Rip up the benefits system
How do you solve the welfare trap? In his regular column, Michael Blastland invites you to rip up the benefits system and start again.
OK, bit of a problem. Wonder if you can help.
It's welfare. All the benefits going to well-off people. Something should be done about it.
There's a scandal at the other end too: the welfare-trap, or poverty-trap, where people might see their benefits cut as soon as they take a job, then on top of that have to pay tax on their earnings. The bottom line is they are sometimes scarcely better off - a criminal disincentive to hard work.
Here's your chance to do something about it, to fix those bad incentives, force people to take responsibility for their own lives, stop subsidising the better off.
There's a comment form at the bottom of this page. First, let's take a very quick look at the problems one at a time, using the slideshow below.Continue reading the main story
Challenges of benefit reform
- If you earn £5,000 or less, let's say you get £2,500 benefit. For every extra £5,000 you earn, in this example, you lose £500 of benefit. When you hit £30,000, you lose all benefits.
- But that gives benefits to people who are too well off.
So... take it away from them.
- Like this... So the maximum you can earn and still claim benefit is just over £20,000. That's better.
- But, hey, that just made the poverty trap worse. Now when you earn an extra £5,000, you lose £750 in benefits. That's on top of all the income tax you now pay that you didn't pay before.
- That's terrible. What a disincentive to work. Let's ease the poverty trap by taking away benefits more slowly.
- But, hey, that gives benefits to people who are too well off...
Haven't we been here before?
So here's the real problem: how to avoid what seems like an unavoidable trade-off? This is more than a welfare trap. It's the welfare-trap trap. Sounds like a dance and it almost could be - we go round and round to find that sorting one problem seems to make the other worse, the catch-22 of benefit reform.
Can you crack it? Or is it inevitable that the more you ease the taper on benefits to lessen the poverty trap, the higher up the income scale you go? Or, alternatively, the more you confine benefits to the poorest, the steeper the climb out of poverty?
Of course, you could just slash benefits all round. That way, even if there's still a long taper, it won't reach so far up the income scale. But that, obviously, means less for the very worst off.
The latest grand reform plans announced last week - much as they have been commended for the promise of simplification - do not offer a solution. In the past, coalition MPs have criticised both failings of the system, although every government has wrestled with them.
So in the spirit of the new government, we're seeking your ideas, marked for the attention of the Secretary of State for Work and Pensions, on the comment form below. We won't be forwarding them, but let's hope Iain Duncan Smith is a reader.
So get writing. Dear Secretary of State, I would escape the welfare-trap trap by…