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Remove obstructive DWP rules on CTX and other in-work benefits

Comment 11th July 2010

 

The idea that I am proposing is that the Government should take the advice of the 2006-07 Communities and Local Government Parliamentary Committee Report and review Council Tax benefits and the tapering off of all in-work benefits. The research has been done. The Report has been published. It’s available on-line on www.parliament.uk. Look at it again and give us back our freedom to go to work.

Millions of people in this country literally cannot afford to go to work because the DWP sets Council Tax benefits (or rebates) at such a low level. Many of the people on low incomes will not benefit at all from the recently announced raising of their income tax threshold because whatever they are given with one hand will be taken away by the other in reduced council tax benefit, (and, if applicable, reduced housing benefit too.) Their poverty will be perpetuated. Yet a Parliamentary Committee investigated CTX benefits and urged the Government to review these DWP rules as a matter of urgency three years ago.

In May 2007 a cross-party Select Committee on Communities and Local Government, chaired by Dr Phyllis Starkey, launched an enquiry into CTX benefit. This followed the Lyons Inquiry into Local Government. Expert evidence and advice was given by several organisations, including the New Policy Institute, the Low Incomes Tax Reform Group, and London Councils.

The Committee published its Report in August 2007. Paragraph 3 of its conclusions and recommendations finds that: “The council benefit taper, and its interaction with other parts of the tax and benefit system, can act as a disincentive to work. We recommend that the Government address this issue with some urgency and recognise the detrimental effects of the council tax benefit taper in its work on welfare reform.”

This recommendation was cross-referenced to Para. 17 of their Report which stated: “Sir Michael pointed out in his report on local government that the issue of work incentives is much wider than that of council tax reform. We Agree. Any reform is best considered in the context of wider welfare reform policy, but this should not be an excuse for inaction. As the Institute of Revenues Ratings and Valuations argued, a Government review of the council tax benefit taper is long overdue but the issue has been largely ignored by Government for some 20 years.”

And how does this translate into the reality of people’s lives? It means that benefits are tapered off so steeply that the amount people gain when taking on a minimum wage or part time job is so little that it doesn’t even cover the cost of transport to work. They are even worse off than living on benefits and cannot improve their lives by working. DWP regulations on Council Tax rebates prevent people from earning their living, and create difficulties for potential employers trying to take on new staff. It also prevents many people who, for various reasons such as poor health or new parenthood, can only work part time, from taking on a job, because they become liable for Council Tax before they even start paying income tax! So they have to remain on benefits even though, with a fairer CTX rebate system, they could work and be less of a burden on the state.

The Government Response to the Parliamentary Committee’s Report was published on 15 October 2007. The DWP dismissed the Report’s recommendation on the grounds that it was not affordable and that the only route for the poor to improve their lot was through the labour market. Yet the report had gone into great detail about how the poor were unable to improve their lot through the labour market because of the obstacles placed in their way by the DWP! This circularity of thought resulted in no progress in welfare reform and public money spent on this enquiry was spun into a vortex down the drain.

Governments pontificate about “the poor” as if they were a separate species or as idle creatures who must be bullied and cajoled into working. Or they talk about social mobility as a means to remove poverty, but we cannot all be, for example, lawyers, bankers or politicians. Here’s a really simple solution to the problem of poverty: pay people enough to live on. Reward them for working. Those who work in low status jobs are providing essential services for the rest of society. This is about recognising and rewarding their contribution and allowing them to live a decent life.  If employers cannot afford to pay a living wage to their employees then state subsidies become a necessity.

But the DWP has recently decided once more that tapering off these in-work benefits more gradually was still not affordable. Surely it’s more cost-effective for the State to support those in low-paid jobs with adequate in-work benefits than it is to leave people stagnating in long term unemployment, with all the costly social problems that that entails.  In-work benefits are cheaper than unemployment benefits. Cut costs. Reduce our dependence on the state. Restore our freedom to go to work. Enable employers to take on more staff. These DWP regulations are unnecessary and illiberal. Change them. Spread the burden of Council Tax fairly so people can go out and earn their living.

Why does this matter?

This idea is important because it is the responsibility of any Government to manage and organise society for the benefit of everyone. The recent decision to raise the income tax threshold was intended to help the lowest paid who are the group of workers most in need of financial relief. But, unless this issue of low CTX rebates and sharply tapered-off in-work benefits is addressed, the lowest paid will not benefit at all from the income tax adjustments.

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