Labour: No child benefit for the rich?

 
Ed Miliband The Labour leader will declare his support for a cap on so-called "discretionary" welfare spending

When this government decided to cut child benefit from higher and top-rate taxpayers Labour attacked the move as unfair and proving that the government was out of touch with hard-working families.

Now, however, I understand that the party's leadership has concluded that it will not be able to reverse the cut.

To do so would cost £2.3bn [Scroll down to update] . That is 23 times as much as the money which would be saved by removing winter fuel allowance from wealthier pensioners - the policy unveiled by the shadow chancellor Ed Balls earlier this week.

Some critics are likely to see this as more evidence that Labour has abandoned its support for so-called universal benefits - those benefits paid to all regardless of income. One source told me "we have other priorities".

Tomorrow Ed Miliband will declare his support in principle for an idea first suggested by the Chancellor George Osborne - a cap on so-called "discretionary" welfare spending, or that part of the benefit bill which is not triggered automatically by a rise in unemployment.

The chancellor first floated the idea of a cap in his last Budget. He said he would spell out how it would work in the spending review at the end of this month. His aim was to set a political trap for Labour. Ed Miliband is now trying to escape that trap.

Technically, the Treasury is examining a cap on some of what's called AME spending.

That's what's classified as Annually Managed Expenditure - ie the roughly 50% of public spending which is not currently subject to the annual cuts negotiated between Whitehall departments and the Treasury (what's classified as DEL or Departmental Expenditure Limits).

Almost all welfare spending, debt interest and Britain's contributions to the EU are classified by the Treasury as beyond their day-to-day control because, for example, they cannot determine the level of unemployment, interest rates or the outcome of EU negotiations.

Whatever your politics, the argument for a cap on discretionary welfare spending - or much of what is defined as AME - is that it forces governments to spot and deal with with unplanned increases in welfare bills which are not caused by a recession.

Incapacity benefit, housing benefit and Disability Living Allowance all ran out of control in the past few decades under governments of both left and right.

Labour's willingness to embrace the idea - at least in principle - is a further sign that the party is trying to restore its economic credibility by proving that it has the will to curb spending. The Conservatives will respond that it is deeds and not words that really count.

Of course, a welfare cap won't in itself curb welfare spending. What will is difficult decisions to cut the cost of particular benefits.

The coalition cannot agree on the next set of welfare cuts - there will be no more laid out in the spending review.

Labour has yet to spell out any - beyond one which will save around 1,000th of the projected annual deficit at the time of the next election. Tomorrow we will see if Ed Miliband goes any further.

Update: Treasury have confirmed £1.8bn to me as the child benefit figure for the present government policy.

The £2.3bn figure refers to the original policy they announced in 2010 - where they were doing it for all higher-rate taxpayers.

You'll remember they subsequently adjusted it - introducing a taper instead of the cliff edge, meaning some higher-rate taxpayers did receive some of it - and so the saving decreased to £1.8bn.

 
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  • rate this
    +1

    Comment number 807.

    806.I Am ASM

    ===

    Don't worry, it wasn't really your posts I had in mind :)

  • rate this
    0

    Comment number 806.

    803.The J Hoovers Witnesses

    What I am attempting to explain only sounds crazy to people who don't undertand the current structure of banking.

  • rate this
    0

    Comment number 805.

    English land law makes clear that no one except the Crown (following from William I) owns land.

    The thing owned is the legal estate, the freehold or leasehold. They are not the physical land, but tenures, bundles of rights to do stuff on it, such as exclude trespassers. They can be ended, and the land reverts to the Crown. They're limited too. E.g. you can't pollute it or build without PP.

  • rate this
    0

    Comment number 804.

    Sally
    Me @802 I didn't proof read that sorry.
    Here's a link, pages 6-7 should clarify the idea.
    http://www.wiwi.uni-muenster.de/cawm/forschen/Download/Diskbeitraege/DP43_IlgmannMenner.pdf

    An anaolgy would be, imagine you had 12 loaves of bread you could perhaps consume two before they go stale. You would let other's consume them if they replaced them at some point in the future with fresh loaves.

  • rate this
    0

    Comment number 803.

    792.I Am ASM

    "...This 400ch limit is a pain..."

    ===

    Normally I'd agree.

  • rate this
    0

    Comment number 802.

    798
    No,they try to entice spending now with inflation,what this would do is apply market forces to the interest rate on saving & borrowing.
    Inflation affects all monetary assets eg savings this would apply to money only & apply market forces to interest rates rather than as now banks dictating those terms or just sitting on it.

  • rate this
    0

    Comment number 801.

    @800 Indirectly, it does. The market is responsible for whatever shape the Laffer curve happens to have at any particular time for any configuration of taxes, and this informs tax policy. But you're right that excessive taxation destroys employment (that's those free agents deciding it's not worth it). It doesn't follow that lower taxation will necessarily increase employment. Worth a try, though.

  • rate this
    0

    Comment number 800.

    799.Grounder
    "the market does not say it's 0%, for if that were true, there would be no workers"
    =
    The market doesn't set tax policy, so how on Earth can it tax you if you object? Saying you need taxes to create workers is insane. The opposite is true, taxation destroys employment.

    If you want fish, I may create a job to meet your demand. You pay me. We both win. No tax required :)

  • rate this
    0

    Comment number 799.

    @795 That was no dodge, that was my official policy. Self-evidently the market does not say it's 0%, for if that were true, there would be no workers. Employers say they can derive value from my employment under current taxation, and I say what's left after taxation is sufficient incentive for them to continue to try - and the best of British luck to them!

  • rate this
    0

    Comment number 798.

    797.I Am ASM
    Yikes! So, spend your money before it's worthless or you pay too much just for holding it? Sounds like the hot potatoes of Weimar Germany, Chile Argentina, Zimbabwe, Nicaragua, Bolivia, China, Greece, Yugoslavia, Hungary - all in the 20th Century.

  • rate this
    0

    Comment number 797.

    793 "...they won't?"
    That may have been true in the analogue world of notes & coins as Keyens pointed out in his thoughts on the theory, in the digital age it is less of a problem. It will discourage the withholding of it from its primary function.It becomes a 'hot potato' you gain access to it for as short a time as necessary & that is to everyones benefit.
    The theory is sound & is being mooted

  • rate this
    0

    Comment number 796.

    I lost a permanent position due to the fact that nobody recorded that I was on the Future Job Fund set up by Labour. No record of me "working" Tax, NI or Job center, even though I was placed into this government Scheme by the Job Center. A 23 year work record has been tainted, and positions I want to apply for are restricted. Please Mr Miliband do not start to sound like Mr Smith.

  • rate this
    0

    Comment number 795.

    794.Grounder
    I think we can let the market determine that
    =
    Nice question dodge, you can't answer... Anyway, the market says it's 0%.

    I'm going to come around and tax £50 out of your wallet tonight because I don't feel like working, might have a baby instead. I'll call it operation tax and benefit. Don't like it? Well, you shouldn't have signed that invisible contract when you were born.

  • rate this
    0

    Comment number 794.

    @791 Oh, I think we can let the market determine that, don't you? While there are millions more choosing to eschew free subsistence benefits in favour of taxed employment than vice versa, I think we can safely aver that taxation is still just taxation, rather than the spoils of state-sponsored slavery.

  • rate this
    0

    Comment number 793.

    792.I Am ASM
    "A better approach would be a user fee on money"
    =
    That is the absolutely stupid! Are you for real? How wil people exchange for goods & services then, they won't? Anyway, there already is. We have a debt based currency, where every note created at the BoE has debt attached to it. It's a disaster as we'll never get out of debt under such a regime.

  • rate this
    0

    Comment number 792.

    789cont
    This 400ch limit is a pain.I'll conclude with,there now exists in every capitalist economy regardless of political hue a private tax of approx 40p in every £1 you spend this tax is better known as interest yield & whilst you may be a recipient of some yield with modest savings the vast majority of people are net losers & it can only get worse.A better approach would be a user fee on money

  • rate this
    0

    Comment number 791.

    790.Grounder
    If taxing someone 100% is theft, slavery or whatever crime you call it - at what % is not theft/slavery?

    789.I Am ASM
    Fascinating, but I disagree with it.
    You "owe" the community nothing, as it did not create the land either. Your body is your property, do you owe the community rent on that too? No. This is why so many Libertarians reject the "Lockean Proviso", incl Rothbard.

  • rate this
    0

    Comment number 790.

    @786 I don't assume that taxation is lawful, I conclude that it is lawful. Renaming it "legal plunder" doesn't alter my conclusion any more than renaming it "magic fairy dust" would. But I agree that the state could demand so much in taxation that my labour would be "legalised slavery", except that I would have the right to withhold my labour (while retaining the personal right to subsistence).

  • rate this
    0

    Comment number 789.

    784contd.
    ..If a known quantity of money is issued it's the circulation of that money in the exchange of g&s that creates the wealth.Hoarding is madness & why there are so many derogatory quotes re. misers thru history.It is enticed back with reward of interest & at first it works (capitalism) but sows the seeds of instability ..tbc

    786 Lockean proviso http://en.wikipedia.org/wiki/Geolibertarians

  • rate this
    0

    Comment number 788.

    Government is not a real thing. It is just the name of a group of men who claim to have extra rights over the rest of us. They have nothing to give which they do not first take from someone else.

    If you take from one someone, keep most and give some away, you're are a common thief.

    If you take from everyone, keep most and give some away, you're seen as an effective politician.

 

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