86. My parting gift

After too many years in the accounting profession, I’m hanging up my boots.  No more statements on Transfer Pricing, no more pleas to our Institute  to drown FRED 50, no more commentaries on the property market, the pensions industry, or  the ludicrous valuations of loss-making web-based business.

It’s been fun, this blogging lark.  A platform to vent ones spleen – always ever so politely of course!  An unknown audience; some of whom even respond occasionally.

But I couldn’t leave without a swansong.

I’m writing this shortly after Cameron confounded the pundits by not being forced into another coalition.

There is something fundamentally wrong with our great country.  I’ve been aware of this for some considerable time, but the 2015 election campaign [and latterly the ham-fisted EU referendum campaigns on both sides – Ed] brought it to the forefront of my mind.

Far too many people are beneficiaries of the State.  I’m not talking about OAP’s, who always understood they were paying into a scheme when in work that would pay out to them once work ceased.  I’m not talking about people claiming benefits when temporarily unemployed.  And I’m not talking about kids in school or patients in hospital.  I’m talking about everyone whose long-term weekly budget is predicated on the value of the handouts they receive from the State.

According to an article published a while back by the Guardian (not my rag of choice) 20.3 million families receive some kind of benefit (64% of all families), about 8.7 million of them pensioners. For 9.6 million families, benefits make up more than half of their income (30% of all families), around 5.3 million of them pensioners.

The website http://www.poverty.org.uk/ states that “In April 2011, 3.3 million working-age households were in receipt of tax credits over and above those just receiving the family element of Child Tax Credit.”  It goes on to say this “represents around 17% of all working-age households.”  I’m guessing the Guardian’s “64% of all families” includes these.

How did we ever get to this pretty pass?  How did Beveridge’s Welfare State morph into this?  In particular, the phrase:

The State “should not stifle incentive, opportunity, responsibility; in establishing a national minimum, it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family”

How did his comment generate a dependency on the state by more than 50% of the people living in it?

These are rhetorical questions.  We all know how we got here – successive governments, both Labour and Tory, pandering to different parts of the electorate.  But on each and every occasion that more has been bequeathed to a wider population, there have been unforeseen consequences that have needed or still need to be addressed.  Take as an example the Working Family’s Tax Credit – I won’t be alone in being aware that in many areas employers set wage levels in the certain knowledge that inadequate wages are being topped up by these tax credits.  That market distortion cannot have been intended, but happen it has.

It’s not the fault of the recipients.  If successive governments have seen fit to throw at them taxpayers money, not only current but future as well in the form of budget deficits, one can hardly blame the beneficiaries of their largesse.  But it’s pretty lousy governance, and I question whether the beneficiaries benefit at all in the longer term.  Just look back at Beveridge’s stricture that the (Welfare) State “should not stifle incentive, opportunity, responsibility” – how does that square with a society where the weekly budgets of more than six families in ten are in part dependent on the state?

We’ve generated a population fully aware of its entitlements but not of its responsibilities.  A population that having once secured one of these entitlements, fully expects them to increase in real terms, and woe betide the politician who denies it that increase.  Just ask Ed Miliband!

But what’s worse is that dependency isn’t good for the individual.  Who’s usually happier – the person who makes his own way in life, or the person who relies on the generosity of others to get by?  Again, rhetorical – there won’t be many who believe contentment is more easily attained by the person dependent on others.  So that raises the obvious question – have the politicians done us any favours by making so many of us dependent on the largesse of the State?

The solution is obvious – take the benefits out of the equation and encourage people to fend for themselves.   The problem is, how to achieve that outcome without significantly impacting on the lives of so many people.  I don’t have an answer, but then – I’m no politician.  But a few obvious things:

  • Do away with, or tax, many of the pensioner benefits – the winter fuel allowance, the free TV licence, free public transport (what possible justification can there be for me having free travel on London Underground?!?)
  • Stop the ludicrous and almost unworkable Working Tax Credit system whilst we increase the National Minimum Wage to the Living Wage
  • Use some of the savings to improve schooling in areas where it’s hopelessly poor, so that kids from those areas are more fitted for the workplace

And therein lies the cause of Cameron’s (and more recently, the Tories- Ed) unexpected success.  The majority of voters share the view they’d rather be given the opportunity to make their own way in life than be swathed in a comfort blanket created by the morally self-satisfied elite in Westminster.  If Labour ever gets this message, the Tories might face a sterner test than they do right now.

Peter Rogol was a partner in a London accountancy practice.  He now provides mentoring support and advice to businesses. Post retirement Peter also acts as a volunteer business mentor for Gloucester Enterprise.

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3rd October 2016

86. My parting gift

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