7, 2014 at 10:34 pm | Permalink

      1. Yes, the £26,000 cap is too high where it represents around £40,000 pre-tax income. It should be capped at an average wage after tax.

      You seem to have ignored that those in work are able to claim £26,000 in benefits, not just the unemployed.

      4. In cities where there is high unemployment for people to claim benefits their full time job should be looking for a job, so make 40 hour a week, job clubs, training courses and education compulsory for them to receive benefits.

      How exactly are any of these things going to help someone get a job in a place where there’s few jobs available? Especially if their problems aren’t lack of education.

      4. We urgently need to start moving over to personal welfare account system, where we each build up funds over our working lifetime to cover hospital treatment, unemployment benefits and our pensions in much the same way as Hong Kong and Singapore do as our current pyramid system is unsustainable without an ever increasing workforce.

      Care to explain how much the average person would have to earn a year to be able to afford this. If it’s more than the average wage then more than 50% of the population won’t be able to afford hospital treatment, unemployment benefits, or pensions.

  61. Jennifer A
    Posted January 7, 2014 at 5:05 pm | Permalink

    £26k = £35k gross for someone in work who has to pay tax.

    Try getting a job that pays that without serious training and responsibility.

    “Ah. But to get that money you must have lots of children.”

    What of workers who’d like to have lots of children ? They can’t afford to.

    • Jennifer A
      Posted January 7, 2014 at 9:17 pm | Permalink

      It seems that politicians feign not to know that this and other issues are wrong.

  62. ITF Tory
    Posted January 7, 2014 at 5:39 pm | Permalink

    £26k is too high. It’s linked to the average wage, which is stupid. It shouldn’t even be linked to the minimum wage. It should be BELOW the minimum wage, to ensure that working is always more beneficial than sponging.

    Protecting pensioners incomes, but nobody else’s, is idiotic. There should be no protected areas at all. If the police budget can be cut with no adverse effects on crime levels, then why not the health budget? The International Aid budget should be deleted entirely – let’s fix our own problems before giving away our hard-earned money to foreigners (and how much of UK aid actually ends up in the hands of despots and terrorists? At least some, I suspect).

    And eliminating the deficit in the next parliament? Osborne said initially that he’d eliminate it in this parliament, and he’s failed miserably. A pathetic performance.

    • Jennifer A
      Posted January 7, 2014 at 9:20 pm | Permalink

      ITF Tory: It isn’t linked to average wages. It is way above average wages which are taxed.

    • uanime5
      Posted January 7, 2014 at 10:37 pm | Permalink

      £26k is too high. It’s linked to the average wage, which is stupid. It shouldn’t even be linked to the minimum wage. It should be BELOW the minimum wage, to ensure that working is always more beneficial than sponging.

      Comparing how much the unemployed can claim in benefits to the amount you can earn while working for minimum wage, while ignoring that someone working for minimum wage could also claim £26K in benefits, is dishonest.

  63. Bill7718
    Posted January 7, 2014 at 5:42 pm | Permalink

    The following occurs to me

    1. Charge for ‘convenient’ GP appointments (ie before 8.30 am and after 5pm). Those in work will likely be able to afford the charges. Those not in work will be able to attend surgery when the rest of us are working.

    2. Require councils and other government agencies to recruit a percentage of their staff from the long term unemployed. These workers will be employed on long-term contracts (say 3 years) with an expectation that the contract will not be renewed. Give those workers some additional paid time off to attend training to allow them to get another job when their contract comes to an end.

    3. Engage in direct, aggressive (but legal) competition with private sector landlords who have tenants in receipt of housing benefit. The idea is to drive down the market rents in areas which have a lot of people claiming housing benefit. This will reduce the housing benefit bill.

    4. Reduce economic asylum applications by deporting all asylum seekers once their case has been decided.

    Those who are granted asylum are deported to another suitable ‘safe’ country. Those who are not are returned to their home country. Those who appeal are still deported to a suitable ‘safe’ country. Their case can then be re-considered by their new host.

    Agree to accept successful asylum applicants from other ‘safe’ countries in a reciprocal arrangement where they accept ours.

    • cornishstu
      Posted January 7, 2014 at 11:03 pm | Permalink

      Sorry Bill if I am in work and therefore paying into the system, why should I have to pay for an appointment outside of normal daily working hours. For those who work any distance from their GP it is not only an inconvenience but a disruption to their work so why should they be penalized for being in full time employment . Secondly as soon as you start applying criteria to whose employed you do not get the best person for the job just like saying we need to employ more people of this ethnicity or sex. Employment should be given to those who the employer feels will fill the vacancy to the best of their needs from the candidates applying.

  64. uanime5
    Posted January 7, 2014 at 5:43 pm | Permalink

    This leaves the Treasury with its aim of getting more of the reductions from welfare benefits having to do so by tackling non pensioner benefits.

    Given that the largest percentage of the welfare budget is the state pension what exactly are Conservatives planning to cut? It’s unlikely to be housing benefit because that would harm all those buy-to-let landlords.

    So today I want to ask for your opinions on what more could and should be done to curb the ever rising welfare bill?

    Well let’s examine the various parts of the welfare budget.

    Should we cut pensions? No because the over 65’s are the most likely to vote, thus any party that does this will lose the next election.

    Should we cut housing benefit? No because the current growth is due to rising house prices so anything that might reduce them will reduce growth. Also it’s paid to people who work in low paid jobs so reducing housing benefit for those in work will reduce the incentives for people to work.

    Should we cut tax credits? No because these benefits are only paid to people who are working in low paid jobs, so cutting them will reduce people’s incentives to work.

    Should we cut benefits to carers, the disabled, and the sick? No because the negative publicity would make this politically unviable.

    Should we cut benefits to job seekers? No because the government wants to encourage the unemployed to look for jobs, rather than starve or turn to crime.

    So no there aren’t any benefits the Conservatives can reduce without causing political problems.

    It has been going up by more than wages this Parliament, despite the fall in unemployment, as a result of upratings that have exceeded wage growth by a considerable margin, and by the continuing eligibility of a large number of people for various kinds of benefits.

    Well John this is happening for a few reasons:

    1) The ageing population is pushing up pension costs.

    2) The rise in house prices, which you keep praising, is pushing up housing benefit costs.

    3) Those finding jobs tend to be those who aren’t claiming benefits. This is why the number of long term unemployed people and unemployed youths keeps growing despite unemployment falling.

    4) The government keeps forcing people on pointless courses which have not only been shown not to help people find a job but in many cases have been shown to make them even less likely to get a job (examples are the Work Programme and Mandatory Work Activity).

    5) The government using programmes such as the Work Programme and Mandatory Work Activity to hide the number of people who are unemployed by declaring them in training or in work, respectively. So while this trick causes unemployment to fall benefit costs remain high.

    6) Cameron allowing more ITC so that companies can import more workers from abroad, reducing the number of jobs available for people from the UK.

    7) The lack of job created due to long term stagnation and public sector job cuts.

    8) As wages are falling in real terms more people are entitled to claim tax credits.

    In conclusion because the Conservatives have botched the economy and their welfare reforms are doing more harm than good the welfare bill has been constantly increasing.

    I would still like to see a longer time period that a new migrant has to complete before qualifying for UK benefits.

    What is the current period and how long do you want it to be increased to?

    The government can also consider what range of benefits should be available to young people. At what age or point in their lives should young people qualify for state financial and housing assistance to have a home of their own?

    How about as soon as they finish their education. You can’t expect young people to travel to where the jobs are if you don’t pay their housing benefit and job seeker’s allowance while they’re looking for a job. Expecting unemployed young people to live with their parent’s until they’re 25 just increases the likelihood of them becoming one of the long term unemployed.

    The government should be helping young unemployed people, not introducing more obstacles.

    The second issue is the rate of increase in benefits in payment. This government has upgraded benefits by inflation at a time when real wages were falling.

    They used to do this but because people complained it was reduced to below the rate of inflation. So in real terms the government cut benefits last year.

    Should benefits in future continue to be protected against inflation? I am not myself in favour of cutting the real value of benefits, but should there be any upper ceiling?

    Benefits should rise with inflation, as should the minimum wage, to give the government an incentive to manage the economy.

    Is a £26,000 cap fair, or is that too high?

    Given that someone working in a minimum wage job can claims £26,000 or more in benefits it’s clearly too low. Especially in areas where house prices are rising due to the government’s help to buy scheme.

    • Edward2
      Posted January 7, 2014 at 6:41 pm | Permalink

      Uni
      Wrong on many points as usual and no solutions other than ever higher taxes on the wealth creators followed by more State spending.
      But one item needs correcting.
      You say pensions won’t be cut but they have been already with increases in how old you have to be before qualifying and increases in the number of years you have to pay NI contributions to qualify for a full pension.

      • uanime5
        Posted January 7, 2014 at 10:50 pm | Permalink

        Wrong on many points as usual and no solutions other than ever higher taxes on the wealth creators followed by more State spending.

        I never claimed that in this post. I just pointed out that it will be difficult to cut welfare costs for a variety of reasons and explained why these costs are rising despite unemployment falling.

        You say pensions won’t be cut but they have been already with increases in how old you have to be before qualifying and increases in the number of years you have to pay NI contributions to qualify for a full pension.

        Technically this is only a cut if the higher age rate reduces the amount the average pensioner gets. If the average remains the same then overall there hasn’t been a cut.

        • Edward2
          Posted January 8, 2014 at 4:36 pm | Permalink

          But that is your implied solution to everything Uni
          Your master plan to cure all the problems the country has.
          More and more taxes on the wealth creating citizens and businesses (ie up towards the French levels) and then much more state spending and borrowing.

          Pensions, you are being pedantic Uni. Your state pension has already been delayed by several years from the original expectation of having the money at at 65.
          So for every year of delay you have lost out £6000.
          Females have fared even worse with their original pension age of 60 going up and up.
          If that isn’t a cut then I don’t know what is.

    • alan jutson
      Posted January 7, 2014 at 8:22 pm | Permalink

      Uni5

      So your proposed solution is exactly what ?.

      Tax more, or spend less ?

      The problem is at the moment we are spending more than we are getting in, and getting further into debt each year.

      • uanime5
        Posted January 7, 2014 at 10:54 pm | Permalink

        My solutions are to reduce house prices and housing benefit, stop replacing paid jobs with unemployed slave labour, don’t reduce the amount of time the unemployed have to look for jobs, and clamp down on tax avoidance.

        Osborne and IDS’s plans of trying to work or starve the unemployed to death are not going to help the UK’s economy recover.

        Reply Your immoderate language is becoming silly

        • Posted January 8, 2014 at 11:11 am | Permalink

          A better solution is for all leftwingers to pay double income tax.

          If you ‘care’ then put your money where your mouth is.

          You don’t need legislation – you can do it now – just pay up.

          Do it!

          • Edward2
            Posted January 8, 2014 at 8:06 pm | Permalink

            Its not something they would ever do Handbags

            They just want “the rich” to pay for it all.
            Problem they have is there just isn’t enough “rich” to pay for everything on their shopping list.

  65. Monza 71
    Posted January 7, 2014 at 5:46 pm | Permalink

    My Winter Fuel Allowance pays the road tax on my Ferrari

    Enough said………………….

    • Iain Gill
      Posted January 7, 2014 at 7:13 pm | Permalink

      Means testing does not work. For one it costs staggering amounts more for admin than simply handing out sums on simpler criteria. For two it results in widespread fraud with folk hiding their wealth. For three lots of decent people who need the money most will avoid the stigma and stress of claiming.

      • Denis Cooper
        Posted January 8, 2014 at 9:44 am | Permalink

        For four, it discourages honest people from saving and trying to provide for themselves, even if they are in a position to do so.

        • Iain Gill
          Posted January 8, 2014 at 7:21 pm | Permalink

          agreed

      • Posted January 8, 2014 at 2:08 pm | Permalink

        I agree with you, Iain.

        The whole tax system needs simplifying. The ludicrously complicated regime we have now cannot go on for much longer.

        If a flat tax is considered too radical, all the ancillary benefits like TV licences and Bus Passes need to be incorporated into a higher basic pension so that better off pensioners have the payments taxed.

        I’m not in favour or having such a high personal allowance that millions pay nothing in tax. That just creates an ever-larger group of voters who will always vote for any irresponsible party offering to spend more.

        Better to have a low starting rate of 10% so that most people make some contribution. I would remove all exemptions from Council Tax for the same reason. By all means deduct Council Tax at source from benefit payments but at least let the voters know exactly what services cost.

        Nothing is “Free” in the real world.

    • alan jutson
      Posted January 7, 2014 at 8:24 pm | Permalink

      Monza

      What sort of a Ferrari pays only £250 per year road tax, or do you only tax it for 6 months or less.

      • Monza 71
        Posted January 8, 2014 at 12:12 am | Permalink

        It’s only £280 pa anyway but I tax it for six months @ £154

        • alan jutson
          Posted January 8, 2014 at 11:18 am | Permalink

          Monza

          Thought you may have a classic, hence no road tax paid at all.

          I would rather no road tax at all, and higher charges put on fuel, then we get rid of the whole Road tax nonesense, and people pay per usage, for their choice of car, and road mileage.

          So simple, avoids fraud (non payment) and a load of selective complicated rates where low milage drivers pay more per mile than high usage drivers.

          • Bazman
            Posted January 8, 2014 at 6:34 pm | Permalink

            Add tolls and the plebs would be off the roads.

          • Monza 71
            Posted January 9, 2014 at 12:11 am | Permalink

            Sorry to disappoint you, Alan. Any Ferrari that is pre ’74 and hence road tax free would be way beyond my budget !

            I do have a 1968 MGC Roadster which costs only £170 to insure and has no road tax.

            Ferraris are not as expensive to run as people think. Servicing costs are high but if you buy the right model there should be no depreciation which is the biggest expense on a modern car. Full insurance for my 550 Maranello is under £500 pa and road tax £280.

            As for your point about higher fuel prices, France has exactly the same arrangement as you suggest but Brown put up fuel prices so much here that diesel, petrol and LPG are now all cheaper in France despite the lack of road tax. Of course they do have motorway road tolls but many people get by without using them at all.

            I had thought about registering the Ferrari at our house in the Limousin but car insurance in France is so expensive that there would be no saving at all ! As with a lot of things in the country, there is a lack of competition for one’s business.

            A return trip to the house ( it’s 400 miles from LeHavre ) costs a little under £27 in tolls but it’s worth it because the Autoroutes are pretty empty most of the time.

            Driving or riding a motorcycle in rural France is an absolute pleasure. Everyone should try it !

          • alan jutson
            Posted January 9, 2014 at 11:36 am | Permalink

            Baz

            “Road tolls”

            Completely the opposite

            I do not believe in road tolls when such huge amounts of tax are being taken by the government from present road users.
            It would only take a few pence per litre on fuel to compensate for the removal of road tax,

            Work out the amount needed on 10,000 miles per year at 30 MPG to make the tax neutral.

            Business already claims back the VAT element.

          • alan jutson
            Posted January 9, 2014 at 9:44 pm | Permalink

            Monza

            Absolutely agree driving in France more of a pleasure.

            Spent 4 weeks over there last year (rented Villa’s/Gites)

            Booked up three Gites again this year for another 4 weeks away.

            RN roads are perfectly ok if not on a strict time schedule, but if major distances are required in quick time, then the motorways tend to be much, much, less crowded than our own, and the surface of better quality.

            Agree, diesel especially, much cheaper in France.

            Unless you are in the center of major cities or on the Cote d’azure, no car parking fees in Towns because they want you to visit, stay, and spend without a time limit.

  66. Bazman
    Posted January 7, 2014 at 7:35 pm | Permalink

    We will of course be seeing a flood of posts complaining about the bias of Channel 4 News questioning benefit cuts, minimum wage and landlords?
    Maybe their could be some sort of compulsory purchase orders for owners who do not earn enough and live near expensive areas that are critical to the economy like Cambridge and London to provide affordable housing for wealth creators. Middle class exclusions of course. I’m not doing a lot at the moment and Cambridge is only about 45 minutes and I know many others in dead end jobs or unemployed. There must be scientists and engineers struggling to find accommodation around here. A sort of tax cut for the useful. Could be a vote winner…

  67. Cliff. Wokingham.
    Posted January 7, 2014 at 9:32 pm | Permalink

    I have read the above posts and cannot believe just what a nation of nasty, vindictive people we have become.
    It appears to me from the comments above, that we have a welfare state but, woe betide anyone that has to use it!

    The state and the media have done a great job in demonising the sick, elderly and the poor

    (para left out which makes a comparison with an extreme historical case ed)
    Many have stated that benefits are not taxable. I believe that Incapacity benefit, (or whatever it is called this week) Job Seeker’s Allowance and the state pension are all taxable in much the same way wages are.
    People that work and receive child benefit, housing benefit etc are not taxed on those top-up benefits.

    I think all you nasty, uncaring people should remember that one day you will be old or you may become sick or disabled and unable to work. At that point, life becomes hard enough without having to listen to politicians, the media and the general population thinking of even more ways to make life harder for you or to make you feel even less good about yourself. There is a general lack of empathy amongst our population and our political class.

    Growing up in the 1950s and 1960s, we were all told that our national insurance payments would give us a good pension when we retired, we were also told that as we got closer to the twenty-first century, we would have more leisure time and machines would do most of the industrial jobs for us. I now see some people above suggesting people should work into their late Eighties and beyond. I suggest you wait until you’re Sixty something and see if you still fancy another Twenty years of mundane work just to make ends meet; many of us had had enough by the time we were Sixty. As a retired psychiatric nurse, I would suggest I would be a liabilty on the ward at the age of Eighty Eight, should I live that long.
    Have we really made all the leaps forward in medical science just so we can all be corporate slaves for another Twenty plus years?

    We should remember that the vast majority of benefits are paid to people in work and thus, the working poor would suffer the most.
    State pension is something we have paid in for; it is the government that have run the giant Ponzi Scheme, something that is only legal for a government to do, a company would be prosecuted if they attempted to run some thing similar.

    We need to cut the size of the state (or states) and cut back on silly Tsars, champions, and commissioners. There must be a fortune sloshing around in public bodies overseeing other public bodies. I read today that Two regulators are investigating the Co op Bank; why do we need to fund Two, other than to create jobs for cosy club members?

    One minister did say something sensible today about buying British produce. I would go one step further and suggest we should re-introduce the “I’m Backing Britain” campaign which we had in the 1960s, assuming it isn’t illegal under the EUSSR’s rules and regulations. I accept it is also difficult to find British made products, but a campaign such as this would provide demand.

    I would also cut foreign aid until we have sorted our own country out.
    I would also give tax breaks to companies who train and employ British unemployed people and penalise those companies that recruit foreign labour just to keep wage costs down. This includes the NHS; let’s invest more in training our own nationals rather than stealing trained personnel from countries that have fewer nurses and doctors than ourselves and cannot afford to lose those they have.
    It is offensive that so many employers bring labour into this country whilst we have so many people unemployed. They need to pay a decent wage and have decent conditions if they expect people to do the work for them and they should not be able to keep wages artificially low by forcing taxpayers to subsidise their company through the benefit system. If the company cannot pay a decent wage to those who produce its product, then the business is not viable and should not be in business.

    Sorry John this is a bit long but it is an important and emotive subject and so many people are being manipulated by politicians and the media, last night’s Benefit Street was a prime example.

    • alan jutson
      Posted January 11, 2014 at 9:28 am | Permalink

      Cliff

      Agree with much of what you say, but do remember the State is spending more than it gets in with present taxation.

      So we have a choice, increase taxes, cut spending or do a bit of both.

      On Benefits, yes we should have a safety net, but it is not a safety net any more, its more like a trampoline where you can bounce up and down for ever it would seem, with little effort.
      If as suggested half of the population is on some sort of benefit (exclude State Pension), then clearly the system is wrong.
      If families have not worked for decades, but are fit to work, then again the system is wrong which allows it.

      On Pensions, yes the State pension requires contributions, yes the retirement age is set , but you cannot ignor longevity of life, because if the retirement age is kept at 65 then some peole would be taking pensions for 25 years, and the contribution amount simply does not cover that, unless it is raised massively.
      The error was not in raising the retirement age a little, say one year every 10 years from the outset.
      I would certainly agree that those who have done physical work, builders and the like, will have wrecked bodies before those who do not have such physical demands, and yes, your body does tell you when you have had enough, I know that well enough.

      The sad fact is no Government has wanted to face up to the truth for decades, all they have wanted to do is bribe us with our own money to gain power, by offering more than we could afford.

      Now we have to bite the bullet so to speak, because they did not carry out rather more minor corrections years ago.

      • Cliff. Wokingham.
        Posted January 11, 2014 at 7:32 pm | Permalink

        Thanks Alan for your reply.

        The state is indeed spending too much and needs to cut down on the amount it spends. Sadly, during the Blair/Brown years, spending was promoted as a good thing with spending and investing being interchangable although completely different things. I always thought the total amount spent, (or invested as Mr Brown would say) was not that important, rather the value for money was what mattered more to me.
        During the “good years” when receipts were up and there was a boom, our government should have started to put money aside for future pensions. The socialist government was just plain greedy and took more and more money from the people, including from those of us responsible enough to save for our own private pensions.

        I feel you are right that it will more than likely require a comination of cuts and increased taxation to get our nation back on an even keel however, I still feel there are a lot of savings to be made in reducing the size of the state. I am not talking about essential front line services, I am talking about layers and layers of managers and box tickers. I think a sensible government would actually perform a bonfire of the quangos and not create any more, sadly our PM promises one thing and does another. I have still not seen that great repeal bill our host, amongst others, was working on, appearing on the statute books.

        I do think it is sad that all of the great advances in medical science will only keep us at work for longer and longer. This, in my opinion, has lead to the high levels of youth unemployment in our country and, it is my belief, that once someone gets used to inactivity, it is hard to get them out to work, even if its for the first time.
        We need to get the economic climate right for businesses, supported by government, to create high quality, well paid jobs and the necessary training because, my grandchildren are likely to have to work for over fifty-five years before they qualify for their pensions and that is a long time to be stuck in dull, low paid, non stimulating jobs.

  68. They Work for Us?
    Posted January 8, 2014 at 12:10 am | Permalink

    Many of the problem people depicted on “Benefits Street” should be required to live rent free in a closely supervised hostel rather than pay housing benefit and give them an opportunity for them to spend it and build up rent arrears. Basic food like rice and beans could be provided at the hostel. Any other benefits should be paid in vouchers for exchange for permitted items such as basic clothing. Again No Money as such should be provided that can be misspent.
    The stark message would be that this as good as it gets, go out and get a job.

  69. dave/r
    Posted January 8, 2014 at 12:40 am | Permalink

    (not satire unfortunately – it’s the UK today!)

    The government bangs on all the time about the need for fiscal responsibility.

    But how fiscally responsible is it for the coalition to subsidise big banks with £37.7bn of taxpayers’ money every year while at the same time insisting it has to make £20bn of cuts to the NHS to balance the budget?

    Is it only me doing the maths here?

  70. Clive
    Posted January 8, 2014 at 12:28 pm | Permalink

    I have many thoughts, but will just leave one. As someone who is roughly half way through my working life I really do not agree that pensioners should be protected as much as they are (I understand the political reason – they are the people much more likely to vote). As pensions makes up by far the biggest slice of the welfare budget then just a small reduction in the annual increase (say to the average of the 3 elements in the triple lock, not the highest) I woudl imagine would make a significant difference. As as for benefits to the richer pensioners (winter fuel, bus passes) then, unless there is a good argument it costs more in admin vs savings, these are in my view not justifiable any more. I realise the savings there are small, but as much as anything else it’s the message that is sent to the people of my generation and younger.
    I suspect a higher housing supply vs demand would help control rents (and I say that as a landlord, albeit of just 1 property) and with that housing benefits cost.

  71. Posted January 9, 2014 at 12:10 am | Permalink

    “So today I want to ask for your opinions on what more could and should be done to curb the ever rising welfare bill?”

    I have a simple two step solution:

    1. look at what they do in Singapore;
    2. do that here.

    You could probably even save some more money by using their statutes as a basis for ours.

    • Posted January 11, 2014 at 9:06 pm | Permalink

      Well for a start the Singapore have a GNP to gvt debt ratio of over 100%

      Their record on democracy, human rights and is questionable to say the least. Singaporeans tend to have different attitudes to racial equality. You won’t find many non-Chinese ethnic people in the professions, or the officer ranks of the military or as pilots in Singapore Airlines!

      The government has pretty much direct control over every industry.

      So maybe you’d like to rethink that?

  72. petermartin2001
    Posted January 9, 2014 at 12:22 am | Permalink

    Mr Redwood,

    You ask ” So today I want to ask for your opinions on what more could and should be done to curb the ever rising welfare bill? ”

    I should say that an argument that a governments budget deficit isn’t the problem that conventional or neo-liberal economists make it out to be isn’t an argument for having ever greater numbers relying in welfare payments.

    The conventional way to look at the problem is to ask what it is all going to cost in $ or £ terms. A alternative way, and a much better way, is to look at the problem in terms of the resources which are consumed by welfare payments which would be better used elsewhere. In fact, we need to ask why a young person who is physically capable of working , who would probably be happier working, is paid for doing nothing. We need to ask why the available resource which is in their possession is allowed to go to waste.

    So the answer to your question would be do everything possible to organise the national economy in such a way to minimise reliance on welfare. Welfare should only be available to those who are physically or mentally incapable of making any economic contribution to society..

    Note that I didn’t say that everyone should work for their welfare cheque. I didn’t say that the taxpayer should pay the wages of supermarket employees and I didn’t say that people should work for below living wages.

  73. Holmes
    Posted January 9, 2014 at 10:59 am | Permalink

    People are obsessed with immigration and rightly so because it is destroying the social fabric of this country and people who talk about it are generally branded racist, however I see the problem of immigration as wholly linked to various issues with the Welfare system.

    If (a service business ed) must ask for 40,000 (migrants ed) to do full-time minimum wage jobs that says to me that the Benefits system is too high. If the annualised minimum wage was significantly higher than annualised benefits then people would have a stark choice. At the moment there is no choice, benefits are too high and unemployment remains high especially among NEETs who have been deluded into believing that society owes them a job.

    The second issue is ability to claim benefits, it is clearly wrong that people can come here and claim numerous benefits straight away. The Slovak Roma guy on the Nick Robinson documentary the other night had a better handle on the UK benefits system than me. This is crazy. The government also needs to go back to their planned attack on people who once they have had two children would not be subsidized for having any more. I would suggest that that number should be 1 child. etc ed

  • About John Redwood

    John Redwood has been the Member of Parliament for Wokingham since 1987. First attending Kent College, Canterbury, he graduated from Magdalen College, and has a DPhil from All Souls, Oxford. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.
  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page