2) It’s that man again

Frank Field is an unusual MP: he really knows what he is talking about and only talks about what he knows. Last week he launched a report about the progress being made on the government’s pledge to abolish child poverty by 2020 and specially to what extent the welfare to work programs are assisting to achieve this target http://www.reform.co.uk/filestore/pdf/070611%20Welfare%20isn't%20working%20-%20child%20poverty.pdf .
First, a little background information from me: If one looks at the effect of government tax policy over the last 10 years, then I think you can see a consistent strategy of shifting a little money from the middle classes towards getting unemployed parents into work and supporting low earning parents in work. In particular, we have seen the introduction of child tax credits and working tax credits which, as I illustrate below, have generated significant sums of money for some people. However, as has been characteristic of Blair’s general welfare strategy, these payments, or what has been in effect the introduction of negative income tax for some, have been downplayed. I think this is because it was thought it wouldn’t meet with the approval of middle England if they knew the sums involved and who was receiving them. For example, according to Frank Field “In 2006, a lone parent with 2 children under 11, working 16 hours a week on the minimum wage, gained a total net income of £487 a week, largely due to tax credits.” (page 21) I note that this is from a part-time job which, as far as I can see, as the minimum wage is £5.35 per hour would otherwise generate gross earnings of £85.60. I can well believe Frank Field has intentionally chosen this example as one of the system’s ‘big winners’. However for him it illustrates the inequity of the present system as “In order to attain the same weekly income, an equivalent two parent household needed to work 116 hours a week; an extraordinary 100 hours more than the single parent” (page 21)

In this vein and in this detail, Frank Field discusses how the benefits system is both assisting and apparently hindering the government’s attempt to abolish child poverty. Unfortunately, I cannot say, read this report and the working of the welfare system will become clear. I myself am still looking for a ‘welfare benefits for dummies’ type of publication, but I think it significant that no-one came forward to challenge Frank Field on his facts when this report came out.

What I do know is that large sums of money are involved here. I calculate that if the money that has gone into the welfare to work schemes and benefits, had gone instead into income tax cuts, then we could have seen a general 3p in the pound reduction to the basic rate. This will not have escaped the attention of the Conservative party who often speak of sharing the benefits of economic growth between state spending and the tax payer.