Tag Archives: poverty

Why aren’t landlords “in this together” as well?

The government’s response to its defeat in the Lords last night over benefit caps has been notable for its lack of substance. Iain Duncan Smith has taken two lines: that the policy is enormously popular, and that Bishops and left-leaning peers ought to be as concerned by the people paying for the benefits as they are of the people who receive them.

The popularity argument is, well, true. But it is a pretty hollow one. It is hardly surprising that public attitudes have hardened following years of rightwing propaganda emanating from what passes for the British press and, given the small amounts of money involved, this is rather a bread and circuses argument. Throw a couple more Christians to the lions to keep the plebs happy.

They are on stronger ground when they argue that peers ought to consider the needs of hardworking taxpayers more. But this looks like crocodile tears from the Conservatives who appear only willing to raise regressive taxes like VAT, are pressing to cut the upper rate of income tax and won’t even consider the introduction of wealth taxes. The fact that Vince Cable’s Mansion Tax is considered radical within the cabinet, which would only be levied on properties worth over £2 million, shows you how far we need to go to make the case for a fundamental shift from income to wealth taxation.

Fundamentally, this cap saves very little (and may even cost money), applies only to especially large families and undermines the concept of a universal child benefit. It is ironic that Iain Duncan Smith, the great proponent of symbolic taxes designed to encourage marriage is attempting to force through a benefit change which would give the poorest a major financial incentive to break up their families. It is a complete distraction from the real debate which is needed about benefits reform.

One thing that appears to be getting lost in this debate about the benefits bill is how much money is being wasted not to help the poor but to subsidise the privileged. I touched on the way the welfare state subisidises large companies who refuse to pay decent wages – thus ramping up the tax credit bill – last week. When it comes to housing benefit, too few politicians seem prepared to question why we are shelling out so much money which goes straight into the pockets of private landlords and only propose to tackle this issue by forcing people into worse accommodation.

This blind spot isn’t limited to the coalition; after all the housing benefit explosion continued unabated throughout the Labour years. The only justification for it appears to be that policies designed to tackle this problem at the landlord end of the telescope might harm property prices. And property prices help drive the economy.

There is some truth to this: no-one doubts that a collapse in property prices would damage growth. But it does rather bring all this talk of “ethical capitalism” into perspective. Because who is actually benefiting from this racket? Not taxpayers, who have to pay inflated housing benefit bills. Not the poor on welfare, who don’t see a penny from this spending. Not hard working people struggling (and mostly failing) to get onto the first rung of the property ladder. The beneficiaries are, once again, the very people who have managed to insulate themselves from every other aspect of the economic downturn.

If the introduction of land value taxation – which would discourage the speculative ramping up of rents – is not to be contemplated, then the very least we should be considering is the return of rent controls. The introduction of such a policy would mean many more winners than losers. The only real barriers to doing so is dogma about distorting the housing market (which one could argue has already failed chronicly) and fear about how the financial sector might react in its customary intimidatory way.

Instead, we seem hellbent on driving through policies designed to stigmatise the poor and provide everyone with less security. Until politicians on all sides are prepared to take on this beggar-thy-neighbour form of rentier capitalism, I won’t be getting too excited by this ‘new ethics’.

Poverty, marginal tax rates and the big state

Are Conservatives serious when they bang on about the high marginal tax rate of people at the bottom end of the income scale and its symbolism as a failure of the “big state”, as David Cameron referred to on Thursday and William Hague repeated on Any Questions?

I ask this because this “tax rate” – which I don’t dispute – is mainly due to our complex benefits and tax credits system. Simply put, there are two ways to reduce this marginal rate: increase the tail off by cutting means testing or at least extending the income levels at which people still receive benefits, or reducing benefits altogether. The latter option would of course lead to more people living in poverty.

The former option however would increase the size of the state, which we are to understand is a total no-no. This is one of those areas, in short, where you have a very simple choice: reduce poverty or reduce the size of the state. You simply can’t have it both ways and in this respect the Tory conference this week has begged more questions than it has answered.

That isn’t true of all areas of public policy – there are plenty of areas where the small state option is the more pro-social one. But it does highlight how the poverty in aspiring for a “smaller state” as an end in itself. It seems to me that the Tories are obsessed with these second order indices and lukewarm when it comes to the fundamentals.

Cameron and Johnson timed the Venezuela announcement for after the Crewe by-election

At a stroke, Boris Johnson has undermined the capital the Conservatives have made out of the 10p income tax fiasco. It isn’t that the cheap oil deal with Venezuela was defensible – it wasn’t. It was this sort of tokenism that disqualified Livingstone from office in the eyes of most Londoners. But no-one begrudged low income earners from getting half-priced travel. In Crewe, the Tories ground Labour into the dust attacking them for doubling the 10p rate and blithely ignoring the impact it would have on low income earners. Now the Tories have imposed swingeing cuts on a very similar group in society.

What’s worse is the timing: on a bank holiday weekend just hours after winning the Crewe by-election during which time they had very carefully kept quiet about the plans. It is clear they don’t plan to offer people on income support any alternative, otherwise why the stark announcement rather than a more cuddly “consultation” about how to continue paying for the scheme? It is clear they knew it would be politically damaging. And it is abundantly clear that was not merely approved by CCHQ and Cameron but crafted by them in the first place. Make no mistake – this was Cameron’s decision.

Expect this issue to become a Focus leaflet staple, within London at least. I can think of no better symbol of how paper thin the “new” Conservativism really is. Scratch beneath the surface and the nasty side is just itching to come out. At least now we know, but is has the public already made up its mind?

Progress and Poverty

The above title is also the name of Henry George’s greatest work (which I strongly recommend everyone on the planet to read). I mention this because, while the Lib Dems broadly voted the right way during their poverty debate yesterday afternoon (certainly in rejecting the option to support differential age rates for minimum wage), I couldn’t help but feel there was an enormous Georgist hole in the paper.

Why? Because despite what we managed to do today, you can’t divorce taxation from issues relating to poverty. One point I didn’t make this morning was that one of the other poor decisions the party made on its tax proposals yesterday was the decision to effectively kick our “long term goal” of removing people on incomes of less than £10,000 from income tax into even longer grass. This has been sacrificed in favour of a crowd pleasing commitment to cut income tax by 4p in the pound (entirely neutralised by an income tax hike due to the introduction of LIT). Just as Labour does, we will continue to force people on minimum wage to pay income tax – not only is this unfair to the individual, but it adds inflationary pressure onto the minimum wage (since one of the considerations is not unreasonably whether you can afford to live on it) and thus discourages employers to recruit in this country.

I supported the amendment to introduce flexible working for all employees (not that I had a vote…) but again, this adds to the costs of labour. If such policies are to be successful we must somehow relieve the pressure on employers in other ways, and that brings us back once again to personal allowance.

On the other hand, so much of this paper was concerned – rightly – with housing. Yet the focus seemed to be on targets and empowering local authorities to tackle the issue themselves (there is, come to think of it, a slight oxymoron there). I remain sceptical of the rose-tinted view that all of this can be achieved by fiddling with planning law and introducing Community Land Auctions: we need a more fundamental shift in approach.

Of course, LVT would have both enabled us to take the bottom bracket out of taxation, create greater incentives to build housing and dampen speculative investment in property. It’s no accident that George’s book, which develops the argument for authorities to collect economic rent, has as a starting point the need to attack poverty. It just seems that we are attempting to tackle this area with one arm tied behind our collective back. Worse, by scrapping residential property taxation in the form of Council Tax, in many ways we make it worse.

The Federal Policy Committee really need to throw us a bone here. At the very least, so as to demonstrate that our commitment to LVT is more than just “jam tomorrow” they should commission a review about how we might facilitate its introduction. Tony Vickers’ book Location Matters vividly spells out what a government would need to do to introduce the tax and it would certainly take a while. But if we aren’t prepared to even think about it until the start of a second term, then what we’re really promising is to not introduce the tax until the start of a third term. It’s no wonder that Georgists feel as if they are being paid lip service and nothing else.

Why calling for UK population controls misses the point

Madeline Bunting purports to be thinking the unthinkable in her Guardian column this week, calling for the UK to consider population controls. Indeed, I made a similar point when reviewing the Centre for Um’s recent pamphlet on demographics. Sadly though, I must add my name to the members of the blogosphere who think she must be tad confused.

The most fundamental point which she seems to miss is that, leaving aside immigration, indigenous European population growth is rising extremely slowly. It is hard to see what sort of policy you could adopt in a liberal democracy that could slow it further still, and something tells me Ms Bunting wouldn’t approve of, say, scrapping maternity allowance (which, for the record lest there be a misunderstanding), I wouldn’t approve of either! If all you’re going to do is spend lots of money on advertising campaigns around slogans such as “Stop at Two” I suspect you’ll be on a hiding to nothing in a society where so many families now stop at one.

Secondly, adopting a zero net immigration policy – which she appears to be endorsing (while tutting the BNP for having similar policies) is going to do precisely bugger all to stop population growth. The problem is not UK population growth, or even European population growth: it’s global population growth. Even if you could stop people from coming here – illegally or otherwise – the problem is that in developing countries people are breeding at an unsustainable rate.

The solution? Well, perhaps instead of telling us how we need religious people at the centre of political discourse, Madeline should be more vocal in her criticism of the Catholic Church which actively encourages people in developing countries to have as many children as possible and even spreads lies about condom use? Getting control of family planning in developing countries would have three effects: fewer people desperate for work spilling out into other countries, national economies that are better able to manage themselves and – as a massive positive side effect – better control of the HIV-AIDS pandemic. And that’s before you even get into the wider issue of the environment and population.

If we can’t sort that out, then talk about population controls are meaningless. This is probably why, apart from the danger of sounding like a Nazi, so many are unwilling to engage in the debate. The fundamental problem is not trendy secular liberals baulking at nanny-statism but your buddy Benedict XVI (not to mention fellow theocrat George W): deal with it, Maddy.

Gideonics

Jonathan Calder points us to a fascinatingly revealing quote from Gideon Osborne:

“Of course we want a very dynamic and successful City of London. But Britain cannot just be the City of London and then 50-odd million people living off the back of those who work in financial services.”

This line has clearly been carefully crafted to simultaneously look like a genuine concern for the poor, while making it absolutely clear to the city that the Tories not only are not having a go at it, but consider it to be the main source of wealth. According to this rubric, a speculator who has been profiteering on the selling on of financial products based on unsecured loans to the poorest in society is creating wealth, while someone who works a 48 hour week in a factory (longer, if Gideon and John Redwood have anything to do with it) is a parasite. The conclusion is that the rich City stoke broker must pay less tax while the “recipient” (i.e. everyone else) should be prepared to make up the shortfall.

This really is the world turned upside down. I’m looking forward to the Jock Coats response.