Should Millionaire Mick lead to the abolition of Tax Credits?

Mr_Mumble

The spat between The Gruaniad and Heil Mail, over the murderous Mick Philpott, has been as amusing as usual.

The core of the financial problem laid out by The Mail:

BENEFITS BREAKDOWN: HOW MICK PHILPOTT RAKED IN NEARLY £68,000

Child benefit
Philpott: £20.30 a week for eldest son, £13.40 for the other ten. Yearly total: £8,023.60p

Working tax credits

Mairead: Up to £20,560 a year for her six children

Lisa Willis: Up to £17,870 for her five children

Estimated earnings from their cleaning jobs: £14,000

Yearly total: £38,430

Housing benefit
Philpott: £150 a week

Yearly total: £7,800
ESTIMATED GRAND TOTAL: £68,000

This is the approximate take-home pay of someone earning £100,000

Money from Housing Benefit and Child Benefit is dwarfed by the Tax Credits. For every £1 earnt from the cleaning jobs the 'ladies' were garnering £2 in benefits. Philpott and his accomplices - including one of the mothers convicted for 17 years today - were playing the system, being smart and tripling their money from doing these jobs.

The state should be incentivising people to use their smarts in more productive ways than the negative-sum game of ripping off other taxpayers. In this case the modern 'tax credit' system based on 'means-testing' is being abused far more than the older - more flat-rate - child and housing benefit.

The Guardian is, of course, in a different world to The Mail. They got especially enraged by the Mail front-page a couple of days ago:



The problem with the Guardian's response is the factual delusions of their writers, consider this from Zoe Williams: Don't get mad about the Mail's use of the Philpotts to tarnish the poor – get even

The word "poor" continues being used throughout the article. But Philpott, nor anyone else living on benefits with children, is "poor", at least not in a financial sense.

Using the £100,000 taxable income from the Mail's numbers how much would an annuity for someone like Mick Philpott cost?

The current FT/Hargreaves Lansdown annuity table: Single life, RPI, 5yr guarantee at 55: £2,346 income per £100,000 of capital

A lump sum of £4,265,745.95 is required to get an annuity that pays out what Philpott was 'earning'. Philpott was a multi-millionaire!

Yes, this is back of the envelope stuff but I'll refute some initial obvious responses:

1. The kids will not provide a revenue stream until Philpott dies like an annuity would. His partner in crime was 32, plenty more sprog producing years and that's without the potential of snaring another 'lady'.

2. Benefits are no longer uplifted at the rate of RPI. Well, they were at the time of the crime.

3. There's no 5yr guarantee with benefits. True but there are state death benefits and the difference for a level annuity between the guarantee and no guarantee is a fraction of 1%.

4. The Mail numbers are wrong. They'd have to be very inaccurate for Philpott not to garner an income be a millionaire.

5. The numbers you're using are the credits for three adults not one. Many of the potential benefits for the mothers are not included. Even 1/3rd of the sum still makes over a million each.

6. They have a lot of kids to feed. Boo hoo! You breed, you feed.

Many on the left have said the characterisations of benefit claimants as unfair - likening Philpott's incentives to those who of a 'wealthy' person with life insurance. Okay. The incentives of Philpott and other murderous evil-doers are similar here. The loss of cashflow for Philpott from one of his mistresses leaving him was a high six figure lump sums worth.

Most detective stories will float the idea of a life insurance payout as a motive for murder. Why is it wrong for the media and politicians to mention the luxurious benefits culture in modern day Britain as a similar motive for murder considering its lucrative payouts?

Earlier this week the Daily Mail and Guardian were in agreement playing to their readership. They both stated the benefits cuts introduced on Monday were sizeable and historic. The Tories wanted to look tough on 'spongers', Labour wanted to play up the 'harm' on the 'poor'. Yet, the changes in monetary terms were miniscule compared to the cost of Gordon Brown's tax credits that now cost the British taxpayer £30bn each year.

Why not scrap tax credits and use the money by reducing taxes on the working poor? Making income tax and National Insurance Contributions 0%-rated up to £12,000 in earnings would cost £20bn of the £30bn savings from scrapping the circular, admin-heavy, easily exploitable and open to fraud tax credits.

Yes, many in the middle class with children would lose a few hundred quid in tax credits and there will be a sliding scale on down in-terms of impact but the savings from paying less tax on work would also be more meaningful for those on lower wages. It would hit hardest those following similar tactics to Mick Philpott... not a bad trade-off.

princeofpounds

Why not scrap tax credits and use the money by reducing taxes on the working poor? Making income tax and National Insurance Contributions 0%-rated up to £12,000 in earnings would cost £20bn of the £30bn savings from scrapping the circular, admin-heavy, easily exploitable and open to fraud tax credits.

Whilst I don't agree with a good chunk of the view you have written, I do agree with some of ti, and this part most of all.

I have never understood the point of the state taxing people who were earning less than a basic living wage, only to be forced to then pay it back out to them in benefits of one form or another. Not only is it highly inefficient, it also discourages work by making the marginal tax rate for coming off benefits so much higher.

The LibDem/Tory push to move the allowance up to 10k and, IIRC, 12k eventually is one of the best policies for years. If it were up to me, I'd go further than that to about 15k, so that someone doing 250 days work, 8 hours a day, at minimum wage, pays no tax.

(or, if there is an administration value to keeping them in the system such as recording NI contributions or whatever else, a token amount like 1%)

Dreadzone

There is something very wrong when folks are using children as a means for more benefits.

Working people cut their coat according to their cloth, why should folks on benefits be any different?

purch

Dreadzone wrote: »

There is something very wrong when folks are using children as a means for more benefits.

Working people cut their coat according to their cloth, why should folks on benefits be any different?

The tragedy is that it wasn't just cash benefits they were trying to use their children for.

dawn_rose

what exactly did he spend all this money on? He doesnt change his clothes or wash for weeks on end so it certainly isnt that. I doubt he spent it on his kids or his wife and mistress as he is a control freak. He didnt live in the lap of luxury so what he spend the money on?

Murphy_Gooner

Regardless of the amount of benefits they got. I don't think its right the government are using this tragedy as a means of attacking the welfare system. Its a cheap and desperate move.

There are people who work and rely on tax credits because the cost of living compared to what their wage is, simply isnt enough.
With the price of food and bills rising and wages not going up. People are going to be relying on these very benefits even more.

But I would just like too add in that from my line of work I've seen people do crazy things to steal money from someone and these are people who have a decent career etc

chewmylegoff

It is a totally extreme case - the main issue in this case was the fact that the individual was able to convince / control / manipulate two women into living in his house at the same time, having loads of kids with him and then having part time jobs but paying all the tax credits into his account.

Any system can be rorted, and the consequence of not paying "breeders" to look after their own kids is that the kids end up in care which is more expensive than paying benefit to their parents and more likely to result in maladjusted offspring who continue to be a burden on society in perpetuity.

This shameful set of circumstances is an aberration which is, I hope, a one off. We shouldn't reform the system to try to eliminate extreme cases as to some extent they are unavoidable (as least it would not be worth he extra costs of ensuring they don't happen).

That said, I think that your central point (scrap tax credits, raise the tax threshold) is eminently sensible and the case for it is easily made without needing to refer to this horrid set of events.

princeofpounds

I don't think the government are using this to attack the benefits system. The Daily Mail, yes, but Osborne's comments are not that strong in the context of the question he was asked.

paulineb_2

The benefits didnt make him a killer, he was a killer pure and simple. I claim benefits, Im not likely to go out and kill someone. I was talking to my mum tonight, she said that the past few years, the headlines have shifted away from single mums (like she is) being all thats wrong with society to benefit claimants.

My brother has a full time job in a gym, hes 34. His wages are so low he gets working tax credits. Private landlords get paid a lot of money, thousands and more, even though theres now a cap on it, to house people.

The minimum wage should be increased, people should get a fair days wage for a fair days work. I had a job last year, I didnt work enough hours to get tax credits, but I got £6.50 an hour. My boss and her partner are wealthy.

Ive never done anything but exist on benefits, theres something wrong with a society that makes some people rich and other people scrape by.
Cutting the cost of childcare provision might go some way to getting people off the dole (assuming there were jobs) and into work.

Theres a lot wrong with this society, but as far as Im concerned the Mail and the Express have a clear agenda, because if you can target the "scroungers", you leave alone the super rich who have all the tax breaks and evasion going and the companies who dont pay a penny in income tax.

The Mps who get second homes paid for by the taxpayer. Im fed up with people on benefit being labelled and bashed because of a tiny percentage of people who dont want to work, and Im not suggesting the OP is doing that.

But the Mail suggesting that Mick Philpott was a killer because he was on benefits? Sickening and utterly disrespectful to those poor kids that died.

the_flying_pig

say what you like about WTCs, but they certainly make work pay :beer:.

the_flying_pig

paulineb wrote: »

...the Mail suggesting that Mick Philpott was a killer because he was on benefits? ...

yes, yes, that was BS, obviously, e.g. the US has a homicide rate that's 4 times ours and a vastly stingier welfare state.

that level of benefits is still very wrong, mind.