We have already studied two related successful reform proposals: the UK's Family Allowance and Child Benefit. We shall begin this chapter with some proposals that did not succeed, and then discuss some current proposals likely to reform the UK's benefits system. I invite readers from other countries to seek comparisons and contrasts in their own past and present social policy histories.

Proposals that failed

Child Benefit happened, and it is still with us: but other attempts at major reform of the tax and benefits systems have not reached the statute book. Why not?

Tax Credits

In the early 1970s a Conservative government proposed a genuine Tax Credit scheme. These Tax Credits would have replaced tax allowances, would have been paid in full if an individual had no other income, and would have been withdrawn at a specified rate as earned income rose. As earned income continued to rise, the Tax Credits would have ceased to be paid out and the worker would have started to pay tax:

The scheme would have been encumbered with a number of complexities, but eventually most individuals and most households would have found themselves covered by it. Tax Credits were to be withdrawn at 30 per cent as earned income rose: that is, for every extra £1 of earnings below the tax threshold, the employer would have deducted 30p of the Tax Credit, meaning that the individual would have been 70p better off; and for every £1 of extra earnings above the threshold, tax would have been deducted at 30 per cent, again meaning an additional 70p of net income. As we shall see later, this would have gone a long way to creating a genuine free market in labour, and would have reduced considerably the labour market disincentives that many people experienced.