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Why George Osborne is screwing with updating benefits

by | 19th, September 2012

 Why George Osborne is screwing with updating benefitsWHY is George Osborne screwing with your benefits? Because he can, basically. But the how is more interesting:

If the move is implemented, many benefits would be frozen for two years, then rising only in line with average pay.

Leave aside the freeze for a moment. Concentrate on the average pay instead. The “only” part.

Because, you see, the thing is that updating benefits in line with average wages would, in normal times, increase benefits faster than inflation. Because, in normal times, wages rise faster than inflation. This must be true, in fact has been true for some centuries now. That’s why we’re all so much vastly richer than our great grandparents and those who came before them. Because wages do tend to rise faster than inflation.

There are also periods of time when inflation is higher than wage rises. We’re in one now, the last was the mid 1970s.

So, think what you would do if you were a Chancellor trying to cut the amount being spent? You know that you’ve got to index pensions and benefits to something. But what are you going to index it to? Well, if you were a sneaky manipulative little shit then when wages were rising faster than inflation then you would link rises to inflation. And in those periods when inflation is higher than wage rises then you would like benefits rises to wage rises.

And this actually happened too: I think it was Healey who moved benefits indexation over the wages in that period when inflation was higher in the 70s. It was definitely under Maggie in the 80s that the switch back to inflation, not wages, was made. For by that time wages were rising faster than inflation.

What’s Osborne doing no3w? Wages are rising more slowly than inflation. Thus he’s switching to wage indexation, not inflation such. And give it a few years, wages start rising again and whoever it is then, regardless of party, will switch it back again.

Do note that it’s not just here that they screw us over. They’ve all done the same thing with the personal tax allowance. They’ve raised it in line with inflation….although Brown froze even that one year. But wages have risen, over the decades, faster than inflation. So ever more people have been sucked into the income tax net simply because they’ve indexed that personal allowance to inflation not wage increases. That’s how we’ve gone from a system where you had to be on above average wages to pay income tax to one where working part time on minimum wage pays it.

Because, of course, they’re all sneaky manipulative little shits.

 



Posted: 19th, September 2012 | In: Money, Politicians Comments (2) | Follow the Comments on our RSS feed: RSS 2.0 | TrackBack | Permalink