The politicians’ pointless benefits battle

Today our honest, hard-working, selfless politicians go into battle about whether many benefits should only increase by 1% a year. Our TV screens are taken up with fools from both parties pontificating about the issue. What a complete waste of time.

It was the Coalition that increased benefits by around 5% just over a year ago. So their claims to be holding down the cost of benefits are ludicrous. As for Labour, the idiot Gordon Brown, aided and abetted by Ed “borrow-borrow” Balls created an unbelievably complex and administratively expensive system where 5 million unemployed and 15 million employed rely on state handouts. With benefits costing over £200bn a year, a third of all tax receipts are given back in benefits.

Unfortunately, having never had a proper job, most of our politicians don’t understand that complexity drives up cost. The more people who receive some form of benefit, the more administrative transactions there are and the more expensive the whole thing is to run. Moreover, there is a simple rule of thumb – with money given out by the UK government 10%-20% will be lost to administration costs, fraud and incompetence: for the EU it’s over 30%: for foreign aid to Africa, India and Pakistan, repeated UN studies have shown that over 80% disappears due to administration, fraud and incompetence.

What’s needed is a massive simplification of the tax and benefits system with the aim of taking as many people as possible out of paying tax and out of receiving benefits. This could include raising the rate for basic rate tax to £12,000 taking millions out of paying tax and then claiming tax credits. Lowering the threshold for higher-rate taxpayers, so they don’t get the money from a higher basic-rate threshold. Scrapping child benefit, or at least restricting it to the first two children.

There was a useful principle that consultants sometimes used when thinking about making changes in an organisation – USA. That stood for Understand: Simplify: Automate. No doubt helped by Osborne’s useless Office for Tax Simplification (remember the pasty tax, the caravan tax and the granny tax) our hopeless politicians keep tinkering with tax and benefits making them more complex, more expensive to run and easier to defraud. Perhaps the Office for Tax Simplification’s motto is not USA but CCC – Complicate: Complicate: Complicate.

Anyway, restricting increases in benefits to 1% will save around £1.5bn a year. When one million Romanian and Bulgarian families move to Britain over the next year, this will cost us over £30bn a year in schooling, housing, healthcare and benefits. Saving £1.5bn while increasing public spending by £30bn is a strange way to reduce the deficit.