The benefit cap: what is it and is it fair?

I have, until now, paid relatively little attention to the government’s proposed benefit cap. I knew it was there as a proposal but made no effort to find out whether I think it’s a good idea or not.

If you’re in the same position, here are a few things to read first:

• Tim Leunig (CentreForum chief economist) in the Guardian arguing against
• The figures behind Tim’s piece
• Mary Ann Sieghart in the Independent arguing in favour

The proposals

The proposals are for the amount of benefits a household can receive to be capped at £26,000 per year. Why £26,000? Because that is the median, after-tax household income in the UK. Being given £26,000 a year is the equivalent of earning £35,000.

The proposals would apply to all those in receipt of benefits apart from two exceptions: those on working tax credits (ie the working low paid) and those on disability living allowance.

Essentially, then, the people who will be affected are those who live in households where no-one works and the household currently receives more than £26,000 in combined benefits.

Is it fair?

It seems to me there are two arguments behind the proposed cap: the practical and the moral.

The practical argument, enunciated by Iain Duncan Smith, the work and pensions secretary, on the radio this morning is that the cap will incentivise work. The argument goes that the current system allows households where no-one works, particularly if they have a number of children, to claim so much in benefits (particularly housing benefit) that they can afford to live in houses in areas where people with the same size of family but where the parents work could never afford.

The cap, it is argued, will force those people to move out of the most expensive areas of the city and into a more affordable area. This, in turn, gives a greater incentive to work because the property to which they have relocated is affordable to them if they were to get a job, whereas the previous home in the expensive area would not have been (therefore disincentivising work).

(Incidentally, it’s probably worth mentioning one of the more interesting things IDS said on the radio earlier which I didn’t know. We keep hearing a lot of talk about how the changes would lead to more ‘homelessness’, but what does that mean? The technical definition of homelessness is, apparently, children sharing a bedroom. Seems rather perverse to me – not least because it means that I’ve just found out that at various points in my childhood I was technically homeless!)

The wider moral argument is that it is simply unfair for unemployed people to receive more in state benefits than the average household does by going out to work. In other words, those who work hard for a relatively low wage should not subsidise those who do not work to live in a nicer house in a nicer area. That’s a simply and fairly compelling argument.

What’s my conclusion? Well, I haven’t decided yet. Fortunately I’m not a member of the House of Lords, so don’t have to vote on the proposals tonight.

On tie knots and continuity

Nice windsor, Mr Bond - but for how long...?

Continuity in television and film is absolutely vital, not to please the people who watch things just to spot the errors, but because attention to detail is a prerequisite to a film or programme being as enjoyable as it possibly can be. A great plot, compelling characters, the newest technology do not make a good film unless the details – however subtle – are spot on.

Film and television programme makers know this, of course, which is why people are employed specifically for the task of ensuring ‘continuity’ – making sure things don’t go missing from or appear on set during a break in the filming of a scene, for example.

However, I’ve spotted one area where these continuity people don’t seem particularly successful: tie knots.

I first spotted this in one of my favourite US drama series, Boston Legal. The same character can be shown twice in the space of a minute and look essentially the same apart from the knot in the tie. It’s not that the type of knot changes, but that the way the knot looks does – dimple or no dimple, left large and untightened or smaller and more taut.

I noticed a quite gratuitous example in Tomorrow Never Dies, which was on ITV yesterday. Early in the film, when Bond is travelling in the car with M and others, he is shown wearing his tie in a properly dimpled four in hand knot. Literally seconds later, after the shot cuts away to M and then back, he is wearing the same tie, tied in the same way but completely dimple-free.

Does this matter? Well, not massively. Indeed I suspect I’m most certainly in a minority in even noticing (!). But if continuity is deemed important, why not go the whole way and really pay attention to the details?

22 June 2009 – The day Cameron trashed Britain’s EU relationship

David Cameron didn’t betray the British national interest at a dinner last night. He betrayed it over two years ago, on 22 June 2009.

That was the day that he withdrew his party from the main centre-right bloc in the European Parliament – the European People’s Party, home of the parties of Nichola Sarkozy and Angela Merkel – and joined forces with a couple of dozen MEPs from various odd-job right-wing parties from around the EU.

It was the day he willingly and without reason isolated himself from the leaders of Europe’s most important countries.

And what a bizarre analysis of the situation it is to say that Cameron’s use of his veto (if we can call it that) was a sign of strength and success. Persuading his European colleagues of the merits of his (very reasonable) concerns would have been a success. Using his veto was Cameron’s last resort: an ultimate display of his weakness.

Britain’s interests in Europe are best served by being as influential among our fellow nations as we possibly can be. David Cameron’s ‘strength’ has resulted in us having the least amount of influence we have ever had over the course of our membership of the EU. Anyone who calls that a success needs their head testing.

What will happen now in the EU and eurozone is anyone’s guess. The only thing we know for sure is that Britain’s national interest has been severely and unnecessarily damaged by David Cameron’s catastrophic error of judgement back in 2009.

Lib Dem success in benefit increase debate

Over recent weeks, a fierce debate has been raging at the centre of government over the rate at which benefits will be increased next year. The original plan was to increase benefits by whatever the rate of inflation, measured by the CPI, was in September this year.

The reason the issue has been so heavily debated is because the CPI rate of inflation in September was one of the highest of recent times: 5.2%. That was a higher rate than the Treasury had factored into their plans.

More importantly, though, George Osborne – for political reasons – was reluctant to increase benefits at the rate of inflation when average earnings were rising by much less – somewhere around the 2% mark.

Lib Dems in government where keen to see an inflation-level rise, as planned.

Hence this intervention, a couple of weeks ago, by David Laws in a letter to the deputy prime minister and reported in the FT:

Mr Clegg has been advised by David Laws, former Treasury chief secretary, that the coalition should stick with plans to increase all benefits next year by 5.2 per cent – in line with September’s inflation figure – to protect “some of the poorest in society”.

Mr Laws, considered a fiscal hawk, argues in a letter to Mr Clegg that people on benefits were already under severe pressure from inflation and points out that benefits – including child benefit, council tax and housing benefit – have already been squeezed.

Skip forward a week, and Vince Cable is asked about the issue on last week’s Politics Show, and answers thus:

Of course they will go up with inflation. We believe the most vulnerable people in society should be protected in these very difficult conditions.

There is no doubt; of course they should be indexed and that’s fully understood.

Then yesterday comes the report – in The Times and the Guardian – that a compromise has supposedly been reached which will maintain the index link but which will use as a measure a six-month average of inflation figures rather than the one off (and particularly high) September figure. That reports suggest that that figure is 4.5%.

The Guardian suggests that this compromise has not yet been approved by the ‘quad’ (David Cameron, Nick Clegg, George Osborne and Danny Alexander), but it looks like the 4.5% rise is will go ahead.

In my view this is a significant victory for Lib Dems in government. Inflation over the next year or so is likely to be lower rather than higher, so a 4.5% rise will still leave those on benefits better off.

It’s also worth pointing out Labour’s view on all this. The FT reported that Labour were reluctant to criticise a lower increase (even a wage-level increase) because they fear it would alienate low-paid workers, who they believe they need to get back on their side.

In other words, the only political party arguing for the retention of the index link was the Liberal Democrats – and it looks like we have thankfully succeeded.

Video: Wise words from David Laws on Lib Dem strategy

Below is a video of David Laws speaking at a Liberal Vision/IEA fringe event held at Lib Dem conference back in September. As ever, he makes some excellent points.

Review: The Ides of March

‘Expectations management’ is a crucial tool of modern politics: what matters is not how objectively effective or ineffective a person is, but whether they can exceed the standard people (or, more importantly, the media) expect of them.

My expectations of what to expect from The Ides of March had been raised pretty high – I mean, George Clooney and US politics: what could possibly go wrong…?

Well, quite a lot actually. I can’t, of course, say much more than that the film didn’t match my expectations (by a rather long way).

But I found the film very disappointing. The plot was weak, the drama was, well, non-existent and the characters (particularly those played by Ryan Gosling and, in particular, George Clooney – ie the main ones) were utterly unconvincing.

But do you know what my first thought was? It was that the film was not a patch on The West Wing.

It’s inevitable that we West Wing fans are going to judge the film relative to what is one of the finest political dramas ever made, and because of that it was always in the back of my mind that the film wouldn’t be up to the challenge. But I wasn’t expecting it to be quite so wide of the mark.

All of which, incidentally, shows the difference between expectations management in film-making and politics: high expectations help film companies (after all, I still bought the ticket, whatever my opinion of the film now) but high expectations are terrible for politicians (ask Barack Obama).

In short, West Wing fans should prepare to be disappointed. And if you’ve not seen The West Wing, pick up the box set on your way home from seeing The Ides of March and look forward to political drama with characters worth investing in, interesting plots and plenty of drama.

P.S. The film had one redeeming feature: the rather cool poster advertising it:

An open letter to George Osborne – cut taxes for the low paid, and do it quickly

Dear Mr Osborne,

The economic strategy put in place by you and the coalition government in which you serve last May was the right one for Britain. In these turbulent economic times, the one thing we can be sure of is that Britain’s economic position would be considerably more precarious now had the government not put in place a credible, balanced and achievable plan to reduce Britain’s budget deficit.

But economic conditions have changed substantially since last May. Inflation is eating into people’s spending power at a greater rate each month, and the crisis in the eurozone is suppressing the export market which must play a vital part in Britain’s recovery.

It finally appears that the latter of these problems is now being dealt with. The first, though, just keeps getting worse, as today’s rise in the CPI to 5.2% shows.

Inflation itself is clearly a problem outside your hands, and even the Bank of England’s policy options are limited because of the factors forcing inflation up.

But fiscal policy is absolutely in your hands.

A VAT cut, as suggested by the Labour party, would be both expensive and pointless, benefitting mainly those who have enough money to spend on luxury goods in the first place (clearly not the people being most affected by the squeeze on living standards).

But one policy change that would undoubtedly help would be the swift implementation of the coalition’s policy of raising the income tax threshold.

First, this would negate the effects of current inflation on the lowest paid, meaning they don’t have to cut back as a result of price rises.

And secondly, it would have a positive knock-on effect on economic growth, limiting the damage that inflation will do to GDP.

And what’s more, given that this is a policy already budgeted for over the course of this parliament, the cost of implementing the policy more quickly is relatively small and short-term, and so can be paid for with temporary tax increases on those who can afford them.

At a time like this, it is both desirable in itself and economically sensible to cut taxes for the low paid. I urge you to do so, and do so quickly.

Yours,

Nick Thornsby.

Lobbying and party funding reform are both vital and urgent – so why aren’t the Lib Dems saying so?

If there is one thing the Liberal Democrats are not it is a party of vested interests: not beholden to trade unions, to professional lobbyists or to big business. Free to advocate policies that work and are right for the country, not ones that please the people who pay parties to adopt them.

It’s one of the many reasons I’m a member of the party – and it’s a motive I share with our leader.

Among many other things, the murky practices that did it for Liam Fox demonstrate once again with perfect clarity just how necessary reform of both lobbying and party funding are.

The coalition is consulting on what form a new register of lobbyists should take. And Nick Clegg has spoken while in government about the urgent need to reform party funding.

So why aren’t we as a party making use of the situations which demonstrate the need for these policies?

Both Labour and the Tories have no desire to see the status quo changed – it serves them perfectly well (if they arrange things in a way that are sufficiently secretive and in-transparent – Fox’s problem was that he didn’t cover his tracks well enough).

So if we are to get our coalition partners or Labour to back reform, we have to get the public on our side first. Most of the public would probably agree with limiting donations and tightening the rules about lobbying; the problem is that it is not high enough on their list of priorities.

But it should be. Government freed from vested interests is government that works for the whole of the country rather than those with the deepest pockets and superior contacts.

The interests of defence contractors or trade unions are not necessarily the same as the interests of the public as a whole, but as long as these people maintain control of the flow of cash into Tory and Labour HQs, how can we really be sure whose interests are being represented?

So many ‘scandals’ in British politics can be explained with reference either to party funding or lobbying that, when they come along, we have to show the public how they are not just of interest to Westminster obsessives but to ‘ordinary’ voters.

During the expenses scandal, the Liberal Democrats (eventually) made great use of the situation to show the need for wholesale political reform. We must do the same when it comes to what is ultimately a much more pressing political issue: the corruption of our politics by the rich, savvy and powerful.

Let’s not protest too much at Tory rhetoric

Most Liberal Democrats, I suspect, felt slightly queasy, in the aftermath of the recent riots, at some of the very Tory rhetoric used (particularly) by the prime minister. In fact, I know many Liberal Democrats felt a little more than queasy from seeing their blogs and tweets.

At the time, though, I struggled slightly to get quite as worked up as others, and I found myself in the same position over the weekend when Theresa May, the home secretary, started mouthing off about how awful the Human Rights Act is.

The reason is this: these words, this excessive rhetoric, doesn’t amount to anything. It is posturing, pure and simple. After the riots, the prime minister latched onto the anger felt by those who’d been afflicted and promised all sorts of things to show he was “on their side”.

But what did all that talk amount to? We still have a liberal justice secretary, a Liberal Democrat deputy PM chairing the Home Affairs Cabinet Committee and a government with an ambitious programme to reform the failed criminal justice system of the past few decades. David Cameron’s talk changed nothing.

And this weekend, it was Tory members who needed mollifying. And if Tory members are able to work themselves up into a state of excitement because of a (well-spun) interview with the home secretary, it’s fine by me.

Because next Monday, David Cameron will go back to Number 10, Nick Clegg will be at his desk in the Cabinet Office, and the programme for government will still commit this government to strengthening, not diminishing, human rights. Ken Clarke will still be justice secretary, Chris Huhne will be continuing his green revolution, and Britain will still be an active member of the European Union.

And Tory members will go home with a warm feeling inside their stomachs. And then they will remember that, actually, their party didn’t win the election, it is 2011 not 1950 and they’ll realise that human rights and the EU are here to stay. And they’ll get angrier and angrier about all of that until next September, when Theresa May will be interviewed by The Daily Telegraph.

More economically responsible than Labour and more socially just than the Tories – but are we underselling ourselves?

That phrase – that the Liberal Democrats are more economically responsible than Labour and more socially just than the Tories – is a catchy one. It also represents in quite a pithy way the strategy that the Lib Dems should be pursuing.

But, I can’t help thinking that it is slightly…unambitious.

After all, my goldfish is more economically responsible than the Labour party, so that is hardly difficult, and the Tories, for all their talk of compassion, have no realistic basis to call themselves the party of social justice.

Thinking about it, aren’t we (and shouldn’t we be) not only more economically responsible than Labour and more socially just than the Tories, but more economically responsible and socially just than both parties?

Just think how much more sound this government’s economic policy is because of the Lib Dems – no front-loading of cuts (which would have been politically clever for the Tories but economically bad), a decent balance between spending cuts and tax rises to balance the budget, protection of the science budget by a Lib Dem business secretary and a demand-stimulating income tax cut for the low paid. All good for the economy, and all done by the Lib Dems in government.

And Labour scarcely have a better claim on social justice than the Tories – rising inequality on their watch, the ludicrous axing of the 10p income tax bracket and, worst of all, an education system where the wealth of one’s parents still determines success in school – more than almost anywhere else in the world.

So while this slogan represents sound strategic thinking, there’s nothing wrong with being ambitious – particularly when it is quite clearly justified.