Fail (epic, even)

“ineptness.” I don’t know if it’s a real word but – if it is – look up its meaning in a Picture Dictionary and you should see a photo of George Osborne.*

The welfare “reforms” that he presented today don’t make sense in any terms. But, specifically, as far as I can see, they make no sense in the “saving money” terms in which they are presented.

The Chancellor has announced a few unthought out welfare policies: cutting child benefit benefit to higher earners and capping welfare benefits paid to the sick and unemployed.

The child benefit cut is likely to be a smokescreen to distract attention from the latter and to present an image of us all being “in this together” – both rich and poor apparently having to put their hands in their pockets to pay for rescuing the banks. So far, so predictable.

But it’s the consequences of these half-arsed plans that are the most bizarre.

The media has already identified the clearest ones. A Channel 4 news blog points out that a couple each earning £40k will still get child benefit while a single earner on £45k will lose it. At the margin, a few pounds wage increase might cost someone thousands a year. On a BBC blog, it was pointed out that poor families with several children could be much harder hit by the benefit cap than those with few children.

But no one seems to have yet spotted that the whole reform nonsense runs directly against its supposed main purpose of saving money.

Universal benefits, such as family allowance, are actually much better at reaching the poorest people than are means-tested benefits. (Take up is close to 100%. Small sums are worth proportionately more to the poorest recipients so are of more benefit to them than to the better off. ) The fact that the very richest people also got child benefit was a small price to pay for this. It is dishonest for the defenders of this plan to spin it as making money available for the poor by taking it from the greedy middle classes.**

Alongside this, the admin costs of a universal benefit are minimal for both recipients and the state. To process a child benefit claim involved looking at a birth certificate and setting up 16 or so years of payments. That’s pretty well all the admin that a universal benefit needs.

Imagine what enormous admin costs will be involved in the projected scheme. Everybody who gets child benefit or lives with a child benefit recipient will also have to provide proofs of income for each of the 16 or so years.

People whose incomes vary dramatically from one month to the next or one year to the next will have to keep constantly updating the child benefit office with evidence. In particular, the self-employed and employees who change jobs frequently will spend lots of time collecting and submitting evidence and appealing decisions. Couples who separate or form new partnerships will have to keep updating the authorities.

This will require a bureaucratic army.

There are currently no mechanisms to collate income information with child benefits. A whole new adminstrative structure will need to be set up and maintained permanently.

(Civil servants facing job losses because of the coming cuts might find this quite cheering.)

Is it remotely likely that enough savings can be made by cutting the child benefit of a few parents to cover the costs of setting up a whole new bureaucratic infrastructure that serves no other purpose?

(Rhetorical question. The answer is “obviously not”)

The other plan – cutting back welfare benefits to the level of “average family income of 26k” – is equally ludicrous, although it will play better with the condem’s core constituency, whose newspapers tell them every day that people on benefits are better off than the average worker.

I am already confused. Is this £26k before or after tax? What is the “average” “family”? What is a “family” on benefits?

There must be a tiny number of people who get more than £26k a year in benefits. To achieve this £500 a week, benefit recipients would have to be mentally or physically disabled, have a fair few disabled children and maybe a seriously ill elderly relative or two – and probably live in a rented home in the south east. (If you doubt this, try looking at normal benefit rates.)

Could this money be saved by making disabled people or people with disabled kids homeless – refusing to pay for their housing? Hardly. Then the state really would have to kick in, assuming that we still have some claim to be a first world country. Which would be very much more expensive.

Laughing in the face of all the Tories’ “broken society”/”family” rhetoric, what would the adults in any 2 parent home that gets more than £26K a year in benefits do, when they face a cut back in their joint family benefits? Split up their household, obviously. One parent would move out, take a property and collect their own income. Which would be capped at 26k. Another £26K

So, it would be much better financially for reasonably well-paid parents to cut the amount of work they do, so that they don’t risk their earnings going over the cut-off point. It would be much better for the handful of people who get more-than-derisory welfare benefits to keep two homes at the taxpayer’s expense than one.

The Tories claim that they are going to cut public money, discourage idleness and strengthen the “family.”

The likely outcomes seem to be the exact opposite. Aren’t these “welfare reforms” going to involve paying out public money to reward idleness in the rich and to split up poor families?

* There are many other words that could be defined by a picture of George Osborne’s face. I am feeling too polite to list them. Plus, several of them might stop you being able to read this blog in work.
**If that was the real objective, surprisingly, it turns out that there is already a mechanism for redistribution. It’s called direct taxation.