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Tax credits and universal credit
Comments
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Do you really think that the state is best placed to pick winners?
No but I am sure it wouldn't be that hard to work out those degrees that lead to better outcomes for the individuals and the country with the right data sets. I am sure that broad felt tip pen could be used to cut and dice the results in pretty much the same way as other policies are introduced caring little for winners or losers at the margins.
Golf management or bio chemistry. Engineering or photography."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
I've been thinking recently about the phasing out of child and working tax credits, and the introduction of universal credit.
It started because I was looking ahead and trying to find out what's likely to happen to me. My situation (widowed with kids at school) isn't hugely common, and it's been quite hard to find the information I was looking for, so in the process of searching I've learnt quite a lot about UC and how it's going to work. Two things have struck me.
Firstly, once the lengthy transfer process has completed, and the people on transitional relief have eventually got off it, I think there will be a lot of the sort of people who currently qualify for WTC/CTC who won't qualify for any UC at all. People with more than 16k in capital, for example (capital including cash, shares and property that you don't live in yourself), or people at the top end of the income distribution of CTC claimants.
Secondly, I think the ethos and "feeling" of UC will be quite different from CTC/WTC. The current CTC feels rather like child benefit - if you have kids then you can get it even if you're really quite well off, and it's administered by HMRC not the DWP. This means that many people perceive claiming it as somehow not putting them into some kind of "benefit class", and still manage to look down on those who claim housing benefit and JSA and other out of work benefits. UC, however, is going to feel nothing at all like CTC, and a lot more like all those other benefits - the means testing is going to be much more like the current means testing for HB, JSA etc, and people who've only ever claimed CTC and CB are going to find that intrusive and uncomfortable. Some of them, I think, may even get outraged that they are being treated like "benefit scum".
So I thought it might prove an interesting topic for this board, to consider what the likely effects will be on (a) the economy, (b) house prices, and (c) anything else.
[Please note that the hateful phrase "benefit scum" is in quotes because I do not lump all benefit claimants into one category and consider them deserving of contempt. But other people do, and I am interested in how those people may respond to finding themselves part of the same system as those they despise.]
The likely effects will be on (a) the economy,
Will have a negative effect, less money all round, all parts of the economy will suffer.
(b) house prices,
More downwards pressure as the gap between house prices and available funds to buy them widens even more.
(c) anything else.
The UK will start looking more like Greece and Spain who are just a few years ahead of us in the crisis.0 -
I think the reforms are a good idea but it was pointed out to me that the cuts will have a huge impact on business and community as well as individuals.
I don't live in the city anymore but did until recently and there is a high level of benefit claimants in the area. The cuts will mean that there will be quite a few £million less going into the local economy as people won't have the money to spend.
so even those who don't think they will be directly affected, particularly those in service industries that rely on local clients (e.g. a hairdresser working full time may become unemployed because her customers don't visit as often or greggs bakery may close with multiple redundancies as people can't afford to shop there).
Overall I am supportive of moving away from benefits as being a lifestyle choice but the ripple effect on the rest of community may well overshadow any immediate benefits of implementing the reforms.
I'm not one to support the Conservatives but isn't this issue a short term one. I believe the intention is that the economy and the way people are employed will change along with UC. The intention is that those that would have previously claimed tax credits will have to met conditionality rules under UC (yet to be confirmed in detail) which include looking for higher paid work.
If we look back to when the 16 hour rule became common place with tax credits lots of employers split their jobs so that most of their workers could only do 16 hours, that'll change.
I'm not suggesting their idea will fail, I'm not knowledgeable enough for that but I do believe that over time the country will adapt and it might be for the better for all."You've been reading SOS when it's just your clock reading 5:05 "0 -
Sure, but it means there is an incredibly complicated benefits system. A fair better way of enriching folks would be higher wages or lower living costs. I still wander why folks with children (other than perhaps the very poorest) should be provided benefits by the state.
This is the legacy of a highly complicated benefits system. Perhaps one of the benefits (no pun intended) will be that HMRC staff may be reassigned to more important matters such as transfer pricing issues on (predominantly US based) multinationals.
No such luck, a large number of the staff currently administering tax credits will be transferring to DWP. They are, in the majority, Admin grade staff."You've been reading SOS when it's just your clock reading 5:05 "0 -
sammyjammy wrote: »
If we look back to when the 16 hour rule became common place with tax credits lots of employers split their jobs so that most of their workers could only do 16 hours, that'll change.
I'm not suggesting their idea will fail, I'm not knowledgeable enough for that but I do believe that over time the country will adapt and it might be for the better for all.
Isn't one of the reasons employers split work is to remove the NI cost.
If employers start glueing the contracts back together then instead of 2 people being employed, partially reliant on benefits only 1 person would be employed the other being fully reliant on benefit?
The aim is to reduce the welfare bill, whether they will hit the target is any ones guess but it will impact the economy in all sorts of ways which haven't been factored in."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
The likely effects will be on (a) the economy,
Will have a negative effect, less money all round, all parts of the economy will suffer.
(b) house prices,
More downwards pressure as the gap between house prices and available funds to buy them widens even more.
(c) anything else.
The UK will start looking more like Greece and Spain who are just a few years ahead of us in the crisis.
Surely there will be just as much money, as the money used to pay this benefit has to be raised from other taxpayers?0 -
I think you are right, and if so, the middle class who were getting WTC/CTC will find their income as you say "it will decrease it quite a bit.".........
All this austerity going on around the world is only going to get more and more, the middle class is getting wiped out, could it be happening in the UK when WTC/CTC gets stopped and UC is brought in?
I agree that many who think of themselves as "middle class" will find the impact of these measures.
But the problem with using this term is that so many people these days think they are middle class. In reality many are deluding themselves. The real middle classes are unaffected by these measures. The only benefits they rely on are tax avoidance measures.Few people are capable of expressing with equanimity opinions which differ from the prejudices of their social environment. Most people are incapable of forming such opinions.0 -
I agree that many who think of themselves as "middle class" will find the impact of these measures.
But the problem with using this term is that so many people these days think they are middle class. In reality many are deluding themselves. The real middle classes are unaffected by these measures. The only benefits they rely on are tax avoidance measures.
You are right Bob and I have made the same point elsewhere."If you act like an illiterate man, your learning will never stop... Being uneducated, you have no fear of the future.".....
"big business is parasitic, like a mosquito, whereas I prefer the lighter touch, like that of a butterfly. "A butterfly can suck honey from the flower without damaging it," "Arunachalam Muruganantham0 -
Surely there will be just as much money, as the money used to pay this benefit has to be raised from other taxpayers?
Are you sure? The bank of England keeps on creating another 50 billion every now and then, the word on the wire is they will be creating a lot more pounds this year. Japan and the USA are creating the most currency out of thin air.0 -
But Japan’s not the only one. The Norwegians are now gently hinting that they don’t appreciate the strong krone, which hit a record level earlier this month. And the South Koreans are really rather irritated by Japan’s efforts to weaken the yen – their exporters have been the main beneficiaries of Japan’s pain.
In short, it looks like the currency wars will only get hotter this year. The UK and the rest of the world will be creating quadrillions of units of fiat currency and there is only one winner - monetary precious metals. Well OK two winners because only gold and silver are monetary PM.
You've missed out the actual big winner if that is the case: leveraged real estate purchases.
You must have been reading Moneyweek.0
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