PH wrote:thelawnet wrote:My understanding of Universal Credit is that it is designed to prevent claimants from being workshy - there are hundreds of thousands or millions on tax credits who refuse to work more than 16 hours (or 24) because they get tax credits , and the extra hours are barely remunerative. Whereas on UC that's no longer an option - instead of taking £4000 from the government for doing nothing at all, you should instead take £5800 from your employer in return for working more hours.
That's what we're told, your source is no more reliable than the ones you criticise. The theory bears little relationship to the low paid sector where short or zero hours contracts are the norm,
No, my source is irrefutable logic as well as observation, as distinct from an anecdote in a newspaper.
The fact is that tax credit withdrawal rates are 41%, plus 12% national insurance, plus 20% income tax, which equals 73%. Therefore if you have worked enough hours to qualify for WTC it makes sense to refuse more hours.
And indeed this is observable in reality - my wife works in a state school kitchen and there are multiple of her colleagues in such a situation - they don't want more work because it is not sufficiently remunerative after benefits are withdrawn. And why would you?
Whether or not short contracts are the norm isn't the point in that the system is changing from 'meet a tax credit hours threshold and then refuse more work' to 'you must work full time if you are able'
the benefits system has never been able to cope with fluctuating incomes and UC doesn't address that, anyone working in the expanding so called gig economy is properly stuffed. It's easy to view tax credit as subsidising lazy employees, but the reality is it's the employers who are being subsidised. How can household names like Asda with profits counted in the hundreds of millions have so many of their employees requiring government handouts to survive?
Well yes, the tax credits system, invented by Labour, does indeed represent a subsidy to employers.
(Although it might be argued that the welfare state is a tax on employers in the first place in that the existence of state benefits means that people need to work fewer hours and there are fewer people wanting to work low paid.jobs.
Why do they chose to employ two people on 20 hour contracts rather than one on 40? Then ask the government, successive ones there's no party point here, why when benefits are set at a level needed to live and people are better off on them than working they only look at one side of the equation?
The Tories have increased the NMW above inflation, and are forcing people on UC to work more hours, whether they want to or not. Hence they are reducing the subsidy to employers
The rate was £6.70 as of 2015 and will be £8.60 next year but there is talk about increasing it more.
Under tax credits a single parent with two children would need to work 16 hours a week.
As of 2015 that would be
£5574.40 wage
nil tax/ni
£8428.68 housing benefit (at £800/month rent)
£1097 council tax support (Woking, band D)
£10075 tax credits
£1736.80 child benefit
total benefits £21137.48
Under Universal Credit, you would need to work 35 hours, hence
£15652 wage
-£1472.80 income tax/NI
£12755 universal credit
£1736.80 child benefit
£0 council tax support
Hence total benefits net of tax £13019.
Obviously it is difficult to quantify the subsidy as not all benefits are conditional on working, but in the second case the net benefits are £7.15/hour based on 35 hours @ £8.60, and in the first case they are £25.41/hour based on 16 hours @ £6.70.
In either case the effective 'subsidy' to employers has been cut by:
* the freeze on tax credit/benefit rates
* above inflation minimum wage rises
* more hours being required under UC
Also note that the first total is £26711.88 for 16 hours,and the second is £28671 for 35. This is about 7.4% more over 5 years, so in reality less money for more work
So Labour introduced a system where they bribed people to work, and the Conservatives are shifting a lot of this burden onto the employer.
