Thursday 16 July 2009

Chart 2.1

Shamelessly pinched from Mark's Any:


What the chart shows is that if an unemployed person finds a minimum wage job and works 50 hours a week (isn't that against the law anyway? Hmm.), he or she is about £50 a week better off than on the dole, which is why upwards of five million people just don't bother.

Now, is it just me, or wouldn't it make more sense to scrap Housing Benefit, give every legally resident adult £60 (or whatever) per week cash and a BR code for PAYE purposes (i.e. no entitlement to personal allowance). Assuming a flat-tax rate (i.e. income tax and Employee's National Insurance get rolled into one) of 31% to get the ball rolling, a 25-year old who's currently unemployed would only have to work about 20 hours per week to end up better off than they are/would be now.

If the recipient is e.g. a student or a married mum, well so be it, it obviates the need for a whole parallel universe of means-tested student grants and loans and Statutory Maternity Pay (or transferable married couple's allowance or whatever the Tories are currently dreaming up), and if the recipient already has a job, it's much the same as having a £10,000 tax-free personal allowance (at this level of annual income, the weekly tax paid and the £60 benefit would more or less net off).

And last but not least, it'd make life easier for employers, because PAYE would be a flat 31% (or whatever) of gross wages with no need to faff about with personal allowances and so on. We could even go one better than that and scrap Employer's NIC and increase corporation tax to a flat 31% as well ...

Hey, once you start simplifying, the possibilities are endless - if you're with me so far, we could then abandon the distinction between 'corporation tax' on retained profits and 'PAYE' on wages and salaries paid out, and tax companies as if they were partnerships, with automatic loss relief if salaries exceed gross profits...

What's not to like?

8 comments:

James Higham said...

Now, is it just me, or wouldn't it make more sense to scrap Housing Benefit?

It depends whom you scrap it for. Blanket rules don't cut it here. If it is given to income based JSkrs, then by definition, they don't have the income nor the capital.

Everyone's calling for these people to be thrown off that or this but of course it doesn't include them. We're very good at making rules for others - that's the socialist way.

The country first needs to start producing again and getting people back into work. Then start throwing people off things because they then have a chance of finding employment and if they don't, then there's a prima facie case for cutting them adrift.

But Brown has created this 'dole as a way of life' syndrome and has also created an inimical environement for starting up business.

Mark Wadsworth said...

JH, fair comment, but there is an 80% overlap between HB/CTB claimants and social tenants anyway.

What is the point in two branches of The State (local council housing dept/Housing Association and C Tax collection department) asking for rent/C Tax that people can't afford and then having another department (DWP) paying [most of] the rent/C Tax on their behalf?

Surely this would be a far better solution? Plus that would 'free up' a hundred thousand paper pushers at either end.

And as to getting HB claimants out of privately-owned property and into social housing, see my six-step plan at comment 2 here.

Lola said...

What increasingly makes me despair is that I cannot see any politician (least of all the Boy George) with the foresight and guts to effect the really radical changes needed. The tragedy is that once this was all done and had been working for five or so years there is absolutely no way that any lefty government would ever get the mandate to undo it all. It'd be game over for tax 'n spend.

The Final Solution that would completely and utterly do for them all would be to abandon the state monopoly on the manufacture and issue of money. Privatise that and watch the UK become epically wealthy. You'd have to ration the number of rich herberts clamouring to get in and bring their wealth with them. Mind you it's piss of the Yank and Europe. Good.

Mark Wadsworth said...

Lola, I'm not sure about this bit:

"... abandon the state monopoly on the manufacture and issue of money"

It is only about a tenth of all 'money' that is issued or backed by the state (i.e. coins and notes, which is negligible, and government bonds, which in turn are only small fraction as much as existing corporate and bank bonds).

All the rest of it is created by private transactions - whether sales on credit; corporate or bank bond issues; or bank loans (whereby the recipient of the funds deposits the proceeds straight back in the bank).

So as far as I can see, we abandoned the 'state monopoly' long ago, if we ever had it in the first place.

Lola said...

What I mean is that there is an absolute correlation between state interference in money - it's price and its quantity/quality - and booms and busts. In other words markets are better at deciding the price of money than governments. Furthermore if you liberalise banking so that they can make and issue currency they are likely to start marketing themselves on safety rather than rate.

Basically I have no faith at all in any government anywhere ever being disciplined enough to run genuine sound money. They will always get tempted.

At the same time liberalising money might also encourage governemnts to stop borrowing shed loads of money. This must be a good thing.

There are arguments that banks that issue money would have to hold Gold as the guarantor of their safety and that this would result in windfall profits for gold producers. I am not sure about this as if you were a bank issuing money guaranteed by gold if the price of gold rose so would the price / value of your currency.

I s'pose that I am just getting more and more anti government in everything. As mostly they screw it up. And they do this with money and credit on a regular basis.


On the creation of credit point I am not at all sure that this is down to the retail banks in its entirity. If retail banks made profits on being secure and safe rather than rate and innovation they may not be so inclined to create credit which in any event could be controlled by sound money policies on broad money supply.

Look, I am still working on this and I do not pretend that this is a fully formed policy. Its basis is that laissez-faire is a much sounder system (it is not a 'system' of course) than statist bureaucratism.

Give me time.

Mark Wadsworth said...

L, s long as your policy includes "the government will pay off all public debts over the next ten years and never borrow again after that" and "we will disband the Bank of England Monetary Policy Committee", then the rest of it will fall into place.

Henry North London 2.0 said...

Flat taxes and low taxes actually make sense and more economic sense than having a 50% rate for those who earn over 150000 People will just leave

Lola said...

Those points go without saying. In cat they are fundamentally implied in my proposals. I would target debt repayment in five years myself - one parliament. And then work out how to stop a subsequent government getting us in hock again. Time of total war excepted of course.