Some figures on the original (basic rate only) transferable allowance to show why

IFS manifesto analysis when the policy was announced.
* only 35% of the families who gain from the policy have children, and only 17% have children aged under 5.
* pensioner families make up more than a third of the beneficiaries and receive 31% of the gains.

My own estimates, from linking IFS data to national statistics on family structure (but having to use 2001 data): 19% of families with dependent children would be eligible for transferable allowance as described in Tory manifesto (and only 31% of married couples with dependent children).

***

In 2001, there were 7.2 million families with children, of whom 4,559,060 were married couple families and 2.6 million were not.
- 814,939 were cohabiting couple families, 1,664,081 lone mother families and 182,514 lone father families. (The married couple and cohabiting figures each include over 300,000 stepfamilies within those categories).

If we make the simplifying assumption of using those 2001 figures as the latest full set I know about, then about 1.4 million (19.5%) of these 7.2 million familes with children would benefit from the tax allowance – only around a third of the married couple families with children, and none of the others. The precise numbers will be different but the broad shape and point will be very similar.

***

Looking at all married couples (with children or not), there are 12.3 million married couples in the UK:

Four million couples would benefit, a third of all married couples, gaining £150.

5.8 million would not benefit because they are both already taxpayers (so there is no unused tax allowance to transfer);

1.6 million would not benefit because neither are taxpayers (meaning that there is no benefit to either partner from a higher personal allowance);

0.8 million would not benefit because, although only one partner is a taxpayer, they are a higher-rate taxpayer.

If including this group in the £150 policy is the answer, it will be interesting to find out what the question was supposed to be in the first place.

You can tell it’s rank, out-of-date ideology driving this cock up (as well as not a little incompetence and the usual Tory hubris).

HMRC (via Richard Murphy) shows that tuppence on the higher rate would have yielded £1.5bn.

The response? Some squealing, certainly.

But no mathematical, social and bureaucratic absurdities. And the fuss would not have been as acute and would have died away quickly – as it did with the introduction of the 50p rate.

So why was this easy, simple solution not considered? Pure boneheaded rightwing ideology, that’s why.

It really is a mess, isn’t it? But there’s nowhere they can go. Regardless of the specific ins and outs of the marriage tax break, it’s inescapable that if they compensate the losers from the CB move to any significant degree, they wipe out the contribution it was supposed to make to deficit reduction.

There’s going to be much more of this as the dear old ‘Angry Middle’ wake up to the fact that the bulk of Government spending – even welfare spending – isn’t targeted at an underclass of ‘scroungers’, but ploughed into universal services and benefits relied on by everybody from the top of society to the bottom.

(Which is why this much-trumpeted cap on benefits, ending the scourge of scroungers living like kings at the taxpayers’ expense, will save a grand total of around £250 million a year – equivalent to about 0.2% of spending on pensions. Yes, dear Mail reader: payments to decent hardworking folk who’ve paid into the system all their lives and deserve dignity in their old age cost you 500 times as much as excessive payments to workshy layabouts. Gosh – maybe the Tories *won’t* be able to save £83 billion pounds just by cracking down on Labour’s out-of-control handouts!)

@ 2

So why was this easy, simple solution not considered? Pure boneheaded rightwing ideology, that’s why.

Oh dear, we’re heading into Laffer curve territory. I think I’ll leave it to Mr Worstall to set you straight on that one.

Fact is that this child benefit policy wasn’t so much ideological as tactical. At first blush it looked like a quick way of demonstrating that the cuts are not falling only on the welfare claiming classes. Something to show that “we’re all innit together” has substance.

My view is that the time has come to stop worrying about whether measures are “regressive” or “progressive”. The progressives have been given their sop. But that’s where irritating the middle income earners should stop.

It was,after all, Labour’s core vote, not the middle class, which must take chief responsibility for electing the Labour government which ruined the public finances. And it should therefore be traditional Labour voters who take responsibility by shouldering the bulk of the impact of the cuts.

Sunder,

Just to be clear, what is the ideology you think is at work? Do you think that this is a Tory tactic, to make more things means tested and fewer things universal, in order to undermine support for the welfare state, in pursuit of the ideological aim of ultimately reducing the tax burden on the wealthy and reducing support given to the poor? Or do you have something else in mind?

overnight I have been thinking 2 things …

1. how sure are we that means testing benefits (as opposed to universal benefits) undermines support for, and ultimately lowers quality/quantity of, all benefits? Does this effect vary with whether we are talking about services in kind (NHS) or cash handouts? It’s conceivable some people might be more willing to support cash handouts if they are means tested.

2. I owe steveb something of an apology – once I start thinking about the welfare state as encompassing the NHS, education, and perhaps pensions, I agree with the importance of not creating “divisions” so that these things become services for the poor grudgingly paid for by the rich. For lots of reasons, I think it’s better to have these things being services for all, provided at a standard demanded by all.

however, whether the same logic applies to cash handouts, I’m not sure.

“It was,after all, Labour’s core vote, not the middle class, which must take chief responsibility for electing the Labour government which ruined the public finances. And it should therefore be traditional Labour voters who take responsibility by shouldering the bulk of the impact of the cuts.”

Hmmmm….

It was, after all, The Conservatives core vote, not the middle class [whatever the hell that is...?], which must take chief responsibility for electing the Conservative governments [Thatcher and Major] which ruined the public services and destroyed Britain’s industrial base. And it should therefore be traditional Conservative voters who take responsibility by paying higher taxes to pay for the cost of fixing it.

Flowerpower, you really must try harder.

luisenrique:

1. how sure are we that means testing benefits (as opposed to universal benefits) undermines support for, and ultimately lowers quality/quantity of, all benefits?

One indicator might be take-up as a percentage of those eligible for both kids of benefit (which I think is higher for universal benefits than for means tested ones).

Luis @5

Yes, I think it is as you summarise it, certainly for anybody pursuing a ‘smaller state is more freedom’ political mission from the liberal/libertarian right.

Its a poltiical strategy of trying to align the interests of the middle and the top against the ‘scroungers’ at the bottom (Thatcher/Reagan) to make a smaller state palatable or possible

vs

a progressive universalism strategy of trying to align the interests of the bottom and middle thirds, combining a contributory prudential enlightened self-interest across society with a “more equal society is better for us all” appeal, including at the top.

Note that right-wing governments only more rarely attack the means-tested subsistence benefits, because that is welfare in its place as a residual safety net. What is of concern is the extension of say SureStart, childcare, and other services and benefits where public spending becomes more popular than taxation is unpopular.

“a progressive universalism strategy of trying to align the interests of the bottom and middle thirds, combining a contributory prudential enlightened self-interest across society with a “more equal society is better for us all” appeal, including at the top.”

Otherwise known as a cynical strategy to buy middle class support for the welfare state even if it means higher taxes.

“Oh dear, we’re heading into Laffer curve territory. I think I’ll leave it to Mr Worstall to set you straight on that one.”

If you think we are heading into Laffer Curve territory, presumably you have calculated the optimal tax rate to maximise revenue for people earning over £44,000, and found that raising taxes by 1% would reduce revenue. Could you share with us (and the government, who would be very interested) what the optimal rate is?

Paying rich people benefits they don’t need in order to foster some bogus notion of solidarity with the poor looks more ‘ideological’ to me.

5
Thank you Luis, for your info I wasn’t trying to be sanctimonious to you.

Imo, the key to this debate is the term ‘middle-class’, it’s amazing how many people I know who identify themselves with that label but who are, in fact, large consumers of the welfare state. ‘The other’ is the ‘welfare scrounger’ who is likely to be the least likely consumer – young males, who are on benefits and who live in the parental home, but are highly visible, the ones whose curtains are closed at 9am in the morning.
11
So which ‘rich people’ are you alluding to?, people living in the South East on £44k are far worse-off than in other areas whereby the family income is around £20k, those on benefits in expensive areas are significantly worse-off than in cheaper areas.
Making simplistic statements about equally simplistic divisions is so representative of the right.

Luis -

“whether the same logic applies to cash handouts, I’m not sure.”

But the state pension *is* a cash handout – and broadly similar to Child Benefit in that it consists of a non-means-tested, four-figure sum paid to people during a 20-year-ish period of their lives during which their incomes are likely to be stretched.

Shatterface -

“Paying rich people benefits they don’t need in order to foster some bogus notion of solidarity with the poor”

Do you think the notion is equally bogus when applied to other universal benefits and services, like pensions or the NHS?

I know I keep banging on about this, but even if you ignore the evidence on this, surely it’s intuitively obvious that in the long term, the poor are going to get better benefits and services if the better-off are also entitled to those same benefits and services – because that way the Daily Mail brigade as well as bleeding-heart lefties wil fight tooth and nail to defend them. Why is it that the Tories can get away with slashing housing benefit and income support, but don’t dare cut spending *at all* on pensions or the NHS? Because pensions and the NHS are universal entitlements; they’re not just ‘someone else’s problem’.

(I keep waiting for someone to come out and say that just as we shouldn’t be paying CB to people who don’t need it, we shouldn’t be paying pensions to people who don’t need them either. No one has yet taken that perfectly logical step – maybe because they can imagine the sort of shitty JSA-level pensions we’d have in 50 years’ time if we were to take that step.)

G.O.

yes, although qualified with a ‘perhaps’, pension shouldn’t have been there in that sentence.

I guess the argument with cash handouts is that if wealthy people are paying taxes only to receive the money back in handouts, they will want to cash handouts to be generous. Actually, of course this is about the middle classes, not the wealthiest, otherwise it makes no sense to want higher handouts only to then pay more taxes to fund them – it works only if the middle classes know there are wealthier people above them being taxed at a higher rate thereby contributing more toward the handouts. So without sufficiently progressive taxation, the arguments in favour of univesrsal handouts lose power.

with services there’s an additional dimension – quality – educated and better off service users are probably more able to drive quality improvements (which may amount to efficiency improvements). And this isn’t just about the middle classes – the upper third of the income distribution use the NHS a lot too.

4 Flowerpower

Oh dear, we’re heading into Laffer curve territory.

Laffer Curve? Cue huge burst of derisive laughter.

Oh dear, Righties still believe in that little fantasy do they?

Care to show where we are on that curve FP? Or Worstall for that matter.

oh god not the laffer curve again.

BenM

I’m sure it’ll have no impact on you, but here are recent estimates of laffer curves for EU and US. The authors find that Demark and Sweden are on the wrong side of the curve when it comes to capital taxes, but everybody else is below the turning point for other taxes.

alienfromzog @ 6

…..the Conservative governments [Thatcher and Major] which ruined the public services and destroyed Britain’s industrial base.

Sadly your little jeu d’ésprit rests shakily upon a pair of false premises.

Manufacturing grew (in absolute terms) enormously through the Thatcher/Major periods. By the end of the Major government gross value added in manufacturing was somewhere between 25% and 30% up on its figure when Thatcher came in.

As for services – worth remembering just what the NHS was like during the 70s, before the 70% real terms increase in funding under the Tories.

Dear oh dear, what were they telling us when they were in opposition? oh yes, ‘joined up govt.’ But the Chancellor did not even bother to tell the work and pensions secretary.

Never mind tories not talking to Lie Dems , the tories are not even talking to themselves. But this is hardly surprising since Call me Dave and Pip Squeak have never done anything in their lives except go hunting and fishing.

“We are all in this together” yea right!

Hi sally,

A request from the LibCon team. We would be v v grateful if in addition to your comments here, you would go to http://www.twitter.com and set yourself up with an account. You will find that it is an excellent forum for denouncing right wing people

19

Is this a wind up?

Isn’t it just plain barmy to be paying benefits to someone earning 45k? Even if we didn’t have a vast deficit to pay back.

Shouldn’t this money be spent on supporting poorer children to obtain a good education?

Any other argument is merely playing ideological politics surely?

“Is this a wind up?”

No. It would genuinely be ace. I think it was SohoPolitico’s idea.

charlie

no – there are two ways to make the tax/benefits system progressive, on the expenditure side (targeting, means testing) and on the tax side (income tax bands, land taxes, capital gains etc.) and there are good reasons (rehearsed mainly on other thread on this topic) to put the (most) progressiveness on the tax side and leave (some) expenditures universal.

so don’t think of it has paying benefits to somebody earning over £45k, think of it as hitting them with higher taxes then returning some of it to them.

not that you’ll see the argument presented in this fashion in newspapers or hear it from politicians

Indeed it was:

http://twitter.com/SohoPolitico/status/26538403377

Go on Sally, you’re needed!

I am all for sally twittering.

Can’t wait to see who is next denounced as a brownshirt.

Luis -

“I guess the argument with cash handouts is that if wealthy people are paying taxes only to receive the money back in handouts, they will want to cash handouts to be generous.”

Good! If these handouts are things mainly relied on by worse-off people, like CB and the state pension, they *should* be generous.

“Actually, of course this is about the middle classes, not the wealthiest, otherwise it makes no sense to want higher handouts only to then pay more taxes to fund them – it works only if the middle classes know there are wealthier people above them being taxed at a higher rate thereby contributing more toward the handouts.”

Well… wealthy individuals aren’t actively going to call to pay an extra £1000 in taxes in order to get £500 back, no. But in general, surely they’ll be happier to pay into the system if they feel they’re getting *something* back – even if it’s less than they pay in? (It’s not so hard to accept that you have to pay thousands for other people’s kids and healthcare and pensions if you know that you at least have the same entitlements.)

“So without sufficiently progressive taxation, the arguments in favour of univesrsal handouts lose power.”

Absolutely – at the end of the day we shouldn’t be wasting money on the wealthy. But we should be using taxation to claw back the cost of the services & benefits they receive – not restricting their entitlement to those services and benefits.

Flowerpower

“Oh dear, we’re heading into Laffer curve territory. I think I’ll leave it to Mr Worstall to set you straight on that one.”

This does you no credit. It suggests you’ve heard the term Laffer Curve used in discussions about raising taxes, you don’t know what it is but you’re too lazy to look it up, so you ask someone to do the work for you.

I have never before come across such breathtaking arrogance, ignorance and stupidity summed up in one sentence.

[13] “Do you think the notion is equally bogus when applied to other universal benefits and services, like pensions or the NHS” – entitlement to healthcare is, or should be based on ‘clinical need’ which in theory is independently assessed by a medic who has no financial incentive to either provide or decline treatment.

It has hard to see any meaningful ‘need’ if the family income is £100k?

21
How far do you think £45k would go for a family of four living in the south east or most London boroughs? School fees and health insurance would take out a significant lump. And while we’re at it, how would we deal with those people who want emergency medical treatment but earn too much to be part of the NHS ambulance/blood services
This might sound ideological to you but to me it seems downright practical.

Cherub @ 27

Dearest Cherub, I am so sorry that my jaunty tone came over as laziness or arrogance. Fact is I happen to know Mr Worstall has been giving serious consideration in recent days as to precisely where that Laffer curve tipping point is and has been examining evidence from the US. I have a gut feeling that just bungng an extra 2p onto marginal rates wouldn’t bring home the bacon, but mr W will have more than just a gut feeling I’ll warrant.

28

” entitlement to healthcare is, or should be based on ‘clinical need’ which in theory is independently assessed by a medic who has no financial incentive to either provide or decline treatment.

It has hard to see any meaningful ‘need’ if the family income is £100k?”

Sorry, I’m not sure what you’re saying/asking here?

I was making the point that well-off people don’t ‘need’ the state to make a financial contribution towards the cost of their healthcare or pension provision any more than they ‘need’ it to make a contribution towards the cost of raising their children; they can afford private health insurance and pensions. But we’re all better off keeping such services & benefits universal, because “services for the poor will always be poor services”.

‘So which ‘rich people’ are you alluding to?, people living in the South East on £44k are far worse-off than in other areas whereby the family income is around £20k, those on benefits in expensive areas are significantly worse-off than in cheaper areas.’

Well, duh! It costs more to live in expensive areas than cheeper ones -, well, fuck me sideways!

But for a family on £80,000 an extra £1,000 in Child Benefit constitutes an EIGHTIETH of their income so they are hardly ‘on benefits’ in the sense of someone living ‘on benefits’ of £60 a week for whom an extra £20 is a massive contribution.

It’s frankly insulting to those for whom benefits are a lifeline to cry poverty when you spend more on museli than they spend on school uniforms.

Making simplistic statements about equally simplistic divisions is so representative of the right.’

You upped from SINGLE PEOPLE on 44k to FAMILIES

[31] well apart from anything else perhaps you under estimate just HOW expensive health care can be (in certain circumstances), even if you have got a few bob in your pocket.

The distinction in my mind revolves around the concept of need – if you have cancer, or a significant brain injury (say) you are likely to need treatment – but if you are a child in a wealthy home why do you need poor people to subsidise your child’s upbringing?

As I mention on a previous thread I feel slightly guilty (even though I’m not a catholic) that the tax payer has contributed to my sproggs because their lives would have been just as fulfilled without the extra bit of dosh each week.

Flowerpower -

I think Tim suggested in another thread that the revenue-maximising rate was around 50p; I certainly don’t see any reason to think it would be as low as 40p or 41p, and therefore that a 42p tax rate wouldn’t raise extra revenue.

In any case, the CB cut surely has the same sort of effect as a steep tax rise in terms of disincentivising extra work & incentivising avoidance among many of those those hit by it, since they’ll be desperate to ensure that their tax return shows a figure under £44,000 in order to escape effective marginal tax rates that might be far higher than 42%. (Earn a few hundred pounds over the threshold and you could easily face a marginal rate of more like 420%; a few thousand and you might still be looking at 50% plus).

In fact I’d bet good money that a simple, modest tax rise would be a *more* efficient way to maximise revenue than this CB cut. No-one is going to deliberately take pay cuts, fiddle their taxes or leave the country to dodge extra taxes of a couple of hundred quid; but they might to dodge a CB cut of several thousand.

33

“if you have cancer, or a significant brain injury (say) you are likely to need treatment – but if you are a child in a wealthy home why do you need poor people to subsidise your child’s upbringing?”

OK, I see the distinction, and I confess I don’t know what comprehensive private health insurance would cost. But there must be some level of income – whether it’s 50k or 100k – above which people could comfortably afford excellent private healthcare, and so don’t strictly ‘need’ to rely on publicly-funded healthcare.

So you could, in the name of ‘fairness’, suggest that all people who *can* afford private healthcare should be required to take it up, and only those who *can’t* afford it should be entitled to use the NHS.

I think that would be a terrible mistake, but it’s a logical enough step once you embrace the idea that core welfare state benefits and services should be targetted at those who really need them rather than remaining universal.

@ 35 – “above which people could comfortably afford excellent private healthcare, and so don’t strictly ‘need’ to rely on publicly-funded healthcare.”

It’s a very high level of income indeed. So high that you wouldn’t bother with insurance, you’d just pay the bills. Problem is private insurance won’t cover anything that is chronic or long term, or mental illness, or drug/alcohol related health issues. It’s fine if you have an ingrowing toenail and want a room with a carpet and some pot plants, but any real illness, forget it.

‘I think that would be a terrible mistake, but it’s a logical enough step once you embrace the idea that core welfare state benefits and services should be targetted at those who really need them rather than remaining universal.’

It’s not logical at all unless you think that everyone should get Jobseeker Allowance irrespective of whether they have a job or not, Incapacity Benefit whether they are disabled or not, etc.

@30 Flowerpower

I doubt that any Laffer Curve arrived upon by using US statistics would be particularly relevant to the UK. It is, after all, an empirical device and will be influenced by social and other factors.

I’m afraid I couldn’t gain access to the paper Luis Enrique linked to, I would have been interested to see how the curves were arrived at. Are people disincentivised and avoiding taxes in Sweden and Denmark? They are socially quite different from the UK and there may be wider benefits gained by all that would theoretically influence people and change the curve.

Just for the record here, would those who oppose these cuts – which are being carried out to balance the budget – still oppose cuts to wealthy families if their money transferred directly into the hands of poorer parents?

If every £20 taken from a high earner ended up with an unemployed single parent would you still oppose this on the ‘principled’ grounds that it undermines ‘universality’?

Or is your objection that it is being done just to *save* money rather than *redistribute* it?

[35] “I think that would be a terrible mistake, but it’s a logical enough step once you embrace the idea that core welfare state benefits and services should be targetted at those who really need them rather than remaining universal” – such developments (targeting need) is inevitable given the current financial climate?

In fact, Norm tell us that our collective debt has finally tipped the trillion mark;
http://www.normanlamb.libdems.org.uk/news/000101/british_debt_reaches_one_trillion_pounds.html
Scary stuff, eh?

Now returning to child benefit – can anybody explain to me why the poor should subsidise D-Cam’s children, for example, since this benefit will have virtually zero effect on their quality of life?
To my mind this is a different kettle of fish to suggesting that need should not remain universal – I guess I’m saying no such needs amongst certain privileged groups.

On the other hand the rich already pay MORE toward health via taxation (unless you are a skilled tax avoider) so it would seem unreasonable not to mention professionally unethical to with hold services once a clinical need has been established.

Perhaps a key problems is that these nuances can be easily manipulated for certain political ends once in the hands of those driven by less high minded principles – and for that reason alone I share some of your concerns about tampering with this benefit?

“Liberal Conspiracy? More like Brownshirt Conspiracy”

sally’s rants need no more than 140 characters! (awaiting my brownshirt slur any moment now)

Luis

‘Progressive’? What is the cost of the bureucracy attached to taxing someone and then paying them it back. How can that be progressive – it gives the word a dirty name!

If someone is earning 50k pa – they will take home 35k net. They will have paid 15k tax/NICs. If they have 2 kids you then give them 2k pa.

Why not either
a) tax them less and let them decide how to spend their earnings
b) not pay someone on 50k child benefit – keep the 2k and put it towards the education budget (etc).

Either way – cuts out the bureaucratic farce of taxing them and then giving them some back.

Progress surely? Benefits should be our insurance policy for when/if we fall on hard times – through sickness/unemployment etc. Not as a top up for a good salary.

29 steveb

Not as practical as not taxing you in the first place surely?

“‘Progressive’? What is the cost of the bureucracy attached to taxing someone and then paying them it back.”

It actually costs less in bureaucracy to tax everyone and then give them some money back in universal benefits than it does to have lower taxes and a complicated system for assessing that some people should get benefits and other people shouldn’t.

32
Well I was just saying, from your comments it appeared that you did not appreciate the fact.
So when is a benefit not a benefit? when people are earning over £80k pa, but isn’t this purely semantics? And this is where the problem lies, most of the Daily Fail readers, when hearing about people on welfare benefits do not consider that they are. It doesn’t really fit into the ‘middle-Englander’ mould. And £44k pa, when you are the only wage-earner for a family of four is very little in the SE and London area.
39
Hyperthetical question because the state already pays out £20billion pa to subsidize the low paid, I meant employers, silly slip of the fingers.
42
So when you become ill you pay to visit the doctor or if you need an emergency ambulance and medical treatment, providing they take you and trust to payment.
And I suppose you have already got private insurance in place and you didn’t have an existing ailment when you took it out.

“that would be an utter capitulation and abandonment of even the mildest social democratic principles”

Erm, not really. Does social democracy mean all benefits have to be universal? If the cut was modified to stop a couple earning two salaries of £43k getting child benefit whilst the single parent on £44k loses it, then I think most people would regard it as common sense, hard times or not.

People earning above the average DO. NOT. NEED. £20. EXTRA. PER. WEEK.

“from each according to his ability, to each according to his NEED”

NEED.

Key word there.

I am yet to be convinced that any reduction in universalism leads to people wanting to scrap the benefit altogether. If anything, the headlines of the right wing rags this week show that people want to keep it.

Shatterface –

“It’s not logical at all unless you think that everyone should get Jobseeker Allowance irrespective of whether they have a job or not, Incapacity Benefit whether they are disabled or not, etc.”

But there’s a clear difference between thinking that anyone who’s ill should get NHS treatment, anyone who’s old should get a state pension, and anyone who has children should get child benefit, and thinking that working people should get unemployment benefit, healthy people should get chemotherapy, and six-year-olds should get old age pensions!

On the issue of redistribution vs savings: I’m thoroughly comfortable both with the idea of redistributing money from the better-off to the worse-off, and with the idea of taking money from the better-off to help close the deficit. It’s just that I think we should do it by raising their taxes rather than cutting their entitlement to universal benefits and services – it’s fairer, simpler, and helps prevent those benefits and services turning into second-rate ‘safety nets’ for the poor.

There’s a great article here on why universalism matters and why this CB cut is a strategic step towards a US-style ‘safety net’ system:

http://www.guardian.co.uk/commentisfree/2010/oct/05/taxandspending-toryconference

We can’t let the Tories win the argument on this one.

blanco libre -

“I am yet to be convinced that any reduction in universalism leads to people wanting to scrap the benefit altogether. If anything, the headlines of the right wing rags this week show that people want to keep it.”

Sorry, but this makes no sense. The right wing rags are defending it *because it’s universal*.

If it was a means-tested benefit rewarding ‘scroungers’ for irresponsible breeding but not received by ‘hard-working middle class families’, the Mail would be cheering the Tories on. In ten or twenty years’ time, when that’s what CB has become in their eyes, maybe they will be.

@Sunder, OP: “The government has a lot of questions to answer about how it might handle proposals which will clearly have many unintended consequences – introducing the highest marginal tax rates yet seen, disincentivising marriage by introducing big couple penalties, and all sorts of other things the government are meant to against.”

I think that the Conservatives are thinking about how it responds to the unintended consequences of a policy that was designed to grab conference time headlines. I suspect it will be like Labour’s abolition of 10% income tax. And that Liberals are laughing behind their hands.

But taking the role of devil’s advocate, I’ll present a defence for the proposal (but not for implementation). Perhaps a clever somebody suggested this policy knowing that it would be impossible to deliver. Reversing or modifying the proposal gives the coalition an opportunity to appear responsive to public opinion. Which is an aside, given that government will have many other opportunities to amend policy according to popularity, so I will not pursue it further.

One of the arguments presented for the child benefit policy is the simplicity of implementation; it does not require major tweaks to tax and benefit computer systems to enact. The strongest argument against (IMHO) is the effective marginal tax rate. A smart wonk might think that those two arguments together send a very loud signal: that tax and benefit are so intertwined that it is impossible to modify delivery of any benefit without causing pain.

Clawing child benefit back from the wealthy is a popular ambition, except for those who believe in absolute universality of entitlement. If it were possible to modify the entitlement criteria for child benefit according to domestic income, it would be a popular policy. The mechanisms for giving away and collecting money, however, deny a reform that might be popular and fair.

But as a signalling exercise, this policy is useful. Well reasoned opposition to child benefit reform benefits government by informing people about the tax/benefit pickle that we are in. It allows the government to suggest more mainstream reforms for benefits. It gives government the opportunity to unravel tax and benefit. It ties in with Duncan Smith’s proposals to make it more beneficial to work than to be unemployed.

Gosh, this is interesting Steve:

“people living in the South East on £44k are far worse-off than in other areas whereby the family income is around £20k, those on benefits in expensive areas are significantly worse-off than in cheaper areas.
Making simplistic statements about equally simplistic divisions is so representative of the right.”

So you agree then, we need to abandon/abolish national pay scales?

For those in the SE on a, just as an example, nurse’s wages, are far worse off than, say, just as an example, someone on the same nurse’s wages in Macclesfield.

So you agree then, nurse’s wages should not be set nationally?

@50 Tim Worstall: “For those in the SE on a, just as an example, nurse’s wages, are far worse off than, say, just as an example, someone on the same nurse’s wages in Macclesfield.”

One of Eddie George’s pronouncements sticks in my brain: on the lines of “The Bank of England cannot set separate interest rates for the north east”. The differences of regional economies thus stated convinced me that UK membership of the EU region was daft; or more concisely, the EU region is a daft idea.

So whilst I believe that regional economic difference is significant, I have reservations about how much we meddle within the UK. I believe that it is time to look at “London Weighting” and redefine the geographical boundaries. I don’t believe that locally negotiated wages in the public sector are economically efficient but I am open to argument according to real, local circumstances.

Doh, clarifying myself. For “EU region”, qualify that with “common currency and bank rates”.

“I don’t believe that locally negotiated wages in the public sector are economically efficient but I am open to argument according to real, local circumstances.”

One thing we do know is that national pay rates for nurses kills poeple: in high wage areas.

You can see the thesis. If pay is the same for a nurse in a high cost (ie, high wage) area as it is in a low cost area then a nurse will have a better standard of living being a nurse in a low cost area. We would therefore project that there will be shortages of nurses in high cost areas.

This was tested by looking at survival rates from cardiac infarcts. Survival rates were worse in high cost (ie, high income) areas than in low: very much not the usual relationship between socio economic factors and health that you expect.

The cause was identified as high cost areas having to rely much more on agency staff (which is one way for a nurse to boost their income above the national pay scale) and the discontinuity of care this leads to.

The conclusion was unambiguous: national pay scales kill people.