Inefficient methods of managing our taxation system hamper efforts to create a caring society, writes David Watt
IF YOU were to look up The Oxford Dictionary’s definitions of “welfare”, they include the “statutory procedure or social effort designed to promote the basic physical and material well-being of people in need”, sentiments we would all applaud.
However, since 1948, when the foundations of the welfare state were laid down along with the formation of the National Health Service and the National Insurance Scheme, what was originally conceived as a safety net for all, focused on the disadvantaged people in the community, has grown into an expensive and complex system which seems to be hindering economic progress and prosperity.
It is time to stop blaming the banks for all our economic woes – the welfare system was unaffordable well before the banking crisis – and begin to accept that the whole system needs to be reassessed, ideally starting with a blank sheet of paper.
Any substantial reforms require an all-encompassing review that includes input from trade unions to right-wing think tanks. There is no point in rushing into changes that may or may not be right. The danger is you end up with a situation like the recent introduction of the bedroom tax. While in principle it is sensible, it is not realistic in practice, if only because of the severe shortage of appropriate housing stock.
Realistically any root and branch shake-up of the welfare state will not be implemented this side of 2020, but in the interim there are sensible progressive steps that could be taken to start saving and redirecting money. However, any meaningful reform to the current system is going to have to address the sacred cow of “means testing”. I am at a loss to know why so many people are opposed to this as we do it already through the taxation system and for benefits such as the winter fuel payment. So why not do it for prescriptions and pensioners’ bus passes? Surely “means testing” would be easier than setting up a complicated system to enable the conscientious rich who don’t need the money to give it back or give it to charity?
One of the fundamental problems we have is that the two huge bureaucratic monoliths of welfare and tax don’t seem to speak to one another. Most people are in the taxation system and as such are assessed at various levels, so it should not be difficult to integrate them so that eligibility for benefits is determined by how much they earn and the tax they pay.
It would certainly cut down on the unnecessary bureaucracy and expense currently expended on assessing people earning low wages. At present with someone on the minimum wage – £13,500 a year for a 40 hour week – we pay someone to assess and collect tax from them before paying someone else to assess what tax credit and other benefits they are entitled to and then someone else to give it to them. And that’s before local council staff get involved to determine council tax benefit eligibility. Why are we taxing a living wage at all when all it does in effect is meet the cost of administering it?
But not all changes to the system are about saving money. Encouraging people to work is equally as important. I have lost count of the number of employers who have told me how frustrated they are at the 16-hour-a-week rule for anyone on benefits. If an employee works just one extra hour they lose all their benefits. This “all or nothing” approach is madness, as it discourages many people from working more hours and from being more productive because they would be penalised.
There also needs to be a refocusing of priorities. I would like to see a welfare system that gives enough money to the people who really need it, as well as the channelling of resources into sensible initiatives.
The UK government’s recent decision to stop funding the Remploy factories is lamentable. Remploy have been supporting disabled job seekers with job opportunities for many years and such a retrograde action illustrates how necessary it is for someone to sit down and take a good, long, hard look at how to spend the money society earns in a logical and sensible way.
There are many examples of where government spending doesn’t seem do reflect any real logic or focus. For example prescription charges in Scotland. At the moment the Scottish Government is losing out on an estimated £20 million a year by not charging. They claim the cost of collecting would exceed £20m. I find that difficult to believe.
Then there is our defence provision. Few are more supportive of our armed forces than I, but a total defence spending of £34 billion a year exceeds the annual cost of running Scotland.
Why are we buying Trident when we are turning the army into a largely reserve force and indeed, while there is an increasing number of people in the country who cannot afford to buy food?
If I had my way, by 2020 we would live in a country that doesn’t close down Remploy, that gives people a good start in life by encouraging employment and then employs them usefully. We need to focus on people in real need and help them towards the job market or whatever is needed to make their lives more comfortable – for example, more affordable housing.
It is time to consider innovative and radical solutions for our ailing welfare state before it expires of its own accord. Going back to the dictionary, the first definition of welfare is: “the health, happiness, and fortunes of a person or group”. If we are to create a society for the good of all, then we need to do things differently to bring about real, significant and lasting change.
l David Watt, is Executive Director of IoD Scotland