Ideology not necessity…..

October 4, 2010

What’s really, really sick about George Osborne’s plans to means-test Child Benefit and to cap welfare payments at £26k per family, come what may, is that, essentially, the proposals are cosmetic.

I don’t mean by that that no-one will suffer adverse consequences from these measures simply that, in quantum terms, they add up to small-beer in the overall scheme of things he has planned. The political significance of these measures far outweighs the financial sums involved.

Stuck with making a speech to the first post-election Tory Conference taking place just a couple of weeks before he announces the outcome of his comprehensive spending review, Osborne has chosen to highlight small financial measures that are loaded with radical anti-welfare state politics.

The ending of child benefit entitlements for any household having someone earning over £44k p.a., scraps the universality of family allowances for those with kids that goes back to the post-war settlement of the welfare state and restricts a major stake in the provisions of that welfare state to those paying basic rate tax.

With take-up at 98% and paid directly, in the main, to mothers, it reduces the 7.1 million current beneficiaries by 15% for savings of £1bn or 0.6% of the deficit.

The measure is designed to address the question Osborne wants the majority (basic rate taxpayers) to be asking: “Why should we pay child benefit for the kids of the rich?” not the more fundamental: “Does not the whole of society have an obligation to all its children?” which now becomes answered in the negative.

That earning £45k p.a. with one or more children is unlikely to be sufficient to allow parents to reach even the first rung of home-ownership in large parts of the UK is neither here nor there.

Osborne manages to present himself as ‘taking from the rich’ in pursuit of fairness by hitting them for less than the equivalent of an inflation increase in annual boarder fees for the public school he once attended.

Producing an effective marginal tax rate of over 100% and a real dilemma for those parents of youngsters who may be considering promotions to annual salaries of £39k p.a. and over – one wonders how many pupils at St Paul’s, will shortly be moved into state comprehensive schools as a result of the impact of this measure on the truly wealthy. Not many.

Worse is the unstated political underpinning of Osborne’s cap on benefits.

Here he wants to claim that he’s making work pay – but not by providing job opportunities, raising the minimum wage or backing union claims. He’s simply putting a lid – average earnings – on what’s claimable, regardless of circumstance.

The costs and welfare benefits associated with disability are exempt from the limit, but beyond that he’s saying: “Tough – you may have more kids, but if you aren’t able to work to keep them, that’s no business of government.”

What was intended as a safety net for those facing difficult times when the economic cycle prevented government from achieving full employment has at a stroke, been removed from large families just as the government sets about deliberately creating unemployment.

The anticipated savings? About £300m – less than 0.2% of the deficit.

Like I say, sick.