Friday, July 30, 2010

Government still clueless on welfare

The government claimed to announce "The biggest overhaul of the country's now-''antiquated'' benefits system in decades" today.

In reality, they released a report which notes that some think tanks have produced ideas for reforming benefits without saying which ones the government prefers, asks roughly the same questions as every other government consultation of the past decade on reforming the benefits system, and notes that it would be nice if the administration of the benefits system were more efficient.

Things which aren't mentioned include:

1. What the cost of the different proposals mentioned in the report would be.
2. What levels the benefits would be set at, and hence what the impact on poverty would be.
3. Anything about increasing the number of jobs.

Three ideas to reduce the deficit

Three ideas for how the government could save money without affecting frontline services or raising taxes:

1. Hire more tax inspectors.

A government report in 2008 calculated that cutting 600 staff saved £74 million in lower staff costs, but led to a loss of £204 million in tax. On average, each member of compliance staff has a tax yield of £640,000 after employment costs each year. There is over £20 billion in uncollected tax and £25 billion in tax evasion which tax inspectors could help to collect.

2. Introduce rent controls.

The government spends more than £20 billion on housing benefit payments, much of which goes to private landlords. If they reduced the rents that landlords were allowed to charge their tenants, then the housing benefit bill would be cut.

3. Stop paying private companies to harass cancer patients and wounded ex-soldiers.

The government pays a company called Atos healthcare to carry out medical assessments to see whether people are able to work. The more people that Atos healthcare assess as capable of work, the more money they get from the government.

However, up to 70% of their decisions get overturned at appeal, and every appeal costs the government extra money. If the government only paid Atos healthcare money when they got their assessments right, it would reduce the amount they paid the company, and save money on having fewer appeals.


Each of these policies also has other benefits. Hiring more tax inspectors would reduce unemployment and ensure that there are fewer tax dodgers. Rent controls would save tenants in the private rented sector money and help make sure people are better off in work than on benefits. And paying Atos healthcare money to do their job properly and assess people accurately would make life a lot less stressful for many sick and disabled people who have wrongly seen their benefits cut.

Thursday, July 29, 2010

What should Labour's economic policy be?

One of the first big challenges for Labour's next leader will be to set out their response to the Coalition's comprehensive spending review, and in the process define Labour's new economic policy.

Although this hasn't been a big feature of the leadership campaigns, it is possible to identify four main options which I've heard suggested:

1. The Blairite one set out by Pat McFadden. Continuing the economic policies set out by Alastair Darling and prioritising increased investment to increase economic growth while halving the deficit by cutting spending on public services, public sector pensions and welfare benefits by around £60 billion.

2. The Gordon Brown/Ed Balls strategy of maintaining higher levels of public spending on current priorities and reducing the deficit more slowly, aiming to stabilise levels of debt at c. 90% of GDP rather than 70%.

3. The leftie approach of massive cuts to targeted areas of spending such as defence and prisons, maintaining or expanding other areas of public spending, and raising income tax, corporation tax, capital gains tax, council tax, introducing new taxes such as a graduate tax and a mansion tax, while creating jobs through a Green New Deal.

4. Reject orthodox economics and the idea that the deficit is a problem entirely, and argue for an alternative based on an entirely new kind of political economy such as Modern Monetary Theory.


The leadership contest has been very good natured, but economic policy is where there is the potential for real divisions to arise within the Labour Party. The next leader needs to have a mandate from members for whichever economic policy they plan to pursue. The policy needs to be understood and backed by Labour's members and supporters, as well as credible and able to stand up to robust scrutiny. Not an easy task.

Wednesday, July 28, 2010

I would do anything for voting reform, but I won't do that

Things which the lib dems are prepared to do in order to get a referendum on voting reform:

Raise VAT
Cut housing benefit and increase homelessness
Cap immigration
Sack hundreds of thousands of public sector workers
Support Michael Gove's ideological experiment with schools

Things which the lib dems are not prepared to do in order to get a referendum on voting reform:

Hold two separate votes, one on the Tory plans to gerrymander the constituency boundaries, and one on whether or not to have a referendum on voting reform

Friday, July 23, 2010

How to win the referendum on voting reform

The campaign in favour of the alternative vote is looking for ideas to promote the campaign and persuade people to vote for voting reform in the referendum next May.

Their current message is to call for 'fair votes' to change the 'broken system' and elect a Parliament that really represents us. Similarly, opponents of reform are trying to tap into the same anti-politics mood by claiming that voting to change the electoral system will mean that the government is decided by dodgy backroom deals between politicians, rather than in democratic elections, that it is a waste of money to be fiddling around with the voting system, and that you will have to pay more taxes. They will also note the fact that it will give more power to Nick Clegg.

I don't think electoral reformers can win a campaign where both sides compete in doing anti-politics campaigning and trying to appeal to voters who hate politicians, but where the No campaign has lots more money and media support to get their message out and the Yes campaign is led by Nick Clegg. The Yes campaign also has a problem that there is a mismatch between what it says the problem is (out of touch politicians, a broken Parliament, the need for fair votes) and their proposed solution (let people write 1, 2, 3 on their ballot paper rather than put a cross by their preferred candidate).

Instead, I think that the main argument of the Yes campaign should be that the Tories want people to vote No to electoral reform, and therefore you hate the Tories or have been affected by any of their cuts, then you should vote Yes. It shouldn't be hard to come up with a poster campaign and other communications to support this simple and effective message.

Approximately 80% of people in Scotland and Wales hate the Tories, and people in these areas will be going along to vote for their parliamentary elections on the same day, so if you can get them to put a vote in for electoral reform while they are at the polling station for their main business, plus people in other parts of the country who hate the Tories, plus people who are really passionate about changing the voting system, you get a coalition of support which probably outnumbers people in places like Surrey who go along to vote No because they read in the Daily Telegraph that the alternative vote is part of the plan to make Britain part of a European Super State.

I appreciate that it would be difficult for Nick Clegg and the Lib Dems to front a campaign which is built around slagging off their new Tory chums, but I regard this as a positive feature of the campaign strategy, not a problem.

Thursday, July 22, 2010

Taxpayer's Alliance: cut benefits for the poor, more benefits for the rich

The Taxpayer's Alliance have a new report out about how to reform welfare. They claim to have spent a lot of time on the report, and it includes detailed calculations for things like the computation of negative income tax (if rG – T >= 0, then N = M – rG + T and so on). It is an attempt to simplify the benefits system and improve financial incentives for people to take a job, while reducing the overall cost of the system.

The way that it seeks to do this is by making lots of middle and lower income taxpayers considerably worse off. There are pages of pseudo-scientific gibberish and hand waving designed to obscure this point, but the report couldn't find any space to set out, for example, how many people would see their income reduced or by how much under their plans. But using their figures, it is clear that very many families with children would see huge cuts in their income, as would anyone in an area where housing costs are high.

They are very keen to claim that one problem of the welfare system is that it looks at relative poverty (defined as 60% of the median earnings), and that instead we should look at measures of absolute poverty. For all the work they put into their research, however, they didn't realise that the Joseph Rowntree Foundation has already done a lot of this work, developing a "minimum income standard based on what people said is needed to achieve an acceptable standard of living in Britain today". Instead, the Taxpayer's Alliance use examples about how to measure absolute poverty taken from America. (It is worth noting that more taxpayers were involved in the Joseph Rowntree Foundation's research than in this or most other pieces of Taxpayer's Alliance research).

When the Joseph Rowntree Foundation asked people how much people in Britain needed to have an acceptable standard of living, the people came up with an amount which is far higher than the amount that the four (wealthy) authors of the Taxpayer's Alliance report think is enough for millions of people to live on.

Just one small example of the principles underlying the Taxpayer's Alliance proposals to reform welfare. They appear unconcerned with the problems caused by slashing support for families with children, or making people homeless when they can no longer pay the rent. But they are very concerned about the lack of support from the welfare state for people who have assets over £16,000, and propose to scrap asset tests which reduce benefit payments for people who have lots of money saved.

So someone who has tens of thousands of pounds in the bank and who owns one or more homes will be entitled to receive more than £6,000 through their "negative income tax", the same as someone who is out of work and who doesn't have a penny in savings. And if you think that is fair, you are probably rich enough to be one of the tiny number of people who the Taxpayer's Alliance actually speaks for.

Thursday, July 15, 2010

Building the Big Society in Croydon

Nice to see Tory councillors doing their bit to help build the Big Society in Croydon:

"Last night, Croydon Council ratified a 66 per cent drop in funding for the voluntary sector over the next four years at a town hall meeting.

There were scenes of anger outside as more than 120 volunteers protested against the swingeing cuts.

Out of 47 organisations previously funded through the Council’s corporate funding budget only six will get £625,000 worth of council grants through the Stronger Community fund which has replaced it.

Councillor Vidhi Mohan, cabinet member for communities, told the meeting: “This is a radical new approach to the council relationship with the voluntary sector.

“We have been consulting with the voluntary sector for the past few years on this.”"

Tuesday, July 13, 2010

Spending challenge

Lib Dem Voice, 11th July:

"By asking the public for their ideas and recommendations for public sector cuts, the Coalition Government has intelligently put the Labour party in an uncomfortable place...what do Labour do? Join the coalition in developing a mature and non-partisan approach to the national crisis or side with the union paymasters? Either way, Labour is staring into the abyss."

Hmm. Spending public money on a website where people can suggest ideas for public sector cuts. What could possibly go wrong?

The Other Taxpayers' Alliance explains what happened next:

"The government's Spending Challenge website, launched on Friday, invites us to send our ideas for cuts. "A team has been put together right at the heart of government," claims the blurb on the homepage, "and their job is to make sure that your ideas and comments are taken seriously."

Which is deeply worrying, because for the most part the contributors to Spending Challenge give the impression that they have moved there directly from the Daily Express comments board. Many entries have little bearing on government doing "more for less" and instead reflect personal hobby-horses, like the ubiquitous "Bring Back Capital Punishment". Others are exercised by "benefit scroungers", such as the contributor who wants to sterilise young girls who "just breed at will".

One of the most popular tags is "immigration". Entries here tend to fall into one of two categories:

  • racist ranting written entirely in lower case

The former includes a post, "there is only one way to save money", which states:

"now i am not a racist person but this country has had problems since the early 60's we need to decrease the number of immergrants in the uk i walk dow the street only to see hundreds of illegal immergrants that cant even speak english and i mean polish and muslims mainly and most of themare working in our local shops and local call centres."


So it turns out that the Coalition government's idea of a "mature and non-partisan approach" to cutting public services is "wasting our money on providing another platform for racists on the internet".