Wednesday, May 10, 2006

What will we do with Brown's Tax Credits?

The biggest waste of money that Brown has forced on this country in my view is the Tax Credit system. I'm not talking about the over-payments or the mistaken payments here - all worthy of their own posts no doubt - I'm talking about the system itself.

Ever since I first saw the idea of tax credits when I did my dissertation they screamed out at me as entirely nonsensical. Putting it simple, what is the sense in taking peoples money through income tax, shifting it around a bit, and then giving it them back minus the cost of shifting it around?

Why not just not take it in the first place? Why not just apply the same crazy formula through the tax code system? You could still have "means testing" of a sort, but it would just be invisible. People wouldn't have to fill out ludicrously long forms about their entire life in order to get £20 a month from the Treasury. Make it a tax break instead based on actual income and nothing more.

Yes, the people that shift the money around in the system might lose their jobs as a result, but if they're working in that sort of role already I doubt they will have trouble finding alternative employment. There is no such thing as a job for life, and the welfare system should be there to serve the country, not bleed it dry unnecessarily through insanely obvious inefficiencies.

We can also get rid of the paradox of losing tax credits because you save. Currently if you have savings you get less back. The more you save, the less the system calculates you can have. The current system - by design - actually punishes the least well off if they want to be frugel, how crazy is that?

At the end of the day, tax credits are little more than a 21st Century Poor Law. I do wonder what we as a Party intend to do about them.

1 comment:

outsider20 said...

When the Working Families Tax Credit was introduced, it was delivered via a tax break using the tax code. However, old GB himself realised he could make more money, with his "admin charge", and replaced the system with the Child Tax credits. It also looks better in spin terms if he is seen as giving something back. Well here's a novel tip Gordon, people will like you if don't take it in the first place.