Universal Credit is not ‘spending’; it’s a transfer payment

At the risk of generating more fog than light, I’ve just tried to squeeze a complicated little argument into a tweet. Benefits are commonly presented, in public accounts and in the media, as a form of public spending.  That’s not strictly true.  Benefits are technically a form of ‘transfer payment’.  The government doesn’t actually spend the money; they pass the money to the people who receive benefits (pensioners, families and so forth) so that they can spend it.

This has one of two effects.  If the transfer is paid for by personal taxation – that’s not the only way for governments to raise money – then benefits are simply redistributive.  On the face of the matter, redistributive transfers are economically neutral  – they have very little effect.  If they do have an effect on economic activity, it’s because people on lower incomes may well spend their money differently from people on higher incomes.   Typically, they save less (so the money is used more) and they spend more on food as a proportion of their income.

If the transfers aren’t paid by personal taxation, the situation is a little more complex.  If the cost can be tracked to a specific form of finance, that may imply a different pattern of economic behaviour, and the transfer payment may not be so neutral.  However, government finance doesn’t work to a strictly balanced budget, and it’s quite possible that the money will simply have been created, like ‘quantitative easing’ or ‘helicopter money’.  In the present circumstances, there’s a very strong argument for government to maintain a flow of money in order to shore up economic demand.  Quite apart from that, of course, the case  for protecting people on low incomes while that happens is strong in its own right.

Stephen Kidd on universal social security benefits

I’ve just heard a superb  presentation by Stephen Kidd, of Development Pathways.  He argues that developing countries should be focusing on universal benefits, like child benefit or a universal pension, rather than the means-testing which is being rolled out in many poorer countries.  The  report, by Development Pathways and the Church of Sweden, is here.

To give a flavour of his argument, here are two graphs.  The first highlights the failure of selective benefits.  The best performing selective programme, in Brazil, excluded 44% of the eligible group.  The worst performing, in Rwanda, used community based targeting, and excluded more than 97%.

The second graph shows something about the tax take.  Offering universal benefits means that people feel included in the support offered by governments – and that means that they are more ready to pay tax.  Kidd argues that universal benefits create trust, and the sense of a social contract.

The simplicity of Universal Credit

I’ve just finished giving evidence to the Commons Scottish Affairs Committee about welfare in Scotland – the video is here, the transcript here.  The main point I stressed in the hearing is that we no longer have either a minimum threshold for income, or an effective safety net.  The first part is true because there are reasons for benefits not to be paid in full: the repayment of advances, notional income, the two-child limit  and overpayment recovery.  The second part is true because people may find themselves with no support: that can apply because of the five week wait, the 3 week wait for legacy benefits, sanctions, self employment status, immigration status or the treatment of capital.

I have to admit that I’m completely flummoxed by the repeated claims from politicians that Universal Credit is ‘simple’.  This seems to mean, that the UC works by comparison with the legacy benefits; but many of the complexities of legacy benefits, such as managing overpayments, conditionality, assessments and the benefit cap, are recent introductions.

Universal Credit is complicated by design.  It brings together disparate benefits within a common framework of rules. Pre-existing rules relating to worklessness, incapacity, and housing largely remain, and that means that UC is really a group of benefits clumped together under a shared masthead – a ‘portmanteau’ benefit.  Lumping benefits together doesn’t make them simpler.  First, there are the complications built into its design.  People can’t tell when they’re entitled, how much for, or when entitlement stops.  The amounts of benefit can change suddenly and unpredictably.  Second, there is the reliance on technology to fix the problems – tough for those who don’t have the facilities, tougher still when they’re locked down and free sources are cut off.  And then, third, there are all the rules  – multiple, finely discriminating rules, which turn the process into an obstacle course.  Examples are the rules for partners, reporting changes across multiple dimensions, capital rules and managing overpayments.  There are too many rules, and too many moving parts.



Comments from Twitter:

‘Welfare’ doesn’t mean what it used to mean

The Nevada County Sheriff’s Office is not, I have to admit, one of the sites that I regularly monitor for information.  I get daily notifications from Google on a range of topics, including  ‘benefits’, ‘poverty’ and ‘welfare’.  It was the third of these that pointed me towards a police report from Nevada. Here it is:

12:16 p.m. — A woman dialed 911 accidentally. She was told to provide her address or law enforcement would perform a welfare check. She said, “I’m not on welfare and never have been,” before hanging up.

‘Welfare’ in the United States used to mean social assistance – Aid to Families with Dependent Children, then Temporary Aid to Needy Families. However, I’ve noticed, over the last three or four years, that nearly all of the notifications I’ve been getting from the United States have been about something else: a ‘welfare check’, which usually means a visit from a police officer or other official to make sure you’re alive. The term is also used by police forces in the UK, Canada and Australia. Try this, from Cleveland:

Woman tries to run from police during welfare check … Police responded to a business at 9:16 a.m. Nov. 3 regarding an employee who was “acting strangely” and refusing to leave the property. The employee appeared to be upset when police arrived and tried to jump into her car to flee at one point.  Suspected marijuana was found inside the woman’s car and she was taken to a nearby hospital for evaluation.

And this one is from a recent report in Texas:

Welfare check leads to large police presence at Smith County home

Authorities have cleared the scene of a welfare check at a home in Smith County. A SWAT team, Tyler police officers, Smith County sheriff’s deputies, and an ambulance could be seen at the home in the 5500 block of Old Henderson Highway during the noon hour Friday. Traffic was blocked while law enforcement surrounded a home. … the welfare check started with an individual calling the VA hotline and threatening to harm himself … the man did possess a handgun.

A SWAT team is just what you need if you’re thinking of killing yourself.  The Samaritans seem to be missing a trick.  But back to Nevada.  The report throws up two other issues.  One is that this woman, whoever she was, obviously thought that ‘welfare’ did still refer to social assistance.   The second is that an accidental call to 911 is considered to be a good reason for police to come out for a ‘welfare check’.  I can see the reasoning behind that – someone who is being threatened might have been intimidated into dropping a call.  However, it does seem to be part of a new interpretation of ‘welfare’, up to and including calling out the SWAT team.

Funeral support payments: how much information is too much?

When I’ve written about social security payments before, I’ve at times referred to  Funeral Payments as a example of where the system goes wrong – as in my blog, here.  It has too many moving parts to be workable.  I was interested, then, and pleasantly surprised, to see that applicants have few complaints about the application process. You can see what’s asked here,  because the Scottish Government has understood that people need alternatives to on-line processes.  It’s still a convoluted process: applicants are asked about themselves, whether they get benefits,  their relationship to the deceased person, the estate’s resources and the funeral arrangements.

Most complaints in the  claimant feedback, however, are about something else entirely: the details on equalities, which account for the last five pages of the form.  People resent those questions, it seems, because they’re not really about the process at all – and the questions are consequently seen as intrusive, in a way that the earlier questions are not.  People should be able to bury their mother without having to tell a government agency that they’re gay.

The Danmask-19 trial has not told us if masks work or not

A study from Denmark has put into question the effectiveness of wearing a mask.  It’s based on a randomised control trial of 6024 people, assigned either to a mask-wearing group or a control group that didn’t wear a mask.   42 people who wore masks, and 52 people who did not, contracted Covid during the test period.  The study notes that “the findings are inconclusive, with CIs [confidence intervals) compatible with a 46% decrease to a 23% increase in infection.”  Prof. Carl Henegan, writing for the Spectator, has seized on this as proof that any effect masks have is small.  (The Spectator, of course, has serial form in seeking to belittle or deny the seriousness of the disease.)

The problem with that conclusion (or the lack of it) is that the Danish study has not actually tested whether masks are doing what they’re supposed to do, which is to slow the rate of infection.  The graphic which follows, from the New Jersey Department of Environmental Protection, explains what should happen.   The control trial has been looking at people on the top two lines – putatively, groups at higher risk.  The distinction between the higher and lower risk (lines 1-2 and 3-4) depend on people who are infectious wearing masks to stop the spread.  There are claims on the web that the risk on line 1 is 90%, the risk on line 2 is 70%.  I don’t know whether those numbers are well founded, but if they are right, the expected values from 94 cases would be 41 masked cases (42 actual) and 53 unmasked cases (52 actual), which is bang on the nose.  The claim that the risk of transmission reduces to 5% on line 3 is potentially far more important, but Danmask-19  can tell us nothing about that.  Whatever the true figures may be,  the risk of transmission is not the subject of the control trial.

Mask Up!

Labour is found guilty of institutional racism

The Twitter-sphere is full of misinformation about the judgement of the Equality and Human Rights Commission about the Labour Party’s conduct towards Jews.  There are two rather serious misunderstandings doing the rounds.  The first is the mistaken claim that “the EHRC did not find that Labour was institutionally antisemitic”.  Here is an example, ‘liked’ by more than 1500 people :

 The EHRC report does not refer to ‘institutional racism’ at all.  However, the report does specifically and directly confine itself to actions which can be said to have been the responsibility of the Labour Party, as a collective organisation.   The methodology is explained in Annex 3.    It follows that report’s finding of unlawful conduct is, precisely, a finding against the Labour Party as an institution.  So yes, the Labour Party has been found guilty of institutional racism.

The second claim, as expressed by serial provocateur Chris Williamson, is based in a related misunderstanding: that “Despite cries about ‘institutional anti-Semitism’ and an ‘existential threat to British Jews’, the EHRC based its report on a tiny sample of 70 complaints made over a three-year period. It only found two examples of supposed ‘unlawful harassment’ – out of half a million members.”  The report did not look at the conduct of members (let alone that of former members such as Mr Williamson).    The actions of individuals, former members, and members communicating to other members in an individual capacity, were expressly excluded from the scope of the inquiry (p 127). What the EHRC was looking for was something different: actions which could legitimately be said to be conduct of the Labour Party, rather than of individuals.  And that is what the report has condemned.

I think there is some cause for regret here.  The report’s careful and measured tone doesn’t really get the point over to people who have convinced themselves, over a period of years, that the accusations of racism were fabricated – an allegation that is racist in itself.  There are references in the report to the suggestion that complaints about racism were ‘smears’ – that was a major part of the two examples of institutional harassment – but there is not the warning that was needed to explain to people that if they continued to maintain that position, it would amount to further harassment.  The EHRC needed to say it in terms.


Couling strikes again: the DWP continues to be in denial about the failings of Universal Credit

Neil Couling, the ‘Director General’ of Universal Credit and the Senior Responsible Officer accountable to Parliament, has a long track record of denying what everyone else can see.   In 2012, he was the one who claimed that there were no targets for conditionality and sanctions, despite the detailed  evidence provided by the PCS and Guardian.  In 2013, he fronted the UC Full Business Case, where he wrote that

This Business Case clearly demonstrates that Universal Credit provides value for money and huge benefits for claimants, the broader population and the economy as a whole.  Some of the most compelling aspects of Universal Credit are also highlighted here: the £2bn total cost of investment against a social return to the economy of £34bn over ten years; and an increase of people in employment of 200k.

The National Audit Office expressed its doubts, as well it might; there was no evidence to back up those claims.

This year, it fell to Couling and his colleagues to defend the DWP’s perverse practice of pretending that there were no bank holidays.  LJ Rose, for the Court of Appeal commented:

Mr Couling’s evidence is that as at the date of his statement in September 2018 the universal credit IT system had cost £1.3 billion to build and the estimate was it would need another £1 billion to finish the task. Any additional adjustments would increase this cost. Building another calculator to allow the amendment of assessment periods would, he says, require a complete rebuild, therefore substantially increasing the cost to the taxpayer by at least many hundreds of millions of pounds. …  Taking full account of all the SSWP’s evidence … I cannot accept that the programme cannot be modified … This case is, in my judgment, one of the rare instances where the SSWP’s refusal to put in place a solution to this very specific problem is so irrational that I have concluded that … no reasonable SSWP would have struck the balance in that way.

And now we have the latest report of the House of Commons Work and Pensions Committee, which takes Mr Couling to task over several points. First, he wanted to deny that people on UC were falling behind on their rent.

“When asked about the comparison between arrears, in Universal Credit and the legacy system, Neil Couling, the Senior Responsible Owner for Universal Credit, said that it was not possible for him to create a counterfactual” (pp 14-5)

Then he wanted to deny that the DWP had failed to provide the recommended support mechanisms for vulnerable claimants:

“We cannot agree with  the  assertion  made  by  Neil  Couling,  Senior  Responsible  Owner  for  Universal Credit, that the Department is currently providing a “de facto Universal Support”. ( p 46)

And he also wanted to claim that UC was not slower to deliver benefits for people with disabilities than other benefits have been:

the NAO found that, while 84% of claims from people receiving Personal Independence Payment (PIP) and Disability Living Allowance (DLA) were paid the core elements of their Universal Credit claim on time, only 75% of claims were paid in full and on time. … Neil Couling told us that the data on whether disabled claimants are paid in full and on time can “overstate” the degree of lateness … He told us : “Some of the lateness is artificially created by the way in which we are forced to collect the data, which is much better than the legacy system, I am hastening to add …” (p 53)

There is a pattern of behaviour here.  The Public Accounts Committee reported in 2018, after it had received evidence from Mr Couling and his most senior colleague, that

The Department’s systemic culture of denial and defensiveness in the face of any adverse evidence presented by others is a significant risk to the programme.

I am less concerned about the risks to UC, which has never been able to live up to its sales pitch, than I am with the effect on claimants.  The impact of cumulative delays, restrictive conditions, sanctions, an over-reliance on technological wizardry, debt and the devastating removal of minimum entitlements, has subjected millions of people to privation.  But it doesn’t help to be told that none of this is happening.

European citizenship: a broken promise

I had accepted, eighteen months ago, that European citizenship was ‘a promise that will never be kept”.  I’m disappointed, but not surprised, by a judgment in the French Cours de Cassation   that dismisses the rights of British expatriates in France as “inopérants” – ceasing to apply on the UK’s departure from the EU.  Steve Peers, a Professor of EU Law at the University of Essex,  has consistently argued that this would be the case.

Why did I think differently?  I’d point to four reasons, none of which has been persuasive to lawyers.  First, there was the Charter of Fundamental Rights of the European Union, the promise by the EU to its citizens that their rights were ‘fundamental’.  ‘Fundamental’ rights don’t disappear because a member state removes itself from the consideration; only membership rights do that.  Second, there was precedent – when Greenland left the European Community, the rights of its citizens were preserved on request.  Third, there was what I had understood about the nature of European citizenship. This comes from Wheare’s classic work on Federal government (OUP, 1946).  A federation, he explains, is:

“an association of states so organised that powers are divided between a general government which in certain matters … is independent of the governments of the associated states, and on the other hand, state governments which in certain matters are, in their turn, independent of the general government. This involves, as a necessary consequence, that general and regional governments both operate directly upon the people; each citizen is subject to two governments.”

That describes the structure of the European Union precisely – apart, it now seems,  from the last seven words.

Lastly, there was the description of European citizenship in the Treaties, which said that EU citizenship was ‘additional’ to citizenship in a member state, and does not replace it.  There is an ambiguity here.  In the French version of the treaties, the wording is this:

Est citoyen de l’Union toute personne ayant la nationalité d’un État membre. La citoyenneté de l’Union s’ajoute à la citoyenneté nationale et ne la remplace pas.

S’ajouter can be read here as ‘attached’ or ‘supplementary to’, and that, it seems, is how it’s been read in France. A “supplementary” citizenship seems to me to offer much less than an “additional” one.

I think there’s room to cavil about this, because if the term ‘supplementary’ was intended, it could have been said – and if the clause meant that European citizenship was supplementary, the last part, that it would not replace nationality of a member state, clarifies nothing, and could have no meaning or effect.  The caveat only makes sense if European citizenship was being considered as a form of citizenship in its own right.

I have no choice but to bow to the decision, but I persist in thinking of this as a promise broken.

On “The shame game”

The Poverty Alliance hosted a session yesterday prompted by Mary O’Hara’s book, The shame game: overturning the toxic poverty narrative.  It’s a powerful and very readable book, notably strengthened by her personal reflections.  I’d part company with her argument, however, right at the end, where she suggests that the central task is to challenge and overturn the ‘toxic narrative’.  Nor do I share the confidence of Nat Kendall-Taylor, the second speaker at the session, that the task is to find better ways of communicating, because we’re better at it than we used to be.

My own work on stigma was done nearly forty years ago – it was the subject of my doctoral thesis, and my first book.   The stigma of poverty is deeply entrenched in our society, and in many others.   The moral condemnation of the poor  didn’t begin with austerity, or Thatcher, or Reagan; modern politicians have simply mobilised and endorsed prejudices that have been there, literally, for centuries. The stigma of poverty is also reinforced by a broad set of overlapping stigmas – such as the rejection of dependency, disability, mental illness and class.   In the course of my work, I came to think that this was not so much a matter of discourse, as a reflection of something much deeper.  It’s hard to explain the association of poverty with immorality and dirt in purely rational terms.  If anyone out there is interested, my book, Stigma and social welfare, is freely available on my open access page.

It follows that I don’t think that challenging the narrative – a strategy which has been tried repeatedly since at least the 1930s – is likely to be effective in eradicating age-old prejudices.  If we look at what is effective instead, I’d argue that the policies which have worked best have not been directly concerned with poverty at all.  For example, we’ve largely taken health care out of the picture; we don’t criticise the poor recipients of health care for their dependency.  The same is true of the beneficiaries of primary education, libraries, buses and sanitation.  State Pensions and Child Benefit are very effective at helping people who are poor, but they’re understood in different terms.  The least stigmatising policies have been aimed, not at the poorest, but at the welfare of everyone.