Wednesday, 17 December 2014

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.

Readers' comments (11)

  • F451

    You fail to point out that the Walton family owners of ASDA are each individuallly in the top 1% of the world's wealthiest, and if their joint wealth was pooled they would be by far the richest people on the planet!

    Once again the Demon Spin, inferring that Millions are getting an income equivalent to the average wage through benefit when the majority of workers do not even get an average income if work-benefits are added to their minimum wage. This dispicable behaviour by our politicians is not even opposed by the 'Opposition', but worse repeated by them.

    Time to take back the power we give to these extremists, and time to ask the residents up the mountain to stop slapping their pocket and start sharing some of the contents with the workers who are filling it.

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  • Joe Halewood

    Takign the transitional arrangements on faith (no pun intended) also shows that these were not includedd or indeed considered in the impact assessment that was disgracefully only released yesterday morning.

    The 75% or new HB claimants since the elction that are working - With Shapps plans to increase council rent by 41% and HA rent by 24% by 2015 (contained in draft impact assessment with RTB paper) we will of course see the need for these workign tenants to claim more in HB and of course see more working tenants needing to claim.

    Finally an interesting stat for the 76% who naively believe the government arguments on this. Welfare benefit bill is £192bn per year. The claimed £290m per year saving is a saving of 0.15% on that so the position is that 99.85% of it remains.

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  • I found David Cameron's appearance at ASDA disturbing. He is blatantly dishonest with his assessment of the problem and then appears to make a joke about the whole thing. There is something of the bully about this guy.

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  • mrkfm - he's one of many.

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  • Rick Campbell

    mrkfm -- Indeed so.

    Kevin -- Indeed so!

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  • F451

    It is not that unusual.

    The Bullingdon Club members boasted that they were destined to rule. Now they see that destiny fulfilled, there is nothing that they consider is beyond their bounds. It is their destiny. They are our bankers, they are our leaders, they are our captains of industry or have appointed them. Their will is not to be resisted. Their rule is to be unchallenged.

    Such unquestioning self belief is in itself a worrying aspect in a modern government, yet one with historical parallel that must be observed, learned from, and applied.

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  • Jules, please remember it is a vicious circle if Asda - the cheapest supermarket for 8 - 10 years I believe- where huge numbers of those on benefits go to do their shopping each week due to their consistently low prices, excellent range and high quality products were to increase the staff wages say by 20%, the prices of all the goods they sell would also need to increase, and that would be of severe detriment to the many shoppers on benefits, including those retired or disabled, who would not be able to afford to buy their needs for the week. In my two local asda stores, I have always found the staff to be happy and helpful, and their staff retention figures at ASDA exceed those of many retailers. Better to have a job than no job, better for those who have no choice other than to shop at the lowest priced supermarkets. ( NO I dont work for ASDA ! )

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  • Dare I also mention that the numerous bonuses , salaries , expenses paid to government employees and consultants at all levels, and of course the bankers bonuses and salaries of those banks that are virtually state owned also come out of the taxpayers pocket - and I would suggest there is far more government based monetary excesses than in ASDA and Wallmart - trusting you will not object to my minimal attempt to balance this article.

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  • F451

    Steve - have you ever considered that the low wages in retail require benefit on to in order to cover the cost of living, and definately to cover the cost of housing.

    The recent announcement of 7,500 jobs nationally between Asda and McDonalds is welcome employment - but hardly the alternative private sector jobs suggested for the 3/4Million public sector jobs now gone. It is adding pain to the tragedy to say to the university qualified back room manager that they should now stack shelves and become another of the long line of benefit dependents. Try talking to the middle age executives who have approached the retail sector only to be told they are over qualified for the roles and can not get an interview - even via the jobcentre mass recruitment sessions.

    Further, not wishing to knock retail, but they still are not producing anything, simply stacking and scanning things others have made.

    So the outcome of this desparate action is little saving to the taxpayer, and no extra growth from production. Worse, it is increasing the benefit bill not reducing it.

    If the taxpayer is not prepared to top up the wages of the poor and low paid then the customer will have to accept funding the higher pay required in order that benefit may decrease. The alternative is an entire section of society no longer able to afford to house themselves nor feed their families. Is that really what you see as positive?

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  • Jules Birch

    Fair point, Steve, I was only citing ASDA because that was where David Cameron made the speech. The point is not specific to them, or supermarkets, or retail in general but a deeper one about the growth in housing benefit for people in work because wages are too low and rents too high.

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  • F451, yes I worked for many years in retail, agree retail doesnt produce but it still needs to be done. Jules - fair play for responding, the countrys economic circumstances will determine wages for many years to come they will remain low for 95% of employees, and clearly all these council housing stock transfers to HAs which is then resulting in huge increases in housing rents as the new privaye owners seek to make as much profit as they can, albeit to re invest in more housing stock, but of course that results in more housing benefit claims - as read elsewhere in inside housing. The bigger issue is that my HA now deliberately rents out a higher % of properties to those who will not claim HB at the time of letting, leaving those in hostels, bed & breakfast or on the street homeless without a property for longer. I also note the rents now being charged by them on new lets is virtually the same as private rents through an agency. However my HAs chief exec and MD are living the ' life of the bankers ' both receiving well over 100k each, nice cars etc etc, and who pays for their huge luxurious offices ??

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