Universal Credit

BigAunty

Spendless wrote: »

...I do know of some married women with husbands in lowish paid jobs who in the past haven't looked for work/have turned down work cos their tax credit has made it 'not worth me working'. Presumably from what you say UC will stop that?

It's not just married women (though I know someone who said precisely that, that tax credits meant she could be a stay at home mum even when her kids are in school) but lone parents, too, who aren't affected by the move from 16 to 24 hours to claim WTC like couples are.

My sister has a management/recruitment role and lone parents are the bane of her life for refusing all offers of overtime due to the steep withdrawal of benefits and getting clobbered by tax, so the customer service suffers.

A white paper authored by Iain Duncan-Smith contained various examples of just how restrictive tax credits could be, providing concrete facts. For example, a claimant who works x extra hours over the threshold may in fact earn the equivalent of a pound or two an hour because of the tax/benefit conflict.

gingergee

Basically people are going to be rewarded for working? is that not a good thing? How will PIP come into it? What if one person in a couple (or single even) cant work? x

BigAunty

gingergee wrote: »

Basically people are going to be rewarded for working? is that not a good thing? x

Yes, that's pretty much the main principle and driving force in implementing UC, to ensure that households are always better off in employment and ensure it's not possible to receive more in benefits than in employment.

That's why I've never been a fan of tax credits - they disguise true levels of unemployment, have broken work ethic because they've legitimised a work-life balance for many households which the hard working tax payers subsidise and they have erased the distinction in quality and standard of life between fully working versus part time and fully workless households.

Totally mental how a household of two adults have the capacity to work 10 days a week between them but the expectation set by the original WTC threshold is that they only had to work 20% of this capacity to gain it..What a low bar!

gingergee

Can see a lot of "new business" ventures cropping up all over in a month the way it is. x UC is the way forward x

Spendless

BigAunty wrote: »

It's not just married women (though I know someone who said precisely that, that tax credits meant she could be a stay at home mum even when her kids are in school) but lone parents, too, who aren't affected by the move from 16 to 24 hours to claim WTC like couples are.

My sister has a management/recruitment role and lone parents are the bane of her life for refusing all offers of overtime due to the steep withdrawal of benefits and getting clobbered by tax, so the customer service suffers.

A white paper authored by Iain Duncan-Smith contained various examples of just how restrictive tax credits could be, providing concrete facts. For example, a claimant who works x extra hours over the threshold may in fact earn the equivalent of a pound or two an hour because of the tax/benefit conflict.

I wasn't thinking about lone parents in my comment as they if not currently working are required to look for work once their child reaches a certain age (5? 7?).

I was thinking about the eg I know of someone whose husband works perm nights as a postie, a few years back she was offerred a p-time job in the school kitchens that her kids attended, which is a stone's throw from her house. She'd have had school hours, term-time and in the event of a child off sick her husband was at home during the day (albeit trying to sleep after a night shift, but it was certainly manageable). After speaking to tax credits she concluded that it 'wasn't worth it'. because of the loss of tax credits. I have come across this several times before.

The issue you speak of when people don't want to work more hours due to loss of tax credits i've come across too, but wouldn't say I've come across them more in lone parents, I've known couples in low paid jobs say same thing and last year the relief cleaner who was a bloke over 50 without kids was telling me how he'd refuse any more last minute cleaning jobs that he was asked about that week dueto the knock on effect.

HappyMJ

That isn't going to change someone earning more than the personal allowance would have to pay tax and national insurance and lose 65% of the remainder from their UC entitlement. For every £50 extra they earn they get to take home an extra £11.90 but out of that they need to pay for travel to/from work if any extra days are involved.

Sixer

I agree current withdrawal rates are madness. Up to 100% in the case of JSA. And about 76% (on nett income) in the case of tax credits.

I find it laughable that a 50% rate of income tax on a tiny number of people makes headlines for being a disincentive but an effective 76% on a huge number of people is regarded as evidence of scrounging or a workshy attitude.

But don't think UC will sort this out. IDS knows this too. The huge amounts of research undertaken by his foundation (from the right) and others such as Rowntree (from the left) all basically agree that incentive to work is best set at 55%. Anything more than that will simply preserve the status quo. UC's effective rate is 65%.

Hence, presumably, all the conditionality clauses, which, as bestpud noted, will likely have the unintended consequence of paralysing all the delivery systems.

I like the idea of UC. But the more I analyse the briefing notes and rhetoric coming out of DWP, the less effective I think it's going to be. IDS is sounding increasingly desperate, with all the rabble-rousing articles he keeps penning in the newspapers. Very different to the rhetoric coming from his think tank (and from IDS himself, before he became minister). We'll see what he says on the Politics Show today. If his tack is just more demonising instead of properly policy-based, I'll just worry even more.

HappyMJ

I thought UC's effective rate was to remain at 76% keeping the status quo.

i.e Earn an extra £100 pay tax of £20 pay NI of £12. Net £68 then lose £44.20 of UC to be better off by £23.80.

Sixer

HappyMJ wrote: »

I thought UC's effective rate was to remain at 76% keeping the status quo.

i.e Earn an extra £100 pay tax of £20 pay NI of £12. Net £68 then lose £44.20 of UC to be better off by £23.80.

No, 65%. IDS wanted 55%. Treasury said no and wanted to maintain 76%. IDS threw toys out of pram. Treasury dedicated £2bnish - I think, but don't quote me on actual figure - and 65% it was.

Spendless

At the min though the current system makes no distinction between a married SAHM with 3 x under 5s and one with 15 year old triplets. The way it is being proposed Mrs married to the postie I mentioned earlier would currently be expected to have 1 x f-time NMW and 1 x part-time NMW, within a couple of years she'd be expected to have 2 x f-time NMW incomes due to the age of her kids. If she found a part-time job it would be in her own interest to do as many extra hours as she was offerred or to find a f-time job instead as her children hit the age brackets.