Gordon Brown's tax credit scheme. Mr Prudent showing that, once again, he really does not deserve that nickname. Afterall, it is reported today that he is about to write off £2bn as unrecoverable after payments had been made out incorrectly or fraudulantly. That is equivilant to 1p on income tax. So that brilliant budget you did a couple of months ago, Gordon, where you took 2p off income tax (then abolished the lower rate and increased National Insurance contributions) was not only giving with one hand and taking with the other, it was also a waste of time because you've lost 1p in every pound all ready with this numbskull scheme of yours. It could have been 3p in the pound if your department could do some basic accounting. Ministers have already admitted that £5.8bn has been paid to people who should not have received the money! This is incompetence on an NHS scale and this is the man who will be running the country in little over six weeks.
Comments
It's structural, not just managerial error
It is not just incompetence, it is systematic and structural. It is not as though the design and principle of the tax-credit system was fine but they just ballsed up the implementation. Implementation errors and perverse incentives are inate to big government schemes. They are not exclusive to Gordon or the Labour government, although their love of micro-management has opened many more avenues for the expression of human fallibility. The more complex and grandiose the scheme, the more likely that its implementation will test the natural boundaries of human competence and honesty. Gordon's tax-credit schemes are the apotheosis of targeted, micro-managed welfare. They were doomed to fail from the moment they were dreamt up.
The only way to limit the costs of human fallibility, and in the process undo the poverty traps that are the perverse consequences of targeted systems, is to have as simple a system, with as little targeting, as possible. There is only one solution that can truly simplify the system - a Basic Income combined with a flat income tax. Once the domain of loony lefties who view a "social dividend" as a right of all citizens to a share of the national wealth, the Basic Income idea is now also promoted by reputable economic commentators of a distinctly dry disposition, such as Charles Murray and Samuel Brittan. Though no government system can be free of fraud and incompetence, the simplicity of one monthly sum due from the government to be set against one monthly payment of tax to the government would ensure that losses were a mere fraction of our current system. And that is to say nothing of the benefits that should be realised from removing the many disincentives to work in the current system.
We should be careful about ascribing government failures to incompetence. That allows the opposition parties to argue that what is needed is not so much fundamental change as better management. Very convenient if you are an economic wet like the leaders of both main opposition parties. Centrist parties of any hue, coming in to government on a platform of better management of big government rather than on cutting the size of the state, will quickly run up their own tally of waste and incompetence as this government. Major and Heath (after his brief flirtation with economic liberalism) ran no more competent governments than Blair and Wilson. They will all cock it up - the trick is to make sure that they are managing as little as possible so that their mistakes matter as little as possible.