Cutting

CutsThere has been much debate here in the UK on the new round of spending cuts that have come into force this month as part of the Coalition’s austerity measures. In particular, the cuts to Housing Benefit and Council Tax Benefit have been the stuff of media frenzy over the past few days as the implications of the changes become apparent.

For those not in the UK who don’t know what’s going on, let me explain it briefly. First, Housing Benefit for socially provided housing is going to be limited to the number of bedrooms that the family is entitled to, not the number it actually has. The rules for social housing are that children under 11 can share a bedroom in pairs and those over 11 but of the same sex can also do so. So, a family with one daughter and one son under 10 are entitled to two bedrooms (one for the parents, one for the kids)  but once one of those kids passes the age barrier then he/she is entitled to their own room. However, if there are two children of the same sex, they can share regardless of the age difference (so technically a 15 year old could share with a 1 year old).

In the past the local authority has paid for the house that a family occupies, but now it will only pay for the legal requirement. This means that if a family has extra bedrooms to their legal entitlement, they will have a reduction in their housing benefit. The cut is 14% if you have one bedroom over your legal entitlement and 25% if you have two or more. On top of this, there is a new cap of £500 per week for all benefits for families with children and £350 per week for individuals. These caps are being rolled out in some London boroughs now and across the country in the autumn.

General Thoughts

So what to make of this? Well first some general principles.

  • As a country we need to accept that we have run out of money. Although some of the current debt burden on the state is a consquence of the banking crisis of 2008, it is undeniable that a huge portion of the systemic debt was run up over the prior decade by a government that borrowed during a time of economic growth and introduced a systemic shortfall that is burdening public finances now. We can now see that prior increases in public spending (and state sector employment) was funded not by economic growth but by debt.
    This needs to be addressed. It is foolish to suggest that spending can continue as before or that cuts do not need to be made to public expenditure, even if tax revenues are increased. We simply have to balance the books because if we don’t our borrowing will become more and more expensive and the spiral of debt that other countries have found themselves in could become our fate. If you think things are bad in the UK, try living in Ireland, Greece or Cyprus.
  • The Government has a moral obligation to look after the poor and disadvantaged and this is what a welfare state is about. Of course, there is an argument to be had over how best to help people. Some think that the solution is to motivate and incentivise people to seek to better themselves (or to penalise them if they won’t). Others may concur but see the call to meet primary needs is more powerful and therefore the first principle should be to fund people to an appropriate level to provide the basics of life.
    Whilst the principle that people should get on their bikes to find work seems sensible, the simple truth is that whilst some people have (or discover that they have) 3o speed racers, others don’t even have metaphorical bone-shakers. Whilst there may be some people who are simply not interested in working when they can live on benefits, others want to work but find no work available for them (or at least not in their locality). Whilst previous Governments have done much to make the labour market more fluid (the breaking of the Closed Shop being one of the most important moves in this regard) it remains that it is not a completely perfect market for a number of reasons good (the minimum wage) and bad (the lack of skills amongst portions of the working age population).
  • There is no correct best Christian response, or at least it is not obvious. Christians fall across the political spectrum and have different emphases and priorities from their reading of Scripture. Whilst I know very few Christians in the UK who would argue that we should remove the covering of the welfare state, beyond that there is disagreement on the way to tackle poverty and disadvantage. For example, how much money should you give to an alcoholic who is unemployed? Should you restrict what benefit payments can be spent on? What obligations (if any) do those on benefit have to the wider community?
  • Notions of supporting redistribution by taxation on Scripture are shallow. Whilst Scripture is clear that Christians are called to compassion and justice, the key paths towards that appear to be charity and “fairness” in the exercise of power. Romans 13 says that Christians should pay their taxes, but that was to a state that used those taxes to maintain law and order, not to supplement income of those in poverty. As for the idea of the Jubilee Year, this was less redistribution and more a sophisticated form of leasehold. There is little evidence the Jubilee ever actually happened, and the economics of it would be interesting to observe in a modern context. Who would own a factory built on someone else’s land? What about the widgets that the factory made? Furthermore, how would you begin such an economic structure in today’s society? If you kept property rights as they are now then you would perpetuate the current rich in their position and make aspiration and economic improvement impossible. On the otherhand, you might want to confiscate all property and share it out equally – but how is that anything less than theft from those who have worked hard? Furthermore, if we knew that next year we would get an equal share of everything, what would be the incentive to work hard?

Specific Thoughts on the Latest Changes

  • The Housing Benefit changes that are being introduced this month were already in place for the private renting market and were introduced by the previous Labour government. Very few people objected at that point and it strikes me as slightly hypocritical for some to complain now about this government doing what the previous government did already for another sector. Perhaps it has less to do with alarm at the proposals and more to do with taking a political side. Red changes good, blue (and yellow) changes bad?
  • The principle that the State should pay to support that which a family needs rather than that which it desires (like an extra bedroom) seems sensible, especially in a time of austerity. However, one wants to ask how this works out in practice. On the plus side “house swap forums” have started to appear in the most unlikely places – there is one in my local supermarket – and this is evidence of the benefit changes having some of the desired effect. The State has introduced an economic factor into the housing market that is causing many social tenants to rationalise their choices as regards living arrangements. Hurrah for the free market!
    At the same time, what happens if the housing supply doesn’t fit the family arrangements of those on Housing Benefit? It’s one thing to suggest that a family with an extra bedroom should downsize, but what if no smaller houses are available? This is certainly the case in some places and that means that some families will be faced with a reduction in Housing Benefit but no means of avoiding this. I’m not sure how this can be counted as just in any way. Of course, the solution might be to move into private renting, but then that housing stock tends to be more expensive then social housing, and increased demands on two and three bedroom houses might lead to increased rents. The perverse effect could be to increase the Housing Benefit cost, not reduce it.
    Of course, families could move out of their locality, but what if that means moving away from where your friends and relatives are and from where you work? That might work for families and individuals that are aspirational, but for many of the more vulnerable in society this is not a (literally) healthy option.
  • It seems to me that these new proposals could work if (and only if) the Government accepted that it cannot impose them arbitrarily. If the Government wants to pay someone less for the home it has happily been supporting for years, it has an obligation to provide that home (or at least to help the family involved find that home) in a reasonable place (i.e. not hundreds of miles away). Social housing has always had a different status from private housing and the notion that the State helps provide proper homes for families to provide generational security and societal stability is in danger of being seriously undermined.

Conclusions

The problems that face our country are myriad and paying the bills is one of them. There are no easy answers and anyone who suggests there are is not being realistic. Government budgets will be slashed and everyone has to accept the consequences. Like it or not, welfare is a major expenditure and there is no way of getting around the simple truth that the benefit bill has to be reduced.

At the same time we are in severe danger of losing the principle of the best of the welfare state which is to not just provide the resources to live on but also to help promote a stable and secure society. There is a possibility that the current proposals may force many to move far away from friends and family (not to mention workplaces) and to undermine the cohesion of the very aspirational communities that the Government is attempting to promote.

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21 Comments on “Cutting

  1. Peter- thought-provoking piece- it has always seemed to me that the Romans 13:1-7 passage is so tantalising for us today precisely because it is so limited in its specific application of the time- as you point out, to law and order. That’s where the debate takes off for Christians wishing to use the passage in the contemporary UK- to what extent should our taxes pay for a wider welfare state? To quote a previous PM ‘tough on crime, tough on the causes of crime’- to be pro-active and preventative requires some investment in education and health, for example. But we will always disagree about the strategy here. And of course, there are the questions of incentives/disincentives which get to the heart of the human problem.

    • What I object to most of all is the notion that left-wing solutions are “more Christian”. The picture in Scripture seems to be justice and charity, so strong independent courts and a generous heart with personal finances and wealth. Most left-wingers should spend a month in India to understand that the welfare state we have here is an absolute luxury and not the be all and end all of relieving poverty. What’s the most interesting about seeing the slums of Bangalore is the way that terribly capitalist things like micro-finance and savings clubs alongside education and health-care have much more powerful effects then just giving people more money in helping people become economically independent.

  2. Not being from the UK, I don’t know all the background to this. However, I do recall that a few years ago, under Labor, the UK decided to maintain its nuclear missile capability by renewing the Trident system at a very significant cost to the British taxpayer. It just seems strange that certain areas of govt spending seem to be protected, even in times of economic downturn, while social services seem to be always under scrutiny. Obviously there are broader policy questions about whether the UK should keep its nuclear deterrent, beside the economic questsions.

    Unfortunately in Australia, we have developed our own unique brand of welfare dependence – we give it to middle class families as an election bribe, but cut back welfare to the genuinely needy.

    http://www.guardian.co.uk/uk/2012/mar/21/trident-nuclear-missiles-savings

    • This really boils down to a question of what the role of government is. If you think that defending the country is an appropriate role of government, but redistributing wealth is not, then there’s at least a prima facie case for renewing Trident and cutting welfare at the same time.

      (Of course, there’s the debate about whether Trident actually contributes to the defence of the country, but that’s a separate one to the “why are you preserving X while cutting Y?” question.)

      • I think defending the country is certainly a role of government, but you have to ask whether there is still a valid nuclear threat to the UK and whether the Trident system is actually a deterrent. I don’t think “redistributing wealth” is a function of government, but providing a safety net for the genuinely needy is a role of government. I note David Cameron has come out today in defence of Trident (no pun intended) http://www.bbc.co.uk/news/uk-politics-22023184

        • “I don’t think “redistributing wealth” is a function of government, but
          providing a safety net for the genuinely needy is a role of government.”

          How do you distinguish between the two? Surely to provide such a safety net you have to take money (or goods) from person A and give it/them to person B?

          Also, can you provide scriptural support for the idea that providing a safety net for the genuinely needy is a role of _government_?

          • Any form of taxation is redistributing wealth. You are taking money from one group of people and giving it to another, whether in the form of social security, assistance to business, salaries of government workers, companies who provide equipment to government etc. What I am trying to get at here is providing a basic safety net for those who are genuinely needy through illness, unemployment, etc.

            In terms of scriptural support, have a look at the the debt and land ownership provisions of Leviticus 25, which are far more radical than anything I’m proposing. It basically resets the entire society every 50 years. Also, the OT consistently describes the role of the king or leaders in caring for the poor, outcast and widows in places like Psalm 72, for example. That doesn’t automatically mean welfare, but some mechanism for ensuring their basic needs are met.

            • “Any form of taxation is redistributing wealth.” But there’s a very big difference between doing it as your intention, and it happening as a side effect of some other goal. So social security and assistance to business are both simple “take from A and give to B”. Whereas salaries of government workers and paying for objects and services you need are things where you do it in order to obtain the object or service – you get something in return, and enriching the person at the other end is not the _goal_.

              Psalm 72 says that the king should rescue the needy from oppression and violence, and do justice. Absolutely – that’s one of the key things I think government _should_ be doing. Keeping the law, making sure people do what they promise, favouring neither the rich nor the poor in court, and so on. But I don’t see the state being given the role of providing for people’s material needs.

              The trouble with your suggestion of the state “providing a basic safety net for those who are genuinely needy through illness, unemployment” is that a) it’s not very good at it, and b) it never remains basic. If you give this ability, then sinful politicians will love to expand the remit of the program because giving away other people’s money can make the recipients like you, and be more likely to vote for you. And then they start feeling entitled. Hence we are where we are, where the welfare bill is 1/3 of government expenditure and rising, and people scream at any attempt to reduce it.

              The difference between government and e.g. a charity or a church is that government has the (God-given) power to raise money from you by use of force. The fact that it has this power means that we need to be very careful about extending its remit.

  3. “The Government has a moral obligation to look after the poor and disadvantaged and this is what a welfare state is about.”

    I’d say that you should replace “The Government” with “society” in that sentence. I think it’s a logical fallacy to say “God gives us an obligation to look after the poor and disadvantaged” and then move straight to a call on the Government to do something. I would make the case that this role in Scripture is given to the church and the family, not to the state. And I think the evidence is that the state is not very good at it – it’s one-size-fits-all (or a myriad of exceptions, allowances and complex rules), it’s not local, it’s not relational, and it doesn’t take good account of circumstances. And that leads to people perceiving inequality and unfairness (and, if you accept the basis of the system as a given, they are right).

    The government supplying people with houses is a case in point. If someone else is paying for you to live in the house you are in, you are at their whim if they decide to ask you to move, or raise or lower the amount they are paying you. It’s upsetting and distressing for people to be told they have to move house – but the real problem is that the ability to balance their resources in the way they think best is not as open to them.

    Of course, that doesn’t tell us how to get there from here. Dismantling the entire welfare state tomorrow would probably result in anarchy. But it’s only when we know where we are supposed to be going that we can move in the right direction.

    Also (unless there’s something that prevents this?) one way that people could avoid the over-sized-house benefit cut if there is no smaller housing in the area would be to take a lodger. Instead of a reduction in your income you’d see a rise. As a bonus, under the Rent a Room scheme, the income would be tax free.

  4. Peter, I strongly disagree with your downgrading of the importance of Jubilee, which is a theme that reappears many times throughout the old testament in different forms. It was applied only to agricultural land, with property ownership allowed in towns. This means that your example of a factory falls away as industry is overwhelmingly cited in developed areas where leasehold was permitted.

    I also disagree with your assertion that because there is no evidence that the Jubilee was ever applied it is unimportant. There are many aspects of Old Testament Law that were never or partically applied by the Israelites, yet we do not automoatically argue they were unimportant – we argue the context and themes throughout scripture. And the Jubilee theme is a strong and persistent one – right up to Christ’s proclamation that ‘The Spirit of the Lord is upon me’ in the New Testament.

    By the time the Law of the Jubilee was promulgated, with average life expectancies still longer than the present day (see Moses) its 50 year time limit before redistribution of agricultural land corresponded perhaps to a working life. Jubilee limits the accumulation of the original means of production – land supporting agriculture and mining which then produce all industrial feedstocks at the time – to a person’s working life and the product of their own personal skill, talent and application. It has no dampening effect on individual enterprise during a person’s life but it does stop at source the accumulation of unearned wealth in the form of the inheritance of productive rural land. Vast inequalities in land holdings became the original source of inequalities of wealth and power from feudalism onwards. and up to this present day.
    Worth thinking about before you next write on Jubilee …

    • “I also disagree with your assertion that because there is no evidence that the Jubilee was ever applied it is unimportant.”

      I said the first thing, not the latter. What I then went on to do was to explore the economic implications of imposing the Jubilee law rigidly in a modern environment. I never made a moral judgement on it, I simply examined what the issues would be with living it out today.

      You are correct that it applied to agricultural land, but then even there in a modern society you need to answer what would happen to agricultural land this is used for other purposes. Does it revert to a corn-field at the end of 50 years? What happens to the factory built on it? The electricity pilons and water pipes?

      I think a large part of the Levitical law is a type of redeemed creation – it creates a social order that images in some way what idealised life would look like.

  5. Do you have a comment on the change in the higher tax rate from 50p to 45p done at the same time as the reductions in benefit (for those working as well as not working)? In practice this means that those who are poor and are in social housing may receive less, whilst those who have introduced the cuts (higher tax payers) are paying less in tax.

    • There’s a good body of evidence to suggest it didn’t really work.

      http://www.moneyweek.com/blog/does-the-50p-tax-rate-work-we-wont-know-for-five-years-57622

      I’m sure you’re familiar with the concept of the Laffer Curve?

      http://en.wikipedia.org/wiki/Laffer_curve

      The extraordinary fact is that when the 80s Thatcher Government first slashed the top rates of tax that existed under Labour in the 70s (at one point over 90% for some high-earners) it actually led to a massive increase in tax receipts as people felt it was now worthwhile taking the extra effort to earn more. The same is true of the massive slashing of the basic income tax rate in the mid 80s – it led to an economic boom and increased revenues.

    • What do you think is a fair value for the higher rate of tax and, much more importantly, how do you decide what ‘fair’ is, in this case and any others where the word is invoked?

      • The pragmatic solution is to maximise return, for which 45p is better than 50p, and 40p would probably be better still.

        I think we need to recognise that the entire 50p change was a cynical political farrago by a cynical politician – G Brown esq – who left the rate at 40p for 130 months, before increasing it to 50p about a month before he was turfed out of office.

        The politics we hear now against the 45p rate isjust as cynical (although some of the people are also simply ignorant).

        The loss of multiple billions of revenue to the public purse is too high a price to pay for the empty political symbol of a 50p rate.

        We could also note that T Blair Esq increased the PM income from 60k to 100k within months of coming to office, and G Brown Esq – I think, some dispute the exact events – reduced it by about 25% in almost his last month of office.

        Whatever we think of Mr Cameron, we should not mistake Mr Blair and Mr Brown for principled politicians.

        Mr Osborne’s mistake was to fail to expose the manoeuvre for what it was, and reverse it instantly on day one. One on a number of areas where this government have been far too timid.

        • “The pragmatic solution is to maximise return”

          That’s a pretty significant statement; did you really mean to say that the “fair” amount for a government to tax and spend is the maximum it can manage?

          (I agree with everything else you say.)

          • Thanks for you reply, Gerv.

            I meant “pragmatic”.

            Imo “Fair” usually means “that which agrees with the political opinions of the speaker” so I avoided it.

            I’d say that the “fair” amount for a government to tax and spend is the smallest that it can manage commensurate with it’s agreed objectives (which is where politics comes in). I’m very much in support of as little government as possiblel, and I’d say that as much as possible should be left in our pockets for us to spend, rather than on government and paperwork.

            If we are going to take x percent of y group of people to make z revenue, then the pragmatic optimum is to minimise x commensurate with make z to be a given figure.

            if (A) we make z bigger by taking a smaller percentage then that must be better than making (B) z smaller by taking a bigger percentage, as that means that more money than optimal has to be raised from everyone else.

            If we make the tax rates higher even though it makes less revenue, then I’d say that’s just a strategy of political spanking.

  6. An excellent summation of the problems we have here. The saddest thing for me is that I have lots of friends who seem to take the view that Labour are right and the nasty coalition is wrong. And if any argument is made to suggest they are making a facile argument that doesn’t take in the serious nature of the debt gets met with derision, scorn or is just ignored as being the comments of an ill-informed Conservative voter. And even worse, as you have commented, is when it is Christians who take this view and see nothing wrong with Labour’s ideas about “simply” spending more.
    The more people actually stop and think about the problem, particularly those like the Church who might try to fix the situation, the less the rhetoric like “bedroom tax”, “tax breaks for millionaires” and references to “shirkers” and the like would become nothing more than ignored background noise and the search for real answers that are in the best interests of all, rather than spin, sound bite and bluster.

    • It seems to me that people who use the phrase “bedroom tax” appear to have lost the distinction between having more stuff that you earned taken from you (tax) and being given less of the stuff that you didn’t earn (welfare).

      Also, I’ve heard Labour politicians say “a £100,000 tax cut for millionaires” several times, but it’s not true. Firstly, as far as I can see, it’s a £42,500 tax cut – 5% of £850,000, which is the amount of a £1M income that used to be 50% and is now 45%. Secondly, it’s not for millionaires (people whose wealth is greater than £1M), it’s for people whose yearly _income_ is greater than £1M, a much smaller number of people. Perhaps those who can’t recognise the difference between deficit and debt also have trouble with the difference between income and assets?

      • And this is is the nub of the problem. The debate has become centred around the guff that is factually incorrect but sounds good, rather than sticking to arguing on the facts. Politics in the UK is now bereft, at the very top, of people willing to speak the truth based on the facts and then propose their way to deal with it because the media go for the easy-to-quote statements over trying to actually explain things properly. The media have more-or-less encouraged politicians to be hot air and bluster and the politicians have, rather than trying to do it properly, willingly gone along with it. The problem needs a long term fix and as things stand I don’t see either the media or those at the top of politics trying to change it any time soon.

  7. There are differing views over the role of the Government; in my opinion the government does not have a moral obligation to look after the poor and disadvantaged. The welfare state needs dismantling.

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