How high taxes killed our belief in helping others

Posted on January 08, 2013

When all factual and economic arguments have failed, Britain’s proponents of high taxes fall back upon philosophical justifications for their position. “Tax is the thing that makes us civilised”, they declare, “It brings us together as a society”.

Such arguments are dragged out to perform again and again, like those 1960s pop acts who were fleeced of their retirement pots by unscrupulous managers. Of course, there’s no actual evidence for them – that’s the point, they are declarations of conveniently unmeasurable truths.

But even such intangible claims are starting to look shaky. As the debate about cutting benefits for the better off intensifies, it is increasingly clear that high taxation has killed our national sense of helping others, of the well to do making sacrifices to help those less fortunate than themselves.

Just look at the row over Child Benefit. There was a time when people recognised that if they earned a good salary, they didn’t really need welfare to top up their income – whereas others who were barely getting by did.

Now, the letters pages and radio phone ins communicate a very different world view. Those who have been squeezed over and over again by successive Chancellors grabbing at their earnings, their savings, their pensions, their petrol bills and their pasties want something back in return. The idea that just because they might be earning £50,000 a year then they shouldn’t get Child Benefit enrages large numbers of people – the payment is one of the few things they get back from the large amounts they have to pay to the Exchequer.

That is a remarkable shift from the widespread sense of “middle class oblige” that once existed to the far less attractive sight of well-heeled parents defending their right to be welfare recipients.

But people who want to hang onto their payments cannot be blamed for feeling that way. It’s a natural reaction to want to get at least a bit back when you are shelling out a small fortune every year through constant, multiple taxation. It is our politicians, and particularly the high tax lobby, who are responsible for the near-total erosion of that sense of sacrifice for the greater good.

Of course it is an absurdity to pay welfare benefits to the well-off. It is a perverse interpretation of a welfare state that was intended as a safety net – particularly at a time when there are plenty of families who can only dream of earning £50,000 a year. Worse, it means cycling cash through a wasteful tax collection and benefits payment system, only to return some of it to the pocket where it originated.

The welfare bill must be brought down, and the just way to do that is to withdraw benefits from those who need them least. High taxation has driven out the sense of responsibility which would once have made that the obvious and natural thing to do for most Britons. Far from making us “civilised” or “bringing us together”, overfeeding the tax man has made us selfish. Taking more and more money from workers has made them grip what they have left all the tighter.

The moral case against high taxes must be made or – counter-intuitive as it may seem – the moral case for helping others will continue to fall on deaf ears.

The benefits cap debate – a win for Ministers, and an economic fail for critics

Posted on January 23, 2012

The furore over Iain Duncan Smith’s proposed benefits cap was predictable, and Ministers have merrily sailed into it for two reasons – because a high profile fight on this topic brings them an electoral advantage, and because they knew the Left would swallow the bait in one great, unthinking gulp.

The idea that no household should get more than £26,000 in benefits – equivalent to a pre-tax salary of £35,000 – is overwhelmingly popular. British voters subscribe to a strong idea of fairness, particularly when it comes to the idea that working should be more rewarding than not working, and they have been outraged by numerous reports of large families living at no cost to themselves in huge, overpriced houses in particular.

The critique of the proposals coming from the Left, notably from Lib Dem Guardianista Tim Leunig, is fatally flawed because socialist economics fails to recognise that the economy is dynamic. You can’t change one input to the system without others shifting in response – both when macro market forces and micro human behaviour are involved.

The flaw comes when they crunch the numbers. Leunig’s Guardian piece claims to calculate that the benefits cap would leave people living on 62p a day. The most crucial element of his workings is that a 4-bedroom house in Tolworth costs £400 a week. That’s true right now, but it wouldn’t be the case once a cap has been brought in.

The truth is that some of the main beneficiaries of overly high benefits are private landlords. They may not get payments from the DWP direct, but they reap the cash anyway through inflated rents, secure in the knowledge that every time they put the price up, benefits levels are raised to pay them. This is a racket, exploiting the foolishness of officials in pumping more and more money out and the absence of taxpayer power to rein in this behaviour.

Tim Leunig is right that if rents were fixed as they are now then his hypothetical family would pay£400 a week. But rents aren’t fixed, they are fluid. If you remove a large amount of cash from the system then prices will fall. By arguing for the system to remain as it currently is, rather than accept a cap, this supposed “progressive” is effectively fighting the corner of benefit-farming landlords.

There are knock-on benefits to removing the artificial inflation in rents, too. If renting property out becomes less profitable, the desire and the financial means to buy-to-let will be reduced, helping to address the shortage of affordable housing that is so often highlighted as a problem.

This is why we can expect IDS to be intensely relaxed about this fight gaining so much publicity. When it comes down to it, he has public opinion and solid economics on his side.

All of the poor are deserving – but deserving of different things

Posted on June 15, 2011

One of the most pernicious straw men in modern politics is the argument dragged out last week by Rowan Williams. He accused the Coalition Government of using

“the seductive language of the deserving and undeserving poor”

This is almost exclusively a phrase used by the Left – in literal terms, the Government haven’t used that language at all. The reason the Left use it is to try to close down any discussion of distinct problems and solutions for different groups within the mass of Britain’s least advantaged people. In essence, it’s a justification for continuing a blind, blanket policy of handouts, handouts and more handouts, regardless of whether they work or not or the harm they might be doing.

We on the Right should be clear – all of the poor are deserving, but they are deserving of a range of different things.

Those who are unemployed but are keen to work are deserving of our support to get a job. That means financial support, but also access to job opportunities and support through the personal trauma of losing your job. Proud, ambitious people need their pride protecting and their ambition nurturing.

Those who are trapped in addiction to alcohol or drugs are deserving of help to overcome their problems. That should not mean the current policy of handing them cash as if they are automatically going to spend it on food or clothes for their family rather than their next hit. Instead it may mean a voucher system of benefits which is better controlled. The last thing they need is the welfare state giving them the cash to fuel their addiction when we should be helping them to overcome it.

Those who can work but have no interest in doing so, or knowledge of how to do so, are deserving of an escape route from the trap they find themselves in. Given that some people find themselves the third or fourth generation in their family to live on benefits rather than go to work it is no surprise that so few manage to break the pattern. These groups are deserving too – but not deserving of the money and opportunity to simply carry on like this.

It is frankly wicked that the welfare system effectively makes it easy to continue with that life and – even worse – punishes people for trying to escape it.  Those who are trapped in long-term or even multigenerational unemployment are deserving of a better education system, training to introduce them to a life of work and explain its benefits, access to job opportunities and, crucially, the removal of the penalties for choosing to break the pattern and get a job. We need to be honest and say that yes, in some cases they are deserving of some tough love, too.

Helping people to overcome their challenges, whatever they may be, and get into work is good for them, it’s good for wider society, it’s good for the economy and it’s good for the Exchequer. Unemployment kills people, it impoverishes them economically and in terms of quality of life, it deprives them of hope and a sense of self-worth. The blanket one-size-fits-all benefits system and the barriers it places in the way of those who try to get work has ended up reinforcing that harm for many people. Pernicious attempts by the Archbishop of Canterbury or anyone else to deny that this is a challenge that needs several, targeted solutions are dishonest.

Let’s be honest about the issue – we are all deserving of that.