“Nobody could accuse the coalition government of a slow start to the year,” says The Sunday Times. Last Monday the changes to child benefit came into force and the government published its mid-term review, confirming its plans to introduce Iain Duncan Smith’s universal credit. On Tuesday the House of Commons voted on plans to restrict rises in most working-age benefits to 1% annually over the next three years.
It is estimated that the Welfare Benefits Up-rating Bill, which passed its second reading despite opposition by Labour and a handful of Liberal Democrat MPs, will save £1.9bn over five years. By contrast, last year’s decision to increase benefits by 5.2% will cost taxpayers £8.7bn over the same period, says James Kirkup in The Daily Telegraph.
According to the Institute for Fiscal Studies (IFS), the freeze means that an estimated 2.5 million out of 2.8 million non-working households will see their welfare payments reduced by an average of around £215 a year in 2015-6 while seven million of the 14.1 million working-age households will lose an average of £165 a year, says Roland Watson in The Times.
Labour made much of the fact that 60% of those affected are in work, leading both sides to caricature the issue as ‘scroungers versus strivers’. However, as the IFS pointed out, a much higher percentage of non-working households lose out (90%) and by more.
It’s all very confusing, says Hugo Rifkind, also in The Times. If Labour doesn’t like the fact that 60% of the cuts hit working families then presumably it would think it better if 60% of the cuts hit non-working families. So is modern socialism about letting “the brunt of cuts” hit those with no other income? If not, what do Ed Miliband and Ed Balls really think? It would be good to have some “consensus, philosophically speaking”. Should jobs be “a goal or a necessity”? Should a non-working family enjoy the same quality of life as a working family? George and Ed should show us some “first principles”. Then, what they say about benefits will start to sound like “more than partisan shouting”.
What is clear is that “relatively high-earning people should not be given handouts” and that the era of hugely expensive universal benefits and mass dependency on the state is coming to an end, says Allister Heath in The Daily Telegraph. But crude means-testing is “making the tax system even more complex and is destroying the link between work and reward”.
The child-benefit reforms are “horrendously unfair” to single-earner couples and reduce incentives for those on salaries of £50,000-£60,000 to earn more. Iain Duncan Smith’s new system, if it avoids IT-meltdown (it is “mind-bendingly complicated” and requires possibly the government’s largest-ever “data-mining project”, according to the Financial Times’ Janan Ganesh), will be “imperfect”. Many claimants will see their incentives to work improved; others won’t.
The answer is to “give people a tax break rather than a handout”. Why not increase families’ allowances the more children they have? It’s “time for a grand bargain between taxpayers and the state: reduced taxes in return for reduced benefits”.