Not all benefits are unearned, the whole principle of the National Insurance system is that whilst in work you contribute to a scheme which will provide you with benefits at a time of need.
However we need to look at the principles of social security, from which benefits derive regardless of employment history.
Social security exists to maintain income at a time when through unemployment, illness, disability or age, employment is not possible. It provides huge benefits to society as a whole, including:
- the relief of poverty
- social protection - The idea of 'social security' implies that people ought to be able to feel secure. This involves, not only being protected against poverty, but being protected against the hardships that may arise through a change in circumstances.
- redistribution - Benefits which go to people who have inadequate incomes, at the expense of people who are more, are progressive.
- solidarity - Social security should not be seen simply as charity, but as a form of mutual co-operation. It is a principle which is extended across the welfare state.
Thanks for a good response Esk. It comes back to a discussion Clint and I had around the purpose of the welfare state. It sounds very much from the above that welfare exists primarily to provide people with a minimum standard of living rather than on anything really to get people out of poverty and into self-sufficiency.
We can see, sadly, that things like social mobility hasn't budged in a few generations, the schooling of poor, white, British children remains challenging, and unemployment doesn't really get affected by welfare much.
As the old saying goes, better to teach a man to fish than to give him a fish, and you sense that in many ways, that is how we treat aid when we apply it to other countries, yet I'm not sure we do so much with our own.
I mentioned earlier in the thread some thoughts from Ivan Illich and how he regarded a society built around production as being much better than one built around consumption. Welfare does a job in providing purchasing power, but I'm not sure it does very well in improving the productivity side of things.
Does framing welfare as income help shift one from a consumer to a producer do you think?
This is a nonsensical argument - there is no subsidiarity in the income tax system, individual governments make policy decisions to determine the level of benefit spending. However, because there is an entitlement to benefits (like it or not) when the entitlement is reduced or removed it is not unnatural for recipients to feel as if it has been "stolen".
The thing is, the same logic could easily therefore apply to the person who sees an additional chunk of their salary or their savings or whatever taken away by the latest tax rise. I would suggest that's a far more just reason for angst.
Perhaps Lord Freud might be accused of that!
However let's look at the rich taking from the poor. I employ several thousand people. I'm very conscious that there is a huge sensitivity in the affect of changing the level of wages the majority earn. Wages account for roughly 20% of my costs, so a 10% wage cut adds 2% to my margins and a 10% pay rise reduces my margins similarly by 2%. The point here is that 2% either way makes no difference to my lifestyle yet a 10% increase or decrease in wages makes a huge difference to the lifestyle of my employees. A 10% reduction would have serious consequences for the majority I would guess. I am very conscious that as an employer I determine the standard of living of my employees and could quite easily "take from the poor" if I wished to do so. I and other employers have almost complete control in this sense.
Of course, and it's not just in the financial sense. I come across paper after paper highlighting the desire for employees to feel a sense of purpose and control in their work. Indeed, only last week INSEAD produced a paper revealing that young employees would rather take a pay cut for a job they enjoy than work in one they dislike.
It's that kind of thing that sees millions of people around the world participate in projects of various sorts for no money at all.
It's true that the top earners collectively pay more income tax than the bottom earners, but surprise, surprise, that's because they collectively earn more. It's also true that lower earners receive more in state services than they contribute in taxes and higher earners pay for more than they receive. But that's the point of progressive taxation, which almost everyone accepts is a good idea.
What's more important though is to look at the amount of total taxes the poor and the rich pay relative to their income. We need to include indirect taxation here too - VAT, car tax, alcohol taxes etc etc.
So, using ONS figures the poorest 20% pay a total of £4,743 in taxes per person, £1,256 in direct taxes and £3,488 in indirect taxes. The top 20% of earners pay £29,462 on average, £20,322 in direct taxes and £9,140 in indirect taxes.
As a % of income we get the following:
Lowest earners pay on average 55% of their earnings in direct and indirect taxes
Highest earners pay on average 47% of their earnings in direct and indirect taxes
As you know, I'd be certainly in favour of reducing taxes across the board, but also in massively simplifying the tax code. It's a ridiculous mess at the moment that does little to provide clarity to the situation. I've mentioned previously things such as flat taxes and the land value tax, both of which are designed to hugely simplify the collection of taxes.
We have to be realistic here as I think the state tend to pull the wool over our eyes, especially around election time. The state has run a surplus in 3 of the last 25 years. As a successful businessman, I'm sure you can appreciate that this isn't sustainable, yet balancing the books seldom even seems to be a desirable topic for conversation, let alone something to aspire to.
