He’s not the Messiah… he’s a fuckwit!

Mad Frankie ‘The Welfare Reform Messiah’ Field is at it again in the Torygraph.

Gordon Brown’s flagship tax credits programme “brutally discriminates” against two-parent families and actively discourages single parents from forming stable relationships, a damning report says today.

Frank Field, the former Labour minister, has produced findings that show how the Government’s campaign against child poverty has “stalled” by making it more financially attractive for lone parents not to seek partners.

His most telling conclusion is that a single mother working 16 hours a week, after tax credits, gains a total income of £487 a week, while a two-parent family on the minimum wage has to work 116 hours for the same income.

 

The report is a serious embarrassment for Mr Brown, who has championed the role of means-tested tax credits in tackling poverty and helping low-income working families.

Mad Frankie’s full report can be downloaded here (.pdf), which I’m not going to fisk in detail this time, mainly because I can’t be arsed to wade through all the bullshit. But what I will look at is this headline claim that that “a single mother working 16 hours a week, after tax credits, gains a total income of £487 a week, while a two-parent family on the minimum wage has to work 116 hours for the same income”.

So lets start with the single mum with two kids, working sixteen hours a week on current minimum wage rate of £5.35 an hour.  She has an annual income from employment of £4451.20, which equals £85.60 a week on which she’ll pay no income tax or NI because she’s below the lower threshold. On top of that, using a pretty standard online tax credit calculator, she is entitled, in the first instance, to tax credits amounting to £6685 per annum, giving a weekly income from tax credits of £128.55 and a total weekly income of £214.15.

Oops, we seem to missing something here. The little matter of an extra £272.85 a week, which Frankie claims our single mum is getting. Where does that come from?

Well, the answer is simple. In addition to supplementing earned income, tax credits also subsidise 70% of the child costs incurred as result of our single mum going out to work, which is what the 272.85 per week is.  So what this tells us is that our single mum is paying £389.78 per week for child care, the princely sum of £20,268.85 per year, i.e. £10,134.43 per child – and one has to assume that both are aged under 4/5 and therefore not in full-time education.

That seems rather a lot of money, especially when one considers that our single mum works only 16 hours a week. Mmm… a bit more maths seems necessary.

Let’s allow our single mum an hour either side of her base childcare requirements for the time taken in getting the kids to the child-minder/nursery and travelling time to and from work – that’s not an unreasonable figure – so her childcare needs are for 24 hours per week per child and the hourly rate she’s paying is, therefore, £8.12 an hour.

That’s a pretty decent nursery school her kids are going to there, with or without claiming the additional nursery education grant of £1248 per year she’s entitled to once any of her kids reach the age of three, even if we not looking at a Montessori school. By way of contrast, the registered child minder who looked after my daughter before she started full-time education  and still handles the morning school run, so that both myself and my partner can get to work on time, charges a cool £2.50 an hour for her services.

And while were on the subject, let’s not forget that this additional £272.82 per week of income that Frankie has thrown into the calculation without any explanation has zero impact on the living standards of our single mum, because no soon as the money comes in, its also paid out to cover the cost of childcare and is also leave our single mum to find £116.85 per week out of the rest of her income, to cover the 30% of childcare costs that tax credits don’t pay for, which eats up 91% of her income from tax credits, giving her a net gain of £11.70 per week, an effective increase in her hourly rate of £0.73 per hour.

(If that leaves you thinking ‘regressive effect of marginal tax rates’ then, like me, you’ve been reading Messrs Dillow and Worstall for quite long enough to have come to understand what they’ve been going on about for ages)

What about our ‘brutally discriminated’ against two parent family slaving away for 116 hours a week in their minimum wage McJobs?

Well is one takes into account the totality of single mum’s income, which at the quoted £489 per week amounts to £25,428 then, ostensibly, such the parents in such a family would need to be working for 116 hours a week at minimum wage, giving a gross income of £32271.20 per annum, in order to pull down the same annual income after tax and NI… but this also presupposes both that this two parent family incurs the same childcare costs as single mum and make no tax credits claim of its own.

This is a patently unrealistic scenario – or more simply, a load of bollocks.

Instead of taking Mad Frankie at face value, lets look at a more realistic scenario – a two parent family with a single wage earner in the same minimum wage McJob, with all other factors (housing benefit, child benefit, etc) being treated as equal and, therefore, excluded for simplicity.

Straight away, we can toss out the childcare costs, so the income that two-parent family needs to hit for parity in living standards is not the full £25K+ but single mum’s net income after she’s coughed for someone to look after the kids, which amounts to £97.30 per week.

Fortunately, that’s still below the lower threshold for income tax and NI, making our next calculation very simple. The number of hours that our wage-earner in tow-parent family must work to achieve parity in base living standards with single mum is £97.30 divided by minimum wage (£5.35) which equals 18.18 hours a week, and if we allow single mum a couple of hours per week for all the to-ing and fro-ing to the nursery and back, both couples probably work about even.

Even if we factor into the calculations the estimated 30% premium in income necessary to deliver strict parity in living standards between a lone parent and two-parent family (two, it seems, cannot really live as cheaply as one) then that leaves our wage earner needing to work a matter of 24-26 hours per week at minimum wage (allowing for the small tax and NI contribution he or she will make) to break even with single mum.

But that’s not the end of the story…

You see, that all presupposes that two-parent, one wage-earner, family don’t put in their own claim for tax credits. If they do, then their annual earned income of £6577.48 (after tax/NI) gets a further top up of £5898 in tax credits, giving a total annual income of £12,475.48, or £239.91 per week – and no child care costs.

So our two-parent, one wage-earner family are brutally discriminated against by the tax credits system to the tune of an extra £142.62 per week of net income over and above what single mum has to look after her two kids, give or take the extent to which two-parent family get screwed over by marginal tax rates resulting from the loss of housing and council-tax benefits due to their increased income.

Oh, and lets also not forget that its extremely likely that a portion of the £20K+ that single mum is paying out in childcare costs is going to find its way back directly to the Treasury by way of income tax and NI deductions from the earnings of childcare staff or corporation tax paid by the nursery, its is commercial business.

As with his previous efforts to rubbish New Deal, Mad Frankie the Welfare Reform Messiah barely struggles over the starting line before he finds himself with his trousers round his ankle for putting up a piss-poor analysis based on shoddy evidence, or no evidence at all. Frankie’s report doesn’t show his working out, he merely provides references to information published elsewhere – the 116 hour joint working week claim is actually cited as being from a House of Commons Library Note, dated 16 May 2007 and appears to stem from answers to written questions tabled by Frankie himself.

In fact, a look at Frankie’s recent House of Commons activity shows a long stream of written questions (at an average cost to the taxpayer of £140 per question) most of which relate directly to his two recent papers for Reform, so one could be forgiven for thinking that he’s getting a fair chunk of the research for these papers done at our expense.

As for what Frankie would like us to do about the supposedly brutal discrimination that two-parent families face under the present tax credits system – the one that leaves them £140 a week better off than a single parent –  well this is what he suggests.

Working Tax Credits increase the incentives to work for first earners in a couple while decreasing the incentives to work for the second potential earner. This comes about because Working Tax Credit is only available to households with at least one earner but is then means tested against the income of both adults. Hence, if the second adult were to get work too, payments would be reduced. According to IFS evaluations of the impact of the former working families tax credit (which was structured similarly to WTC), on the employment patterns of couples, showed that it
increased employment amongst parents whose partner did not work and reduced it for parents where the other partner did work.

One way of reducing child poverty would be to remove the bias against two parent families by re-weighting the tax credit system to take account of both the extra costs of two parent households and to encourage work of both parents in those households.

This is patently nonsense, as what the detailed like-for-like analysis of Frank’s headline claim actually demonstrates is that the big disincentive for ‘second potential earners’ within two-parent families is not the impact of increased earned income on entitlement to primary tax credits but the high marginal tax rate arising out of  the requirement that working families meet 30% of their childcare costs, a disincentive that, of course, largely disappears once all children in a family are in full-time education.

This suggest that the better solutions would lie in either the provision of more free childcare, either by means of greater statutory provision/subsidy or by increasing tax incentives to employers who provide free childcare to employees or, more radically, by tackling the issue of  high marginal tax rates head on by means of replacing the present welfare system with a Citizen’s Basic Income.

Mad Frankie is now two for two in producing policy research papers on welfare reform in which his arguments fail to stand up to scrutiny due to very basic and obvious flaws in analysis and the presentation of incomplete and misleading data as supporting evidence, from which I can only reasonably conclude that he is committing what would, were he an academic and not a politician, be the near-unforgivable sin of choosing and presenting his evidence in such a selective manner to support his own preconceived views on welfare policy, rather than deriving both his analysis and policy from substantive evidence. Not so much evidence-based policy making as policy-based evidence making.

Given the timing of the publication of these papers to coincide with the transition in Labour Party leadership from Tony Blair to Gordon Brown and his past history with the latter, who is widely held to have been responsible for blocking Frank’s proposals for welfare reform during the period from 1997-8 in which Frank served as Minister for Welfare Reform in the then Department of Social Security and his aspirations of becoming Social Security minister, it is difficult not to see this as a continuation of an ongoing personal vendetta against Brown.

Moreover, the obvious and abject falsity of his comparison of single mum and two-parent family seems less an attempt to advance an argument for substantive, evidence-driven, reform of the welfare system and more an attempt to smuggle a personal moral position on the desirability of marriage onto the agenda in the guise of welfare reform and little more than variation on the general theme of Tory promises to reinstate the married couples tax allowance, which serve the same basic purpose and, in coming from a policy group led by Iain Duncan Smith, derive the same basic source.

Yet again, Field demonstrates that he’s little more than a busted flush and the Labour MP most likely to fuck off and join the Tory Party before the next general election – and if any Tories are looking in, you can have him so far as I’m concerned. As for quite what the laudatory reaction his papers for Reform are getting from within Tory ranks has to say about the general standard of economic literacy in the party, I’ll leave that to you to decide, but Alan Walters it ain’t…

Nevertheless I am looking forward to his next paper, the subject matter of which will no doubt be as extensively trailed in much the same string of £140 a time written questions in the House of Commons as the last two.

Personally I’m looking forward to what I expect will be a devastating critique of the Common Agricultural Policy in which fearless Frankie proves without any shred of doubt that apples are really bananas and that that is completely unfair to the grapefruit.

17 thoughts on “He’s not the Messiah… he’s a fuckwit!

  1. Not necessarily, Tim, as I’m not factoring for the regressive effects of the HB and CT tapers in the calculations, merely acknowledging that the

  2. Just re-read Field’s paper and he does actually factor in housing costs but in functional terms how you work the calculations is irrelevant as it all amounts to the same basic equation:

    Earned income plus tax credits minus impact of brutally high marginal tax rate = shagged.

    He’s still making apples and oranges comparisons that don’t stack up.

    So far as I can tell his prescription for two-parent families amounts to a means tested married couple’s credit/allowance minus the marriage.

  3. “Earned income plus tax credits minus impact of brutally high marginal tax rate = shagged.”

    Oh, agreed. As indeed you note that Mr. S&M (I’ve only been copying what he said) has pointed out.

    I’m just, if your above is true (adn I haven’t had the time to check myself), astonished that FF’s calculations passed muster. This is the sort of thing I complain about from the other side (gender gap etc).

  4. Frank Field is not the Messiah, but he is not a fuckwit either, anybody who can trigger a debate about how our benefits system disourages work, savings and marriage is a Good Person. So he got his maths wrong and read from the wrong page, he sure as Hell knows more about this than those twats who dare mention “Tax Credits” and “National Minimum Wage” in the same sentence.

  5. “Anybody who can trigger a debate about how our benefits system dis[c]ourages work, savings and marriage is a Good Person.”

    How?

    Before we get to ‘how’ should we not establish whether it does that, based on solid evidence, after which some understanding of why wouldn’t go amiss either.

    Take Field’s argument that the current tax credits system works against two-parent families.

    Well, for one, that’s only true under certain conditions. All other things being equal, the system appears to confer about the same degree of modest benefits on both a single parent who works and on a two parent family where both work, while it favours two-parent families in which only one parent works because their gains tax credits are not eaten away by childcare costs.

    Field’s contention that its desirable to arrive a situation in which two-parent, two wage earner families also benefit significantly from the system – why?

    Some would argue that the family model that the system should best support is the one it already does – two parent, one wager earner – on the premise that the beneficial effect of increased parental contact outweighs the benefit on increase income. In other words, that the lack of parental contact has a social cost.

    That social cost can, in turn, be expressed to some degree in economic terms – for each potential family arrangement what is the risk that a child made under-perform educationally, turn to crime, etc. and what are social and economic consequences associated with each of those risks, which one then factors in your calculations and assesses against the degree of risk and social and economic costs of other factors, like poverty and low income, etc.

    And so on…

    Much of discourse around welfare reform is predicated on political views that are, in essence, only beliefs – one can take the view that work, savings and marriage are good/desirable simply because you believe that. It doesn’t make it true, in the factual sense, that only follows if you can back up such arguments with evidence to support your position, which is where Field is falling down on the job, not to mention that his personal agenda appears highly questionable.

    Any idiot can trigger a debate just by taking a position based on a belief they know to be contentious or which appears to challenge a political view. Whether there is any value or merit to such a debate is another matter entirely, and if Field continues to pump out poorly constructed papers littered with basic errors then he will inevitably devalue any debate he may trigger.

    It’s like the situation with Chatshow Charlie and the LD’s local income tax policy – whatever merits such a policy might have had (and personally I doubt it had any) it was fucked from the moment he shipped up on TV and demonstrated that he didn’t understand it and couldn’t explain it. End of debate.

  6. Thanks DD,

    To be honest, having spotted the obvious flaw in Field’s rhetorical point, I hadn’t the heart to hack through all the numbers – the high marginal deductions bite no matter whether factor for the HB & CT tapers or childcare costs.

  7. Tim: This is the sort of thing I complain about from the other side (gender gap etc).

    And occurs for much the same reasons, i.e. selective use/presentation of evidence to fit a preconceived political judgement.

    If someone takes the view that gender equality requires strict economic parity of outcome then any gap in pay between genders is unacceptable in their eyes even if it can be accounted for in entirely rational terms.

    The gender gap thing is one I tend to try to avoid, largely because my views on it would piss off a lot of people on my side of the political fence – most of the arguments seem to fall somewhere between bullshit and voodoo and I’m simply neither dumb enough or blinkered enough to ignore the fact that much of the data consists of apples and oranges comparisons.

    Like your good self, I suspect, I’m one of the awkward sods who came to the social sciences having first developed a solid grounding in the natural sciences and an understanding and appreciation of the value of the scientific method, which means that ‘little’ things like using valid methods of eliminating unnecessary variables, making like-for-like comparisons and deriving conclusions from evidence actually matter to me.

  8. “if Field continues to pump out poorly constructed papers littered with basic errors then he will inevitably devalue any debate he may trigger” Unity at 11.17 14/6.

    OK, it would have been better if he’d got his numbers straight, but even those posting here (and at TW’s) who have a reasonable grasp may have also been guilty of various misunderstandings as well (and I am not sure if my explanation of how FF arrived at the figures he did is corect), but hey…

    “our benefits system discourages work, savings and marriage”, I thought it was broadly agreed that these were Good Things? The more important point is that a tax or welfare or subsidy system that distorts behaviour will inevitably lead to a Worse Outcome (as defined) than a completely neutral Citizen’s Income/Flat Tax type system, call that my personal belief if you like.

    Maybe my wife is right – completely scrap all benefits (but she also thinks that companies should pay fines if they offshore jobs, if she weren’t coloured she’d vote BNP).

    Maybe it is no more than a belief, maybe I am wrong, maybe it is better to have Voluntary Poverty, Bloated Bureaucracy, Benefit Fraud, loads of single parents etc. etc.

  9. It’s also quite shockingly cuntish that we’ve managed to invent a welfare payment that exists solely to pay council tax. Frankly, there have got to be cheaper and less annoying ways of shuffling money between different bits of the government.

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  11. So aren’t you paying your childminder (2.50 an hour) less than the minimum wage?

    Also, 8 quid odd an hour would not get you a particularly fine nursery in the south east. It is a fairly standard amount for a place – and that’s if you can get one at all.

  12. The dead-tree press, in the shape of The Times, has finally picked up on Frank’s mistakes – only took 3+ months. Alice Miles in “A child could see this policy is rubbish” (October 3, 2007) seems to lift some of the facts from the blogs, though not perfectly presented:

    It is not the case that couples who stay together are penalised and paid less in working tax credits than lone parents, an error parroted by people who are too well paid to know. Both families get the same. The Tories have been using a grossly misleading comparison, first cited by the Labour MP Frank Field, to back up their case. Mr Field has said that a single mother working 16 hours a week, after tax credits, gains a total income of

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