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Liberal Democrats offer best social care plans says The Economist

June 7, 2017 1:09 PM

"Britain's poor face another round of painful benefit cuts. Labour would do little to reverse the Tories' regressive plans."

So says The Economist who have endorsed the Liberal Democrats economic plans and now also say our social care plans are the best.

"The welfare reforms are bad news for the 50%-plus of families in Britain that receive income from at least one benefit. The Institute for Fiscal Studies, a think-tank, reckons that the Tories' plans will reduce the net incomes of households in the bottom income decile by a tenth (see chart). The incomes of working-age folk with children in the bottom decile could end up fully 15% lower. The unemployment rate, at 4.6%, cannot fall much further, so the labour market will not offset the effects of these welfare changes, as it did in 2010-15. And there is little sign that cuts to in-work benefits, such as tax credits, prompt employers to bump up wages instead.

Labour says it is offering a radical alternative, but the distributional impact of its tax-and-benefits policy is similar to the Tories'. True, it plans to raise income tax for high earners. Yet Labour has pencilled in only £4.5bn or so more for welfare. It says cancelling the benefits freeze entirely is unaffordable, although it has found about £10bn to remove university-tuition fees, a policy that heavily benefits the better-off.

A rising minimum wage, whether fixed by the Tories at 60% of the median or Labour's leap to £10 an hour, is not much help, either. Unlike tax credits, where the state bears the cost, a higher minimum wage is likely to lead to higher unemployment, which would disproportionately affect the unskilled. In any case, many of the poorest Britons do not work at all.

Of the main parties, the Liberal Democrats promise the most progressive welfare reforms. Unlike Labour, they pledge to unfreeze benefits, reverse cuts to child tax credit and entirely overturn cuts to universal credit. Along with a one-percentage-point rise in all rates of income tax, under their plans the burden of fiscal adjustment falls more evenly along the income distribution."

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