Does anyone else feel penalised for being sensible with money?

RainbowLaura

Just a general vent really, not sure where this belongs.

I always wanted to be a stay-at-home mum, but both my husband and I have always been low earners. We had two choices - just go for it and start claiming benefits, or save like crazy so we could manage by ourselves.

So save we did, for several years, before starting a family. This way, his income could just about cover the bills but we wouldn't have to worry if he lost his job or we found ourselves in financial difficulty. This has worked out really well for the last couple of years, and we were looking forward to using our savings to buy a bigger house once the children are at school and I'm back in work.

With the 2 year energy price guarantee, we'd have been fine. But thanks to the reversal, it's becoming clear that our savings are about to be wiped out on energy bills. 

I can't help but compare myself to my friend, who is also a stay-at-home mum. She and her husband bought the bigger house before having their children, but leaving themselves with hardly anything in the bank. Then, when she gave up work, went on universal credit. Now, they will get plenty of help with her energy bills yet we probably won't. 

I feel so resentful, not towards my friend, but towards a system which does nothing to reward financial responsibility. We will probably never have the bigger house now, all because we were sensible. We'd be entitled to around £400 a month in benefits if we'd just blown our savings instead of trying to do the right thing. I kind of wish we had.

No point to this post really. I just needed somewhere to vent, as it's eating me up a bit at the moment.

Bradden

I think many members will agree with you on this.. without judging others the current system was set up as a safety net but could do more to encourage financial responsibility. I was listening to a member of the clergy on Radio 4 PM yesterday asking for the government to increase benefits in line with inflation.. which I don't disagree -  I can't help feeling annoyed as my pay rise was below inflation as it was for countless others in the private sector but I'm expected to pay for others to get a bigger increase that I did.

I'm glad I don't have to rely on benefits, but it seems some people forget it's paid for by everyone else... and we're not all millionaires,

Bradden

Expanding on this thought - surely part of the problem is out definition of poverty, currently set a 60% of average income - this seems an arbitrary figure to me. Poverty shouldn't be a relative calculation.

MattMattMattUK

I agree to an extent, I see our benefits system as being too easy for some to gain, but also failing to look after the most vulnerable. The huge growth in "in-work" benefits is also a problem, artificially deflating wages and encouraging many people to only work to the 16 hour threshold. The much touted unemployment figure is low which is theoretically a good thing, but the problem is that the participation rate is also low, people are not job seeing, but removing themselves from the job market. 

We do have some of the lowest state pensions in the EU (I know we left), but we also have the lowest levels of tax apart from the tax havens. The bottom two thirds of workers in the UK have the lowest level of income taxation in the EU, the top third have the fifth highest, we have lower effective VAT than almost every other EU country as well.

I like many others would probably be prepared to pay more if there was a complete reform of the system, not just tax, but benefits, pensions, social care, education, policing etc. The freeloaders need to be removed from the system both in terms of benefits, but also in terms of tax rates being too low for the majority, realistically the tax free allowance needs to be reduced to no more than £2,000 or abolished entirely. 

MattMattMattUK

Very random, but did 4-5 replies just disappear from this thread? 

Albermarle

With the 2 year energy price guarantee, we'd have been fine. But thanks to the reversal, it's becoming clear that our savings are about to be wiped out on energy bills.

I think it is pretty clear, that any new arrangement will not be 100% support from anyone on benefits, and zero for everybody else. However supporting all energy bill payers the same as we will this Winter, was not a very sensible policy going forward and very expensive.

So almost certainly low and middle earners will still get some support for their energy bills, after the current arrangement is ended. The practicalities of how it is targeted, will be for sure tricky to arrange fairly though.

Another point, often missed, is that wholesale gas prices have come down from their peaks and may continue to do so,  despite the ongoing Ukraine situation. There are also moves to reduce electricity prices where the electricity is not generated from gas. So come next April the Chancellor may have some more room to maintain a reasonable level of support.

Overall though your point about lower earners who are sensible with money, can be seen to be losing out to those who rely on benefits is a valid one. Of course most people on benefits have no choice, but there is a small minority for whom it seems to be almost  a lifestyle choice. 

DullGreyGuy

Bradden said:

I think many members will agree with you on this.. without judging others the current system was set up as a safety net but could do more to encourage financial responsibility. I was listening to a member of the clergy on Radio 4 PM yesterday asking for the government to increase benefits in line with inflation.. which I don't disagree -  I can't help feeling annoyed as my pay rise was below inflation as it was for countless others in the private sector but I'm expected to pay for others to get a bigger increase that I did.

Then maybe minimum wage should also be pegged to inflation?

No idea what monies you are on but if someone is on £60k then maybe the disparity between what they are on and what the lowest earners are on should close a little when in situations like this... certainly in better years higher earners have had way above inflation pay rises whereas benefit recipients and NMW have stayed still.

Unless you can make universal basic income work then benefits will always be exceptionally difficult to set correctly as whatever measure you put in place to try to catch the cheats/lazy etc you will almost certainly also accidently also catch some genuine cases. There are vast numbers of daily posts across social media about both how those on benefits have it too easy and others saying its far too hard to get the benefits they feel they are entitled to/need.

Bradden said:

but it seems some people forget it's paid for by everyone else

Its paid by everyone including benefit recipients, not everyone else... those on benefits spend their money in shops paying VAT making profits for companies that pay Corporation Tax and employ people paying NI and Income Tax etc

Bradden

@DullGreyGuy thanks.. you made some good points. I do agree that the gap between the richest and poorest in the UK needs reducing,, ..getting below inflation pay rises in the private sector and then hearing clergy pushing for inflation linked benefits on just seemed unfair to me. Why not just call for all pay rises to be in line with inflation?

My real concern is the seemingly arbitrary poverty level.. Why is it set at 60% and not a lower or higher figure? Should  poverty be a comparative calculation? 

DullGreyGuy

Bradden said:
it;s those at the lower end I'm thinking of ..getting below inflation pay rises when many are pushing for inflation linked benefits.. just seems unfair to me.

Hence suggest peg minimum wage to inflation too so the bottom earners also inflation based increases.

What would happen to just above minimum wage earners would be the potential interesting point... do employers let them hit minimum wage saying they cannot afford to pay them more or do people refuse to be supervisors, "seniors" etc whilst being paid the same as those they are supposed to be senior to/supervising 

Bradden said:

My real concern is the seemingly arbitrary poverty level.. Why is it set at 60% and not a lower or higher figure? Should  poverty be a comparative calculation? 

You really need to speak to an economist and it would probably be worth comparing 60% of the median salary with what the World Bank would calculate poverty with their definition... theirs is naturally more complex a definition as to include "purchasing power parities" as what you can buy for £1 in the UK is not the same as what that would get you in China.

No matter how you calculate it its ultimately always going to be an arbitrary line in the sand. The reality is always going to be more nuanced but for statistic purposes its never going to be possible to give a 100% accurate answer. 

The US official figure is based on gross adjusted income (based on composition of household) -v- 3x the price of a basic diet in 1963 adjusted for CPI... its equally arbitrary to choose 1963's food prices and I'm sure there'd be a lot of debate as to what was determined as a basic diet... meat twice a day or once a week?

It absolutely has to be a comparative calculation, poverty is about the inability to adequately house, feed, clothe etc and so directly or indirectly has to compare the income to the cost of living

Albermarle

My real concern is the seemingly arbitrary poverty level.. Why is it set at 60% and not a lower or higher figure? Should  poverty be a comparative calculation? 

60% just seems to be an accepted figure, probably as good as any.

There is also 'absolute poverty' which is defined in a different way, as not having enough money for the basics of life.

Probably best to google the different definitions if you are interested.

Bradden

thanks @DullGreyGuy you clearly know a lot more about this subject than me! 

@Albermarle i wasn't aware there was already a distinction between absolute and comparative poverty. In my mind poverty is about not being able to afford the essentials to live .. but this is probably an outdated view.

Thanks