JSA for the victims of domestic violence

With the winding down of Income Support, we are losing the main residual benefit that is available for people with very low income who don’t fit other pre-set categories. The DWP have announced a new rule, “easing” conditions for JSA claimants who have been victims of domestic violence. “Victims will be offered a period of support without worrying about looking for work.” This is very much to be welcomed, and I hope the precedent will be extended to others in catastrophic or unpredictable situations.

The impact of Work Experience

In February, I wrote to the UK Statistics Authority to express concern about some uncheckable claims being made about the benefits of work experience. The Minister for Employment, Chris Grayling MP, had published an open letter to Polly Toynbee on Politics Home, claiming that “a significant number of placements turn into jobs, with the employer getting to like the young person and keeping them on. … so far around half those doing placements have come off benefits very quickly afterwards.” In the Times on 24th February, he also claimed that “half those young people stop claiming benefits after taking part.” (p.32) This was referred to in BBC’s Question Time on 23rd February as evidence that the scheme was working well. The only evidence, however, was based on a first cohort of 1300 people on placement from January 2011 to March 2011, when by the time of the statement the scheme had been extended to more than 34,000 people.

The DWP has now published more data, this time covering 3490 people in the scheme from January to May 2011. It shows an increase in employment, by comparison with a group of non-participants, from 27% to 35%. There are two main reservations to make about the figure: that it still relates only to an early cohort, who may (or may not) have been easier to place than later cohorts, and that there is no explanation of what being “in employment” might mean in terms of hours or duration (the only test seems to be that the employer has sent a return to HMRC). It is also a lot less than the 50% originally claimed.

Liberty before liberalism

I am currently putting the finishing touches on a book considering the relationship between individualist thought and welfare policy. I’ve just attended two fascinating sessions given by Quentin Skinner, the intellectual historian, who explained what was, to me, a completely unfamiliar different way of understanding the idea of liberty. In Roman law, he explains, freedom was a status, not a course of action; the distinction between freedom and slavery rested not on individual choice, but on domination, dependency and subjection to arbitrary power. Within the neo-Roman or “Republican” model, people lose their freedom, not so much because they are interfered with by laws, but because they have a status which is subject to the decisions of others. There is, arguably, a lesson for contemporary welfare states in the construction of our social rights.

Welfare Reform in the Scottish Parliament

My submission to the consultation on the Welfare Reform (Further Provisions) Scotland Bill is here. The main point is technical, but in a nutshell the issue is that the Scottish Parliament, and Scottish local authorities, do not have the power to do things in relation to benefits that English local authorities can do. At present that means that when the Social Fund is abolished, the Scottish authorities will not be able legally to do what they need to do to protect people who are vulnerable.

Tax relief for charitable donation

The purpose of tax reliefs on charitable donations is intended, in part, to limit abusive tax avoidance, but there are points of principle to consider. Whenever tax relief is given, the state is foregoing the tax revenue it could otherwise claim; effectively, the charity is receiving money that would otherwise have gone to the government. Charities are already exempt from a range of taxes, particularly council tax and water rates. Charities which raise money by asking people to declare that they are are taxpayers are effectively seeking – and receving – government subsidy. The idea that this is “free” money is illusory.

The support of “philanthropy” by tax relief effectively means that people are able to give money to charities in lieu of giving it to government – a situation which puts individual preference in place of collective decision making. What a phalanx of very rich “philanthropists” are demanding is that they, not the government, should be able to determine how their tax liabilities are spent. The US Government accepts that demand, unreasonable as it is, and the US functions consistently with the federal government in deficit as a result. Most European governments would not tolerate it, and they should not.

Taxing businesses

In conventional economic theory, the costs of any tax on business will be transferred to the customers of that business. That implies that business taxes can only be used with caution, that they tend to distort markets, and that it makes more sense to raise money in other ways. Business taxation does, however, have another function, and that is to ensure equity between different taxpayers. Current concerns about Amazon are based in issues of fairness, not about the economic effects.

More generally, there is another side to business taxation. People who run businesses often have the option of treating revenue as either part of the income of the business, or as personal income. If business is lower than income tax, the incentive is to run costs through the business. If income tax was lower, the reverse would be true. The only equitable position would be if business taxes were set at the same rate as personal taxes. That would not quite be neutral, because business expenses can be offset against income in a way that personal expenses cannot be, but it would be fairer.

The cult of leadership

Two items on Friday morning hit a common, jarring note in rapid succession. The Metropolitan police have again been accused of insufficient activity to deal with racism; there was an immediate call for leadership. Mayors are being elected to serve English cities; they will provide leadership. ‘Leadership’ is not a solution to anything; the belief that it is has become part of our problems.

The first problem is that the idea misunderstands what public services do, and how they do it. People in public office are supposed to be public servants, not masters. The public services rely on a strong system of accountability – nothing is done that is not part of the “golden thread” – and everyone is responsible to others for their actions. The proposals for mayors are based in the inappropriate belief that what we need to settle our problems is someone who’s really in charge. Nonsense. Anyone who thinks they are “leading” their city should be kept on a leash.

The second problem is that what “leaders” are supposed to do is not what we need to have done. Leadership is commonly described in terms of motivation, influence, strategy and vision. We have bucketfuls of documents of this sort – all made by partnerships, not by leaders – but if they are valid, it is because they rest on participation, empowerment and diverse voices, not the vision of an elite group. Mayors will be advocates for an area, communicators between people and authority, and perhaps executives.

The third problem follows from the second: people are being appointed to senior office on the wrong criteria. They are being selected because they appear to have “leadership” qualities. We have seen a series of fiascoes where “leaders” and “leadership teams” have made visionary but ill-informed decisions – such as the NHS computer system. It might be better if people in senior positions were appointed for their competence, knowledge and skills.

Flat tax in Kazakhstan

Following other work on tax, I have just been listening to a student paper about the flat tax in Kazakhstan.  Most earned income is subject to a flat tax of 10%, one of the lowest rates in the world, but the incomes of some groups are exempt.  They include soldiers, police, veterans of the second world war, fire services, some disabled people and their families, the victims of a nuclear accident and lawyers.

Simplifying the tax system

Because I’ve been looking at the tax system in the course of the last week, I’ve been considering some of the arguments for “simplification” and the possibility of a flat tax. Some of the allowances and approaches being used are bizarre, and several complications seem unnecessary – for example, the calculation of NIC on a weekly basis when everything else is monthly or annual, the arcane mechanisms for clawback, and the lack of integration with tax credits.

However, I’ve argued in the past that attempts to simplify social security systems are illusory. Benefits have too many aims, they deal with too many people in complex and changing circumstances. The same arguments seem to me to apply with as much force to taxation. Taxation is supposed to do many things at once. Richard Murphy begins with five: raising revenue, repricing, redistribution, fiscal policy and solidarity (though Richard found a way to begin the last two with an “R”). To that I can add at least two others – changing behaviour (incentives, disincentives and subsidies) and conveying a moral position (e.g. in support for families). Add to that the complexity of people’s lives, the things that are being taxed, and the constant changes in circumstances, and I am sceptical that taxation can ever be anything other than complicated.

That doesn’t mean, that nothing could be simplified, or that the system could not be made more comprehensible – for example, by unifying allowances with credits, or by harmonising rates between employment, self-employment and taxation of companies. One thing is unavoidable; in any reform, there will be gainers and losers. If the system costs the same, then some people will be worse off; if no-one is to be worse off, the system must cost more. There is no way round that.

More job seekers

The DWP has sent out 124,000 letters today to tell lone parents with children aged 5 to 7 that they will have to claim JSA instead of Income support, from this May onwards. Yesterday I commented critically about the assumption that the claimant count is expected to fall by half a million in five years …