Ian Duncan Smith is 99% correct on tax credits

Ian Duncan Smith has raised the alarm on tax credits. For many of us this is not exactly news but it is important to spread the word about how it was administered so terribly. I know several people who were overpaid by thousands of pounds and no doubt many of you readers have clients who arrnaged their affairs through their own companies to take advantage of the rules - I do believe they call it a loophole . Perfectly legal of course. Makes one wonder how many of the people displaying righteous indignation over the Starbucks affair were screwing the tax credits.

Anyway, enough digression - the point I wished to make in today's blog is that IDS hasmissed out the crucial missing link in his assessment of the system. Have you got it yet ? The Labour administration  bribed a huge swathe of the electorate by dishing out tax credits like confetti. Clever isn't it ?

Comments
ShirleyM's picture

That's politics for you    1 thanks

ShirleyM | | Permalink

Do what is best for the party and the country comes second.

Labour is not alone, is it? Do you remember Maggie selling off all the council houses for a fraction of their value? That bought a few votes at the time.

What about the 5% tax cut for the higher paid and the reduction in CT for the larger companies? That will maybe buy a few votes, too :)

I don't have very much respect for politicians, but they are all alike.

Flying Scotsman's picture

Bribes for votes

Flying Scotsman | | Permalink

You have a point up to a point. The difference here is that it wa set up in a reckless way , dishing out money willy nilly and a blind eye was turned to the fraud and gaping holes.

At least with Maggie you got a house and along with that came responsibility . The tax credit handout is why we have a "take take take" mentaility .

We live in a generation of rights not responsibility - I think that is the lasting social legacy of Messrs Blair & Brown

Old Greying Accountant's picture

Whilst not disgreeing ...    1 thanks

Old Greying Acc... | | Permalink

... what figure the millions not claimed.

There were many who didn't claim but could have, either because they did not want to for reasons of pride, self respect etc (not saying rightly or wrongly, just a fact) and countless who knew what a shambles it was and were risk adverse to being stung for a repayment of hundreds/thousands of pounds potentially overpaid.

Has that been netted off the bogus and miscalculated claims?

Makes impressive reading ...

JC | | Permalink

If only because of the massive abuse and previous failures to curb generational dependancy - all because GB wanted to 'bribe' the electorate

‘.. In the years between 2003 and 2010, Labour spent a staggering £171 billion on tax credits, contributing to a 60 per cent rise in the welfare bill ..'

'.. The Coalition has disclosed that tax credits are paid to almost 6,000 children living abroad ..'

'.. But it does not know how much taxpayers’ money is being paid to foreign-based families, who are entitled to the British handouts under European law ..'

The above probably says it all -

References

http://www.dailymail.co.uk/news/article-2255505/Labours-tax-credit-wide-...

http://www.dailymail.co.uk/news/article-2255837/Benefits-rising-twice-fa...

http://www.dailymail.co.uk/news/article-2255203/200-families-claiming-ho...
 

Flying Scotsman's picture

Not claimed    1 thanks

Flying Scotsman | | Permalink

Come on...do you really really think that the non-claimants amount to a large number , so much so to offest the dodgy claims ?

Old Greying Accountant's picture

Yes and no

Old Greying Acc... | | Permalink

Yes I think there are a significant number, but I didn't say I thought it would offset ALL the dodgy ones (few of my clients claimed it), but I am pedantic and like accurate figures - it adds credibility.

I am sick of the modern trend of picking what news to report - I want all or nothing. Is it £10billion net or £10billion dodgy and £1billion unclaimed = £9billion loss? (figures just for illustration)

As to politicians, I agree you couldn't slide a fag paper between any of them whatever colour rosette they wear, but the Tories make no pretence about wanting power and to get their snouts in the trough, they don't claim to stand for the rights of the "working" man.

Here's an interesting concept ....

JC | | Permalink

A number of years ago the labour party decided that they were un-electable under their then current guise.

As a result they took a long hard look at what area would win power and opted for the middle ground; in doing so they 'stole' the traditional Tory ground and saddled the country with two fairly similar parties, thus removing the critical element of opposing parties and competition of differing viewpoints

'New Labour' was born and because they ditched all their Socialist beliefs and became a mirror image of conservatism (small c), they left the Tory party with no-where to go; which is why they were in the wilderness so long

Essentially therefore anyone who voted for 'New Labour' and TB were effectively selecting a variation of the Conservative party, although, they would probably be too blinkered to accept this and be riled at the suggestion

The only real difference was that 'New Labour', although, a re-badging exercise had taken place retained their inate inability to actually balance the books and run the financial side of the country - which in large measure is why we are in the present situation

So if you voted 'New Labour' in the past then you were really a 'closet' Tory; who had 'dumped' your socialist principles in favour of becoming electable (sold yourself!) -

How do we like that as an idea?

Flying Scotsman's picture

Who are we voting for ?

Flying Scotsman | | Permalink

I agree but the electorate don't fully grasp how Tony Blair stole the Tory clothes. The point is moot because we are where we are and unless the bland  Mr Miliband takes the party back into the union-run caves from whence they crawled out, we're stuck with 2 centrist parties.

However , 2 things are now the crucial issue for voters:

1) Europe - Labour are on the wrong side of the voting fence

2) Economy - people may brand the Tories are heartless and nasty but deep down they know that the medicine is what is needed and Labour really cannot be trusted on the economy.

So perhaps a wedge is slowly driving between them - all we need is a long pre-election campaign to drive the wedge harder and force them apart 

Old Greying Accountant's picture

Agree ...

Old Greying Acc... | | Permalink

... and if DC had any balls he would call an in out referendum asap and a walk a spring election, because at the moment UKIP are siphoning off the grassroots Tories and the goldfish in the middle are already fogetting it was New Labour that put us in the mire!

Flying Scotsman's picture

Remember Gordon Brown's fluffed election call ?

Flying Scotsman | | Permalink

I think he needs to keep it on the boil and go for the in/out vote at the end of year 3 , or perhaps have a joint election and referendum (keeps costs down)

The BIG question is how to present the gain / loss to the the great British public. There does not seem to be a concensus of what the economic impact would be.

I would be very surprised if British companies lost trade. We do a lot of specialist manufacturing in UK so if it's good you'll still buy it.

Bring on the vote !

Old Greying Accountant's picture

I know ...

Old Greying Acc... | | Permalink

... it reaffirmed my belief in God, otherwise we would still be suffering under New Labour!

I have little faith is the finance guru's and their predictions, I think the current situation demonstrates why!

At the end of the day politics and governments are just another hazard for commerce to negotiate, and with the global market we now have localised economic regions are out-dated and more of a hinderance than a help.

Trade will happen whatever, and no one is going to put trade barriers up against us because they need us as an export market as much as we need them.

Can we really trust any of these cowboys....    2 thanks

justsotax | | Permalink

are we really to believe that toffs with trusts funds, property portfolios, and enough kick backs from unions/big business/multi-millionaire friends to clear the the debts of a small nation, can come up with policies that have a really great positive impact on the ordinary person in the street.

 

I am sure IDS does enough paid speaking/non exec/board roles and the rest to use a few 'loopholes' himself....I wonder how much he pays his wife for 'administration' services....

ShirleyM's picture

Just for info ....    1 thanks

ShirleyM | | Permalink

A quote from IDS ...

 

'You have to remember it was Denis Healey who did most of the serious hard work, the heavy lifting, before Mrs Thatcher came in,' said Mr Duncan Smith.

'Had she come in without Healey's work in the IMF, I don't think she'd have lasted two years. She would have been out in 1983.

However, the normal state of affairs is to blame the previous government for any balls up (even when it is the same party), and the current government takes the credit for any improvements. This applies to all the parties!

All politicians are expert in the art of spin, and that is how they get power. It certainly isn't related to honesty & integrity.

Hang on - credit where credit due ...

JC | | Permalink

@justsotax

IDS has done a great deal of research in the area of social justice and is probably one of the most 'clued up' politicians on the subject

By all means rubbish politicians etc. but balance that against playing fair, and realising the contributions he has made in this area

IDS has actually spent a lot of time & effort since 2004 on the topic of social justice trying to find solutions to difficult problems in todays society

References

http://en.wikipedia.org/wiki/Centre_for_Social_Justice
http://www.centreforsocialjustice.org.uk/

I would hope that    1 thanks

justsotax | | Permalink

most politicians take an interest in the fabric of society....after all they are voted in by the public to serve the best interest of the public.  But as far as i can see IDS's attack on tax credits bares little relation to 'social justice'...he is only concerned about the fraud/overspend and seemingly attacking a policy which in principle is there to benefit the poorest in society?!

 

 

 

Flying Scotsman's picture

Social justice

Flying Scotsman | | Permalink

Soemtiems one has to be cruel to be kind . Gettign people off benefits and into work is a tremendous act of kindness. I established and run a charity that assists people to do just that. I could write for hours on the gratitude that I receive from success stories - it changes people's lives .Once their self esteem is restore the rest usually follows.

 

I am sure you are right....

justsotax | | Permalink

not so sure simply removing benefits is the answer.....its ashame that it falls to a charity to do what the government should be doing....

Flying Scotsman's picture

Charity

Flying Scotsman | | Permalink

Well, I am now receiving small funding from government to augment the support from myself.  Our outputs are well above the local average and we are receiving a fraction of the funding that the big outfits are getting.

Small and nimble delivers far better than big and bloated

Removing benefits is a drastic measure but it can be managed in a way that is fair to all stakeholders.

Why should somebody receive unemployment benefits if they refuse to attend interviews or take jobs that they are capable of doing but don't fancy doing ? Once we remove the fallacy that your NIC pays for hard times and it is in effect a straight tax, it'll ne a whole load easier to change the system

 

 

just ashame

justsotax | | Permalink

IDS doesn't listen to people like yourself....but i presume his vehicle for 'social justice' doesn't quite want to go in that direction.  I am sure you are not the first, and you certainly will not be the last where people on the front line in their community are able to offer a substantial better way of life for those people in need than those guys (MPs) whose job it actually is to provide the community with a better way to help people.  

 

Flying Scotsman's picture

Benefits    1 thanks

Flying Scotsman | | Permalink

I spoke to somebody in London who was given my number for finnacial advice about leabing the big smoke and moving up north. He explained that the cost of housign is no longer affordable and his benefits are to be capped. After discussion it was a no brainer to move to Manchester , where his family lives. He said that his long term ambition is to be off benefits and stand on his own two feet. Clearly here the cap on benefits is doing exactly what it was designed to do.

The economic textbook will tell us that this will redistribute people from the south to the north , lower rents in the south and fill vacant properties up north. Somehow I am not so sure it will end up thus and we'll find out in 3 or 4 years exactly what problems it has created in place, but I do know that the private rental sector has been rubbing its hand with glee at the blank cheques handed out in housing benefits - it made a lot of people very very rich.

 

So what is the welfare solution then ...

JC | | Permalink

@justsotax - It is generally recognised that State spending is prodigious and totally unaffordable. The process of taking with one hand and giving back with another is a bureaucratic nonsense which simply ratchets up the costs of implementing anything.

Furthermore, any system that operates on an ‘income disregard’ of £25k, allows for self certification, fails to claw-back errors, is open to fraud / abuse and inhibits those to want to work by making them worse off is simply ‘Not Fit For Purpose’

Whilst a great many agree with this and acknowledge cuts need to be addressed, nobody wants it to affect them. Nevertheless the figures below make interesting reading, although, they do not take account of other areas such as the cost for savers of artifically low interest rates in order to keep the housing market afloat and underwrite those who have borrowed more than is prudent; but that is another side to theb whole equation.

Quote

'.. One of the biggest problems, however — and it is not a new one — is welfare. Britain, as the Institute for Fiscal Studies’ excellent Survey of the UK Benefit System points out, really is a welfare state

Some 30m people, almost half the population, receive one benefit or more. The bill for all this is more than £200bn a year, “£3,324 for every man, woman and child in the country”, and the equivalent of 13.5% of GDP and 29% of spending

Social security spending was 4% of GDP at the dawn of the welfare state. In 40 years, from the early 1970s, it has risen more than 300% in real terms, double the increase in the size of the economy ..'

http://www.thesundaytimes.co.uk/sto/business/Economy/article1188539.ece

Flying Scotsman's picture

Welfare solution

Flying Scotsman | | Permalink

The first thing to crack is public perception . I think there may have been a substantial change on this as the problems are now getting a very public airing. Just as same sex "marriage" (there's an oxymoron if ever there was one) would have been unthinkable 30  or 40 years ago  but is now on the table , so is the notion that welfare really should be a safety net and not taken for granted as a right of passage.

Next we have to work out a way that withdraws benefits without a shock to the system , both on a personal level to recipients and on a macro-economic level to the nation's spending power.

People need to wise up to the fact that if you are less well off you will go without some things. I went without holidays as a kid - we did day trips to the Cylde coast or Loch Lomond. the rest of the class went to Disneyland in the USA. I accepted it - I didn't throw my toys out the pram.

 

All that is needed now

justsotax | | Permalink

is someone to 'crack' the perception that by cutting the tax bills of the wealthiest that they will suddenly be volunteering to be taxed on there hidden millions.....'all in it together'.....you would like to think wouldn't you.

Absolutely right ..    2 thanks

JC | | Permalink

@Flying Scotsman - the tricky bit is

'.. we have to work out a way that withdraws benefits without a shock to the system , both on a personal level to recipients and on a macro-economic level to the nation's spending power ..'

Especially when the newspapers interview people who say that simply cannot live on £50-60K pa without state assistance - hello! - this is the problem with recognising the welfare overspend and still refusing to live within ones means

Of course the waters are then muddied by the inevitable refusal to distinguish between real poverty and those who are either taking the p*** or on £50k and cannot manage without a state top-up with child benefit; or state mutualised insurance premiums because their house is in a flood plain; or subsidised interest rates for mortgages; .. or ... or ... or ... the list of everyone wanting to indeminfied/underwritten is endless and does a great dis-service to those in real need

Unfortunately along the way the really deserving cases get either overlooked or lumped in with all the others hoping for a free ride - and politics/unions etc mixing it for their own ends really does not help alleviate the situation

We seem to have lost the fundamental distinction between the welfare state (poor safety net) and entitlement culture expanded to cover everyone’s wish list (iPhones, booze, fags and all the other 'necessities' of life etc.)

Old Greying Accountant's picture

My view is that ...    1 thanks

Old Greying Acc... | | Permalink

... the system should be provision of food/clothes/accomodation not cash for those with no income, and a sensible supplement for those with a shortfall in income, but rigourously scrutenised.

Nowadays (rightly so) you have to go through rigorous (but possibly still not stringent enough) means testing for a mortgage, why not for supplementary benefits? As Flying Scotsman says whilst you still pay for holidays, cigarettes and alcohol you have no need of any state top-up.

A civilised society should ensure no-one is homeless, unclad or starving, but I do not feel there is anymore duty than that.

I would draw the line at work-houses, but there should be some system of contributing time and effort in return for benefits.

Agree with child benefit comments, but the problem is the fact two people earning £45,000 each will get it but one earning £60,000 will not. The couple with 2 x £45000 will take home £65887.68, a single earner on £90000 will take home £58983.84 - that is nearly £7000 less! On top of this if they each have 3 children the two income family will get £2500 benefit so they will be nearly £10,000 better off than the sole earner family who will get none. I am not saying either should get child benefit, but if you are drawing lines in the sand they need to be fair! If the sole earner lives in London and the two earners in Macclesfield there is an even bigger divide!

Personally, I think child benefit should be scrapped for all and replaced with a sensible package of means tested benefits based on personal circumstances.

Flying Scotsman's picture

Safety net

Flying Scotsman | | Permalink

I agree with Old Greying that it is to be a provider of the last resort . Nearly all the things that were once luxuries are now generally commoditised and never been cheaper, at least not for the basic model. Even those on a safety net cannot grumble that a fridge or phone is not affordable. A TV ? I haven't got one and haven't felt I am lacking - in fact life is far better since I scrapped mine 20 years ago . Smart phone - nope , not got one of them either. And , yes, I do on occassion use the library or swap books with friends . Shock , horror !  Designer clothes - what are they ? Take a trip round your local "deprived area" and see the latest gear , gadgets and 48" tellies . How is it paid for ? Either benefits , undeclared earnings or illegal means . Time to stamp it out.

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I've been blogging on my website www.formationsdirect.com for some time with my non-PC view of the world of economics,business and other stuff. If you like to read the views of somebody who doesn't "toe the party line" you've come to the right place. Government cock-ups, financial turmoil , business scandals and people's behaviour - I've got something to say about it , whether you like it or not.