AIBU to think that Tax Credits and subsequently Universal Credit were the worst thing to happen to the UK?

[BookkeeperBobby]

I can see how it was well intentioned as a mechanism of redistributing money, maybe, in the short term. But 22 years down the line all it means is that employers pay less, productivity drops, UK workers are worth less. Add quantitative easing into the mix which means that anyone with any money buys up assets eg property, while at the same time wages stagnate due to the above, and the country has become a low wage economy with a high cost of living. Which in the face of energy price rises that have to be paid with real money, not just shuffling benefits around, is a disaster.

a depressing read about inequality

@tontown

The other thing that has suppressed wages significantly is companies still needing to fund historical DB pension schemes, where the contributions were nowhere near sufficient to fund what is paid out to pensioners. This leaves less money for current workers to have payrises, even though they'll receive no such pension benefits themselves.

what happens when younger workers retire or will they not because the pensions are so crap

Well exactly. It's a ticking time bomb. Low wages mean little money to save. No DB schemes anymore. And also a far higher proportion of renters. Oh and underfunded public sector pensions where the contributions are nowhere near sufficient to cover the promises made. And then the inflationary impact on company pension liabilities and asset write-downs... it will not be pretty.

The problem is that those at the very top have a disproportionate amount of money in the UK.

If you imagine a pot of money to share between 10 people. 1 person gets 90% and the other 9 get 10% between them.

That’s what is going on in this country. It’s skewed too far towards the 1 person.

Even shifting it to 50% to that 1 person would make a massive difference.

@Iggly

At the end of the day, we have had over 40 years of neoliberalism which has led us to this point.

Businesses can run by under cutting their staff (by paying them less), because they have more power than individual employees.

Tax credits are but a symptom of that.

The system needs tipping upside down, turning inside out and starting again. Anything now is just tinkering.

Politicians in America had the right idea of calling for a global effort to tackle obscene wealth but funnily enough many other politicians just don’t want to because they benefit!

In the short term, we need more reform in terms of the way in which wealth is taxed as opposed to a penny here and there on income tax. There’s a great chart somewhere which shows how the rich have moved their money into wealth and tax systems haven’t bothered to catch up = the rest of us are fucked.

One thing the US does have right is taxing companies far more. It's simply "if you wosh to operate here you will pay this". And they do.

They also enforce taxes far more robustly. And force absent parents to pay a not-insulting sum towards raising their children.

Without TC/UC wages would be even lower as people would be more desperate to work there fore employer would be able to pay less .

We want everything cheap cheap cheap so in order to do that margins and cost are cut resulting in lower wages.

look at the milk in asda more expensive but it grantees the framer a better price most of it's on the shelf the cheaper stuff sold out .

If that’s the case @GiraffesInScarfs how come the US has such terrible public service and massive inequality?

@HotelCaliforniaOnRepeat

Every thread like this is the same. If companies pay more then costs go up and it's a vicious circle as you don't gain from the higher wage. The idea behind tax credits was to stop the increase in costs so people actually benefit. The problems started when they started to fiddle with it. Now nobody can work out the ridiculous calculations, people are underpaid or overpaid their credits and no longer better off working. It's farcical. The original tax credits helped many people.

That's why the only real solution is to improve productivity. The Government has done nothing about that though.

@rwalker

Without TC/UC wages would be even lower as people would be more desperate to work there fore employer would be able to pay less .

We want everything cheap cheap cheap so in order to do that margins and cost are cut resulting in lower wages.

look at the milk in asda more expensive but it grantees the framer a better price most of it's on the shelf the cheaper stuff sold out .

We need cheap because our wages are low….

When you earn more, you don’t choose to eat dirt cheap crappy food (on the whole!)

Wages are low because of the unequal distribution of gains.

@Iggly agree about a wealth tax.

That's why the only real solution is to improve productivity. The Government has done nothing about that though

Because it’s stuck on the idea that the UK are lazy, should be under paid, get no sick leave and rubbish rights.

So, funnily enough, people aren’t productive because they’re treated like shit.

@Iggly

If that’s the case *@GiraffesInScarfs* how come the US has such terrible public service and massive inequality?

Those are policy decisions. Their healthcare system is ridiculous (expensive and bad outcomes) and welfare pretty much non-existent. It is a totally different culture to European democracies. They would consider the UK Conservatives to be socialists. Their Democrats are much further right.

It's a society I wish we would emulate less. We have far more in common culturally and in terms of values with other European countries. Another reason that Brexit was a bad idea - we should be seeking closer relationships with our European neighbours so we have more clout to stand up to multi-national corporations. Mind you, that's why so many rich people funded the Brexit campaign: they didn't want the EU Directive on tax avoidance to be implemented so their offshore stashes in UK tax havens would be revealed.

As I said in my post, there are a couple of things the US does well though in terms of tax.

8Housing benefits should be capped as in rents capped. Landlords could then earn a profit but not an excessive one. We have our gas etc capped so why not rents?*

Housing benefits are capped, for private rented they do not pay more than the lower 30% of rent in any given area.

I was helping a young homeless person looks for a private rented flat and there was not a single place to rent that was less than £100 over the LHA, luckily they did get a housing assoiation property.

Cutting housing benefits is not the answer, making more affordable homes available is what is needed.

I'd like to see a universal basic income OR free utilities up to a certain usage. Not a pisstaking paltry usage. A real average for a family household. That would be life altering stuff

@BookkeeperBobby

I can see how it was well intentioned as a mechanism of redistributing money, maybe, in the short term. But 22 years down the line all it means is that employers pay less, productivity drops, UK workers are worth less. Add quantitative easing into the mix which means that anyone with any money buys up assets eg property, while at the same time wages stagnate due to the above, and the country has become a low wage economy with a high cost of living. Which in the face of energy price rises that have to be paid with real money, not just shuffling benefits around, is a disaster.

Personally, I think min wage has had a more direct effect on how much employers are willing to pay. It's an artificial price floor. All employers are NOT equally productive. I effect some aren't worth it. Price's law and Pareto distribution deal with wealth distribution and work output/participation.

You have to bear in mind we're now in a truly global economy, we're competing with leaner, keener nations. I think the UK has a myriad of social problems that hamper our economy.
The current cost of living rises is a global post covid fallout, with no immediate remedy.

Cutting housing benefits is not the answer, making more affordable homes available is what is needed.

This 100%.

Where I live there has been a big building programme from a HA. It’s had a massively positive effect on the rental market from a renters pov.

A lot of people now have a secure tenancy from the HA. That means less competition for rented properties which has given people the chance to be more picky.

LL’s like me that charge a fair rent for a decent property haven’t suffered any fall in interest. LL’s like the guy downstairs from my rental have massively suffered - no-one wants his ridiculously expensive over-priced flat with mouldy walls and shit windows. And no-one has had to take his flat as a last resort.

I also think the government could do something similar with nurseries. Round here there is only one nursery chain operating. They now charge £60 a day. People can’t afford that. That £60 doesn’t even cover food, extra activities or anything. It’s a high price for distinctively shit nursery tbh. Rather than profits going into private hands they could be recycled back. They won’t though as they’d then have to think about the low amount they pay nurseries that do funded places.

OK so tax credits came in 22 years ago but they replaced the previous system of benefits to support people on low wages.

If i remember it rightly it was family credit before them and Supplementary benefit before that.

There has been a top up for low wages since the welfare state began so can you explain why is this a problem only emerging now??

You also know that the majority of countries like the UK have similar systems as well - so are we the only ones with this problem??

@daimbarsatemydogsbone you clearly know more about it than I do, so I withdraw my comment and accept yours. Wish I knew what the solution was though.

Upamountain43
OK so tax credits came in 22 years ago but they replaced the previous system of benefits to support people on low wages.

If i remember it rightly it was family credit before them and Supplementary benefit before that.

In-work benefits were first introduced for people with young children as Family Income Supplement in 1971. Yes that’s right; 51 years ago, probably before most mumsnetters were born. The idea that wages were so high before that, that you could comfortably support a family, especially as a single mum, is frankly ludicrous.

(Supplementary benefit was about of work benefit which replaced National Assistance and was, in turn, replaced by Income Support.

@Iggly
rwalker
Without TC/UC wages would be even lower as people would be more desperate to work there fore employer would be able to pay less .

We want everything cheap cheap cheap so in order to do that margins and cost are cut resulting in lower wages.

look at the milk in asda more expensive but it grantees the framer a better price most of it's on the shelf the cheaper stuff sold out .
We need cheap because our wages are low….

When you earn more, you don’t choose to eat dirt cheap crappy food (on the whole!)

Wages are low because of the unequal distribution of gains.

Even in good times people will not pay they always want rock bottom prices hence low wages