The statistics for fraud and error wobble around

As part of my work on the new social security book, which will be out in February, I’ve been updating some of the figures I refer to.  I’ve just been revising figures related to fraud and error in the benefit system, and I’ve been struck by the extent of variation in the DWP estimates by comparison with previous figures.  Overpayments of JSA are said to have increased from 3.9% to 5.0%, both because of higher fraud and higher official error.  Overpayments of Pensions Credit came down from 5.9% overpaid to 4.6%, but have now apparently gone back up to 5.6%, even though claimant error seems to have fallen.  Over the last couple of years the figures for Housing Benefit have reapportioned blame from claimant error to fraud.   This is an uncertain area, and most of this can probably be put down to methodology rather than any underlying trends.

The HMRC figures, which refer to a previous period, avoid problems by a simple strategem: they don’t admit to making any mistakes themselves.  (Table 5 in their figures puts the damage at no more than £10m out of nearly £30bn).


More problems with EBT cards

EBT stands for ‘Electronic Benefit Transfer’.  The system has been used in several US States and the general approach has a fairly consistent record of messing up the administration.  It’s not astonishing, then, to read a report about an audit in Pennsylvania,  which found that 2324 dead people received benefits last year.  The audit is 114 pages long, much of it in repetitive appendices,  and it may not be your leisure reading of choice, but there’s a brief press report here.  The breach arguably isn’t that bad numerically, given that there are nearly two million cardholders – but this is only one possible category of misuse.  What this audit is really about is trying to devise procedures to plug the gaps that the discrepancy has revealed.

This kind of problem is fairly predictable – I’ve criticised the approach several times on this blog.  Financial institutions and banks generally know where the vulnerable points are in their security, and over the years they’ve developed familiar processes to reduce the problems.  Alternatives to money, such as EBT cards, come with none of those protections, and that’s why reports like this have to be written to develop them.

Apparently we’re all insisting that water joins the retail revolution.

The general arguments for competition – arguments about quality, innovation and cost control – don’t apply very clearly to the supply of domestic water.  The provision of fixed water supplies is one of the strongest cases of a “‘natural monopoly”; the quality of the product has to be uniform; and there are strong public goods argument to say that the provision should not be subject to the choices of providers or consumers.  No house in the UK is considered fit for habitation if it does not have an internal fixed water supply providing drinkable water.   So it’s already questionable whether the arguments for ‘competition’ being forwarded by the regulator, Ofwat, offer any clear advantage to citizens.

That makes the recent statements of Ofwat’s Chief Executive, Cathryn Ross, somewhat puzzling.  She claims:

“We are living in an age of retail revolution, but water customers are being left behind. Customers tell us they think they should have the freedom to choose and don’t understand why water is the only retail market in which there isn’t some form of competition.”

Who, I wonder, are these customers?  How many of us think of water as a ‘retail market’? Are we baffled by the lack of competition?  Are there really deputations of villagers  standing there with pitchforks and firebrands, demanding that their services be privatised?

‘Real’ evidence is hard to come by

I’ve just been complimented on Twitter for offering ‘real’ evidence.  While it’s pleasing to be flattered,  I ought to add two cautionary notes about my last blog.  The first is that I started the entry by expressing reservations about the direction of causation.  It’s a problem that bedevils most statistical analysis – showing an association between two factors often looks plausible, but it’s not possible to say confidently whether there is a direct relationship, if the connection is best explained  through another factor, or there’s some further aspect of the figures I’ve been using that produces an artefact.  (The figures I had to hand, as it happens, were mainly for larger countries.  I don’t know whether that matters.)

The second reservation is the curse of comparative data – the graph is based on a handful of observations, where each national government counts for one uniform policy unit (e.g. the USA, Switzerland, Denmark), regardless of differences in size, variations in structure and rules, and so forth.  Belgium has at least six governments and I don’t know how to count Switzerland.   The numbers, Castles argues in Comparative Public Policy, allow us at best to run “a preliminary sorting process, informing us about combinations of variables which fit together to produce possible accounts”.

I suspect that the main determinant of labour market participation is the structure of the economy,  and while I’m not sure it has anything to do with benefits, there are hidden elements of conditionality in most systems which the crude figures won’t reflect.  That’s also why I finished up by saying, ‘if there’s an association…”

Lower unemployment benefits imply less labour market participation, not more

A blog from Tim Worstall at the Adam Smith Institute claims bizarrely that the way to cut unemployment is to cut unemployment benefits.  That’s like blaming hospitals for broken legs – though I suppose that if there weren’t as many hospitals we’d not get to count the broken legs quite so thoroughly.

I threw together this graph fairly rapidly from OECD figures I had to hand: the axis on the left shows replacement ratios (how much unemployment benefits replace of salary during the first 60 months, assuming housing costs are allowed for), the bottom axis shows labour market participation, the points on the graph are all major OECD countries.  If there is a relationship, it’s in the opposite direction to the claim made by the Adam Smith Institute.  I’m sceptical, however, that there is a direct relationship.  There is no good theoretical reason to suppose that unemployment benefits trump economic and social conditions in determining labour market participation.


Rationing isn’t best done by charging for services

A discussion on the Radical Statistics list sent me off looking through some old material.  The cash crisis in the National Health Service has fuelled calls for charges to be introduced, as a way of quelling demand. Charges, however, are not a good way of doing this.

This table was part of a paper I never published – I cannibalised sections for a book, and put the arguments differently.

Normative criteria applied to different forms of rationing


Distributive equity Access for a target population: avoiding errors of exclusion Reducing aggregate demand Selectivity:
avoiding errors of inclusion
Denial of service – closing the doors ?
Rationing by price ?
Filtering/ referral processes ? ?
Eligibility criteria
Priority weighting ? ? ?
Dilution – less service for everyone ? ? ? ?
Deterrence ? ?
Delay – waiting times ? ?


Some of the ratings might be questioned – I think, for example, that there is a case to show that making people wait has bad distributive consequences, not just questionable ones.  The central point to take from this is that there is no reason to suppose that price rationing has any intrinsic superiority over other methods. If anything, it is rather inadequate as an instrument of public policy: it has nothing to prevent inappropriate inclusion or exclusion, and while some people think it’s a fair procedure (which is debatable), it is unlikely to be fair in distribution. Waiting lists and queues are not much better. The two methods of rationing which relate best to most of the criteria are eligibility rules and filtering, such as triage or using referral processes.

Italy proposes a European Unemployment Benefit Scheme

The Italian Government has proposed the introduction of a European Unemployment Benefit Scheme, applicable to all the members of the Eurozone.  The benefit would provide 40% of previous salary for 6-8 months.  The purpose of the benefit scheme would be to provide solidarity when countries experience a surge of unemployment; the amount of benefit payable in a country would be limited to 200% of its contribution to the scheme.

I suspect the scheme is a non-starter.  The Italians have shrewdly put the proposal in a way which is not subject to treaty change or isolated vetoes, but it will be hard to get this past the presumption of subsidiarity.  Some of current arrangements within the Eurozone are based on independent and non-governmental arrangements – the Ghent system, based on trades unions, is used in Denmark, Sweden and Finland  (see this link by Clasen and Viebrock), and  the French scheme, Unédic, is administered by a ‘convention’ of employers and trades unions.   The Italian scheme is noteworthy, however, in three ways.  It shows that there is still continued interest in promoting the idea of a Social Europe.  It  reinforces the view that there is now a two-speed Europe, the Eurozone and the rest.  And it shows how very far the UK is out of step with the rest of the European Union, both in the objectives and in the level of benefit offered.


The Joseph Rowntree Foundation thinks it can solve poverty. It won’t do it this way.

The Joseph Rowntree Foundation has issued two reports under the headline, “We can solve poverty in the UK.”  They define poverty as being “to have resources that are well below minimum needs.”  Their objectives are to ensure that no-one should be destitute, that no-one should be poor for more than two years, and that there should be fewer than 10% of the population who have less than the standard at any time.  The first of the reports,  UK Poverty: causes, costs and solutions , has a lengthy account of research findings about people on low incomes.  The second report, We can solve poverty in the UK, is a manifesto with a long series of proposals.

The reports are lengthy; probably the best way to convey the focus of the approach is to reproduce the key measures they propose.  They write:

We could solve poverty by:
•  Supporting people to be good parents, helping parents share care and stay in work, minimising the adverse impacts of separation on children, and supporting children and parents’ mental health;
•  Giving access to high-quality, flexible and affordable childcare to parents on low incomes, allowing them to work and improving children’s pre-school development;
•  Ensuring all children from low-income backgrounds can succeed in school;
•  Ensuring all young people leave school with  the support, advice, skills and confidence  to move successfully into education, training  or the labour market and towards  independence; and
•  Raising and protecting family incomes so they an afford essentials, reduce stress and give children the opportunity to participate socially and educationally.

•  Supporting people to gain the skills and capabilities to find a job and progress once in work;
•  Creating more jobs offering at least a  Living Wage, with greater job security and opportunities for progression; and
•  A social security system that incentivises work and increasing hours, and supports people in and out of work to escape poverty.

•  Encouraging more older people to take up the financial support for which they  are eligible;
•  Ensuring more working-age people contribute to savings schemes and pension funds; and
•  Providing benefits for older disabled people that are tailored to meet additional costs of disability and care needs.

•  Ending the poverty premium through responsible business practices, better customer service, regulatory intervention and product innovation;
•  Enabling low-income and at-risk consumers  to get the best deals from providers;
•  Boosting the supply of genuinely affordable housing; and
•  Reducing energy demand through efficiency programmes.

•  Enabling young people leaving care to maximise their potential, with proper support around housing, employment and training;
•  Providing good quality holistic approaches to family support services, which address a  variety of issues, including material poverty and behaviour;
•  Providing homeless people with secure,  long-term homes; and
•  Significantly increasing access to and funding for mental health services.

•  Supporting communities to create and implement locally-led solutions and build pressure for bigger change;
•  National, regional and local leaders setting a clear vision and co-ordinating efforts across  sectors;
•  ‘Anchors’ – the big employers and in a place – using their purchasing power and networks to connect to land neighbourhoods; and big businesses and investors helping to rebalance the economy, driving growth up in ways that drive poverty down.

There are lots of measures here, some to agree with, some not, and a scattering (like leadership or responsible business practice) which seem frankly feeble.  What it isn’t doesn’t add up to is an anti-poverty strategy.  The  specific objectives which are identified are not linked to specific measures that could bring them about;  there is far too much emphasis on issues (such as parenting behaviour and work incentives) which have consistently failed to address the problems of poverty.

At root, the conceptualisation of poverty is weak.  Even if we accept the narrow focus on resources, the reports overemphasise pathological explanations for poverty – individual competence and family dysfunction – and say far too little about either the structure of the economy or social exclusion.  The resources that are identified are much too often concerned with cash and work, rather than assets and services.  There is very little consideration of entitlements and capabilities, basic security or empowerment.   The result is, I regret to say, a missed opportunity.

Universal Credit is not back on track

A report by Nicholas Timmins for the Institute of Government suggests that Universal Credit has recovered from its initial disasters and is now on the road to recovery.  He has been told, and seems to accept, that the DWP and the Treasury have finally got a grip and sorted out the basic mistakes, and something like Universal Credit will be established.

Timmins’ report is largely based on interviews with senior politicians and civil servants.  The report is basically a chronological account of how the policy developed, how it went wrong and what’s been done subsequently to get it right.  But he would have done well to seek out some other perspectives.  The failures in design are fundamental – and because critical analysis through the usual channels was suspended, they have still not been adequately considered.  Amongst the many failures of Universal Credit,

  • all the primary objectives – such as simplification, work incentives, reducing in-work poverty, smoothing transitions and cutting back on fraud and error – have been fatally compromised
  • there is no effective system for coordinating and pooling all the information required in one place – the new system has come to rely primarily  on returns from claimants about changes
  • the system relies on accurate information from claimants, and people cannot answer questions they do not know the answer to.  No computer system can go faster than the information that goes into it
  • the marginal rate of deduction is much higher than intended
  • the cuts in work allowances remove any incentive for most claimants to remain in contact with the system if they find work
  • the system makes  complex demands of people, (for example, those relating to security, agreements by couples and job search) which are almost impossible to police.

The administrative failures of Universal Credit largely reflect a cavalier disregard for any practical experience derived from the benefits it is supposed to replace.   Even if everything had been done well, the scheme would have foundered; it was trying to do the wrong things in the wrong way.  There is little indication that the present implementation has done more than re-christen existing benefits with some tweaks in the rules, and as things stand many of those tweaks (such as rules on rent, reporting and conditionality) are not working too well.

Rethinking disability assessments

Jeane Freeman, the Scottish minister for social security, has declared that rethinking disability assessments will be a priority for the new administration.  I haven’t dealt with this issue in my draft submission – I needed to cut down the length, I’ve had other opportunities to put the argument and in any case they’re on it.   None of those is a reason not to cover the issues here.

As things stand, nearly everyone who claims is being assessed.  According to the National Audit Office, the DWP had initially intended 75% of all claimants to undergo face to face assessments for PIP, but the actual rate has been 98%.  Most assessments relating to disability are pointless.  They either confirm the obvious or they duplicate information that is already held.  We can do something about that.  The problem is that some assessments are necessary: many people with disabilities cannot say whether they are disabled or not, and have no idea whether or not their disability fits the criteria for benefits.  Any general rule, no matter how sensitively it is administered, is going to have to deal with some grey areas.  But the same approach does not have to apply to everyone: the Scottish Government has the power greatly to reduce the numbers of assessments, by adapting the procedure to the circumstances.

First, it is possible to identify certain conditions which should imply automatic entitlement, offering benefits on minimal or secondary evidence – either accepting on sight that the person has a qulaifying disability (double amputation, severe disfigurement) or passporting benefits on the basis of provision by other agencies (congenital disability, blindness).

Second, there are conditions which will have led to prolonged long term contact with health services, and certification from a consultant is sufficient to establish that the condition is there without requiring further detailed examination of personal circumstances. Examples are terminal illness, multiple sclerosis, MND, malignant neoplasms or brittle bones.

Third, there are conditions where existing services in long-term contact with the individual are far better placed to judge the impact of a condition than an independent assessor could be, and it would be appropriate to accept medical certification. Examples are continued psychosis, epilepsy, dementia and learning disability.

In all three categories, there will be some which should receive a long-term award or whole-life award and will not require reassessment.

Only after these three categories are considered is it appropriate to think in terms of further individual assessment. The points scheme currently used in a range of benefits was initially developed from work done by the Office of Population, Censuses and Surveys to establish the range and severity of disabilities in the UK. That study validated the approach through a range of tests, but it pointed to an important conclusion: that once the primary disabilities had been identified, it was very rare for further disabilities to make any notable difference to the findings, and that information served no useful purpose. It follows that it is neither appropriate nor necessary to ask most claimants whether they can go to the toilet unaided.  The question is embarrassing and the information obtained is for the most part irrelevant. The assessment process should begin by asking people to identify their most important disabilities, ask questions about those, and go further only in marginal or complex circumstances.

Finally, there will be a residual category of people who are not adequately dealt with by any of the four stages above, and who will require or ask for a more thorough comprehensive assessment. This category should be small.