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Yesterday (February 11) we had a chance to see what the Tories – or at least some of them – want to do to state benefits.
Charlie Elphicke, Tory MP for Dover, launched a debate in the Westminster Hall in which he called for the axing of maternity pay – and other in-work benefits – to make way for a new insurance system into which employers and the self-employed would pay, and from which the costs of maternity leave and other benefits would be met. He suggested that participating employers would see a corresponding cut in their National Insurance contributions.
He said he wanted this system to pay out at minimum wage levels, rather than at the current £137 per week maternity rate. The state would back the scheme, but it would be entirely funded by businesses.
The taxpayer would not fund any of this scheme – at least, not the way the visionary Charlie put it during the debate. It would be “paid for by the workplaces of the nation”.
This is how (some) Tories want the system to be: Insurance schemes-a-go-go, with people and businesses standing or falling on their ability to meet the requirements of the system.
Obviously he has not considered the drawbacks of such a scheme. One is very simple: If employers are paying everything towards in-work benefits, why not simply pay the Living Wage, whether a person is working, on maternity, or whatever? The cost would be the same or lower – because there would be no government administrative burden.
Liberal Democrat Work and Pensions minister Steve Webb put some more of them into words.
“As the system currently works… 93 per cent of the cost of statutory maternity pay is refunded to employers. In fact, more than 100 per cent is refunded to small firms,” he said.
“If an employer is reluctant to take on a woman who might have a child, therefore, the pure finances should not make a huge difference.
“I am not therefore sure that having a collectivised… system of insurance is any different substantively for the employer. Either way, employers are getting reimbursed — the costs are being met and are not in essence falling on the employer.”
In other words, there would be no benefit to employers.
He continued: “Whenever we set up a new scheme, we have new infrastructure, bureaucracy and sets of rules. If we had the levy—the at-work scheme that he described — we would have to define the new tax base, have a new levy collection mechanism, work out who was in and who was out, have appeals and all that kind of stuff. There is always a dead weight to such things. Simply setting up new infrastructure costs money. I would have to be convinced that we were getting something back for it.”
In other words, the scheme proposed by the intellectual Mr Elphicke would be more expensive than the current system.
“He then says that he wants the rate not to be some £130 a week, but to be £200 and something a week,” said Mr Webb.
“I was not clear where that extra money would come from. If we pay women on maternity leave double, someone must pay for it. If he does not want that to be an extra burden on firms, paying for it will simply be a tax increase.”
In other words, the scheme might be doubly more expensive.
In addition, he said the proposal created issues around whether it distorted the choice between becoming an employed earner or a self-employed person.
And he pointed out that Mr Elphicke’s proposal was based on a belief that women taking maternity leave would not return to their previous employment – but this is no longer true. Mr Elphicke’s proposal is based on an outdated understanding of the market.
Mr Webb said: “The norm now for an employer who takes on a woman who goes on maternity leave is that — four times out of five — he will come back to the job for which she was trained, in which she is experienced and to which she can contribute.
“We now find that three quarters of women return to work within 12 to 18 months of having their baby… We need to educate employers about the fact that, if they do not employ women of childbearing age, they are depriving themselves of talented people who contribute to the work force. Not employing such women is clearly a bad thing, not only from a social point of view, but from an economic point of view.”
There you have it. Mr Elphicke’s proposal was defeated by a member of his own Coalition government; it was archaic, it was expensive, and it offered no profit for the people who were to pay for it.
That won’t stop him pushing plans like this. You will have noticed that a keystone of his scheme was that businesses would pay for in-work benefits – not the state. Charlie Elphicke is a Tory, and Tories cut taxes for very rich people like themselves. He’ll go on pushing for it in one form or another, for as long as he remains an MP.
Even if it is expensive, harmful nonsense.
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