Monday, August 03, 2009

This £186bn Budget Must Be Cut

Did you know that 25% of all government spending is devoted to social security and housing benefits? That's £186 billion a year. Today the Centre for Policy Studies pubishes a report calling for the benefits system to be simplified as a vital precursor to controlling the amount spent.

The report says that DWP benefits manuals total nearly 9,000 pages, while HMRC has a 260 page manual covering tax credits.

I hope that Theresa May will be reading and digesting this report over the summer.

38 comments:

Hawkeye said...

"I hope that Theresa May will be reading and digesting this report over the summer."

Are you suggesting that the delectable Theresa is some form of human termite, digesting all that paper? Surely she would be feeling bloated afterwards - rather like the paperwork itself?

Perhaps some sort of sauce would help?

SHB said...

I did know that, next largest budget is the NHS at c£100bn.

As well as simplification of the system does the report comment on how much is paid out:

1) in error
2) to fraud

I think the budget for the old DSS in 1996 was c£80bn. Allowing for inflation at 2.5% per annum since then would indicate a 2009 spend of c£108bn.

So what is the other £78bn being spent on?

I do recognise that the DSS of 1996 is different to the DWP of 2009 and that will account for some of the difference, but I would like to see Brown and Darling give us a straight answer on that one.

Anonymous said...

In my area the Job centre sends people to the Citizens Advice Bureau to explain the benefits system!

Millsee said...

I did know this. I also know that the entire working population's Income Tax comes to about £150bn a year.

So think on, hard workers of the UK: when you next get your payslip and see the line "Income Tax", think in your mind "Dole Scroungers's Wages" and then realise how angry you really are....

Stronghold Barricades said...

Why not just simplify the tax system so that the people at the bottom don't pay any?

Then they have an incentive to work.

Just imagine what will happen to the rental market and house prices if the DWP removed its rent payment scheme

davidc said...

'---but I would like to see Brown and Darling give us a straight answer on that one.'

don't hold your breath !

Neil M said...

Broon is relying on the income tax generated by an immigrant workforce to help pay for our home grown workshy scroungers. There is only one answer, and that is to put a time limit on benefits.

What a fucked up country.

Anonymous said...

Median household income is about 25k. So about half the households in England are running on 25k pa or less. The child poverty targets require children to be in households on %60 of median, ie about 15k.
Now go look at the DWP figures provided in documents linked on this page:
http://research.dwp.gov.uk/asd/tbmt.asp

I'll use the April 2008 Tax Benefit Model Tables
http://research.dwp.gov.uk/asd/asd1/TBMT_2008.pdf

On p 20 is Table 1.2a Lone Parent with 1 child under 11 LA Tenant.

If s/he earns £100 pw the cash in hand after housing costs is £180 pw
If s/he earns £400 pw the cash in hand after housing costs is £265 pw

ie earn an extra £300 pw and gain £85 pw in hand.

On p40 is Table 1.3a Lone Parent with 2 child under 11 LA Tenant.

If s/he earns £100 pw the cash in hand after housing costs is £233 pw
If s/he earns £400 pw the cash in hand after housing costs is £309 pw

ie earn an extra £300 pw and gain £76 pw in hand.

Or, if you stay on £100 pw and have a second child, you receive an extra £53pw

Now suppose s/he marries the other parent of the second child who earns a further £400 pw

If s+he earns £800 pw the cash in hand after housing costs is £536 pw

Ie the second earner earns an extra £400pw but gains only an extra £227pw in hand towards the household.

ie Once there are a couple of children in a below-median-income household working barely increases your income while having the children prevents it ever falling. There's not much point having the father live in the same household as his earnings will trigger at least 50% deductions as either tax or loss of benefits.

John Moss said...

There are over 50 separate schemes under which you can claim benefits. Many of them have the interesting feature of allowing you to claim more money if you are "more sick" or unemployed for longer. This creates a perverse incentive to present yourself in a worse state than you actually are and not to seek work.

We shoud assess peoples' needs not their means. Ensure they are supportedsufficiently to meet these needs, just - welfare should be adequate, not comfortable. Then, incentivise them back to work by ensuring the rate at which their welfare is withdrawn declines as they move to the point where they start paying tax, which should be payable at a rate lower still than the rate at which welfare is withdrawn.

Sean Haffey said...

The best thing that the Conservative government could do to make efficiencies would be to simplify government. Reducing staggering numbers of rules and policies is the easy bit: the challenge will be training civil servants and local government employees to develop judgement and so be able to manage without this excess of petty rules.

Carl Gardner, Head of Legal said...

As I recall, by far the biggest item of DWP's spending is old age pensions, at about £60 billion.

Ian said...

Well when you have a system that encourages people not to go into work by making them worse off for having a low paying job what do you expect?

There was a wonderful point last week where lefties were up in arms about how the bottom 20% of people pay more tax as a % of income than the top 20%. If you actually dig through the figures you see that our complex web of taxes and benefits results in an application of Friedman's Negative Income Tax, alebit a horrendously inefficient one.

What this essentially means is that all the thousands of pages that comprise the DWP and HMRC handbooks can be reduced down to one formula to calculate tax/welfare due.

Elby the Beserk said...

@SHB.

Straight answer from Brown. That's very funny.

On the matter of tax credits, my ex was working for the DWP in their main centre in Bristol before they came into being. All such large offices had talk son them. and were asked how they saw them. Response from all was - this will not work (if on,y for the fact that HMRC are geared up to take money OFF us - and not to administer benefits, which of course they are).

This consensual response from across the country was taken back to the powers that be. Who ignored it.

Say no more. We are run by utter incompetents, who would have problem running a tap, never mind a huge department.


Oh and by the way, the DWP budget now costs more than ALL receipts from tax.

Good eh? You know it makes sense...

sFrom somebody who has seen it in action said...

Incapacity Benefit is a classic case where the recent Government's reforms have made life far worse for those who are genuinely sick. Now they are being hounded. They have to have extra medicals who purpose is not their welfare but rather to find any excuse, however flimsy, to push them off the numbers.

As part of this deal the government are paying private companies a bonus for each person so removed. The result is the impoverishing of a collection of genuinely sick people, while expense fiddling MPs preen themselves for how "tough" they are being. Ironically the net cost to the taxpayer of this Government action is HIGHER as these bonuses paid to the companies are considerable.

The Tories policy is just as bad: "kicking the sick" sums it up.

Thats News said...

Of COURSE the Euro-immigrants can out price local workers!

One comes over and gets a job. He then rents a house and illegally sublets to say 6 to 10 others, depending on the size of the house.

They split the rent between them, so can then work for a lower wage, thus undercutting UK workers who have to pay full rent/mortgage and Council Tax on their property!

A neighbour of ours does this.

Uncle Bob said...

The administrative costs alone are horrendous and are largely a waste of time designed to create extra tasks to keep DWP staff busy so they can justify their jobs, which I've learned through experience in the past month.

allnottinghambasearebelongtous said...

Something approaching half the DWP budget is spent on pensioners, a tiny proportion is spent on 'dole scroungers.

So. Who fancies arguing for a time limit on Retirement Pension?

Matthew said...

To provide some context, according to the DWP annual report, spending for 2008-09 was:

£76.2bn on pensioners
£17.2bn on disabled people
£47.7bn on working age benefits

Presumably, when you screech that social security and housing benefit spending amounts to 25% of all government spending and must be cut, you are not referring to the Basic State Pension, or to the support received by disabled people to enable them to lead independent lives? So why the hysterical use of the 25% figure?

Bil said...

Well, I have an appointment with the Jobcentre this afternoon to understand what I may be able to claim. May come back and discuss later.

After 25 years in full-time employment, it is a very bad day for me.

Uncle Bob said...

A time limit on retirement pension? That sounds a bit 'Logan's Run'.

SHB said...

@ davidc and Elby

I am not holding my breath!

Anonymous said...

Did you know that 25% of all government spending is devoted to social security and housing benefits?

Actually, I did. I have to ask, with full respect, why you, an important commentator and aspiring politician, did not.

The bill for benefits is more than the combined budgets for defence, education and the health service. Cuts must be made unless the next government decides to finish Labour's mission and finally reduce the idiots with jobs to the status of helots, labouring away to produce wealth for the feckless, the ignorant and the lazy (i.e. Labour's core vote).

Martin said...

£186 billion to buy 10 million Labour voters. Seems good value to me.

Budgie said...

The most critical task is simplification of the tax/benefits system.

We must get rid of the 70 per cent plus marginal tax rates for the low paid, so they get to keep more of what they earn.

By simplifying we can also cut administration costs drastically. This is not to say government workers are idle, but that they are often doing jobs that either don't need doing at all, or jobs which can be accomplished much more efficiently than now, as a result of simplification.

Of course, many of Brown's pet schemes will have to go. But, hey, you can't have everything.

No Society said...

Matthew August 03, 2009 10:48 AM got it more balanced than the headline hyperbole and sycophant replies Iain. Now im starting to get uneasy reading this blog. I visit because it is broadly seen as fair and balanced not always (right wing) partial. I'm not disagreeing that the benefits system encourages laziness which is the subtext here.What would be more balanced and accepted if you or someone replied to Matthew which, in essence ,states that contrary to 25% spent "on benefits" that actually 47.7/141 x 25%=8.4%is the share 2008/09. Prob just be more a snack for Theresa May to digest

Gary Elsby said...

As a taster of things to come, post 2010, why doesn't Dave give us an idea of 'cuts' in the 30 Conservative marginals that is looking handsome for him at the moment?

He won't do it and do you know why he won't do it?

Because they will avalanche to Labour overnight.

If you were Directing a Labour election broadcast, how would you play it?

'Dave let's Gideon loose with cuts and spend'

'Gideon given a free rein to cut with an axe'

'Britain under the Tory axe'

'NHS closes down'

'crime up-officers down'

'rich kids return to Uni'

Anonymous said...

Presumably, when you screech that social security and housing benefit spending amounts to 25% of all government spending and must be cut, you are not referring to the Basic State Pension,

You are either badly informed or extremely dishonest. The £76.2 billion you cite for pensions is not, by any stretch of the imagination, spent on maintaining the BSP. To present it as such speaks, as I said, either of the most profound ignorance or of a genuine attempt to deceive.

The ridiculously high expenditure on pensions is due, in no small part, to the sheer number of gold-plated pensions made available to civil service pen-pushers (people who were superfluous when they were employed and certainly have no legitimate expectation that I, the taxpayer, will maintain them in perpetuity). This is the direct consequence of the Labour Party's policy of fiddling unemployment figures by making endless phony jobs for their client-voters.

Mirtha Tidville said...

Broon and his ever useless minions reckon that this is money well spent.....The principle benificaries are Chavs....Chavs will always vote for the hand that gives them something for nothing and doesnt expect them to lift a finger in return. Ergo Liebour....Chavs also breed faster than most other sectors of society, therefore ensuring a continuous lifeline of the species to feed the Liebour vote...

Simple really...

Flemingcrag said...

Iain, try and get through to an HMRC office, any office and you will have a long wait on the end of your phone.

At a time when the Country needs to bring in every penny in taxes it can to pay Gordon's bills this department is close to complete meltdown. I would urge you to try and talk to some of the long-suffering staff in this chaotic organisation. I hasten to add this is nothing to do with the abilities of the frontline staff and everything to do with Gordon's interference.

HMR was a body working very efficiently at doing what it does best, gathering taxes. Then Gordon decided in one of his stupid moments that this body have the added duty of giving out benefits in the form of tax credits. Since then it has been downhill for the staffs' morale and chaos upon chaos as an organisation steeped in tax raiseg experience was expected to give equal priority to handing out benefits. Long after it was apparent this system of combining tax take with tax giveaway was not working, Gordon decided the time was ripe to combine Customs with HMR.

The benefit system in Gordon's "Alice in Wonderland" world of socialism takes priority over any need for order and efficiency in collecting the taxes that must ultimately pay for it all, thats why we have the biggest budget deficit in history.

allnottinghambasearebelongtous said...

@Anon 1.41PM

Public sector occupational pensions do not come from the DWP budget.

The total spent on old age pensions (which I'm pretty sure will include Pension Credits)for 07/08 was £75.5bn (see tables for ch6 here
http://www.hm-treasury.gov.uk/pespub_pesa08.htm) so I think Matthew's figure will be correct.

It's a bad idea to accuse other people of being 'badly informed or dishonest' when you are so clearly talking out of your own butthole.

Anonymous said...

The benefits system is essentially free money for Labour voters. It should be cut right back. I'd start with child benefit: free money for people with children, regardless of need. The system really is lunacy.

Anonymous said...

I looked at the 2008 figures recently..the total intake from personal taxation came to £152.5 Billion.The benefits bill came to £150.1 Billion;the equivalent of98.5% of all personal taxation.This year it's looking like 100%,and next year the benefits bill will increase by £16 Billion.A friend who works in a local college tells me that it's commonplace for full-time female workers there who have kids to cut their hours down to 15 or 16 hours,then claim the difference in Tax Credits.Effectively the council tax payers are having to fork out nearly three peoples' wages for one job.

Mr Smith said...

So Iain if you were unemployed and could not afford a mortgage would you like your housing benefits cut by a future Conservative government? I think not!

Iain Dale said...

Mr Smith, yesterday evening you kept trying to words into my mouth about railway privatisation. Please don't repeat the exercise tonight.

There are savings to be made in all benefits systems. We know that there is £2 million a year wasted, because the Treasury tells us so. We also know that people earning £60k a year qualify for children's tax credit. Ridiculous.

Shall I go on?

I certainly am not in favour of cutting benefits to those in real need. That's what the welfare state is for. But there is too much money going to people who are not in need of it.

I can't have a debate about this tonight as I am about to go to dinner with friends.

Matthew said...

Further to my earlier post, the following Treasury document provides a functional breakdown of public expenditure:

http://www.hm-treasury.gov.uk/d/6(4).pdf

Unemployment (i.e. JSA) accounted for around £4bn of public expenditure in 2007-08 - i.e. only a tiny fraction of all welfare spending.

The debate around making reductions centres on the £28.4bn that goes on families (much of it on lone parent benefits) and the £35bn that goes on disability benefits.

There are many people in both of these groups who could work but don't. However, the process for getting them back into work is hugely challenging and requires substantial support. It is even more difficult in light of the recession.

The Government is already making substantial efforts in this area. It is legitimate for the Tories to argue for going further, but they are unlikely to find it particularly easy to do.

The problem with Iain's original post is that it focuses simplistically on the headline cost of the benefits system as a whole (both the good and bad bits) and doesn't engage at all in the difficult policy decisions that would need to be made to reduce that number. That doesn't help anyone.

Bruno Prior said...

Come on. That's Theresa you're talking about. As Fraser Nelson correctly identified in an article in The Spectator shortly after she was appointed, the whole point of Theresa is to act as a cypher to signal that you have no radical plans for a particular department.

Russ Williams said...

Agree with the headline, but I don't believe the £189bn (2009 budget figure) on "Social Protection" is all in benefits - the dole is outweighed about 10:1 by the state pension which comes from the same pot.

Anonymous said...

"25% of all government spending is devoted to social security and housing benefits?"

The inevitable result of 30 years of running the economy for the benefit of the rich.

Cheer up Iain. Soon the liblabcons will be history, except for their painful punishments and endings.

Then we will have plenty of British jobs for British people.