Monday, 04 May 2015

Winners and losers

From: Inside edge

Who has most to celebrate from last night’s defeat for the government on welfare reform?

The obvious answer is families with children who, thanks to the bishops, Labour peers and a significant rebellion by Lib Dem peers in the Lords last night, will see their child benefit exempted from the £26,000 household benefit cap.

But anyone watching David Cameron’s PM Direct appearance in front of workers at ASDA on BBC News yesterday (watch from 4.35 in if you missed it) might come to a very different conclusion.

‘Are you happy that your taxes are going towards families where no-one is working and they’re earning more than £26,000 in benefits?’ Cameron asked them. ‘Is that fair? No. I don’t think it’s fair either and that’s why it’s right to have a welfare cap.’

Cameron was clearly loving the chance to talk to ‘hard-working families who do the right thing and pay their taxes’. He was comfortable in the knowledge that the cap has 76 per cent support in opinion polls and must also be loving the fact that his Lib Dem coalition partners are split down the middle and the Labour opposition are squirming with discomfort.

As Gary Gibbon put it on Channel 4 News, the defeat is more likely to have ministers ‘popping the champagne corks’ at another chance to demonstrate they are on the side of ‘fairness’ and ‘hard-working taxpayers’ than bemoaning a defeat that they look certain to reverse in the House of Commons.

I’m guessing that a majority of you reading this here, possibly more than 76 per cent, can see the problems with all of this. Not just the dozen that I blogged about yesterday but the very obvious one raised by David Cameron’s appearance.

Because the truth is that as a hard-working taxpayer myself I rather resent the fact that ASDA does not pay many (most?) of its staff enough to live on without receiving tax credits and housing benefit from the state.

The profits, dividends and top salaries of managers at its parent company Walmart are effectively subsidised out of my (and your) pockets. Meanwhile, should any of the 5,000 people who get the new jobs announced yesterday have their hours cut to less than 16 hours a week, they will be caught by the benefit cap.

By far the fairest way to deal with the cap would have been to exclude housing costs altogether. Housing benefit is already capped, after all. As Joe Halewood points out on his blog 75 per cent of the 170,000 new claimants since the election are in work. And that’s before you get to arguments about rent levels.

That’s not going to happen now. Instead we are left with a cap on income that is set at the level of the average take-home earnings of someone in work. That sounds simple but fair. But it does not reflect the extra income someone in work will get on top of that from tax credits, housing benefit and child benefit (an average of another £6,000 or so). And it does not cover everyone: there are exemptions from the cap for people on disability living allowance (DLA), war widows and widowers and people working more than 16 hours a week. Both the level and the scope of the cap are, in other words, subjective choices by the government not objective expressions of fairness.

Arguments like those were being put in the Lords yesterday but they have fallen on deaf ears among the electorate as a whole. The cap, which began life in a conference speech by George Osborne and was reportedly opposed even by Duncan Smith at first, has been a devastatingly effective political weapon that has enabled the government to portray itself as on the side of ‘fairness’ and completely wrong-footed the opposition.

That was summed up for me by the way that Duncan Smith was able to quote the support of a vicar yesterday. ‘Interestingly, I have just had an e-mail from a vicar, who wondered why the bishops fail to recognise that he is paid only £22,000 a year. He wonders why they are getting excited about £26,000 being a poverty-level figure.’ The vicar was, of course, conveniently ignoring the fact that his housing is paid for by his employer.

Attention now switches to the transitional arrangements for the cap and here at least there were enough signs of movement for Lord Best to withdraw his amendments on a 26-week grace period and an exemption for temporary accommodation costs pending further announcements from the minister.

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