My take on the 2016 Budget

George Osborne was described on Wednesday as the man who wants to have it all. He’s a man for all seasons, someone who on the one hand can introduce policies with widescale appeal, yet on the other be on the side of big business.

I believe however that this week’s budget represented something of a departure from this bent. That is, many of the Chancellor’s fiscal measures can be interpreted as a helping hand to the richest in UK society, to the detriment of the poorest.

Here are my four takeaways

  1. As hinted at above, Osbo’s measures, particularly around personal income tax will actually benefit the richer much more than the poorer. Two such policies that will ensure this will are a.) the increase in the personal income tax threshold to £11,500 and b.) the increase in the point at which the 40 per cent threshold will kick in. Provided your eyes haven’t glazed over at this point, I’d urge you to take a look at the nifty graph below from the respected Resolution Foundation. It shows that the greatest benefit of the aforementioned income tax cuts will go to the richest 10% of the population. ‘How can this be?’ I hear you ask. Well, in regard to increasing the personal income tax threshold to £11,500, whilst its true that you can now earn this sum without paying any income tax whatsoever, the poorest probably aren’t paying any already, so any further increase in the threshold won’t help them, at all. Sorry about that. Secondly, our tax system is based on what you earn as an individual, taking no account of those in your family who might not earn anything. Indeed, measures like this will give more benefit to households where both members of a couple are earning over the threshold than only one. And unsurprisingly, poverty tends to be more likely in single earner households. Despite the facts, policies like this are popular with the electorate, hence why Gideon, ever the politically astute cat, persists with such ruses.
  2.  The Chancellor also announced measures to introduce something called a ‘lifetime ISA’ If you’re under 40, you’ll be able to save up to £4,000 per year, and if you do, the Government will very kindly top that up by 25%, thus boosting your nice little nest egg by £1,000 per annum. Savings are good, if you can earn enough to save. The problem is, many can’t. And don’t think this only applies to unemployed layabouts. Many who are in paid employment cannot save anything either. Bad news if you want a pension, or a property deposit, or a rainy fay fund should things get rainy, or a packet of crisps. Its also worth mentioning that this won’t even begin to deal with the biggest problem facing the housing market, supply. If this sticky wicket was remedied, perhaps mega ISAs like this wouldn’t be needed in the first place. Ha, that’s funny.
  3. George Osborne bravely (like King Arthur) has promised a surplus of £10 billion by 2019-20. This Excalibur like pledge coming despite Government numbers predicting a deficit of £21.4 billion just the year before. Such a promise seems implausible at best. This serves as a timely reminder then that economic forecasts can and often do change from one budget to the next, thus, we shouldn’t pay too much attention to them. Lest we forget the promise by Ossie G that the dastardly deficit would be eliminated by 2015. Sadly, even if Osborne does break his fiscal rules, its unlikely the public on the whole will mind too much. Make of that what you will.
  4. George ‘four seasons’ Osborne has carved his reputation on the notion that those with the broadest shoulders (or some other like-minded metaphor) should bear the biggest burden in terms of getting our blasted deficit down. Which makes one his measures announced on Wednesday rather curious – cutting £4.4 billion of disability benefit – directly affecting a group which many will surely agree are a pretty vulnerable segment of our population. To put it another way, 200,000 people with access to the PIP (Personal Independent Payment) will lose almost £3,000 per year. Not one of George’s more politically cat like moves, a view shared by many of his own MP’s. This one hasn’t finished yet though I fancy. On Thursday’s edition of Question Time, Education Secretary Nicky Morgan said ‘discussions were still ongoing on the issue’ or something.

*UPDATE 18/03/2016 – As I said, this one hasn’t finished yet. DWP Secretary of State Iain Duncan Smith has tonight resigned, seemingly over the disability cuts announced by the Chancellor. You can read his resignation letter here:

BINDER’S ROUNDUP – 21ST MARCH 2015

ShopHere’s a round up of some interesting articles you might have missed in the last fortnight or so. As usual, I don’t necessarily agree with all the opinions expressed, but nonetheless found the articles worthwhile reads.

Do Christians love one another? By Ian Paul – Psephizo.
KEY POINT: How much do we love our Christian brothers and sisters?

A troubling attitude to statistics by Jonathan Portes – NIESR Blog
KEY POINT: Would at least some of the 105,000 ‘troubled families’ have turned around without the help of the Troubled Families Programme? Quite possibly.

This is why there are things we don’t say about race (even when they are true) by Joseph Harker – The Guardian

KEY POINT: ‘Facts in themselves are neutral but their interpretation certainly isn’t. And while on their own facts cannot be racist, the way they are chosen certainly can be.’

Who was St Patrick? By Kevin DeYoung – The Gospel Coalition
KEY POINT: St Patrick was a Christian missionary to Ireland. Who knew?

Wild Sex by Adrian Reynolds – The Proclamation Trust Blog
KEY POINT: Whilst secular advice about sex (and other issues) may be very helpful, it needs to be always filtered always through a biblical grid because, fundamentally, Christians views and the world’s views are wildly different.

Doubling down: Why increasing the personal tax allowance yet again is still poor value for money by Nick Pearce – IPPR Blog
KEY POINT: Raising the personal income tax threshold to £11,000 benefits those in the richer half of the popular half much more than those in the poorer.

Clarkson suspended for act of kindness – The Daily Mash
KEY POINT: Contrary to news reports, Jeremy Clarkson was suspended by the BBC for helping some disabled people.

Why do witnesses never bite back at grandstanding MPs? By Iain Martin – The Daily Telegraph
KEY POINT: MPs need to be more respectful toward Committee witnesses.

Dead stars and deep secrets: we are still in the dark when it comes to black holes by Michael Brooks – The New Statesman
KEY POINT: We don’t really know what’s in the middle of a Black Hole.

Binder’s roundup – 9th March 2015

ShopHere’s a round up of some interesting articles you might have missed in the last fortnight or so. Topics covered include the meaning of life, blindness, sentencing policy in the USA, the upcoming UK general election, the ‘Nordic’ welfare model, moving the UK Parliament to Hull and more. As usual, I don’t necessarily agree with all the opinions expressed, but nonetheless found the articles worthwhile reads.

Whatever it takes by Jonathan Parnell – Desiring God

Would you like 5 million votes and 4 seats or 1 million votes and 56 seats? By Charles Morris & Harry Lambert – May2015

Felony murder: why a teenager who didn’t kill anyone faces 55 years in jail by Ed Pilkington – The Guardian

Delhi rapist says victim shouldn’t have fought back by Leslee Udwin – BBC News Magazine

Tim Farron profile: The Lib Dems’ leader in waiting by George Eaton – New Statesman

Seven things to consider if your spouse is not supportive of your ministry by Thom Rainer – thomrainer.com

Labour’s higher education funding plans by Jack Britton et al – IFS

Do blind people really experience complete darkness? By Damon Rose – BBC News Ouch

Meet the man who could own Aviva France by Dan McCrum – Financial Times Alphaville

The Nordic model is no longer a holy grail by Philippe Pochet – Social Europe

Maybe we don’t need to move Parliament to Hull. But we do need to overhaul its alienating traditions, by Helen Lewis – New Statesman

Universal Credit might be under budget, but it will still leave many out of pocket

To be fair to the much maligned IDS, he did a decent job on Sunday’s Andrew Marr show of trying to gloss over bad news. This bad news being that as opposed to 1 million UK citizens being enrolled in the new system of benefits payments as was originally planned by this point, only 26,000 have made the transition. The Work and Pensions secretary attempted to deflect this troubling headline by revealing that the replacement for the current system of tax credits would be delivered some £600 million under budget, which to be fair is quite impressive.

Despite the numerous delays and now infamous problems with the dreaded new IT system, the £600 million dollar question remains: will people be better off under Universal Credits than they were under the old system of Tax Credits? Two ways in which this question can be answered are by comparing work incentives (or the financial reward from any extra income earned) and how generous payments will be for various family types compared to Tax Credits.

By way of brief introduction, Universal Credit will essentially combine many of the existing state transfers (including tax credits) into one existing payment. It will replace Income-based Jobseeker’s Allowance, Income-related Employment and Support Allowance.

Will Universal Credit make work pay?

Under Tax credits, it is, unbelievably enough, possible to face a Marginal Effective Tax Rate (METR) of some 96%, meaning that for every extra £1 earned through overtime for instance an earner would only see 4 pence. Yes, that’s right, 4 pence. Such crippling work incentives are basically the consequence of Tax Credits being very generous for very lowly paid earners (by OECD standards anyway) but being withdrawn extremely quickly as one progresses up the income distribution. Even if you take Housing Benefit withdrawal out of the equation, many households still face rates of 73%. Lone parents and one-earner couples with two children on incomes between £18,000 and £27,000 per annum (the latter of which are at particular risk of poverty according to the Joseph Rowntree Foundation) are amongst those affected  by these crippling incentives.

Under Universal Credits, no earner will face an METR higher than 76.2%; meaning that an earner subject to this METR will see 24 pence come into the household for every extra £1 earned. No more ridiculous 96% rates! Rejoice! However, the DWP admit that the majority will actually see their METR’s increase slightly from 73% currently to 76%.

Even if we take the best case scenario (where METRs are reduced from 96% to 76%), where would this METR leave the UK in comparison to other developed countries? Not well. Data from the OECD shows for instance that, an METR of 76.2% would leave a -earner family on 75% of the OECD average wage (about £27,000 per year) with the worst work incentives in the OECD.  Thus, whilst under Universal Credit work might be more rewarding for some families, it’ll still be far too high for too many others. On this basis, to claim so confidently that ‘work will pay under Universal Credit’ is quite a stretch. The fact is that most governments and families throughout Europe would baulk at such poor work incentives. Thus, whoever comes into government come May 2015 and whatever they think of Universal Credit will have to tackle this issue with some urgency.

Will Universal Credit be more or less generous than Tax Credits?

As with most tax, benefits and welfare policy, the answer as to whether you will be a winner or loser very much depends on who you are.

The respected Institute for Fiscal Studies (IFS) (whose conclusions have been confirmed by the Department of Work and Pensions) have said that lone parents with two children working less than 16 hours a week will be better-off, the difference will be very little for those working between 16 and 29 hours, and those working 30 or more hours per week will be slightly worse off. As far as couples with two children are concerned, single earner in-work couples will be-better off, whilst couples with savings of more than £16,000 will do worse.

Taking a look at the bigger picture, The DWP published a revealing Impact Assessment in December 2012.  This shows that 3.1 million households will have higher entitlement as a result of Universal Credit – on average gaining £168 per month. Around 1.9 million households will see an increase of more than £100 per month.  2.8 million Households will have lower entitlement, the average reduction here being £137 per month. Thus, it appears that the majority of recipients will do better out of Universal Credit than Tax Credits (although a significant minority won’t), an achievement given the tough fiscal climate in which IDS and his department have had to operate in this term.

Conclusion – More to do

Whilst the relative simplicity of Universal Credit is to be applauded, and whilst the outrageous 96% METR will go, work incentives will actually decrease for the majority of claimants. As things currently stand, it cannot really be claimed that Universal Credit will make work pay. On the other hand, the majority will actually gain monetarily from the new system. We therefore have something of a mixed picture. Given the amount already done, whoever comes in post May 2015 will be stuck with this policy, and would be worth their while looking at ways to improve work incentives whilst ensuring that the poorest continue to be protected.

Who would win from a 2015 rise in the Minimum Wage?

Another year, another Autumn Statement, and with the forthcoming 2015 General Election mere months away, would the Chancellor do anything in terms of increasing the minimum wage? Might he even enforce the living wage? Whilst there were stamp duty reliefs and yet another regressiveincrease in the personal income tax threshold, the answer in terms of wages was a big fat no.

This omission from the Treasury is odd, given than wages have been on the lips of politicians, members of the public and businesses alike for much of the previous year. Indeed, with pay packets still a way behind their pre-2008 recession peak, it is perplexing to say the least that nothing was forthcoming from Mr Osborne. Further, with hardly any other issue more important to the electorate, issues regarding the economy and wages are likely to be at the forefront of political debate as we approach May 2015.

Many have called for a substantial rise in the minimum wage, with the Living Wage campaign gaining extra traction of late, it’s arguments backed up by recent findings from the Joseph Rowntree Foundation claiming that half of all poverty is found in working families. Proponents of the Living Wage have argued that the minimum wage should rise to ‘reflect the real cost of living’ to £9.15 in London and £7.85 outside. The question is though, will those in low pay see much of any rise in their wages once tax and benefit changes have been taken into account? To find out, I look at four family types on the current minimum wage (£6.50 per hour) and how much they’d gain from an increase to the Living Wage outside London (£7.85), before considering what can be done to help workers gain more from any rise in pay, before setting out how things might change under Universal Credit.

Winners and Losers

In order to establish who will gain the most from any rise in pay it is assumed that each family type is working 37 hours per week on the minimum wage, and will enjoy a rise to the Living Wage outside London on the same hours. I calculate the Marginal Effective Rate which tells us how much from the earner’s extra wages will actually go into the pockets of the household once tax rises and benefit withdrawals have been taken into account. At the minimum wage at 37 hours per week, an earner will be earning £240.50 per week, and at the 2014 living wage they’ll be bringing in £290.45, a difference of £49.95. How much of this extra income will each household see?

27 pence

That’s the amount each of the households identified in this article will gain for every extra pound earned. This means that from the extra £49.95 earned in a move from the minimum wage to the living wage, all the earners will stand to gain only £13.49 per week. Thus, in terms of tackling the in- work poverty noted at the beginning of the piece, this pitiful return may not be the silver bullet to eliminating in-work poverty some perhaps think it is. To explain further, from every extra pound earned, 20 pence will be withdrawn via Income Tax, 12 pence through National Insurance Contributions and a staggering 41 pence through Tax Credits withdrawal. Given this stark reality, what can be done to help alleviate the situation?

  1. Expand the tax credits system further up the income distribution

The withdrawal rates noted above reveal much about how we in Britain withdraw state support as one progresses up the income distribution. In other words, as one earns more income in work in one hand, state support withdrawal means it is substantially taken away with the other. One answer to this would be to make the curve less severe, withdrawing Tax Credits more gently as one’s income ascends. Although effective, this measure would be quite expensive for the taxpayer, yet if a Government can spend billions on a tax measure that mainly benefits those in the upper half of the income distribution (raising the tax free threshold to £10,600) then why not do something like this to help those in the lower half? After all, ‘we’re in it together’ aren’t we?

  1. Raise the minimum wage to a level where low paid workers are less reliant on state cash transfers

Essentially, the system we have now is a legacy of the New Labour Government’s ‘Third Way’ approach, whereby Labour enforced a minimum wage but set it low enough for it to be attractive to employers. However, if the state were to enforce a higher minimum wage instead of subjecting low paid workers to highly conditional state benefits, then previously in receipt of state transfers would only be subject to Income Tax and National Insurance deductions. Whilst this option has obvious attractions, employers would kick up a stink, claiming (not entirely without merit) that jobs would go if they were made to increase the wage to the levels that would be necessary to make up for substantial losses in state benefits.

  1. Introduce transferable allowances

This measure, introduced in very limited form in this year’s Budget essentially means that a non-earning spouse in a one-earner couple household can transfer part of his or her unused personal tax allowance to the earning partner. In the current system, this would result in a net gain for the couple of around £260 per year, which clearly has very limited benefits in terms of tackling in-work poverty. Worse, when implementation of the Universal Credit is taken into account, families in low pay would benefit by only around £91 per year. If, on the other hand Universal Credit payments were disregarded and the allowance were fully transferable , the policy would be more useful, lowering the earning spouse’s marginal tax rate by 20%, resulting in an extra 20p in the pound for a group the Joseph Rowntree Foundation say are at particular risk of poverty. Thus, whilst this measure in ‘full fat’ form could be useful, it only benefits the primary earner within one earner families and actually acts as a disincentive for secondary earners. Overall then, this measure could really only be considered as part of a whole suite of measures to raise rewards from extra income earned.

Future prospects – Universal Credit

Having considered three measures which may alleviate the problem, we now look to the future under Universal Credit, the system set to replace tax credits. I won’t go into a full nuts and bolts explanation of what it is, but supporters allege that it’ll both be simpler than the current arrangement and will help tackle stifling work incentives. Whilst it may be simpler to understand and administer than tax credits, the Department for Work and Pensions own Universal Credit Impact Assessment admits that those currently facing a withdrawal rate of 73% will face an increase of 3 percentage points to 76%. On the other hand, those on Housing Benefit will see their withdrawal rates fall from 91% to 76%. In sum, many families under Universal Credit will actually end up gaining less from any rise in pay than under the current tax credits system.

No silver bullets

Those believing that wage increases will bring with them a fall in working poverty are on the basis of the evidence seen in this article in for a shock. Tax Credits leave many earners with little to shout about when it comes to financial reward from extra pay, and whilst those receiving Housing Benefit may gain from the move to Universal Credit, they will still endure punitive returns from a pay rise, with many actually being worse off than under Tax Credits.  All this isn’t to say growth in low wages isn’t welcome, it clearly is; however we’re kidding ourselves if we think that wage rises on their own will lift millions out of poverty. Increases in wages must be accompanied by reforms to the welfare system so that workers keep more of what they earn.

Christianity isn’t about being ‘good’ Mr Cameron

So, it seems David Cameron is ‘doing God’ again. The possible reasons for this are numerous, from trying to court the so called ‘evangelical vote’, particularly after the recent passing of gay marriage into UK statute which has disappointed many evangelical Christians, to the apparent desertion of many evangelicals to UKIP. This latter motivation might be particularly likely given the upcoming European elections which the UKIPs are tipped to do rather well in. Alternatively, it could be neither of these things, it could be that Mr Cameron really does love the Church (or at least his version of it) and that he wants the UK to hear more about his faith. In any case, it’s not my job to judge Mr Cameron’s motives. No, my purpose here is to share some comments on how the Prime Minister portrayed Christianity in his recent media output.

The overriding sense I got from listening and reading to DC’s comments was that he felt Christianity’s main contribution in the past, present and future of UK society is essentially social. That is, Cameron made much mention of the soup kitchens, homeless shelters and plethora of other social projects run by Christians throughout the land. Furthermore, and perhaps even more importantly, he feels that Christianity has much to teach about ‘morality’ and ‘being good.’ Well, to put it bluntly, Christianity is neither primarily about doing good things or being good. Nor should it be doing things the state should be doing (i.e. the ‘Big Society’). To put it another way, why did Jesus walk this earth and found what we now know as Christianity? Observe Jesus’ words in the gospel of Mark, and the Apostle Paul’s words to the Corinthian church.

Jesus: ‘For even the Son of Man came not to be served but to serve, and to give his life as a ransom for many.” (Mark 10:45)

Paul: ‘For I delivered to you as of first importance what I also received: that Christ died for our sins in accordance with the Scriptures, that he was buried, that he was raised on the third day in accordance with the Scriptures.’ (1 Corinthians 15:3-4)

Thus, we can see here that Jesus didn’t come to tell people to live moral lives or encourage us to run good social projects but to give his life as a ransom for humanity. What is more, he did so for precisely for the opposite reason to what Cameron has insinuated in his Easter output up to now, because man isn’t inherently good but is inherently sinful (Ephesians 2:3), hence why we need a saviour in Jesus, who was inherently good (2 Corinthians 5:21). In other words, what makes Christianity so unique is not what Christians have done for the World, but what Jesus has done for us in offering eternal life through his death and resurrection. It is disappointing that the Prime Minister neglected to mention this life changing truth .

Indeed, this life changing truth is massively important because despite it being worthwhile to get involved in various social works as Christians, we should not do so for their own sake or because they in themselves are what make us Christians or what constitute the Church. Thus, without acknowledgement of the gospel, Christianity is merely a promoter of good social works and good morality in themselves, and not a solution to the ultimate problem of sin brought about by man’s rejection of God. Put plainly, Christianity without the gospel, is no Christianity at all. Hence, the PM was greatly mistaken in failing to mention this, and to me failed to really present the true Christianity seen in the Bible.

With this in mind, it’s no surprise that Big Dave appears to see Christianity and the Church through the lens of the so called ‘Big Society.’ I fear that one of the key reasons the PM sees Christianity as good is because it is a vehicle through which duties previously undertaken by the State can be performed. This, to be frank, is quite wrong.

The Bible makes it clear that Christians should be spending much of their time proclaiming the gospel to those unsaved (2 Cor 5:18-20), and building up fellow Christians in faith and in godliness (Ephesians 4:11-16), enabling them to stand firm in the gospel into eternity. This in my mind means that Christians shouldn’t be spending the majority of their time immersed in social programmes which the state should be initiating and maintaining. Now as I’ve said already, Christians undertaking social works is good, not least because evangelism (that is, sharing the gospel) can be particularly effective through building genuine relationships. However, the Bible clearly states that God has instituted the state to govern (Romans 13:1-2), not to palm off duties to the Church in order to fulfil the Tory small state ideal. That is not what the Church is there for! In other words, seeking to fit the Church and Christianity into some man-made political fad simply doesn’t wash.

To conclude, David Cameron in arguing the case for Christianity in Great Britain has missed out the very thing that makes Christians such in the first place, faith in the gospel of Jesus Christ. It seems sadly ironic that in and around Easter week, the Prime Minister has completely neglected to mention the death and resurrection of Christ, the very act which defines this period and which quite literally changes everything for those who place trust in this act for their salvation. Further, although it is good for Christians to undertake social projects, doing so is neither the central or only thing Christians have achieved for the UK, or should be in the future. Thus, on these bases, seeking to fit the church into the ‘Big Society’ is highly misguided. One prays that the Prime Minister would truly grasp the centrality of the gospel in Christianity and realise it is the role of Government to govern and not the Church.

My top articles from January 2014 – Part 3

man thinkingHere’s the third and final part of my top articles from January 2014.  Themes covered include, young people and the church, freedom of speech and expression, economics of the family, jobs and tax. Thanks for reading!

  1. How is God working in the World? Understanding Miracles and Providence by Justin Holcomb – The Gospel Coalition
  2. On the importance of the right to offend by Kenan Malik – Pandaemonium
  3. ‘Nuisance and annoyance’ injunctions abandoned after Lords defeat by Alan Travis – The Guardian
  4. Where is Unemployment the highest (infographic)? By International Labour Organisation – International Labour Organisation
  5. Petition to deselect LibDem candidate Maajid Nawaz for tweeting Jesus and Mo cartoon by Archbishop Cranmer – Archbishop Cranmer Blog
  6. The heavy price adults have to pay for independence by Donald Hirsch – Donald Hirsch blog
  7. Economists: Your parents are more important than ever by Derek Thompson – The Atlantic
  8. 3 common traits of youth who don’t leave the church by Jon Nielson – Church Leaders
  9. 50p tax – strolling across the summit of the laffer curve? By Paul Johnson and David Phillips – IFS
  10. Opinion poll exclusive: Labour lead cut to one point after Tories gain on living standards by Andrew Grice – The Independent