George Osborne’s land of make believe

So the Party Conference season is finally over for this year and the last lot of humans impersonating seals are now heading back to their constituencies and preparing for cuts.

The good people of Birmingham will be grateful that their town centre has been returned to them and the police can come out from hiding under the bridges by the canal.

Boy George came out the worst in this conference season. A few big announcements that kept the seals in the audience applauding until they walked out of the hall and realised that they were who he was on about.

The first which was always going to get the Mail and Express all reiled up was the announcement to end child benefit for top rate taxpayers. And boy did they scream. The Child Benefit cut creates the anomoly of a couple earning £43,500 each, totalling £87,000 per year still qualifying for child benfefit and another couple where one who earns £44,000 does not qualify.

It also introduces a pervous earnings penalty. Where someone with 3 children who gets a pay rise from £43,999 per year to £44,000 per year loses £2,400 per year in child benefit.

Now all kinds of tax fixes are being promised to fix the “problems.”. This will do nothing but further complicate the tax system. The Daily Mail is screaming. The easiest solution would have been to make child benefit a premium within child tax credits, therefore merging two benefits, reducing administration and ensuring that the fraud ridden system that is tax credits finally has a reason to verify household make up properly.

There are too many what ifs at the moment. What happens if you lose your well paid job halfway through the financial year – can you get your child benefit back-dated? What if you are self-employed or freelance so don’t know your tax liability until the end of the year? What if you do overtime or have an unexpected bonus which pushes you into the higher tax bracket – do you have to pay it all back? What about if you are only a couple of hundred quid over, but you have received £3k in child benefit?

By the time this gets passed as legislation there will be more loopholes than a footballers goal net and the £1billion savings will simply not materialise.

The second announcement was even more ridiculous, it got the seals applauding however because it targeted the feckless “scrounging” poor and not the whining wealthy, ie those who write the newspaper headlines, you will no decent analysis of it in most of our newspapers.

Osborne has proposed a £25k cap on benefits paid to claimants. Local Councils will be expected to administer this through the housing benefit system. So LAs during the time of big cuts to services will be forking over more money to Northgate and Capita for a tiny software re-write that will cost each LA in the Country about £100k.

By introducing an absolute cap, the poorest will however get a good shafting, especially if they live in London. The last reform of Housing Benefit introduced a cap of £400 per week for Private Tenants as well as a reduction in benefits for all other tenants. This cut has not yet been introduced and the cap will be on top of this. For tenants with a HB level of £400 per week (which goes to their landlord and not them) and Council Tax benefit of about £20 per week, the total left out of that £25,000k per year cap would be the princely sum of £80 per week. Not much to feed a family, pay for utilities and school uniforms.

The cap will apply to the combined income from jobseekers’ allowance, income support, employment support allowance, housing benefit, council tax benefit, child benefit and child tax credit and other related benefits.

There was a promise not to hit the disabled. It appears that is not entirely accurate. The cap will include Employment Support Allowance / Incapacity Benefit, carer’s allowance and industrial injuries disablement benefit. All of these are disability related benefits.

To be fair those on War Widows Benefits or Disability Living Allowance will be excluded from the cap.

What immediately gets me is that there appears to be a complete lack of understanding by the Treasury of the Benefits system. Means tested benefits are not just paid to the feckless unemployed watching Tricia and re-runs of Jerry Springer on widescreen tvs.

Housing and Council Tax Benefits are both in work and out of work benefits. Housing Benefit costs are high in the big cities (and very much more so in London) because rents are high. It is a sad indictment of the Housing market that as a result of the very high rent levels in London, top rate taxpayers are qualifying for housing benefit. So they must be feckless scroungers as well.

More housing would reduce rents and therefore benefit levels but that proposal would not come from the Coalition Government and Labour did less than nothing about social housing.

Whatever the rights and wrongs of having a large family and being on benefit are (what about widows? Lone parents fleeing domestic violence?) it all seems a bit arbitary – we will give you x amount of income support / child benefit to support your family, but if we assess your families need as being over £26,000 we are not going to pay your rent. So you, and your family, will be homeless. If you are lucky enough to be placed in a Council House, well you won’t get any Housing Benefit either, the Council will evict you and you will not get rehoused.

So what will low income families be expected to do?  Well I suppose they could sell their children.

Tens of thousands of claimants will be hit by this. Almost all from London and the South East. (The other area to be hit will be Edinburgh). What will happen to the Labour market in London? Where will all those cooks, cleaners, shop assistants come from if they will not have a subsidy to stay in London? Are they all part of the “undeserving poor”?

This is a badly thought out policy that owes more to crowd pleasing the Conservative Conference and the Daily Mail. Osborne may attack New Labour all he wants but his first Conference as Chancellor shows he is little different to them. Soundbites masquerading as policy. Blair was however in his early years able to keep them happy. Osborne failed to do even that.

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