Alex

The welfare state, the deficit and political ideology

Sally wrote an interesting post about child benefit cut whiners yesterday. You can read it on Whos the Mummy if you already haven’t. Any readers of my blog while know that I’ve commented repeatedly on the iniquity of the initial proposed cuts and the actual cut that was finally implemented. It’s arbitrary on many levels; it penalises single worker families, ignores regional cost of living variances and is generally really badly thought out and implemented. 

But reading the comments on Sally’s post, there seems to be some misconception that savings in child benefit from the governments proclaimed “rich” are a good thing because the money will be used to support the poorest who desperately need it.

The savings made, if there are any after the additional bureaucracy of administrating several hundred thousand additional tax returns, won’t benefit the poorest, (they’re as much the enemy of the government as they ever have been it seems) any left over “savings” will simply disappear into a black hole never to be seen again.

The whole concept of “spending cuts” is a PR myth you see- the rate of increase in government spending may occasionally slow down a little but it hasn’t fallen since this time of austerity started. In the year to September 2012, government spending increased by 3.7% and the deficit actually increased by almost £5bn. The last election was fought on a somewhat bizarre platform of deficit reduction strategies, and it’s become some sort of buzz word for “doing things right” ever since. 

Anyone who’s followed We are Spartacus will know benefit cuts generally are more of an idealogical attack on the welfare state by the Conservatives rather than anything to do with cost savings. If the government was interested in cost savings, they wouldn’t be spending £643m on initial design work for a replacement to the Cold War nuclear deterrent. An actual decision on whether to proceed with a replacement for Trident wont be made until 2016, so at best that will be £643m down the drain, at worst many billions spent on a deterrent for a world situation that ceased to exist a long time ago.

There are obviously issues with the child benefit payment system but it’s a matter of priority on what should be tackled first. Cycling on the pavement is illegal but we chose to go after “proper” criminals in preference to this, to give an example that will no doubt rile Mike ;)

Off the top of my head, this is a list of things the government should sort out before mucking about with child benefit:

  • corporate tax evasion that sees billions syphoned to tax havens rather than generating revenue for the government;
  • broken government systems that see billions written off from working family tax credits overpayments every year;
  •  IR35 issues with service companies that see individuals avoid PAYE and pay much less personal tax and national insurance than they properly should;
  • Personal tax evasion using offshore companies, life benefit trusts, etc, as popularised by Jimmy Carr
  • International Development Agency payments need to be investigated and reined in. For example we currently give over £300m a year in development aid to India. Indian spends $1.25bn a year on it’s space programme and continues to grow it’s economy during what’s perceived as a world downturn.

Maybe once they’ve made headway on those, they can start looking at means testing winter fuel payments to the elderly and child benefit to those who are “well off”. Yes, we can save a relative pittance by mucking about with child benefit but real substantial savings could be made if higher priority things were tackled first. Lets do those and then revisit child benefit with a saner, more logically thought out way of tackling it, rather than the mess that’s in situ. The way to sort this situation out and ensure the government has money to fund the welfare state isn’t tinkering with benefits, it’s to tackle the wholesale multi billion tax evasion by large multinationals. 

It’s unfortunate that the government doesn’t have the balls to do it though; it’s policies seem to be driven by sound-bite and PR spin. I have even seen cynics suggest that introducing the child benefit cap was initially mooted purely in order to win votes by abolishing it just prior to the next election. Far fetched? Who knows any more.
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