Balancing tax and benefit cuts

Balancing tax and benefit cuts

The headline story in the latest budget is all about “incentivising” people back to work. Cut the benefits for claimants and lower tax for workers. Sounds obvious really – those who work are better off at the expense of those not working and claiming benefits.

I’m a tax payer and I also have real problems with the spongers in society who I am subsidising. But will George Osborne’s plan work? Going back to work sounds easy but matching unemployed people to suitable jobs isn’t just a numbers game. There are many areas where a high level of unemployment coexists with skill shortages. In other words, there are many unemployed people but they do not have the correct skill set to fill vacancies.

Even when somebody who has not worked for some time finds suitable employment, the transition from being unemployed to employed can be a bumpy ride. From a practical viewpoint, arranging (and paying for) child care, looking after dependants and pets or simply arranging a regular school pickup. The expense of acquiring a vehicle to take up employment may also be an issue.

I have little doubt there are thousands of people who would dearly love to work but cannot. This may be because of training needs, disabilities or other factors over which they have little or no control. It concerns me that some people in society who really need support will suffer.

In theory, a system will exist to address this but quite frankly, I have no confidence that our civil service will implement this correctly. Their track record is not good. Problems with the Tax Credit scheme are well documented.

Last year, the Citizens Advice Bureau (CAB) claimed they had seen an increase of 14% in people facing financial difficulties as a result of paying back over-payments. In some cases, this could ultimately lead to entering an Individual Voluntary Arrangement (IVA) or even bankruptcy.

On a personal note, I am currently paying too little tax because my tax code has been miscalculated. This is an annual event despite my personal tax circumstances being very simple. As I do not want to face a huge tax bill at the end of the year, I tried to contact tax authorities. They do not accept e-mails, they do not answer the phone so I wrote to them, two months ago. No response. A Recorded Delivery letter of complaint will prompt a reply, it always does.

So despite not having any sympathy for those who won’t work, I worry the consequences of the Chancellor’s budget will bulldoze over more vulnerable members of society. This could be a classic case of “throwing the baby out with the bathwater”.

(All views expressed in this article are the viewpoint of the respective author and do not necessarily represent the views of  Wilson Field Ltd or any of its affiliates)

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