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SMI Labour Benefit's Culture Catastrophe - Come to Britain and We Will Pay Your Mortgage!

Politics / UK Politics Mar 13, 2013 - 02:20 AM GMT

By: Nadeem_Walayat


You want a FREE £200k+ House? Then come to Britain, and we will give this and much more, only thing you need to do in return is to vote Labour. Britain continues to suffer the consequences of rampant Labour government bribery of the electorate in terms of expanding the width and breadth of the benefits culture that has resulted in enticing approx 1/5th of those of working age that could work ( 8 million) to instead park themselves onto benefits for life where the name of the game is how to maximise benefit receipts rather than engage in productive activity.

The net effect of the benefits culture is that for MOST working families, at the time of the last election it was far, far better to park themselves onto benefits than to work, the resulting £200 billion total benefits bill of which at least £40 billion is out and out fraud as a consequence of those that could work making a life style choice to instead become baby making factories to maximise benefits without consequences for the impact of having children that they have little intentions of actually looking after has on wider society.

This article focuses in on one aspects of rampant benefits fraud as illustrated by Support for Mortgage Interest (SMI), which the Labour government introduced to bribe approx 240,000 additional vested interest voters.

The public spin on SMI was that it supports those who become unemployed, paying the interest on mortgages for upto 2 years of upto £200,000 at a flat rate of 6.08% which translated into a maximum benefit of £12,160 per year on top of ALL other benefits. This despite the fact that the policy of zero interest rates had long since pushed mortgage interest rates to about HALF the amount of benefit being paid out! So the tax payer had been effectively paying Interest AND Capital as in a typical 3% mortgage rate the benefit covers the interest on a mortgage upto £400,000!

The Collation Government eventually cut the interest paid from 6% to 3.63% which still amounts to an annual benefits payment of mortgage interest to a maximum of £7,260 for what amounts to a life-time mortgage interest payments.


The effect of the SMI benefit is at least four fold -

1. Those through no fault of their own who lose their jobs with sizable mortgages, are going to be LESS likely to take on similarly paid employment in the future again due to the impact of this mortgage benefit i.e. a family of 5 (2+3) on benefits would need to earn an estimated gross income of more than £32,000 to over come the total amount of benefits that they are likely to be in receipt.

2. It encourages benefits fraud in terms of staying on benefits for life whilst encouraging under-declaring work i.e. as self-employed cash in hand so as to maximise benefits, as it is relatively easy for benefits fraudsters to overcome the 2 year time limit such as switching to claim income support for low income and working less than 16 hour work weeks or claiming that they have a disability.

3. The benefit is not only available to those of working age but also to pensioners upto a £100k mortgage, this defeats that whole purpose of what the benefit was said to be for, i.e. as a temporary support for those who become unemployed, when more than half the claimants are pensioners, which effectively means that the tax payer is paying for the next generations inheritance rather than prompting the downsizing and freeing up the housing stock which the likes of the bedroom tax encourages.

4. It encourages systematic benefits fraud in terms of citizens and also acts as a beacon to attract immigrants who have already mapped out how they will proceed to defraud the system and achieve their goal of obtaining a property with an over £200k mortgage so as to maximise benefits income potential whilst engaging in undeclared work as the state supports their children whom they live with but don't live with to further maximise benefits. This is one of the reason's why immigration to the UK has been about TEN Times that the last labour government promised it would be.

The above are just 4 examples as there are many more variations to this fraudulent benefit such as paying for second homes i.e. towards buy to let property portfolios.

The coalition government is desperately attempting to unwind labour's benefit for life culture through several mechanisms including introducing a £25,000 benefits cap and the bedroom tax, thought both of these are repeatedly watered down to dilute savings in the annual benefits bill or to entice those that could work to actually start to contemplate working (legally).

The problem that the coalition government faces is that it is relatively easy for the Labour party to promise the electorate debt fuelled bribes over responsible government the price for which is ultimately paid for by inflation. Therefore the more responsible the coalition movement acts, the less likely they are to get re-elected. Which means times-up ! Get ready to expect just as big voter bribes during 2014 that the last Labour government made which translates into INFLATION.

The coalition government has already acted to bribe voters by extending the SMI scheme into 2016. This effectively acts to PROP UP house prices.

The system of bribing voters to get elected is designed to bankrupt Britain. Protect your wealth now from incompetent corrupt politicians before inflation erodes away the value of your hard earned savings see my latest ebook in my Inflation Mega-trend series Stocks Stealth Bull Market 2013 and Beyond (FREE DOWNLOAD).

Source and Comments:

Nadeem Walayat

Copyright © 2005-2013 (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of four ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series.that can be downloaded for Free.

The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction.

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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