The savings limit penalty imposed upon the poor makes it more expensive for us to save money than it is for the rich to borrow money. It penalises us for being financially responsible. It thus actively discourages and erodes the ancient virtues of thrift and prudence, so vital to a robust and stable family economy. [PDF]
When I became unemployed in 1991, my accounts became very unstable. Anticipated revenue from non-payers caused havoc with the management of my current account balance. I therefore had to close the current and deposit accounts for my business, and also my personal deposit account. I thus consolidate all my money into a single personal current account. The significant events were as follows.
During 1992 my wife did the same with her accounts. I also had to meet outstanding commitments as gracefully as possible. The significant events were as follows.
I also had to wait until the appropriate times to get rid of committed funds for unpaid Value Added Tax to be paid at the end of the quarter, income tax to be paid at the year end, and previously ordered supplies which had not yet arrived.
I managed to get all this done covertly before the DSS and the Local Authority checked my accounts. Had they done so, their stupid front-line robots would simply have decreed my £10,000 business loan, plus all other committed moneys in my account to be 'capital'. Had this 'capital' then disappeared as quickly as it did, I would have been disqualified from receiving welfare and Council Tax relief on the grounds that I had deliberately disposed of my capital (presumably on having a good time or by buying non-assessable capital items) in order to tap into the welfare system sooner than I should.
As my accounts show, this was certainly not the case. Common sense notwithstanding, the only thing the DSS and Local Authority look at when assessing my welfare deduction and Council Tax contribution is the plain simple balance in my and my wife's accounts, plus any cash we may have to hand. It even includes any amount over £3,000 each that our children may have been given by grandparents and special Local Authority grants for their education.
At the beginning of 1993, winter bills were driving my balance further and further down. Then, on 9 February, I got money owed to me from long ago by two customers. This was followed on 12 February by a large payment from the DSS of underpaid benefit. This was just in time to meet my winter utility bills on the 20 February, followed by a large car repair bill on top of annual road tax on 10 March. I then struggled to build my balance. On 22 April I received payment for damages awarded by a Court to do with a non-paying former customer. The sudden jump in my balance on 10 September was another very late payment from a former customer. This was more than eaten up by the repayment of a loan for materials for structural repairs to my house roof. The roof was slowly collapsing. Then the relentless onslaught of autumn annual bills for utilities and insurances drove my balance down again until mid December. Then, on 17 December I recovered another long overdue payment from a customer.
Although still quite erratic in appearance, my 1994 account is starting to acquire some stability. The rugged appearance resulted from the large transactions (superimposed on my normal domestic incomings and outgoings) from residual support work I was being asked to do on systems implemented during the 1980s. These transactions were for both income and costs. The downward blip on 12 July was for the deposit on my daughter's accommodation at Université Lyon III where she had to spend a semester of her degree course. This was later reimbursed.
The 1995 account is slightly less rugged than 1994. This is mainly because there were far fewer business transactions. [In fact I only did 3 small upgrading jobs.] The natural seasonal wave of my domestic outgoings can be clearly seen. Then in 1996, the account becomes more rugged again due to a final flurry of upgrading jobs. A tighter version of the natural domestic wave is back again in 1997. During this year I did the last two little jobs of my business career for my last remaining customer.
In February 1998, my current account balance took an unprecedented dive. This was caused by a large car repair bill of £314.38 on top of the usual winter gas and electricity bills and road tax renewal. We skated dangerously close to the £2,000 level until May. Then our combined balance suddenly shot up above the critical £3,000 threshold.
But this was caused by the DSS themselves. Despite having had her illness for over 30 years, January 1998 was the first time my wife had been granted Disability Living Allowance [DLA]. The DSS should therefore have started to pay my wife's DLA in January. But they didn't. As a result, I had to apply Draconian discipline to stop our accounts from emptying down to zero where we would have incurred swingeing bank charges + interest. I could not afford to let this happen. We had to shut down into a state of torpid economic existence. Then, in May, the DSS paid the whole lot in a single transaction. The result was that our combined 'capital' shot up over the critical £3,000 threshold at which our welfare payment is reduced and progressive Council Tax becomes payable. Neat trick!
Not having any idea 'what the law says', and having no idea how to find out, I never know how much welfare (benefit) we should be receiving. Our extreme hardship during those months resulted from the fact that the DSS was under-paying me also. Then in October, all of a sudden, my own balance took off way above the critical £3,000 limit. The reason for this sudden jump was the DSS paying £1,325.20 in underpaid welfare since January on top of the usual fortnightly payment. This sent our combined 'capital' skating up to over £4,000. Very neat trick!
The effect of these DSS lump payments was to increase the transient range (or swing) of our combined balance to £1,850.20 (£1934.60 in £Y2K). That is not easy to manage. If I had managed to keep our combined balance below the £3,000 threshold, it would have dropped down to £1149.80. That would give me only a 38% contingency. I think most seasoned financial directors would find a problem managing that, particularly when you remember that, like everybody else, my ability to borrow from a bank or hire purchase company is subject to status. And for the poor and unemployed, that simply means 'no'.
The extra money came just in time. The net fall over November was caused by vital car repair costs. In December, more was gobbled up by the cost of my younger son's school history trip to Russia. This was the only time he has been out of the UK. If he had not gone, he would have been almost the only pupil in his history group not to have gone. I considered it essential to his education. I also had to lend a lot of money to my daughter for a week to bridge a house move. She had to put down a deposit + the first month's rent on her new flat before some of the deposit held by her previous landlord could be prised back out of him. Hence the one week chasm in early December on the graph.
By January 1999 my family were all in desperate need of new clothes and shoes. Then was the most economical time to buy them. This, together with the winter gas and electricity bills, plus road tax and other costs caused our combined 'capital' to fall by £1,000 from just under £4,000 to just under £3,000 over that month.
But apart from buying new clothes and shoes in January, we were still shut down into the torpid economic state I had had to impose the previous February. Knowing the catastrophic consequences of debt while on welfare, it is psychologically very difficult to slacken the tight reign. Were I to allow the least too much slack, commercial, social and teenage peer pressures would accelerate us down into the abyss of debt with the pull of a neutron star. For example, if we went back to our pre-welfare level of spending on food alone (which was only average for the size of our family), our entire 'capital' would be consumed within a year. It would be zero!
Statements from two bank accounts do not always show the balance on the same days. It is therefore very difficult to steer a combined balance to know what you can spend, and when, in order to maintain a steady level of reserve. Consequently, I can only practicably steer the balance of my own account. I managed to hold the balance fairly steady averaging around £2,750 until the beginning of September 1999. I thought this was sufficiently below the £3,000 threshold to allow for my wife's balance. Unfortunately, it wasn't. The combined balance hovered around about £3,300. In retrospect, however, I am glad I didn't engineer it any lower, because in late August to early September, my account balance took an almost £1,000 dive.
My elder son was a special needs pupil. As such he was theoretically entitled to free secondary education to the age of 25 instead of the usual 19. However, this apparently does not apply to the Child Benefit and welfare support necessary for him to be able to realise this. His Child Benefit and welfare support stopped when he reached 19. This was before he actually left school. Consequently the four of us had to live on the amount of welfare meant for three until he did.
This resulted in the slight drop in the overall mean balance in my account from June to September. I had maintained this level by holding off from buying much needed household items. Then in September the crisis came. In order to function within a society you have to tend towards certain norms. Otherwise people think you are odd. This does not help with the task of job searching. I had to give my sons money to buy a complete re-fit of new clothes just so they could approximate to the social norm. On top of this I had to pay for more car repairs. Hence the catastrophic fall in my balance in early September.
From then on into the Year 2000 my balance never recovered. But in June, the DSS did a spot check on the balances of my current account plus my wife's savings account. The latest bank statements we had were for May. The DSS operative who inspected our statements, saw that our combined 'capital' had strayed above the £3,000 threshold during that month, even though in the middle of the month it was only £15.81 above the £3,000 threshold. Consequently, as a bureaucratic rule-driven robot without any apparent trace of human feeling, she reduced our welfare payments accordingly. That meant we were being charged 329% per annum for the privilege of possessing that extra £15.81 we had saved out of our welfare! Yet the rich can borrow on their credit cards at 7·9% money which isn't even theirs.
Then the inevitable started to happen. First, on the 17th of November, the cheap veneered chipboard bedroom furniture we could barely afford 20 years ago fell apart. I had to get two new chests of drawers. I managed to find two flood damaged pine chests of drawers for £438. Next, on the 22nd December, our 22 year old washing machine finally failed beyond my ability to repair it. It had been beyond all economic sense to pay for it to be repaired for many years. I managed to seek out one at a very discounted price (for actual cash notes) of £300.
Next, on the 2nd of February, our 20 year old dish washer failed beyond repair. Many would class this as a luxury. However, please consider that my wife has a mental illness. She is far slower at doing things than well people. Furthermore, she finds it extremely difficult to organise her day without asking me to direct her at each frustratingly detailed step. Still further, my son and I had just endured two months of her 7th relapse before the medics would admit her to hospital where she spent 6 weeks. During this two months we had practically no sleep. This resulted in my son suffering a breakdown and having to spend 2½ months in hospital himself, followed by 6 months off work. A dishwasher is no luxury in these circumstances.
Next, on the 2nd March, I had to spend £555.95 on my car to get it through the MOT. Without my car I could not have visited my wife or son in hospital. Nor would I be able to take my son to the extensive psychotherapy he now needs to get him over the trauma of two months sleep deprivation during which he continued to go to work each day. Certainly, trapped here in Yuppyville, where the level of public transport reflects the needs of its elite multi-car families, one could not possibly function without a car.
Finally, on the 30th of April, fate exacted its 'piece de résistance', which I had been anticipating for some years. Our 21 year old gas boiler failed beyond safe repair. Not having the space, the means or the opportunity to implement my ideal home energy system, a new gas boiler was my only practicable choice. Yet even if I determinedly studied the entire subject of gas boilers, I could not buy and install a new one myself. It would be illegal for me to do so. Besides, no supplier would sell me one. The supply and fitting of gas boilers is a wholly restrictive practice. Only registered gas installers are allowed to do it. Since our house has no other means of heating - not even a fire place or a chimney - and since our climate at 52° North is not habitable by humans without heating, I had no choice but to pay their price.
The new gas boiler cost me £1292.50. This brought my total unscheduled outgoings, since I was last penalised for having too much in the way of 'savings' in Summer 2000, to £2,816.45. My so-called 'savings' have thus gone from the severely penalised £3015.81 down to a precarious £199.36 in 9 months. There is not one item of this expenditure that did not go directly to maintaining the basic function of the household. None of it was spent on luxuries of any kind, nor on any form of respite or relief from the trauma my family and I had just endured. £199.36 cannot possibly cover forthcoming domestic bills.
It should be noted that if a fickle decision-making process had not resulted in my wife receiving the minimum rate of Disability Living Allowance (DLA) for the past 3 years, then we would not have been able to have a new gas boiler. We would have been left with no form of heating. We would have had no choice but to 'stay in bed' all winter. Remember, the ability to borrow money is 'subject to status' and, being on welfare, we simply do not have the necessary 'status'.
It is, in some circumstances, possible to get local authority grants for what are called 'essentials'. However, we have already had grants to repair our leaking house roof and to replace an inoperable flush toilet in the past two years. There is a limit as to the number of grants you can have in a given span of time. Also, for a gas boiler to qualify, it has to bear an official sticker stating that it is actually too dangerous to use. This requires that a gas engineer inspect it and find it unquestionably to be so at the time he inspects it. Then, one has to freeze for months while the wheels of bureaucracy turn to get approval for a minimally specified new boiler to be installed.
We live in poverty, but we would rather live than wait until the side of our house is blown off or any of our family is maimed or killed by a gas explosion. I have known for a long time from the smell of gas and burning electrical insulation that the boiler was unsafe. Perhaps its benign failure was providential.
Then, over the summer, my son was sacked by his employer because of the length of his illness. He advised of his sacking one week afterwards. The Benefits Agency then refused to give him benefit for the first 6 weeks after his dismissal. And all this at a point when all our savings had been drained.
In early December, I noticed from my November bank statement that I had only just over £5 in my account. I had not drawn out money for ages. We had to catch up on our re-stocking of food and consumables. I also had utility bills to pay. Looking more closely, I discovered that shortly after my transfer to Income Support from Jobseeker's Allowance at the end of September, the Benefits Agency had suddenly stopped paying me. I had not received anything for over two months, although they had not bothered to tell me they had stopped paying me.
The reason they had stopped paying me was that the Income Support Department of the Benefits Agency was not sure what the Invalid Care Allowance Department of the Benefits Agency had been paying me and vice versa. So to make sure they did not waste any of their precious taxpayers' money, both departments unilaterally decided to stop paying me anything until they had sorted themselves out in their own good time. Were it not for the providential arrival of a winter fuel giro, we would have been entirely destitute for a month. This was a time of immense financial stress since my daughter - who was unemployed, had no savings, and had been refused benefit - had taken refuge with us.
Then, all of a sudden, both departments paid me the whole lot at once. This is the cause of the sudden leap in my 'savings' in early December (see applet). This resulted in a transient swing in my account balance of £2183 over the year, without my having made a single non-event-driven expenditure. Not once did I freely choose to buy something. And we were constantly just on the threshold of survival. How can anybody be expected to maintain their so-called 'savings' between zero (we cannot borrow) and the penalty threshold of £3000 (we cannot afford to have our benefit reduced) when we get jerked around like this by the Benefits Agency? The degree of self-discipline and stringent control I have had to impose on my family is Draconian, oppressive, stressful and superlatively debilitating.
It would be arrogant and absurd to think that we could be the only ones in this position in a country of over 60 million people. How many people, who do not have their miserable welfare payments supplemented by DLA, are living in this country with no form of heating in their homes? How many of those who die of hypothermia each winter, in houses without fireplaces or in smokeless zones, do so because they cannot afford a new gas boiler? Obviously, not enough for a vote-chasing government, elected by an affluent self-seeking majority, to have to worry about.