Monday 26 October 2015

'Osborne in Listening Mode'. I'll Bet he Is

So Genius George has decided to listen to, well, everybody.  Our esteemed RWendland should clearly have been one of his first ports of call.

All sorts of things we can overlook, but not rank incompetence.  "If he trips, he must be sustained. If he make mistakes, they must be covered. If he sleeps, he must not be wantonly disturbed. If he is no good, he must be pole-axed."

Churchill there, of course.



Dick the Prick said...

But....but...but...he's a strategic genius so obviously Fraser Nelson's article stating that there's a marginal tax rate of 93% for low earners must be embarrassing for such an august journal.

Geez, it's not even Brown's 10p debacle - the lad went for this and Cammo signed it off. A few threads ago I said I thought that Osborne had gone and hired some decent staff; I retract such flummerious drivel - we're back to normal again - phew, what an err...(tax) relief!!

Botogol said...

The Govt must be rather hoping the Lords block tax credits. Massive relief all round, would give them a chance to retreat and rethink, without having to voluntarily back down, and welcome distraction of a big constitutional flap.

Electro-Kevin said...

Dealing with tax credits is a job half done.

Why do we have them ? Some would say it was Labour gerrymandering.

I say it was to mitigate the full effect of mass immigration. Without top-ups it would have been a race to the bottom on wages.

Osborn says that without tax credits tax can go down and wages will be increased. No they won't. We still have a predeliction for importing poor people. This means either taxed subsidy to keep the standard of living where it is - or an adjustment.

The esteemed Rwendland indicates to us that an adjustment is what it will be.

Electro-Kevin said...

Plus what Botogol says.

Botogol said...

The Govt must be rather hoping the Lords block tax credits. Massive relief all round, would give them a chance to retreat and rethink, without having to voluntarily back down, and welcome distraction of a big constitutional flap.

MyCallItLikeItIsName said...

I have to agree with Botogol... a welcome distraction for the Tories.

However someone must be keelhauled for this foolishness. With Kermit heading for the exit, it has to be Osbourne, surely?

How can it be good for a deflating economy when mortgage lending, wages and full-time employment are contracting to remove a chunk of income?
Are Capitalists convinced that decreasing incomes will be offset when immigration is high and rising, automation is increasing and unemployment is at generational highs?

If this is so, Quantitative Easing must be seen as an instrument of Fascism....

Could be seen as more Fascist

rwendland said...

EK, on the "Why do we have them" point.

I can't speak for any ulterior motives, but I do know what the claimed advantages of Tax Credits stated in 1998 were.

An important point though is that there are really two versions of Tax Credits. The 1997 version was paid through the payroll - if you were an employer 1998 to 2003 you'll probably remember the annoying STOP and START notices for each employee on Tax Credits telling you what to do. Employers hated it, so for this reason plus some others (eg implementation was tricky for an employee with multiple jobs), the more generous 2003 version of Tax Credits switched to direct payments from HMRC.

Anyway the stated advantages for the 1998 version, which was modelled on the U.S. Earned Income Tax Credit (EITC), and paid through the pay packet, were:

1. reinforce the effect of the minimum wage by making work pay better

2. boost work incentives, by increasing potential in-work incomes

3. as a tax credit rather than a welfare benefit it should result in higher take up

4. payment in the pay packet should demonstrate the rewards of work over welfare

5. highly effective way of targeting help at low income families, thus reducing poverty and strengthening the family

My memory is that reducing child poverty was the most important driver, and secondary a poor take-up problem by the entitled with the previous Family Credit system. But it was also supposed to reinforce the work pays message - though I don't think that part worked so well. I don't recall any thought being given to the the issue of incentivising immigration - probably it should have been considered.

If you have a limited amount of money to spend as chancellor, and your primary objective is reducing child poverty, tax credits are much more efficient that raising the tax threshold. The problem with raising the tax threshold is that there is a lot of leakage to people without children, or quite well off families.

Raising the tax thresholds e.g. benefits:

a) single people, who will spend the extra money on things like clubbing, boozing and socialising in general - not helping poor kids

b) part time working spouses in well off families

c) the self-employed and directors using the pay the not-really-working spouse tax trick

But Tax Credits are pretty efficiently focused on low income families, and their children. (Though there is a problem about people fibbing about taxable income - tax credits is a further incentive to lie.)

If you really want to read up more on the history, House of Commons Library Research Papers 98/46 and 99/3 are good places to start! Some of the above is lifted from them!!

BTW the first UK Green Paper on Tax Credits was written by (wait for it) Keith Joseph and Anthony Barber:

Proposals for a tax credit system - Cmnd 5116, 1972

Yes, the Heath govt first considered Tax Credits. In the end they went for the stop-gap Family Income Supplement instead, which had a withdrawal rate in some circumstances of £1.20 for every extra £1 earned - a real earnings trap which Tax Credits eventually fixed.

Family Credit was introduced in 1988 by the Thatcher govt. This actually introduced features seen in Brown's Tax Credits, like a main 70% withdrawal rate, and the 16-hour and 30-hour per week benefit steps.

Tax Credits are usually seen as Brown's baby, but a fair few is that major elements were inherited from the systems put in place by Heath and Thatcher, and the U.S. tax Credit system, and it should really be viewed as an evolution not revolution.

Jan said...

I think it was all a dastardly plot to shine a light on and show up the lack of balance in the House of Lords ie a huge number of LibDem peers with only 8 MPs and so rather unconstitutional. This helps to lay the groundwork for reform of the Lords. Maybe he is a master strategist after all.

andrew said...

In the late 80s I knew a teacher who met a junior education minister (or something like that) at a dinner party.
He had been in post for ~6 months.
She was the first teacher he had spoken to.

This disconnect from common reality is unsettlingly frequent amongst senior pols and I am sure Osborne suffers from it too
- indeed does not actually know anyone on tax credits.

In the same way, I imagine TB thinks he is not a war criminal.

Sebastian Weetabix said...

Tony Blair isn't a war criminal. He and his pet geopolitical project are failures, which is much, much worse.