Developments in asset-based welfare policy

At the time of the Pre-Budget Report, the Treasury published a second consultation document discussing two proposed asset-based welfare policies, the Saving Gateway and the Child Trust Fund. These are intended to ‘extend the benefits of saving and asset-ownership more widely’.1 In this chapter, we consider each of these two policies in turn. We discuss what the new document tells us about the policies and then consider what issues remain to be resolved before the policies are implemented

Is middle Britain middle-income Britain?

There is a strong consensus that the British general election successes of the Labour Party in 1997 and 2001 owed much to attracting and retaining support from amongst the 'middle-class' voters of 'middle Britain'. But are the supposed residents of middle Britain in the middle of the income distribution? In this briefing note, we look at where we might find the 'middle classes' in the income distribution, and at the pattern of income distribution more generally

Labour's proposals

Election Briefing Note 5 shows how households have been affected by Labour's tax and benefit reforms. This Election Briefing Note discusses further tax-benefit reform that Labour proposes to introduce if re-elected. The first section discusses three "credits" the government is proposing to introduce - the integrated child credit, the pension credit and the employment tax credit. We analyse their likely effect on household incomes and how much each would cost to introduce. The new credits represent developments of tax-benefit reforms implemented in the last Parliament, but Labour's manifesto also contains proposals for "asset-based" welfare, which would represent more of a new departure. In particular, the party plans to introduce two new policies - the Child Trust Fund and the Saving Gateway. Both are targeted towards low-income households and provide financial assistance in the form of assets. This method of asset-based welfare delivery contrasts with (and is intended to complement) the traditional approach of providing social security benefits as income supplements. Section 2 considers some of the arguments for and against the proposed new approach. Finally, we consider Labour's approach to income tax

Explosive welding technique for joining aluminum and steel tubes

Silver sheet is wrapped around aluminum portion of joint. Mylar powder box is wrapped over silver sheet. Explosion welds silver to aluminum. Stainless-steel tube is placed over silver-aluminum interface. Mylar powder box, covered with Mylar tape, is wrapped around steel member. Explosion welds steel to silver-aluminum interface

The Saving Gateway and the Child Trust Fund: Is asset-based welfare 'well fair'?

The 2001 Labour Party manifesto committed the government to introducing a 'Child Trust Fund' and a 'Saving Gateway' in the current parliament. This Commentary assesses these two policy proposals. It looks for possible rationales behind the government's plans for some form of asset-based welfare. It provides a discussion of many of the issues important to the design of the Child Trust Fund and the Saving Gateway. It also presents new evidence on the characteristics, incomes and savings of lower-income groups who might be eligible for the Saving Gateway

The distributional effects of tax and benefit reforms since 1997

Tax and benefit changes under Labour to date will have a net cost to the exchequer of around £1.1 billion in 2005–06. This is the difference between a large set of changes raising around £57.2 billion and a slightly larger set of changes costing £58.3 billion. Tax and benefit reforms implemented in Labour’s first term cost a net £4.8 billion, while those since 2001 have raised a net £3.7 billion. The average impact of the £1.1 billion tax and benefit giveaway since 1997 is to raise household disposable incomes by £0.84 a week or 0.2%. The biggest proportionate gains are in the second-poorest tenth of the population, whose disposable incomes are increased by 10.8%, while the richest tenth fare worst, with a cut in income of 5.1%. Tax and benefit reforms since 1997 have clearly been progressive, benefiting the less-well-off relative to the better-off. Reforms in the second term – while less generous on average – were more progressive than those in the first, with the poorest faring better. Increases in council tax above inflation since 1997 will raise a net £5.8 billion for local government in 2005–06, net of council tax benefit. This outweighs the £0.84 a week net giveaway per household by central government and leaves households overall £3.62 a week worse off on average. The increase in council tax is regressive, except for the poorest fifth of the population (thanks to council tax benefit). But the impact of council tax on the relative distribution of income is modest, leaving the overall progressive pattern of tax and benefit changes since 1997 intact

Achieving simplicity, security and choice in retirement? An assessment of the government's proposed pensions reforms

On 17 December 2002, the government published a Department for Work and Pensions Green Paper about working and saving for retirementұ and a set of Inland Revenue proposals for reforms to the tax treatment of private pensions.2 Of the options explored in the two papers, it is claimed that Ѵhese proposals for better information, simpler pensions, simplified tax treatment, better protection and more flexible retirement are designed to enable people to make their own choices for retirement' (DWP Green Paper, Summary, 66, 10). The perceived need for yet more reforms to the UK pension system seems to stem from the governmentҳ belief that Ѱerhaps 3 million people are seriously under-saving (or planning to retire too soon)' and that ѡ further group of between 5 and 10 million people may want to consider saving more or working longer' (DWP Green Paper, 3, 16, 36). In this Briefing Note, we discuss whether or not the proposed reforms are likely to help individuals to make choices about how to provide for their retirement that are appropriate to their circumstances. We focus particularly on whether or not the proposals might prompt those individuals who are not thought to be providing sufficiently for their retirement to save more each year or to retire at an older age than might otherwise have been the case. This would help alleviate concerns about underprovision. The structure of our discussion is as follows. Section 2 describes the main proposed reforms. Section 3 discusses whether they are likely help individuals to make saving decisions that are appropriate to their circumstances. Section 4 looks at how the reforms might affect retirement ages. Section 5 concludes

Tax and benefit changes: who wins and who loses?

* Tax and benefit changes implemented by Labour since 1997 will have a net cost to the exchequer of around £2.2 billion in 2005-06. The average (mean) impact of this small net giveaway is to raise household disposable incomes by £1.69 a week or 0.4%. The biggest proportionate gains are in the 2nd poorest tenth of the population, whose disposable incomes are increased by 11.4%, while the richest tenth fare worst, with a cut in income of 3.7%. * Tax and benefit reforms since 1997 have clearly been progressive, benefiting the less well-off relative to the better-off. Reforms in the second term - while less generous on average - were more progressive than those in the first, with the poorest faring better. * Increases in council tax above inflation since 1997 will raise £5.8 billion in 2005-06, net of council tax benefit. This outweighs the giveaway by central government, and leaves households overall £2.85 a week worse off on average, equivalent to 0.6% of their disposable incomes. The increase in council tax is regressive, except for the poorest fifth of the population, who are partially protected from the rises by council tax benefit

Five years of social security reforms in the UK

The current Labour Government was elected in 1997 with few specific social security proposals. This paper argues that after five years, consistent trends in social security policy have emerged: there is a willingness to increase benefits; a “work-first” focus; increasing centrality for benefits that relate to ‘need’, which has involved expanded means-testing; a downgrading of contributory benefits; and, a desire to reduce poverty by redistributing to particular demographic groups. Many of these characteristics of Labour policy, such as the size of caseloads or aggregate expenditure, are yet to show up in various aggregate data, and we argue that this is probably due to various counter-balancing socio-economic changes since 1997. Looking forward, we discuss what the introduction of new forms of means-test might achieve. We also suggest that it might be considered odd that Labour has left Housing Benefit and Council Tax Benefit unreformed, especially since a good chance to reform them without significant cost or low-income losers, has been missed