How the tax system drives families apart

Frank Field MP, in a report for the think tank Reform, reveals not only that the Government will miss its key target of halving child poverty by 2010-11, but that the centrepiece of the Government's efforts in this area, the tax credit and benefits strategy, has a devastating discriminatory effect on the children of two-parent families:

A single mother working 16 hours a week, after tax credits, gains a total income of £487 a week. A two parent family earning the minimum wage has to work 116 hours to gain the same income. This discrimination helps to explain why children in working two parent families now make up the single most important group of poor children.

In addition, government policy:

§ has missed its 2004-05 target of a reduction of a quarter in child poverty and fallen further behind last year;

§ has seen no change in the numbers of children in severe poverty; and

§ leaves one in five of poor children in persistently poor households.

Because the Government’s policies so heavily discriminate against families with two parents:

§ the risk of poverty has hardly changed for children in two-parent families;

§ half of all poor children are in working families despite the Government’s belief that working is the best route out of poverty; and

§ the numbers of children in working poor households is back at the level it was in 1995.

In the circumstances the widespread breakdown in family life is hardly surprising, and points urgently to the need to a thoroughgoing reappraisal of government strategy. Not only does the current policy discriminate against two parent working families, it also acts as a powerful disincentive against single parents choosing to re-enter a permanent relationship, or to declare their existing partners.

The trend towards exiling fathers from families represents a further, profoundly damaging social change, the effects of which are now being manifested in a feral culture, where work and discipline are increasingly absent, and criminality and violence increasingly a way of life for many. Ways and means must be found to discourage such developments rather than to entrench them via the welfare system. In place of the essentially fraudulent tax credit (fraudulent because it is not a tax credit at all, but just another welfare handout), those on lower incomes should be removed from income tax altogether by massively increasing the personal tax threshold. This would incentivise work but not penalise low-paid workers. A tax and benefits system must be devised which will not drive families apart, and which will not reward people for remaining outside the labour market. Social cohesion requires both that family life is supported, and that citizens provide for themselves, their families and the common good through work. There is no question of whether such a system can be afforded. The fact is that we cannot afford to be without one.

Capitalism delivers the goods

The G8 summit in Germany has attracted the usual mob of Neanderthal troublemakers intent on exercising the riot control skills of local law enforcement agencies. Against what, precisely, are "anti-globalisation protesters" protesting, that justifies regular scenes of violent disorder wherever the G8 decides to hold its summit meetings?

The benefits of global capitalism will be clear to one man at least. The unfortunate Pole, Jan Grebski, who has just awoken from a 19 year coma after being hit by a train in 1988 shortly before the collapse of Communism in Eastern Europe the following year. Dominic Lawson comments:

Last weekend he told Polish television that "when I went into a coma there was only tea and vinegar in the shops, meat was rationed and huge petrol queues were everywhere. Now there are so many goods in the shops it makes my head spin." According to his wife, Gertruda, "Jan was so amazed to see the colourful streets. He says the world is prettier now."

Among those who do not share Mr Grebski's view of the comparative state of the world, almost 20 years after the fall of Communism, are the thousands of "anti-globalisation" protesters whose rioting in Rostock at the weekend caused injuries to 430 German policemen. Organisers of the demonstrations, who had merely planned to disrupt the G8 summit in nearby Heiligendamm, apologised to the police for the violence and, according to the FT, "distanced themselves from the estimated 2,000 militant activists involved".

They distanced themselves from the violence, but not from the aims. It would be difficult for them to do so, such is the inchoate nature of the anti-globalisation movement. It encompasses everything from anarchists to extreme reactionaries who believe that the world took a wrong turn with the invention of the tractor. One thing they all have in common, however, is a virulently expressed anti-Americanism.

I believe them when they say that this is not racist, that they do not have a quarrel with Americans as individuals. What they hate - incoherently and therefore violently - is what America itself stands for: capitalism. They are the successors to those in the West who sympathised with the Soviet-backed dictatorships in Eastern Europe, who believed that such an absolute lack of economic and political freedom was a much better system than the free-for-all which unaccountably had not produced a revolution by the "oppressed masses" in the US...

The "enemies of globalism" ... are motivated not so much by sympathy with the losers in a free market, as by hatred of the winners. If the price of a system which banned winners is an absolute fall in living standards for everyone, that is a price they are willing to pay: or rather, a price they are willing for all of us to pay.

It should almost go without saying that it is similar factors which have caused Africa to lag so far behind the rest of the world economically: corrupt, self-serving governments that use absolute political power to extort economic benefits for their supporters at the expense of the people as a whole - Zimbabwe is the example with which we are most familiar. It should go without saying, except that the anti-globalisers blame it on America. Since the US is the biggest aid donor to Africa - albeit a much smaller donor per capita than some other countries - this viewpoint amounts to a pathological condition, rather than a political one.

The anti-globalisation movement is deeply flawed and deeply reactionary: the economic Luddites who tour the world pursuing G8 conferences have nothing constructive to contribute. The history of the twentieth century, as shown in the experience of Mr Grebski, shows that capitalism delivers prosperity, socialism delivers misery. The world needs more of the former, and less of the latter. Not everybody needs to be hit by a train to discern this fact.