Sunday, 2 May 2010

UKIP's plans kill the poverty trap - Basic Cash Benefit and flat rate tax is brilliiant!

Why has the media and the fiscal world failed to latch onto the brilliance of UKIP's Basic Cash Benefit and Flat Rate tax plans? It kills the benefits poverty trap.

Here is how it works:


All 70 odd current benefits are scrapped and replaced with the Basic Cash Benefit - BCB - set at the same level as the current Job Seeker's Allowance. It is paid to all unemployed and low earners without any clawback if they take employment. Those on BCB, however, pay flat rate tax on all earnings, whilst keeping the full BCB.

When earnings reach £11,500, the BCB stops but then the personal tax allowance kicks in and the flat rate tax is paid only on earnings over £11,500.

What does all that mean?


Have a look at this (assumes BCB is £60 pw)

BCB........3120......3120......3120......3120......3120......0000.....0000......0000
PAY........000......1500......2500.....10000.....11400.....11500....14000.....20000
TAX........000.......465.......775........3100......3534.......000......775......2635
POCKET.3120......4155......4845.....10020.....10986.....11500...13225.....17365


As can been seen there is clearly an incentive to take work and to build up to full time employment and full wages. The Personal Allowance of £11,500 equates to a full time job on the minimum wage.

The poverty trap would be no more.

8 comments:

Mark Wadsworth said...

Exactly!

Peregrine's Bird Blog said...

Brilliant Idea

Anonymous said...

Good idea, but.....

How exactly would housing and council tax benefit work into this?

You cannot pay your rent or council tax with only £60 per week cash income. Housing and council tax benefits are the real causes of why people become caught and held fast in the benefits/poverty trap.

Everyone who has never found themselves in this position always espouse that the answer is oh so simple.

And what about all those people who cannot work due to ill health and disability?

Mike Scott-Hayward, UKIP, North East Fife said...

Hi Anonymous,

There is a lot in our manifesto which I commend you read - the answers are there: see http://www.ukip.org/content/ukip-policies

In the meantime - here is an extract addressing your question..

Housing Benefit and Social (Council) Housing
* Instead of social housing being let at below-market rents with tenants liable for full
Council Tax, with social tenants entitled to claim income-related Housing Benefit
and Council Tax Benefit, local councils should charge social tenants an all-inclusive
rent (rent plus Council Tax), set at a flat percentage of the tenant household’s gross
income.
* Housing Benefit and Council Tax Benefit for private tenants should be phased out
and replaced with ‘Workfare’ jobs, which will be administered by local councils, to
ensure that those who would otherwise not be able to find work can still cover their
rent and Council Tax, as well as contributing something of value to the local
community

Disability Allowance
* UKIP fully supports those who cannot work and have disabilities. UKIP does not
propose any changes to Disability Living Allowance, Attendance Allowance or
Mobility Allowance.


Mike

Mike Scott-Hayward, UKIP, North East Fife said...
This comment has been removed by the author.
adamcollyer said...

Totally agree - UKIP's welfare policies are completely sensible. The Tories should read them and steal mercilessly!

Ed said...

Great stuff, but I would simplify further by paying BCB direct to all[1], and having flat rate tax for all. That would make admin much simpler for employers, particularly in the case of someone whose e.g. £12000 income comes from two or more different jobs, or whose job status changes unexpectedly during the financial year. Flat rate tax for all means that the tax can be easily calculated on each monthly or weekly wage packet without any knowledge being required of any past or future payments.

[1] Next issue: Does all mean all? Or just British citizens? Plus those who have permanent leave to remain? EU citizens?

Mark Wadsworth said...

Ed, in principle, people could choose the BCB even if their earnings were above £11,500. If we get the rates right, then there is nothing to be gained or lost from doing so.

However, having two jobs is not an issue
1. If one job pays > £11,500 then you use your personal allowance against that one.
2. If both are < £11,500, then claim the BCB (as you suggest), and so on. The same applies to sudden increases or falls in your salary, it all evens out (assuming you are allowed to switch from personal allowance to BCB during the year).

In the manifesto UKIP say entitlement is for resident British Citizens, and entitlement kicks in after five years legal residence for non-British Citizens.