The Real Boswell's

It may or may not surprise you to find out, that the Merseyside area holds the greatest number of welfare recipients in the country (per head of population that is). This 'fact' has been suggested at by comedians and residents of other towns for some years, but as far as I know its only recently that anyone has quantified it as a real 'fact'.

The Late Carla Lane's 'Boswells' - Atypical Liverpudlians?

The Benefit Trap Revisited

The other day I found out that a man I know, had given up work a couple of decades ago to 'care for his wife'. I was surprised at this information (which came from someone else), as nothing he had ever said, had suggested that he hadn't worked in decades, and as I had seen his wife occasionally walking about, so I had thought that he had only recently 'retired' early, and had a pension etc.

Many People Are Called 'Workshy' ....

 

In fact I might add that he had even encouraged this belief, by implication when talking about 'grafting hard' when in another city in the past. On top of this was the fact that his wife often visits her family, and they go on a holiday abroad to Spain once every year, so this was something of a surprise on a couple of levels.

1) That he was not working (or recently stopped work), and
2) That he could afford a lifestyle that includes the pub at weekends, and a holiday abroad every year, while on welfare benefits.

Tax Dodging UK

"We don't pay taxes. Only the little people pay taxes." .... said US billionairess Leona Helmsley in 1983. Although originally sentenced to 16 years, she later spent 18 months in prison (the wealthy even evade the 'justice' meted out to 'little people'), for dodging her taxes.

Lets not fool ourselves, the UK tax system favours the rich (and big Companies such as Starbucks and Amazon), just as much as the US model, but also the loop holes and lack of join up allow the lesser earners to run a 'cart and horse' through the idea of us all paying our fair dues. In fact, as I will illustrate below, only those on P.A.Y.E (Pay As You Earn), i.e. directly employed by someone else, actually cop for 'paying our fair dues'.

UK's Most Wanted Tax Dodgers

Here's an illustration of how bizarre and unjust the UK's tax regime has become:

An I.T. Contractor, using a one man limited company as his employment vehicle (he and his wife are co directors, and he is the 'employee'), earns around £72k pa and decides to try and get round the provisions of Inland Revenue regulation 35, about what is 'self employed' in I.T. So with the aid of his wife, a qualified accountant, he says that he is compliant with this regulation, and can claim to be fully self employed, even though he is actually directed in his work by the companies he works for, and is not self employed in the same sense as say, a *plumber.

So in fact his contract doesn't get a round this IR 35 rule, and he most likely wouldn't be excluded from high rates of tax, should he ever be investigated by HMRC, but never mind, he decides to make hay while the sun shines, and declares his income as below the tax threshold and the vast majority of his income as 'dividends' i.e. Subject to tax at only 20% instead of the higher or standard rates, saving himself anything between £15 and £25k pa in taxes.

Now, being a bright and creative soul, he then hits upon another wheeze, and to reinforce his claim to be 'below the poverty line' .... he claims for Family Tax Credits. So now this genius is not only doing the tax payer out of £15k to £25k of tax revenue, but is also claiming free school meals and a tax credit for one year under Gordon Browns ill thought out scheme .... although presumably he will have to declare the 'dividends' as income at the end of one year and lose his Family Tax Credits for the following year.

He is also looking to see if he can try to dodge the change in rules on Child Benefit, that say families with an earner getting £50k plus can't get it, by using the same financial devices as he has used to avoid taxes.

If anything illustrates exactly why the tax burden is so high for the many, while being so low for the fortunate few, then this does. I know its a true scenario because the contractor was actually so proud of all his clever schemes that he boasted of them to a group of mere employees .... only prudence prevents me from naming him on this page.

Now before we all turn on the IT contractor, consider this:

(A) This is all 'legal' (apart from the IR35 part, which its very dubious that they would qualify to comply with if investigated), and is not breaking any laws except the moral standards we might hope for (and with an accountant as a partner, you would expect few of those).
(B) In fact most of the 'entertainers' on TV etc, and even those 'presenter names' at the BBC - "stars" in fact, employ exactly the same 'tax management' schemes via limited companies.

So when you are watching or listening to some liberal presenter, or a left wing comedians diatribe about 'the rich Tories', and or a liberal radio presenter on a day time phone in, 'tut tutting' at some wealthy persons money being 'off shore' .... just remember that they are all using the same tax avoidance schemes as each other. Jimmy Carr was just the more extreme edge of a thin wedge. To reinforce this view about who gets done, the HMRC has just announced that it won't prosecute those people with secret Swiss HSBC bank accounts (passed over by the French government), who admit tax avoidance.

'Pinsent Masons' director Ray McCann told The Times: “It is those at the lower end of the social scale who go to prison. There is no immunity offer for benefit cheats. The Revenue made a policy decision … Where there was an HSBC account, they would automatically go to contractual disclosure facility. This means immunity from prosecution is guaranteed if you own up to tax evasion, whether it be a small amount or billions.”

Unfortunately the Companies house check service doesn't allow for a check of directors, or we could put in names, and find what each of these high wealth hypocrites actually declares as earnings, because from the humble freelance IT programmer, to the winner of a Sony award for radio, they all think that, to quote US Billionairess Leona Helmsley again, "We don't pay taxes .... Only the little people pay taxes..."

* Neither are the BBC employees who claim similar status for much the same tax avoidance reasons, but that's another story.

Love on The Dole

In a story that displays everything that’s wrong in the Welfare benefits system in the UK, the BBC has run a post about the proposed cap on the amount of benefits a family can receive. I can only assume that the BBC picked this particular family of unemployed husband and wife and their seven kids living in north Wales, so that we workers can feel sorry for them.

He was an I.T. programmer who found that work in his ‘specialised field’ dried up, and he stopped work 10 yrs ago – he apparently didn't feel the urge or need to retrain or branch out into other programming fields. Frankly any programmer worth their salt could have found contract work easily up until a couple of years or so …. There are I.T. contractors working at my office now.

This man and his families current benefit level is £30,284.80 pa net (US $47,943.87 pa) .... and he justifies his benefit levels and the expenditure it supports as follows:

• Pubs - 'I go out once a week, on a Friday night. I meet up with my mates in the pub and have three or four pints'... most married men can only do the same.
• Satellite TV - 'We get the Sky Movies package because we're stuck in the house all week - otherwise we wouldn't have any entertainment.' – Freeview TV is not good enough for a man who hasn't worked for a decade
• The family all have mobile phones - 'My wife and I have mobile phones, and so do all of the teenage children. You try telling teenagers they're going to have to do without their mobiles and there'll be hell to pay.' – noticeably he doesn't need one to look for work.
• Cigarettes and Alcohol – His weekly household shop includes 24 cans of lager, 200 cigarettes and a large pouch of tobacco - ‘On the cigarettes, my wife tried to give up, but she missed one appointment on the course and they threw her off it.' – he apparently has never tried to give up, but then he needs his beer and cigarettes to sit and watch his satellite TV package when he’s not going to the pub.
• Life in North Wales - 'this is social housing in Wales, so the rent is hardly massive. If we rented privately in this area, then the cost would be four or five times as much.' – meaning he has a house which is subsidised already and for which the government pays the rent.

North Wales - There are worse places to be.

He goes to bed and gets up as he wishes – he has no worries over having a roof over his head, he has no issues about commuting to work every day, or losing his job, or where the next mortgage (rent) payment is coming from. In fact his only concern is that by capping his benefits he may have to give up his 24 cans of beer, his Sky movie package, his cigarettes, or his Mobile phones.

We have posted on this benefit trap once or twice before, and in one of those posts we highlighted the case of a woman who while not working and apparently medically disabled, was having children with different men, and who considered that ‘the state is my breadwinner’.

This lifestyle is so attractive, that millions in the UK apparently aspire to it – family and security with no worries … indeed many people in the EU and elsewhere in the world share this same aspiration, which is maybe why getting into to the UK and on to the benefits gravy train, is such a popular pastime at Heathrow and other entry points in the UK. As a government minister recently said “Importing economic dependency on the state is unacceptable”.

In the meantime the political cronies of the Labour and Liberal Parties in the House of Lords (there are no real lords there anymore), have voted consistently to ensure that there is no adequate cap on benefit payments, despite the obvious public appetite to stop this gravy train.

Many of us would suggest that the limit of £26,000 (US $41,160.60) is still far, far, too generous, and with way too many exemptions on even that amount. A limit of closer to £20,000 net pa (which would still be very generous), would be more likely to encourage the idle to return to work, and prevent people like this man from drifting into to the comfort zone of a supported lifestyle that most can only aspire to, and that couldn't reasonably be attained by normal work.

There is something very rotten in the state of the UK (or Denmark if they are stupid enough to be as generous), when it’s benefit culture and the lifestyle that it can support, props up so many who require so much and who return so little.

How The Benefit Trap Works ....

Amongst all the rows over who has been most affected by the public sector cuts introduced by this Government there was a couple of nuggets that simply had to be rehashed and mulled over. These were the impact that capping at state benefits at £26,000 (net!) may have on those on long-term welfare claimants.

Now lets start with a few points .... most unemployed benefit claimants don't get much more than the basic benefits, plus housing benefits .... so a man, wife and two children, living in a local authority rented accommodation, in the North West of England, might be on £100.95 (Couple Allowance) + £17.40 (Family Premium) + £115.14 (£57.57 per child) ..... a grand total of £233.49 pw or £12,141.48 pa in benefits plus an average of £84.24 per week in housing benefits paid direct to the landlords. This represents a net income of £16,521.96 pa (the housing benefit element will differ in areas, but the main benefit income will not).

Now in order to 'earn' that amount net, a 'worker' would have to be on a salary of £21,291 pa ..... i.e. a starting salary that is higher than that offered on many non skilled jobs ..... and this is where the 'benefit trap' starts, because in reality no one is going to get up every day, pay for transport etc without being a lot better off, so a salary of at least £500 pw (£26,000 pa) is the realistic figure that would get this particular claimant back to work (but note: If they are in expensive accommodation they may never want to come off welfare benefit payments, which is why housing benefits will be capped at at £400 a week).

For single people the incentive to work is greater as they are on either (£51.85 and £65.45 pw ... under or over age 25).

You, like me, may think that these levels of benefits for people with kids, represent a quite high hurdle against finding work, when they are set above the lower levels of wages currently paid in the UK, so imagine what happens when they have large numbers of children or like Kellie-Ann Cottam, who apparently suffers from a painful disability called Ehlers Danlos syndrome, and needs help to care for her four children (to three different fathers) ..... to maintain the same lifestyle, she said she would need to earn £60,000 (£41,710.40 net) a year to meet her family's needs.

Now let us be honest, she is basically unemployable, she has no skills (psychology graduates litter the lower levels of many offices .... salary around £18k, so no good to her with her lifestyle), that could ever give her a career that would give her the £60,000 a year, which she considers to be the reasonable equivalent to living off the back of those of us who have to get to work everyday for a lot less than that.

Through the government's motability scheme she has also been given a specially adapted people carrier for herself and her children, who are aged between seven months and 14 years of age, oh, and she also gets free prescriptions, school meals for the children and free trips to the dentist and the optician .... she has been on the Benefit System for ten years, so she has managed to have relationships that produced at least two children, but somehow not ever managed to come off welfare payments.

She in fact epitomises all that's wrong with the benefits system .... "I am so grateful for the benefits system, I don't have a husband, I don't have a breadwinner - the state is my breadwinner," she said. Well I didn't get asked if I wanted to be her and her broods 'breadwinner', and nor did anyone else ..... still in all fairness this lady has admitted that the 'Benefit Trap' exists for her and that shes in it, and she has tried to launch a self help scheme called “Challenge Britain” to try to end people’s reliance on handouts ...... presumably not for herself though.

Final word on this benefit system to a woman from Grimsby ... A pub regular called Amanda said: "Don't cut the benefits for the people who are really, really struggling. I don't think it's fair - we are struggling enough as it is. I live on £174 a fortnight and it's not fair." ....... the keys to this statement is that the interview was 'lunchtime' in the pub where 'Amanda' was 'a pub regular' ..... and she thinks she is 'really struggling'.

She should read the diary of an unemployed family from living in York in 1910, where a Mr Nevinson was having a very hard time..... if he didn't find a job, he and his family didn't eat. From his diary its apparent that the family were only eating about a third of the calories they needed.

"Up at five, walked round and round the town until 12. Nothing doing anywhere, so I was fairly sick of walking about. No breakfast, no tea and no supper. Went to bed around 7.30."

The Watsons - Victorian Poor

The diaries reveal that in one week the family had just tea and bread for most meals. Occasionally they could afford margarine or jam as well. Sundays seemed plentiful in comparison.

Monday:

• Breakfast - Tea, bread and margarine
• Dinner - Tea, bread and margarine
• Supper - Tea, bread

Tuesday:

• Breakfast -Tea, bread and jam
• Dinner - Tea, 3 stale buns
• Supper - Tea, bread

 Sunday:

• Breakfast - Tea, kippers, bread
• Dinner - three pennyworth of meat pieces boiled with potatoes
• Tea - bread and margarine, onions

PS: If you agree with me that the "Benefit Trap" has to be addressed, before Britain can ever tackle the welfare culture, then email this article or a link to your MP or your representative in Congress (the problem is the same in much of the US) .... China, India and Brazil don't have this problem, and people work.