This proposal forms part of the Prosperity Manifesto due to be published in September 2010.
‘Us and Them’
Tax payers are indignant at the inability of the state to control welfare. They see their tax pounds wasted on a growing underclass of people some of whom are the third generation in their family to have never worked. They are looked upon as wastrels, lazy and totally lacking aspiration; condemned to small worlds with small horizons devoid of opportunity.
The long term unemployed suffer the worst health of any group in the country and cost the NHS roughly double the average spend per capita. They go through the dehumanising process of claiming benefits that still leave them struggling but make low paid work pointless as the loss of benefits versus additional money earned is simply not worth the effort. Simply put they are “entrenched in economic dependency”.
The State spends £196bn on welfare. It also spends billions more on schemes such as welfare to work, flexible new deal etc. There are many DWP contractors vying for the chance to deliver these schemes but bureaucracy gums up the system and leaves the clients frustrated expending energy railing against the machine rather than positively seeking work.
Who is at fault?
1. The state for trying to mollycoddle us from cradle to grave resulting in the emasculation of millions through economic dependence.
2. The jobless for relying on the state for their daily bread.
3. ‘Us’ for thinking that by paying tax we can simply leave it up to the government to sort out all of society’s problems. Some of us are talented, educated, had opportunity and work hard but have fallen into the trap of thinking that paying tax allows us to simply abrogate the need to have any further involvement with ‘Society’.
The Solution
‘Big Society not Big Government’ is at the heart of new liberal Conservative thinking. It is a compelling approach that deserves greater attention.
One simple solution that any future Government could implement to effect rapid change and foster enterprise would be to encourage Us and Them to work together. GB Job Clubs has developed a small loan and mentoring programme that matches successful businessmen with job club members who aspire to start their own ventures. A simple change to the tax regime could encourage greater involvement by ‘Us’ and would work just as well to encourage small traders taking on apprentices and paying for training as it would for start up ventures.
A small loan and the time of a mentor are invaluable to someone brave enough to step out on their own. Give the lender/mentor the ability to provide funds from gross income and receive it back tax free provided it has helped someone successfully sustain employment over a period of at least three years. Allow him/her to write off failed ventures in the same way they can roll forward losses for Capital Gains Tax.
Additionally pay a proportion of the benefits saved/tax NI gained back to both the new entrepreneur and lender/mentor over the first three years. At the end of the first year pay each party £1000, year two £2000 and year three £3000. This should be by way of tax credits redeemable over a term long enough for the fledgling entrepreneur to benefit.
Three years benefits saved tax and National Insurance gained is worth in excess of £24,000 per person. Imagine the positive effect on society if 100,000 which is only around 2% of benefit claimants could be helped in this way? Then think of the savings to the tax payer of around £12bn in the first three years and then £8bn per year for every year that they remain employed thereafter.
I’s need dotting and T’s crossing but it is a simple idea and could be set in motion very quickly through an existing network of third sector organisations.
Chris Neal – April 2010. chris@cjneal.com