Politicians need to get a grip on what matters

January 15, 2010

Ali SteedAlison Steed is editor and co-founder of the personal finance website for women MyMoneyDiva.com. The opinions expressed are her own.-

The battle lines are already being drawn in this election year. Although none of us knows for sure when the election will be, there are signs that “May” is going to be a significant month.

Winning the hearts and minds of the nation is key winning an election, and as it stands, there is plenty of work to be done there for all parts of the community. A televised debate for the first time in the UK will change the way the election is fought, although it seems slightly pathetic that our politicians want the debates “themed” so they can swot up on the answers beforehand.

No doubt we will hear the same platitudes trotted out about the need to return to “family values” and that “educashun” is paramount, that “schoolsanhospitals” need more cash than they are already getting. With the country’s national debt rising by around 4,835 pounds a second cuts are needed, and are being talked about, but are unlikely to win votes.

Families have been a focus of the incumbent government to try and win the hearts and minds of the nation throughout its 12-year tenure. Yet as with so many things in politics, what is said to be a stated aim is so often contradicted by the action that succeeds it.

Tax credits are a prime example. With a system so complicated that the only person I know who understands it properly is an accountant who decided to learn Mandarin “for fun”, is it any wonder that so many problems have occurred?

Constant overpayments, the pressure of families to repay tax credits that have been wrongly calculated – and yes, they are supposed to work out for themselves how much they are due – not to mention the fact that what is due is worked out on the basis of earnings a year behind the current year, because of the way the system is set up.

Add to that the ignominy of a marginal tax rate of 70 percent – almost twice as much as that for millionaires – for some of the poorest people in our society, and it is hard to see how the government can claim this money-go-round is a success.

In 2007/2008, the aggregate amount overpaid on tax credits was 1 billion pounds, with around 1.3 million accounts being overpaid – making an average of just under 750 pounds each, according to HM Revenue & Customs figures. Given that some people will have been underpaid, there is a real issue here. That money is not written off either – nor should it be, in fairness, as it is money paid in good faith to government coffers by taxpayers.

Yet what position does it put the families in who are required to pay that money back? The revenue has changed the system to automatically recoup tax credits from the start of this year, and will reduce the tax credits of those who have been overpaid because they have not told it about a change in circumstances quickly enough.

But since 44 million phone calls were not answered by revenue staff last year, almost half of the total number of calls made, is it any wonder that some honest people have fallen foul of the rules?

Once the amount overpaid has been recouped, then the tax credits will increase to where they should be.
In some cases, this could lead to a loss of the entire tax credit, but at the very least 10 per cent would go.

It may not sound like a lot, but when you are dealing with the poorest families in the UK, the smallest amount is going to have an impact. Since the recoup is automatic, it also begs the question “what happens if the Revenue makes a mistake?”.

The offer of free school meals to 500,000 primary school children in the pre-Budget report will help low income families stretch their budgets that bit further, especially now that Vat has gone back up to 17.5 percent. But then why delay this move until September, when Labour may not even be in power at all to make it happen? This is a measure that families need a lot sooner to help them make ends meet.

The dichotomy does not make sense.

Since the televised debate is going to bring British elections into the 21st Century, perhaps the politicians should drag themselves into the same century, and get a grip on what matters to people most.

When you have ladies anecdotally agreeing to vote for the British National Party because they have promised to sort out their wheelie bins, politicians need to think less about claiming expenses to clearing moats and buying duck houses, and more about what really matters to families in the UK.

One comment

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The problem can be solved by slashing expenditure on healthcare. Healthcare is a false religion. If life expectancy goes up say two years in the next twenty, but everything else stays the same, the country won’t feel any better about itself than it does now.

Posted by Oliver Chettle | Report as abusive