The welfare cuts that the 50p tax rate could have prevented

George Osborne abolished the top rate of tax after it "only" raised £1bn - but which welfare cuts could have been avoided for that amount?

George Osborne's stated justification for abolishing the 50p income tax rate was that, due to mass avoidance, it raised "just a third of the £3bn" expected. Even by Osborne's standards, this was a peculiarly unconvincing argument. It's true that £16bn of income was shifted into the previous tax year  - when the rate was still 40p - but this was a trick the rich could only have played once. Moreover, as the government has acknowledged in other instances, tax avoidance isn't an argument for cutting tax, it's an argument for limiting avoidance. 

But leave this aside. The fact remains that, as Osborne conceded, the 50p rate raised £1bn (and had the potential to raise far more). Not a transformative amount, to be sure (the deficit is forecast to be £120.9bn this year), but hardly to be sniffed at. Indeed, it's precisely this argument that the government makes when justifying "tough" measures such as the "bedroom tax" (which it is hoped will save £465m a year): every little helps. 

Osborne claims that the reduction in the top rate to 45p will cost the government just £100m but, once again, this is based on an anomalous year's data. Having brought forward their income in order to avoid the 50p rate in its first year, the rich have now delayed it in order to benefit from the reduction to 45p (again, a trick they can only play once) this year. The reality is that the cost of scrapping the rate is likely to be far higher, with up to £3bn in revenue forsaken. But as I show below, even if we accept the anomalous figure of £1bn, a significant number of the welfare cuts introduced by the government could have been avoided if the 50p rate had remained in place. 

The "bedroom tax"

The measure, which will see housing benefit cut by 14 per cent for those social housing tenants deemed to have one spare room and by 25 per cent for those with two or more, is forecast to save £480m - less than half of the yield from the 50p rate. 

It will cost 660,000 tenants an average of £14 a week or £728 a year. Exemptions have been introduced for 5,000 foster carers, some armed forces families and families with severely disabled children - but not families with a severely disabled adult

Estimated saving: £465m a year.


Council tax support cut by 10 per cent

The retention of the 50p rate could also have paid for the reversal of the 10 per cent cut in council tax support, which is forecast to save up to £480m a year. The measure will cost 1.9 million families who do not currently pay council tax an average of £140 a year. In addition, 150,000 low income families will pay on average £300 more a year.

I've written about the policy in greater detail here (Will this be the coalition's poll tax moment?).

Estimated saving: £480m a year. 


Legal aid cuts

Alternatively, the 50p rate could have prevented the lowering of the cut-off point for legal aid to a household income of £32,000 and the introduction of a means-test for those earning between £14,000 and £32,000. 

Estimated saving: £350m.


1% cap on benefit increases

Around half of the revenue raised by the 50p rate in its first year could have allowed the government to uprate benefits in line with inflation (which stood at 2.2 per cent in September 2012, the month traditionally used to calculate benefit increases), rather than by just 1 per cent. 

Estimated saving: £505m in 2013-14.

George Osborne scrapped the 50p tax rate in his 2012 Budget after it raised "just a third of the £3bn" expected. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Can’t afford to die: the rise of funeral poverty

The cost to councils of public health funerals has risen by 30 per cent in the past four years. 

Dying, as you'll know if you've ever planned a funeral, is an expensive business. If your relatives plan a service with a funeral director, they should expect to pay around £3,500*. Burial alone will cost you around £1,750 (making cremation, at £660, seem like a positive steal). And that's before they've even bought a box to put you in. So it is unsurprising that, according to insurance company Sun Life Research, one in seven families struggles to pay funeral costs. 

Families who can't pay are left with two options. First, there's the Social Fund, a centrally-managed pot of money which can offer a one-off payment to help with funeral costs (it also covers things like maternity grants and the winter fuel allowance). Councils themselves also offer "public health funerals" for either people who die with no next of kin, or whose next of kin can't afford to bury them.

Public health funerals are, it seems, on the rise - partly because of the rising costs of burial and the limited nature of the Social Fund, but also thanks to austerity measures which mean that luxuries (like burying your loved ones) are no longer within reach for the poorest families in Britain. 

Coffin up

A Freedom of Information request by BBC Local Radio found that, according to responses from 300 councils of the 409 who offer public health burials, the costs to councils of these public health services was up an average of 30 per cent from four years ago. Part of this rise is due to the skyrocketing costs of funerals, but part was down to the fact that the number of public health funerals had increased by 11 per cent.  

The assistant director of bereavement at Cardiff City Council told the BBC that when he started his job 20 years ago, the service was mostly used by "vagrants or alcoholics". However, the pool of those accessing council funds for burial has widened dramatically: 

"Over the years it has increased, and sometimes there are families but they are estranged or divorced, or there are families where they claim there's an inability to pay."

Another factor is that applying to the Social Fund, as opposed to your council, is complex and confusing, so many who are eligible for it don't get the money they're entitled to. Even if they do, they're only given £700; an amount that hasn't increased over the past decade despite the rising cost of funeral services. 

Grave policies 

Social policy academics from the University of Bath, led by Katherine Woodthorpe, recently investigated the role of bereavement in public policy. In their paper, they note that "little attention has been paid towards benefits associated with bereavement". The researchers conclude that the system needs to be simplified so families don't have to pay the costs up front, then apply to complicated systems of funding afterwards:

The most constructive change to the current system would be to re-organise the claim process so that individuals could be informed of their eligibility and (potentially) what they might receive from the state before committing to funeral costs. The current practice of submitting a claim after committing to funeral costs is counterproductive, leads to confusion and is the creator of unnecessary stress and financial difficulty for newly bereaved individuals.

When Woodthorpe's paper came out last year, the Telegraph reported its findings under the headline "Paupers’ funerals making comeback as families exploit loophole to save funeral costs", based on the fact that some families who couldn't afford services were going to councils for funeral funding rather than applying to the Social Fund. It included reports of council workers' "anger" at seeing people "who claimed they could not pay then turning up to the laden with expensive bouquets and other embellishments". 

It’s more than possible that these funds are occasionally misallocated and exploited, but we also need to remember that respectful disposal of the dead, while something we take for granted, is deeply ingrained in our culture – which is why there is a dedicated public health budget to ensure that this process isn't restricted to those with thousands of pounds in the bank.It's also worth noting that even the price of the most "expensive" bouquet wouldn't make much of a dent in modern funeral costs. 

It’s perhaps a sign of the times that a respectful burial, which is a deeply symbolic and emotionally significant ritual in all cultures, is now seen as a luxury, increasingly beyond the reach of the poorest families - and one which we bedgrudge those who are too poor to access it without help. 

*Costs are estimates from Money Saving Expert. 

Barbara Speed is a technology and digital culture writer at the New Statesman and a staff writer at CityMetric.