Universal Credit and Savings

Sixer

tagq2 wrote: »

Savings often reflect a decision to put money aside for later. This is how a (vaguely) capitalist economy is supposed to work: you accrue capital and invest it when the time is right, e.g. in a house, education, business or whatever. People who choose to work in the system by being frugal and saving are being punished in favour of those who choose to spend money when they receive it.

To compare it with private options, if I buy some form of insurance then I don't expect the insurer to tell me that I already have enough money so they won't be paying out. Welfare was more traditionally a national insurance system in which everyone is encouraged to contribute to a pool in order to spread the burden of particular costs, e.g. illness or unemployment - what it seems to be turning into is a perverse and exploitative way of stopping poor people from starving.

If you believe in means-testing in principle, consider the following typical scenario for someone in the USA: tomorrow you're diagnosed with a condition which requires £10,000s of medical treatment for the rest of your life. Since the NHS is just another form of welfare, should this mean that you have to give up everything and live on the bread line for the rest of your life? If not, why not? You have capital to contribute. Even the "not the house you own and live in" exception seems arbitrary - if a tenant can move, why can't an owner-occupier?

Now I know that some people can hardly afford to save at all, but the aim is surely not to create some lowest common denominator - that does not foster economic or humanitarian progress. These people could instead be encouraged and funded for training in areas with skills shortages.

I still consider that the conflation of tax allowances and welfare payments are an important element of what inflames this debate. NOBODY complains about tax breaks. NOBODY suggests that raising tax thresholds are anything other than a good thing for the industrious poor. A tenner a week more in the pocket of a low paid worker due to reduced tax is generally regarded as a great thing. NOBODY would tell that person that they couldn't have that tax break if they'd dared to be prudent and save it. Can you just imagine the outcry?

Yet exactly the same tenner to exactly the same person doing exactly the same job is "taking from the taxpayer" when it's called a tax credit/welfare payment. It's ludicrous.

Germany encourages low paid workers by saying that second jobs (if they're part-time, under a certain level of pay) are tax free.

Every developed country, including the USA, gives tax breaks to families with children, families with older children in higher education, etc etc. We don't. We give welfare payments instead. But the overall effect on the exchequer is comparable.

So, do we have a welfare problem? Or a high tax problem? How on earth is someone working full time on NMW paying income tax and NICs if these mean they don't have enough for a life outside of relative poverty and are therefore given welfare payments to reduce the level of relative child poverty?

Why do we pretend our income tax rates are 20%, 40% and 45% when in reality they are 12%, 32%, 42% and 47%?

The whole system is utterly ridiculous. You can make statistics say what you like. What UK governments like them to say is that the working poor are parasites. They're not.

ALIBOBSY

princessdon wrote: »

I agree - but there is also the "lifestyle" choice of Tax Credits - where people actively seek to work bare minimum hours or start a business knowing it will never pay to avoid JSA etc and have thousands in the bank.

I have been there a few times (both myself and OH losing our jobs) and have been told - savings = no benefits.

It isn't fair that someone can work 24 hours a week between 2 healthy people and get Tax Credits with savings and a family facing both losing jobs - get nothing due to savings.

It also isn't fair that 2 people with similar incomes - 1 who spends (has debts) and 1 who is frugal would create a denial of benefits.

But not 100% sure what the answer is - I don't think it right they get TC - I also don't think it is right that maintenance isn't counted (it is income) and so much more.

I think UC and the purse tightening is only just beginning

That s/e thing is being addressed by UC, as I understand it they have to work more hours and will be treated as earning min wage for those hours. So the amount paid will go down.

Ali x

Sixer

ALIBOBSY wrote: »

That s/e thing is being addressed by UC, as I understand it they have to work more hours and will be treated as earning min wage for those hours. So the amount paid will go down.

Ali x

Low profit self-employed people will have a choice: get UC based on what they actually earn but also submit to conditionality (proving to DWP that they're looking for more/better paid work like JSA claimants have to do now), or to get UC based on NMW x a certain number of hours (depending on whether or not they have care of children and how old the children are).

ALIBOBSY

Sixer wrote: »

Low profit self-employed people will have a choice: get UC based on what they actually earn but also submit to conditionality (proving to DWP that they're looking for more/better paid work like JSA claimants have to do now), or to get UC based on NMW x a certain number of hours (depending on whether or not they have care of children and how old the children are).

Ahh ok makes sense, so when people are saying they are being forced into more work its not strictly true, they can choose to accept a calculation based on the new NMW calc and live as they are but with less benefit support.

Ali x

Sixer

ALIBOBSY wrote: »

Ahh ok makes sense, so when people are saying they are being forced into more work its not strictly true, they can choose to accept a calculation based on the new NMW calc and live as they are but with less benefit support.

Ali x

Exactly so.

Icequeen99

Sixer wrote: »

Actually, I would say neither you nor Big Aunty have read the relevant data. I have. Please see the capital briefing note - the link for which I already posted. This makes it entirely clear that tax credit claimants with capital will receive transitional protection. Even though what I already posted and you quoted makes it equally clear. You have a very odd reading of "There will be no cash losers directly as a result of the migration to Universal Credit ".

Edited to add: hadn't seen that Zagfles had already posted.

On the transitional protection point though, it isn't as straightforward as you say. Not all tax credit claimants will get TP. If you look at the specific TP briefing note, you will see that it only applies to those who are 'managed' migrated to UC. If you naturally go across due to a change of circs (i.e. you have another child, reduce your childcare costs/increase your costs) then you will not get TP. And of course if the list of changes that trigger this is long, those who get TP will be reduced.

I see in one of your earlier posts you mention this change of circs distinction, but actually it won't just be major changes and if you look at the TP protection briefing you can easily lose that TP once you go onto UC.

IQ

tagq2

Sixer wrote: »

I still consider that the conflation of tax allowances and welfare payments are an important element of what inflames this debate. NOBODY complains about tax breaks.

I see what you are saying. I am not really considering it from a political PoV. A welfare payment (which doesn't exceed tax paid) is no different from a tax break. You are describing a problem with perception.

But, in a democracy, I suppose that sometimes perception matters - even if the reality is no different.

Increasing the personal allowance to £10k is well overdue.

Why do we pretend our income tax rates are 20%, 40% and 45% when in reality they are 12%, 32%, 42% and 47%?

I sort of agree. But NI is charged on a per-job basis, so lots of small jobs may attract no or little NI. (Worse, lots of small jobs may entitle you to no State Pension accrual.)

If NI is going to continue, it needs to be a reasonable and well-protected pool of money to insure people against various risks - as was originally intended.

I'd also quote figures to include employer NI - it is an amount withheld from you before you even see it.

Every developed country, including the USA, gives tax breaks to

If I understand correctly, the USA starts taxing at 10% after only $5,950 earnt (around £3,800) - and that's just federal income tax. You have 6.2% (temporarily 4.2%) employee-contributed and 6.2% employer-contributed FICA and 1.45% Medicare with I think *no* lower earnings limit, and possibly state and unemployment taxes on top of that.

So the single working poor, at least, are less likely to escape the revenue services. And they get much less than UK citizens for their SS contributions, so (unless their wage is /very/ low) have to pay out privately for e.g. health costs. I have a friend in Texas who has only just won proper health coverage from her employer, having avoided appointments for nearly a year because she was in the gap between eligibility for aid and having enough money to pay. This is still the reality for the working poor in the US.

What UK governments like them to say is that the working poor are parasites. They're not.

True enough.

Sixer

Icequeen99 wrote: »

On the transitional protection point though, it isn't as straightforward as you say. Not all tax credit claimants will get TP. If you look at the specific TP briefing note, you will see that it only applies to those who are 'managed' migrated to UC. If you naturally go across due to a change of circs (i.e. you have another child, reduce your childcare costs/increase your costs) then you will not get TP. And of course if the list of changes that trigger this is long, those who get TP will be reduced.

I see in one of your earlier posts you mention this change of circs distinction, but actually it won't just be major changes and if you look at the TP protection briefing you can easily lose that TP once you go onto UC.

IQ

Yes: my apologies. I realise this but wasn't at all clear - getting frustrated at posting links which were being ignored!

Still, the main point I was making stands: those without changes of circumstances will migrate to UC with transitional protection, INCLUDING those with capital.

Those who have a change off circs after migration will lose entitlement if they have capital.

Those who "move early" or similar from tax credits to UC due to a change of circs will lost entitlement if they have capital.

This isn't at all what BigAunty and Miss P were saying.

Icequeen99

Sixer wrote: »

Yes: my apologies. I realise this but wasn't at all clear - getting frustrated at posting links which were being ignored!

Still, the main point I was making stands: those without changes of circumstances will migrate to UC with transitional protection, INCLUDING those with capital.

Those who have a change off circs after migration will lose entitlement if they have capital.

Those who "move early" or similar from tax credits to UC due to a change of circs will lost entitlement if they have capital.

This isn't at all what BigAunty and Miss P were saying.

I absolutely get what you were saying. But the detail makes the 'no one will lose out' a bit misleading if you don't look at the detail.

IQ

zagfles

Icequeen99 wrote: »

On the transitional protection point though, it isn't as straightforward as you say. Not all tax credit claimants will get TP. If you look at the specific TP briefing note, you will see that it only applies to those who are 'managed' migrated to UC. If you naturally go across due to a change of circs (i.e. you have another child, reduce your childcare costs/increase your costs) then you will not get TP. And of course if the list of changes that trigger this is long, those who get TP will be reduced.

I see in one of your earlier posts you mention this change of circs distinction, but actually it won't just be major changes and if you look at the TP protection briefing you can easily lose that TP once you go onto UC.

IQ

What do you think would happen for changes in circumstances which you don't currently have to tell tax credits about (ie aren't on the mandatory list http://www.hmrc.gov.uk/manuals/tctmanual/TCTM05100.htm) usually because they increase entitlement?

For instance say someone has 2 children and substantial capital, and is claiming tax credits quite happily. If they have another child:

1) before they are managed migrated - could they avoid being "naturally" migrated by not telling them/claiming for new child?

2) after being managed migrated - could they carry on getting TP by not notifying?

Same if childcare went up, etc. Stuff that's not mandatory to notify.

If would be a silly situation if someone with 2 children could carry on getting TP, but a change which would normally increase entitlement (eg the addition of a third child) stopped TP completely!