Monday, 6 August 2012

Notes on plans for Working Tax Credit and Universal Credit


These are a few ad hoc notes on the question of WTC and UC:

For a couple of years now, the Government has had plans to change the benefits system considerably by introducing Universal Credit.  My concern here is with the aspect of that policy which is most likely to affect me personally - the changes in Working Families Tax Credit.  This is a benefit paid to people who are in work but on a low income.  The Government is concerned that this benefit is being used as a way of avoiding paid work.  More specifically, it is suggested that people tend not to do enough paid work because they know they can fall back on WTC.  This is also seen as applying to some self-employed people on a low income.  I am of course a person who is self-employed with a low income.

First, a preliminary comment:  I am aware that i'm underemployed.  I have less paid work than i would like to have and i think this is probably partly linked to psychological factors.  It is in fact possible that this change in policy is exactly what i need and that it will motivate me to find a means of increasing my income through paid work.  All of this may be predicated on an unrealistic doubt that i can achieve this.  However, even if this is so, there will be other people who lack that luxury, so whether or not i can extricate myself from this predicament, my comments are still relevant.


The people who will be assessing how self-employed people are performing may not have experience of small businesses themselves and this should be a requirement of anyone whose job involves doing this. Otherwise they risk making poor decisions.

Our first priority must be to our customers. If we are expected to attend interviews at short notice when these clash with appointments or other work which needs to be done on time, it will reduce the quality of our service to them and impair our ability to grow the business.

Formerly self-employed people do not make good employees and employers know this. This implies that, whether or not they are visible in the unemployment figures, the fact is that they are more likely to become long-term unemployed. This can of course be hidden by taking them on as trainees, but again they will be poorly motivated and this will impair the productivity of larger employers.

It usually takes well over a year for a start-up to make a consistent profit. Expecting a newly self-employed person to do so in such a short period of time will scupper their chances of making it work in many cases. I would expect this to be clearly understood by a party which aims to support the private sector.

Causing businesses to fold will lead to costs to the taxpayer in the long term and an increase in unemployment because they will be unable to grow and the self-employed person who would have taken on new employees after their business has been given a few years to grow will not now do so.

The senior party in the government has a long history of opposing the minimum wage for various reasons, one of which is that it makes it more expensive to employ people. By insisting that self-employed people pay themselves the minimum wage, it is introducing an excessive expense to many people who may prefer instead to invest the profits from their work in their business, and there is no clear argument consistent with a Conservative outlook to insist on this being so.

Self-employed people are more likely to vote Conservative than employees. By reducing the number of self-employed people, the government is reducing the number of Conservative voters. If formerly self-employed people are given jobs or reduced to complete dependence on benefits, they won't be as aware of how much of their income goes to the government and are therefore less likely to support a party which aims to lower taxation on principle. They will be low-paid employees or unemployed instead and therefore natural Labour voters.