Monday, 4 October 2010

Why Dizzy and The Devil Might be Wrong

George Osborne announced his plan to stop Child Benefits for those earning above £44,000. He also said, though, that if both parents are earning less than that they will still receive the benefit even though their total combined income was over £80k. Dizzy and The Devil both have (ahem) strong words to say about this. I think they're wrong.

Osborne explained the oddness of the proposal as follows:
"The chancellor defended this by saying his plan was "the most straightforward" option - which would avoid across-the-board means testing. The alternative was to introduce a "complex" system of means testing where all households had their incomes assessed, he said."
In other words, setting up a system to stop payments when the combined income is above £44,000 would cost more than the payments being made.

True, if we suppose that the person earning the most but still receiving the payment is deserving of it, then it is unfair that others earning less do not. However, the argument here is simply that any household with an income over £44k doesn't need the benefits payments. In that case is it better for the State to spend money enforcing the threshold properly or better to spend less money by not enforcing it? Does it do any harm for those earning more to still receive this payment? Only if it is money being spent that needn't be spent. But in this case Osborne is saying that it is cheaper just to effectively overpay than it is to properly enforce the rules.

Sure, it looks bad and Labour can have a field day. But in reality doesn't it make sense?

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