C is for Coalition

I was going to write a blog post about something else for C, but an article in the Guardian newspaper caught my eye and I thought I would summarise and share some interesting points with you on the coalitions welfare and tax reforms that are coming into effect this week in the United Kingdom.



In the UK we have a coalition government, that means that two, not one political parties are running the government at the present time. In 2010 the UK general election, to cut a long story short, the Labour and Conservative Party lost a significant number of seats to the Liberal Democrats which in turn resulted in what  is called a Hung Parliament. This meant that the Liberal Democrat leader, Nick Clegg was essentially a "kingmaker". This meant that he had the power to choose between Labour and the Conservatives as to which party would be forming the majority of the parliament with the Liberal Democrats filling a lesser number of positions. Nick Clegg cut a deal with the Conservatives and as a result of that, he is now Deputy Prime Minister. The Conservative Leader David Cameron is Prime Minister with the Conservatives holding sixteen seats in total and the Lib Dems having five.

They have been in power for nearly two years and have not been a popular government as cutbacks and austerity measures have been the order of the day on the home front. This week sees the following reforms come into effect.

1. The Bedroom Tax: If you live in social housing in the UK and you have a spare bedroom in your house, you will lose 14% of your housing benefit and if you have two or more spare bedrooms you will lose up to 25%. An estimated 1 million homes are paid housing benefit in the UK. Approximately 660,000 people are affected by this change that comes into force on the 1st of April and may lose up to £728 a year in benefits. two thirds of this number are registered disabled. The savings to the government are said to be £465 million

2. Legal Aid. The cut off for people to qualify for Legal Aid from the government has been reduced to salaries of £32K a year. If you earn between £14K and £32K you will have to take a means test. Legal cases for divorce, child custody, immigration and employment disputes will be badly affected. Labour has called this a "day of shame". Comes into effect on the 1st of April. Savings are estimated at £2.2 billion.

3. Council Tax Benefit. The government will no longer control Council Tax benefit, instead local councils will be able to determine this after being passed the responsibility by the central government with a 10% reduction in funding. Therefore, people on low income will face a reduction in their support from their local councils. Also, local councils funding from the government has been reduced by 26.8% in the past two years. Local councils are already facing difficult choices on where to put their money every year, with many stating that cuts will have to be made on care services for the elderly and infirm. 2.4 million people will also see their council tax rise this year. Savings are estimated to be up to £480 million a year. Comes in on April the 1st.

4. National Health Service commissioning. A total of 240 commissioning groups all over the UK will take control of their respective budgets and will be able to contract out services to private companies as long as they meet standards and costs. Costs are estimated to be approximately 1.5 billion in redundancies. Then savings of up to 5 billion by 2015. April 1st.

5. The FSA is scrapped. The Financial Standards Authority is to be scrapped on the 1st of April to be replaced by the Financial Conduct Authority and the Prudential Regulation Authority. The Bank of England says that these new bodies will supervise the Stock Market banks more closely and will be able to prosecute, throw people out of the industry and withdraw a banks licence. Above all it will monitor the risk to the UK banking system as a whole.

6. 50p in the pound tax rate to high earners will be scrapped. The Chancellor of the Exchequer stated in the 2012 budget stated that the higher tax rate for high earners introduced by the Labour Government in 2009 did not raise as much as was forecast. £1 billion and not 2.5 billion. The Uk's tax office found that £16 billion was shifted into the accounts of the previous year so that owners and large companies could take larger dividends when the rate was lower at 40p. Labour claims that 13,000 millionaires will receive a £100,000 tax cut. 6th April.

7. Disability living allowance scrapped. This will be replaced by the personal independence payment. No longer will people registered disabled have benefits placed on condition, but how the condition affects the individual. Two elements will come together to form a score based on daily living and mobility. If you score enough, a payment will be made to you. 8th April.

8. Benefit Uprating begins. For the first time in UK history on the 8th of April, welfare and tax credits will not rise in line with inflation and will rise instead by 1%. If there was no change, they would have risen by 2.2%. Disability benefits will rise with inflation. Savings are estimated to be £505 million in the first year, rising to £2.3 billion by 2015-16. 9.5 million families will be affected including 7 million in work, by £165 a year.

The full article can be found on the Guardian website here. Suffice to say, the UK welfare state will be changed irrevocably as a result of these reforms and the success of the coalition government will be measured by this weeks events. Some may say that the savings are a good thing, but is this the best way to make them?

Also, Rocco's Random Number is 246 on the linky list which gives us =]V[= (yes, that's really the blog title) hosted by Matt Conlon. Seems like a nice fella and this is his third time on the A-Z blogfest. A veteran no less. Go over there and enjoy yourself. Say I sent you.

Rock on,

W.