[Metrobeans]

B438 - Welfare Bill 2012, TSR Libertarian Party

Welfare and Tax Reform Act 2012

An Act to introduce a simpler, better welfare system and more sensible, while still progressive, tax system to cause less deadweight efficiency losses while ensuring all citizen's have a decent standard of living.


BE IT ENACTED by The Queen's most Excellent Majesty, by and with the advice and consent of the Commons in this present Parliament assembled, in accordance with the provisions of the Parliament Acts 1911 and 1949, and by the authority of the same, as follows:


Part I: Welfare
1 Other Direct Payments
(1) All monetary payments from the state to an individual for reasons other than direct employment, government error or Funeral Allowance, other than outlined in this Act are ceased.
(2) Free bus passes are no longer administered.


2 Resident's Income
(1) The Resident's Income is paid to all eligible, claiming households on a monthly basis.
(2) All those legally resident within the United Kingdom are eligible for the Resident's Income.
(3) The amounts for the Resident's Income depends on the composition of the household, and shall be at the rates as set out in Schedule 1.
(4) These amounts are subject to an annual review.
(5) One single form per household is required to claim Resident's Income.


3 Disability Costs
(1) In the case of extra living costs due to disability or long-term illness, a person shall receive confirmation from a GP of their illness or disability.
(2) Social Services shall carry out an assessment to quantify the extra living costs incurred due to disability or illness.
(3) Social Services shall inform the Department for Social Security, and this shall be added to the Resident's Income payment.
(4) The received payment is dependent on an annual checkup with the GP.
(5) Where the GP suspects that the condition has changed such that living costs change, they shall instruct Social Services to carry out an assessment to quantify the new living costs of the person in question.
(6) In the case of extra living costs from being the full-time, unpaid carer of a disabled or ill person, a person may claim for these extra living costs.
(7) Social Services shall carry out an assessment to quantify the extra living costs incurred by providing full-time care.
(8) Social Services shall inform the Department for Social Security, and this shall be added to the Resident's Income payment.
(9) The received payment is reviewed on an annual basis.


4 Funeral Allowance
(1) To be eligible for Funeral Allowance, the household must have an income (other than Resident's Income) below £10,000.


5 Housing Benefit
(1) Housing benefit is a statutory responsibility of county councils.
(2) It is administered and funded by local authorities.
(3) Rates, eligibility criteria, and taper rates are decided by county councils.
(4) Country councils' plans must meet the following minimum criteria:

(a) Anyone with a household income of below £16,000 and savings of below £16,000 must be eligible for 100% of their rent up to the 20th percentile of rents for a dwelling with a number of bedrooms equal to the number of people in the dwelling.
(b) For an individual renting a room, section 3(4)(a) will apply, and it is defined as a 1-bedroom dwelling.

Part II: Tax
6 Local Income Tax
(1) County Councils have the power to levy a local income tax in order to pay for services provided by local government.
(2) Central Government grants to Local Authorities are reduced by £75bn.


7 Central Income Tax
(1) In section 1(2) of Tax Act 2011 (Income Tax) for "fifteen pence in the pound" substitute "5 per cent".
(2) In section 1(3) of Tax Act 2011 (Income Tax) for "twenty-five pence in the pound" substitute "15 per cent".
(3) In section 1(4) of Tax Act 2011 (Income Tax) for "thirty-five pence in the pound" substitute "25 per cent".


8 Ground Rent Tax
(1) In section 6(1) of Tax Act 2011 (Ground Rent Tax), for "forty percent" substitute "54 per cent".


9 VAT
(1) In section 2(1) of VATA 1994 (rate of VAT), for "12.5 per cent" substitute "5 per cent".


10 Abolition of Secondary NICs
(1) The provisions for the collection of secondary National Insurance Contributions as set out in the Social Security Contributions and Benefits Act 1992 c.4 are hereby repealed.


Part III: Miscellaneous
11 Short Title
(1) This Act may be cited as the Welfare Act 2012.


Schedule 1: Rates Of Citizen's Income
1st adult (16-64 years): £162.00 per week
Subsequent adults (16-64 years): £92.00 per week
1st pensioner (65+ years): £132.00 per week
Subsequent pensioners (65+ years): £69.00 per week
Child aged 12-15 years: £72.00 per week
Child aged 5-11 years: £60.00 per week
Child aged 3-4: £48.00 per week
Child aged 0-2: £40.00 per week

Notes + Costing

Why These Figures Per Week?

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The figures given are based on the Joseph Rowntree Foundation research on the minimum income - we have excluded council tax (since we abolished it), rent (since we retain housing benefit at a local level) and we have adjusted slightly down for the reduction in prices based on the VAT reduction in real life from 20% to 5% (we have adjusted down by 5% based on the pass through rates of previous VAT rises and cuts to the price level).

Cost of Resident's Income

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From Table 22 and population estimates from ONS we can see that the country is made of:


Non-Retired Households
3.88m households with 1 adult @ £162 p/w, annual cost: £32.7bn
10.8m households with 2 adults @ £254 p/w, annual cost: £142.6bn
3.15m households with 3 adults @ £346 p/w, annual cost: £56.7bn
2.82m Children 12-15 @ £72 p/w, annual cost: £10.6bn
4.98m Children 5-11 @ £60 p/w, annual cost: £15.5bn
4.01m Children 0-4 @ £44 p/w, annual cost: £9.2bn.
Total annual cost for non-retired households: £267.3bn




Retired:
3.75m households with 1 pensioner @ £132 p/w, annual cost: £25.7bn
3.22m households with 2 pensioners @ £201 p/w, annual cost: £33.7bn
Total annual cost for retired households: £59.4bn


Notes: I've taken the average cost for 0-2 and 3-4 payments since there's only data on 0-4.


It might seem odd that retired households have no children, but I've just taken the total figures for children and put them in the non-retired bit for costing. If a retired person/persons have children in the household, they will be eligible to claim for them.


The total outpayments from the scheme will be [/b]£326.7bn[/B].

Current Welfare Spending

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From here, we can see that current welfare + state pensions spending is £248.4bn, the cost of free bus passes is £1bn (here). This leaves a shortfall of £77.3bn which is made up with the changes in tax.

Surplus from Tax Act 2011 miscalculations

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The miscalculation of the Ground Rent Tax Base meant that we underestimated revenue in the Tax Act 2011 by £85.2bn. There was a £25bn oversight talked about in the first reading - this was my mistake and did not actually exist, for details please see this post.

Central Government

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Extra welfare spending: £77.3bn
Reduced grants to local government: -£75bn.
Total extra spending: £2.3bn.


Increase in Ground Rent Tax rate: £78.3bn
Extra Revenue from Tax Act 2011: £85.2bn
VAT to 5%: -£37.5bn
Income Tax Changes: -£60.3bn
Employer NICs gone: -£48bn
Total Revenue Changes: £17.7bn.


Total Surplus: £15.4bn.

Local Government

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Cuts to grants: -£75bn
Housing Benefit Cost: £housing benefit.
Local Income Tax: £75bn + £housing benefit (by design from local government, to balance their budgets).
Total Change: £0.

Income Tax Revenue Calculations - See table 2.5, 2011/12.

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£0-10K: 0% (£0)

• 0% tax rate yields no revenue.

£10-20K: 5% (£10.71bn)

• From those earning £10-20K, total income £170.3bn.
• Subtract personal allowance of those 11.61m taxpayers.
• Tax base of £54.2bn from these taxpayers.
• 15.997m taxpayers earning over £20K.
• Each paying £800 in tax at this rate.
• Total revenue = 5% * £54.2bn + (5% * £10,000 * 15.997m)
• Total revenue = £10.71bn

£20K-100K: 15% (£45.11bn)

• From those earning £20-100K, total income £548bn.
• Subtract all income liable for tax at lower rates of those 15.27mn taxpayers.
• Tax base of £242.6bn from these taxpayers.
• 727,000 taxpayers earning over £100K.
• Each paying £20,000 in tax at this rate.
• Total revenue = 15% * £242.6bn + (15% * £80,000 * 0.727m).
• Total revenue = £45.11bn

£100K+: 25% (£23.55bn)

• From those earning £100K+, total income £166.9bn
• Subtract all income liable for tax at lower incomes of those 727,000 taxpayers.
• Tax base of £94.2bn at this rate.
• Total revenue = 25% * £94.2bn
• Total Revenue = £23.55bn

Total: £79.37bn
Previous Income Tax Revenue: £140.29bn (see Tax Act 2011)
Shortfall: £60.92bn

Ground Rent Tax Base

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Ground Rent Tax rate is based upon The Land Value of Britain, 1985 -1990, by David Richards (E.S.S.R.A. paper, 1990) which gives a taxable ground rent value of £110 billion for 1989. Adjusting this for land value growth (using the figures from 2000 to 2005 relative to GDP and extrapolating from there) this gives a total taxable land value rental of £559bn in the UK (this and this for uprating).


Note: Previously, I did not account for the difference in growth rates - that land values grew by 49% whilst nominal GDP by 28% in the period 2000-05, I merely then times the growth in nominal GDP by (1.49/1.28), instead, the extrapolation should take the form of 49% growth for each 28% growth in nominal GDP. Hence we massively underestimated before.

Changes

First --> Second Reading

• VAT now down to 5%, not 7% (from surplus from previous miscalculation (see costing section).
• Funeral allowance now kept
• Disability Allowance clarified such that carers if they incur extra living costs may also claim.
• Renamed Resident's Income

[Rakas21]

Abstain.

Agree broadly with everything on here, just don't agree with some of the rates and eligibility which are all easily amended.

[jesusandtequila]

It passes. Woohoo.

[toronto353]

(Original post by jesusandtequila)
It passes. Woohoo.

Well that was a quick pass. Congratulations!

[Metrobeans]

The aye's have it! The aye's have it!