Tuesday, 15 October 2013

Who advocates for the Poor?

It may surprise you to learn I am not against generous benefits, or even the principle of redistribution.

Much of your wealth or otherwise is down to luck. There are moral and practical reasons for supporting redistribution. The best is based on one simple fact: It's just much, much easier to get rich if you start with wealthy parents, good nutrition, high IQ, an education costing half a million pounds, height above average (if male) good looks (if male or female) and no regional accent. Start with these advantages, and you're most of the way to getting into the top 10% of earners straight out of university, which your parents, of course were able to afford. Of course some have some or none of these advantages and succeed, but very few. Those who succeed support those who don't through redistributive taxes and benefits. This is fair because many of those struggling do so because of bad luck.

There's a utilitarian argument. The poor have a much higher marginal utility for money than the rich. This is the argument for progressive taxation. A pound on benefits matters more to its recipients than a pound on taxes to a higher-rate tax-payer. So society is better off if some money is moved from one to the other.

Finally, if you make sure everyone has enough money to eat and keep a roof over their heads, there's less likelihood they'll pick up pitch forks and re-distribute by force. Think of the benefits bill as insurance against being on the end of a gibbet come the revolution.

So your taxes, about a third of which go to paying working-age benefits, about a third in pensions, and the rest, everything else are part of a decent society in which everyone's helping everyone else. Or they would be if the system wasn't comprehensively broken, failing at all the significant tasks the welfare state is supposed to achieve. The welfare state is supposed to prevent poverty. It is, in fact, its major cause.

The problem is one of incentives, and not just those faced by the poor themselves. It's obvious to anyone who isn't paid handsomely to farm the poor, that for many people, it's simply irrational to work. Once they've paid for taxes, clothes, transport and lunch, they're considerably worse off than they would have been had they stayed in their pyjamas and watched Jeremy Kyle. Why would you take a miserable, boring, unpleasant minimum wage job instead of existing on benefits? The job insecurity at the bottom of the pyramid and the bureaucratic complexity of informing the authorities of a 'change in circumstance' is a further barrier. So when when the low-waged is "let go" after a couple of weeks, he's got to re-apply for Housing benefits, Job-seekers' allowance, Council Tax Benefit, income support and so on, from scratch. He may be genuinely destitute as a result of payments stopped, then restarted again too late, thanks to an abortive effort to "do the right thing". Is it really any wonder so many feel trapped?

So, who benefits from this system? Certainly not those getting the benefits many of whom are comprehensively trapped in a life they wouldn't have chosen. Not the Children of those getting benefits, who learn no other life thanks to the distorted incentives faced by their parents, but in whose name the benefits are paid. Certainly not the people paying the bill, John Q. Taxpayer, who thanks to the system face a sullen and resentful underclass, some of whom spend their non-working lives looking for ways to relieve you of your easily saleable property in order to buy sufficient narcotics to break the tedium for a few hours.

The main benefit of the benefits system accrues to those employed on secure graduate salaries to administer the system. These people are the farmers of the poor. This is not just the civil servants and local government employees who administer the system, but also the charity employees who don't see the homeless and destitute (they outsource this to unpaid volunteers). It's the police who are part of the state-crushing of the spirit of the young who find themselves trapped in this hell. The that the poor exist at all causes fear in the hearts of the affluent, and justifies the need for a police force. The Bureaucracy is an excellent provider of jobs. Which is why none of the solutions suggested by the Left of the political spectrum would ever reduce bureaucacy or police numbers, or the benefits bill. For that would involve firing sub-paying members of Unite or the PCS, and Unite is by far the biggest funder of the Labour party.

The Conservatives, Iain Duncan-Smith especially, are aware of the above. They were just unprepared for the sheer effectiveness of the poor-farmers at defending their state-financed do-gooding jobs. The Tories tried to cut the number of benefits, simplifying the system. They have tried to work on the incentives by reducing withdrawal rates. And they have tried to limit benefits. No-one should be richer out of work than in.

The problem is the Conservatives blamed the poor for responding to incentives quite reasonably. The Left have a nice handy boogey-man to scare their charges into continuing to voting for a machine which is actually enslaving them. The poor are still trapped. Some policies that might have worked are only half-implemented. And life goes on. Unite the Union gets bigger, the bureaucracy gets more opaque.

So now I'm going to sing the praises of another surprising character: Nye Bevan the architect of the welfare state, who saw precisely the outcomes described above. Which he saw benefits as being low and universal, where possible, and contributory where not. Basically, everyone got a bit, and if you needed more, you had to have paid into the system at some point. Worklessness for life was simply not an option, so it didn't really happen. Bevan would have been horrified at what his system has become.

People need to advocate for the poor. What do they actually need? Options. And what does the system remove from them? Options. They cannot choose where they live, whether they prioritise transport or housing, food or clothing. They are given a house. Their housing benefit bill, incidentally distorts the housing market for everyone else too. They are made a pawn in someone elses game which involves stats and targets and certainly not the aspriartions of a human being at the bottom of the pyramid.

The only way we can ensure a decent standard of living for everyone is to provide a basic income below which it has been decided that no-one can fall, in perpetuity, for life. No work done will see that basic income withdrawn. So there's no disincentive to find what work is available. In return, we scrap the minimum wage, which prevents the poor and low-skilled having any means to improve their lot through effort. We stop taxing income and profits altogether reducing the costs of hiring people. We replace income tax, NI, council tax and corporation tax with a proper land value tax and a few pigou taxes. This means the poor will be able to escape taxation almost entirely, if they wish to live far away. And we stop demanding the poor account for their choices to people who want to help, but actually trap them in a bureaucratic hell.

The losers from this policy: The tens of thousands of civil servants who administer the thousands of pages of tax-rules. The hundreds of thousands of civil servants and local government employees who administer the benefits system (some of whom will be needed to administer a LVT). The winners are the poor, who will have real options once again and won't have to submit to the whim of the bureaucrat or fill in endless forms. This will also give options to the rest of us, and hopefully make the country a much, much better place to live.

The poor have the same Hierarchy of needs as the affluent. Would a system which didn't seek to crush their self-actualisation and didn't put barriers in the way of the social and human contact be better, not just for the recipients, but all the rest of us too? The problem is the system serves best those employed by it. It gives them a secure, well-paid job, and power over fellow humans. The poor deserve better. With options, you can bet few would choose the trap they're currently in. By freeing human talents from the trap, we're all wealthier. Give the poor what they need. And then leave them alone.

More redistribution. Less Government.


Jon said...

Lovely idea. Unfortunately the minimum benefit would also be legally available to 300m people from the EU which just might make it a little impractical.

Visc said...

The poor farmers will include many middle class people who would self identify with the 'bash the lazy poor' wing of the spectrum.

Just think of buy to let - would this be anywhere near as lucrative without the housing benefit price floor?

However I think the conclusion of our ideas leaad to far more radical reforms than attempted.

Jackart said...

Jon. Not necessarily. The total amount of the CBA would be low: £700 PCM or so. The point is without minimum wages, payroll or income taxes, it wouldn't matter. most people would be net contributors. Everyone would be doing some work.

Luke said...

Have you done away with housing benefit as well?

Does anyone know the answer to Jon's point for sure? ( I suspect he's right, but I can see that £700 PCM, esp w/o housing benefit, is not a great temptation to idleness.)

Pigou taxes - problem is that if they work, tend to be declining source.

Sorry to quibble. Largely agree. I suspect what I gained in CBA I'd lose in land tax....

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