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October 06, 2006
Wealth redistribution
I was amused and annoyed yesterday to read that the Rowntree Foundation, one of the country's "leading" Think Tanks - they recently gave a report that said children were living in poverty when they didn't have designer trainers and expensive electronic toys - is now publishing a report that is highly critical of the Chancellor of the Exchequer's much vaunted "Family Credit" system for redistributing money from my and every other working taxpayers pocket, to someone elses. According to the report, the system is so complex that it actually works as a disincentive to anyone to "get into" work. For once I can see what they mean and agree with the authors.
The problem is that the "Family Credits" are supposed to "top up" low incomes and lift low wage earners out of the poverty trap. This system replaced the universal "Child Allowance" and is "means tested" - which means that if you earn more than the arbitrary "average" wage set by the usual suspects in Whitehall as low as they think they can get away with - you do not qualify for this "benefit". What is not generally known is that your "Credits" are eroded if you are in work and earn anything above your supposed weekly maximum. So, anyone earning a little extra in overtime is immediately penalised by having their Credits cut. As the Rowntree researchers have found it is possible, when you take the tax, national insurance and any other deductions taken from the gross amount are added to the cut in the Family Credit, it amounts to a supertax which can reach 100% of the amount earned in overtime. Some incentive to do a bit of extra work! Naturally, those overpaid and completely unproductive buffoons at the Treasury deny that this is a disincentive and point to the fact that unemployment is low. Fine, provided you realise that the reason that unemployment numbers are low is that the workforce is currently enlarged by the influx of Eastern Europeans and, as any mathematician can tell you, if you raise the numbers at one end, the numbers at the other end of any statistical sample fall. More workers in low paid jobs and a larger workforce means that the numbers out of work, although largely static, look smaller in a statistical percentages presentation.
Its called fraud if anyone else tries to present facts in this way.
But then, this is something Whitehall have excelled at for almost two hundred years since Gladstone invented our modern bureaucracy. It is one of the most entrenched aspects of our modern society, that we want to believe that the civil service is actually there to provide the necessary infrastructures and stability necessary to make the modern state work. The truth is somewhat different. In fact, the civil service has become, as Parkinson predicted in his book of the late 1950's, an entirely self sustaining and self interested organism. Moreover, it has become a parasite which is slowly but surely crushing all enterprise out of the society it purports to serve. The long term result is to create a society of dependents - exactly what the Family Credit system is now doing.
It may well be that this situation suits our political classes and their civil servant parasites because a population dependent on them for everything from income to health is unlikely to want to eject them from power. There is a further dimension which may well derail all of this - it is based on the assumption that wealth creation can only occur within the control of the government and its sycophants, or, as was the theory in the 17th Century, that all wealth is a fixed sum and can be accrued to a small group who can control its distribution. This last is an interesting postulation since it assumes that nothing more can be developed or created and the only thing that can now happen is that the "wealth" can be redistributed by means of some artificial construct that moves it from one person to another and is not based on productivity or ability. In fact, if you think about it, this is what the architects of the failed "socialist" experiments in Eastern Europe, Russia and China have tried.
Mr Brown seems to think that he can continue to control the wealth of every individual by means of the tax system. What he has done is create a monster which is rapidly doing the opposite of what he intended. Instead of giving people the incentive to go out and create further wealth, he has provided an incentive to sit back, relax and take the handouts. I doubt very much that this situation will be changed until we get rid of the socialist thinking and thinkers in our iuniversities, schools and the department's of state. Only then will this country have any hope of once more becoming a beacon of forward thinking and enterprise.
Don't hold your breath though - its likely to be a long time coming!
Posted by The Gray Monk at October 6, 2006 03:07 PM
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