Wednesday, 15 July 2015

Benefits are not a Socialist Thing

Compassion is not the preserve of any one political ideology. Compassionate people do not make the same political choices. But they are likely to think Benefits a good thing because Benefits, like Charity, extend a hand to the unfortunate.

But it’s just because it is so like Charity that the distribution of Benefits as a major sector of government activity is not a good thing. Governments are not charities. They rely on taxes, not donations and they have no right to give away taxes as if they are given them to do as they think best with.  Only if taxpayers tell them they want their money given away to the poor or the feckless should governments do so.

Benefits are certainly not a Socialist thing. Socialism, in most of its forms, concerned itself with exploitation not misfortune. It wanted a fair (or fairer) distribution of the proceeds of labour. It saw government as an instrument to create greater equality or – in its social democratic form – a level playing field which would allow the talented child from a poor home to rise and create a richer home for his (usually his) own children.

Greater equality can be created either through redistribution – in practice, progressive taxation – or by legislation which sets minimum wages and maximum wages .

The potency of redistributive taxation has been weakened in recent decades by the growth of indirect taxes, primarily VAT, which are regressive in character. They take the same amount from the poor as the rich which implies that they take a bigger percentage of the income of the poor than of the rich. Curbing and abolishing Indirect taxes ought to be a prime objective for the redistributive socialist but, for some unclear reason, it never is.  It is tax havens like the Channel Islands – deliberately afforded a better life by the UK Parliament - that can afford the redistributive effect of charging no VAT to their inhabitants.

Gordon Brown also introduced several regressive Benefits, notably the (entirely bogus of course) Winter Fuel Payment which as a flat tax-free sum is worth more to a richer higher rate taxpayer than a basic rate taxpayer. (You simply work out how much a 40% taxpayer would have to earn to get £200 net and compare it with what a 20% taxpayer would have to earn to measure the regressiveness).


As for legislation, Britain’s Conservative government has recently embraced the cause of a Minimum Wage high enough to be a Living Wage as an alternative to Benefits. It is a move which Socialists can welcome. They just need to press for a Maximum Wage too. Thomas Piketty (in a recent Financial Times interview) suggests a cap of 10 or 20 times the average or median wage as the maximum which can be paid to company bosses. It is a differential in line with what prevailed fifty years ago but which has been hugely widened in the past couple of decades by predatory management raiding companies for huge salaries and bonuses, even to the point of bankrupting those companies.

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