Nigeria needs to spend more on social support

I was alarmed to read a report in the Nigerian Observer, which told me that the World Bank was pressing Nigeria to ‘reduce the poverty net’.

If structural reforms are not implemented, Nigeria’s future looks bleak, per capita income will plateau, Nigerians will not have a full-time job by 2030 and if the employment rate does not improve, 23 million more Nigerians will live in extreme poverty by 2030,” according to the [World Bank’s] chief economist.

The report goes on to list the kinds of reforms that are being looked for: support for the private sector, ‘unlocking’ private investment, introducing ‘critical’ macroeconomic and structural reforms.  That, on the face of the matter, looks like a call for ‘structural adjustment’ and a return to the ‘Washington Consensus’, which emphasised liberalisation, privatisation and fiscal discipline.  Structural adjustment was not an unmitigated disaster – its effects were mixed – but it did lead to substantial hardship  and in some cases created positive obstacles to development.  One might have hoped it had been left behind in the 1990s.

As it turns out, however, this is not what the World Bank has been saying at all.  The Bank’s Nigeria Public Finance Review bemoans the chaotic arrangements that characterise many of Nigeria’s current policies, but the central theme is very different: Nigeria needs to devote far more of its resources to  public expenditure, and it needs particularly to expand its systems of social support.  Yes, it calls for ‘fiscal adjustment for better and sustainable results’, but it also argues that ‘Nigeria’s social spending is too low, both in levels and as a share of budget resources’; that education and health provision is not enough to raise human capital; and that government and the states need to raise revenue substantially to pay for it.  Nigeria has been shaping up to become one of the world’s largest poor countries – ‘the world’s second-largest poor population after India’. The World Bank’s policies have been misjudged at times, but this is not one of those times.

A few reasons not to cut the value of benefits

The most obvious problem with cutting the real value of benefits is that it will plunge people further into poverty.   It’s not a great surprise that people on benefits and low wages might be going without food; that’s been a recurring problem since at least the early 1980s.  It’s been estimated that there are two and a half million people in Britain who are destitute.  There will be more.  Expect growing malnutrition, and the short and long term harm to public health that goes with it.

A policy of impoverishing benefit recipients, however, will affect more people than just the recipients. There are the macroeconomic effects.  Cutting the value of people’s benefits would cut the demand for goods and services, at a time when the economy is teetering on the edge of a slump.  We know that people on lower incomes spend proportionately more of their income than richer people do – that much is self-evident, because people on lower incomes don’t have resources to save.  Research for the IMF has calculated that benefits for poorer people produce more of a multiplier – a beneficial ripple outwards – than tax cuts for richer people.  Conversely, withdrawing money from poor people will reduce demand  more than withholding it from richer people.

Next, there are sectoral effects.  Poor people spend proportionately more on food and energy than people on higher incomes do. Local shops and community businesses depend on their customer base; if that base withers away, so do the businesses that serve them.

Now to labour markets.    Most benefits, by quite a long way, are not concerned with whether or not people are part of the labour market: pensions, child benefits and disability benefits account for three quarters of the cost of benefits, and other benefits, notably Universal Credit, extend to people who are working as well as those who don’t. The mean-minded reluctance to support people on benefits is often justified in terms of the ‘incentive’ to work.  As benefits for unemployed people currently stand at something like 15% of the average wage, one might have thought that there was every incentive to work for pay. But there’s more going on here.  Many years ago, I heard a senior executive from the Danish social security system explain that they didn’t want to make too little provision, because if people got used to living on very low income that would undermine their incentives to work.  I dismissed that argument  at the time – the evidence didn’t seem to show much of an incentive or disincentive effect in either their system or in ours.  But the speaker had a point.  If we want people to engage in a high-wage economy, the last thing we should be asking those people to do is to survive on a pittance and  take any low-skilled job that comes up.  Forget the gibberish about preparing CVs: we should be training, getting people into education and funding internships.  We have to put more money into the process, not less.

Finally, microeconomics.  One of the central arguments that’s made by free-market liberals is that markets need to be able to operate.  Indeed they do, but markets have to be fed.  When people get cash benefits, those benefits are spent in the market.  When incomes are very, very low, people have less ability to participate in markets, and market providers have less reason to engage with them. Lower incomes mean more uncertainty for businesses and for poor people, more debt, and more debt defaults. This is the opposite of anything a free-marketeer should want.

 

Retrenchment after the pandemic

An outstanding report by Isabel Ortiz and Matthew Cummins explains what’s been happening to welfare around the world as the pandemic recedes.  A disturbingly large number of countries – 143, covering 85% of the world’s population – have been introducing ‘austerity’ measures, aiming to scale back the role of the state.  More than 50 countries are planning to cut services back to less than they were before the pandemic.

For many of these countries, the policies which seem most vulnerable have been introduced relatively recently – notably expenditure on health care and cash benefits.  A commitment to health care seems to have been maintained in most, while changes to cash benefits or ‘social protection’ have tended to focus on ‘targeting’ (or limiting entitlement) rather than the wholesale abandonment of such policies.  It’s worth considering, too, that in the past the legacy of managing major crises – famously, through the impact of war – has been to increase, not to reduce, expectations and the role of the state.  On that basis, I don’t believe this retrenchment represents a long-term trend – but it is a major setback.

What kind of support can be offered to people on low incomes?

Many people in the UK are facing destitution; at least 2.4 million people are there already. One of the complaints we hear most about proposals to cope with current threats to household income is that the proposals are not adequately targeted.   What that usually means is that some people on higher incomes will benefit.   The call goes up, repeatedly, for any benefits to be confined to people on low incomes.

It’s not easily done. Introducing a new means test would be complex, hard to roll out and liable not to reach large numbers of the intended population. There are ways forward, however.  The mechanism used for Cold Weather Payment, for example, gets the benefit to recipients of Pension Credit and to a range of recepients of Universal Credit, including those with children under 5 or people with a range of disabilities – there doesn’t have to be cold weather to call that mechanism into play.

If the aim of benefits is to redistribute income in general terms, there’s an  argument for doing something like this.  That’s true because overall, the effect of making payments on this basis is to improve the average income of people in the lowest parts of the income distribution, generally at the expense of those on higher incomes.  What it can’t do, however, is to protect the full range of people who stand in need of protection.  More than a third of all pensioners who should get Pension Credit don’t.  Official figures claim that Universal Credit goes to 80% of those entitled, but that is highly implausible  – Jobseekers’ Allowance had a takeup of less than 60% and Universal Credit has subjected hundreds of thousands of people to sanctions, exclusions and delays.  And that, of course, only takes account of the people who are supposed to get the benefit.  More people are on very low incomes, but not entitled because they have some savings, because they have theoretical or imputed income attributed to them, or because they fail to meet other conditions such as availability for work.

Any process which calls for a selection to be made has to be subject to some kind of test, and any test is likely to exclude the people who we are supposed to be helping.  The situation has been made worse, however, by the progressive limitations on the scope of benefits that have been imposed by successive governments.  We might have been able to argue, forty years ago, that we had a safety net – an effective minimum income, even if there were some gaps.  We no longer have the same.

That, then, leaves the outstanding question: what can we do to help the people who are most at risk now?  Coming back to the figures on destitution, we know there are three factors which come up repeatedly about destitute people.  They are people with complex needs, migrants, and they are likely to be single.  Any scheme which does not cover those three contingencies is not going to protect others from becoming destitute; and we know that this coverage is not on offer within the scope of the existing benefits system.

There are two main options.  One is to address the specific issues which are causing the current crisis – in particular, the costs of fuel, food and housing.   Labour has proposed a temporary cap on energy prices.  A cap on energy costs, certain foods or rents would would imply direct interference with the market.  We have done all of these in the past – the control of milk, eggs and meat in the 1950s and 60s, the use of rent control, and the current price cap on energy – so we can say that this is feasible.    This would, however, require a fundamental change in the way that governments manage the economy, and indeed on how they think.

The alternative is to think about ways that people can manage in a market-based economy, increasing their command over resources overall.  That can be done both by removing limitations which work particularly against people on low incomes (such as the pernicious effect of laws on debt and debt recovery, or the price discrimination against prepayment meters) and by finding alternative ways for essential costs to be met – such as child care, general needs housing and travel passes.  What wouldn’t work, in this context, is simply giving people more money to pass to the energy companies. Giving people generic money will not cope with the pressures that specific commodities are creating – it will just put up the prices of those commodities.

Additional material, 25th August

The Resolution Foundation has just published a careful and considered approach to targeting.  They recognise that supplementing people on means-tested benefits would fail to reach 40% of everyone in the lowest income quintile – that is, the bottom fifth.  Their suggestion is for a social tariff, more broadly based than current means-tested benefits, covering benefits, pensioners and low earners; but that still suffers from the outstanding problem that it is not possible to target people on lower incomes without introducing ‘a new means-tested benefit outside the benefit system’.   Coverage of people with complex needs could be improved by extending this to cover disabilitiy benefits, and coverage for migrants by removing restrictions on claiming after entry to the country, but there would still be gaps.

The way out of poverty is not to be found ‘holistically’

I attended a session the other day that was intended to discuss the Scottish Goverment’s current plans for tackling child poverty.  A word that was used repeatedly in that document, and so in the presentations, jarred with me.  The word is ‘holistic’.  The plan promises a ‘holistic’   response at many points, and in a range of different contexts – such as employability, support, income generation.  What could be wrong with that?

To my mind, there are three great flaws in this approach.   The first is the implicit assumption, in much of this, that the appropriate way to respond to poverty is ‘person-centred’, personal or individualised.  Here are some examples:

We will invest [in] Whole Family Wellbeing Funding … This will help transform services that support families to ensure that all families can access preventative,
holistic support which is wrapped around their needs, and provided when they need it and for as long as they need it.

Through direct efforts to get more cash in the
pockets of families now, alongside a genuinely holistic, person-centred package of family support, we can help to ensure families receive the right support at the right time, for as long as they need it, creating the  conditions for families to navigate their way out of poverty.

It takes all of us, across Scotland, working together – united in focus  and purpose – to deliver the change to  how public services are delivered, moving to a person-centred holistic approach to supporting families.

In the published document, there are more than thirty similar phrases to choose from.  It should be recognised, however, that the circumstances that lead people to be in poverty are not, for the most part, specific to the individual or of the family.  The central purpose of the strategy is not to deal with the individual circumstances of poor families, but to reduce overall the numbers of people who are falling into poverty.   To do that, the focus has to be, not just on those who are poor currently, but on the throughput – the very large numbers of people, actually most of the population, who will pass through poverty for an extended period.  That calls for a structural perspective, not an individualised one.

There are strong hints in the figures where the problems are likely to be concentrated.  Why, for example, are most children of young mothers likely to be poor?  The answer has little to do with personal or individual factors.  It’s because the capacity of women to earn is critical to household income,  the children of young mothers  are far more likely to be young, and young children have to be looked after.  The situation calls for higher income for people with responsibility for children, and extensive, affordable  child care – ours is almost the most expensive in the OECD.

The second problem about the claim to be providing ‘holistic’ services is that it’s not true.   It doesn’t happen, anywhere, ever.  The reason why we have medical practices delivering health care, schools providing education and social security providing money is that these are all things that matter, that need to be done, and require specific routes and channels to be delivered.  We often hear the complaint that Scottish services are based in ‘silos’.  Of course they are. The doctor doesn’t teach your children to read, the social security officer doesn’t allocate houses  and the social worker is not there to take your appendix out. It’s true that specific services can be transformative, changing every part of a person’s life. Decent housing can turn someone’s life around in days, but that doesn’t happen because of an holistic assessment; it happens because housing is so important for people’s lives. The most effective strategies for  dealing with poverty have generally worked by focusing on one of the elements that lead people to be deprived – elements such as health care, education, income support or housing – and removing part of the burden from poor people.

The third issue is about policy. Targeting resources on  poor families has a clear value here and now, but it is not the only  way to deal with the problems.  We could do much more. To safeguard people now and in the future, we need to change the conditions which underlie the experience of poverty.  I have already given the  example of  child care; that needs to be done as a universal basic service, not a process targeted on poor families.  Let me take another: the case for free school meals.  That contributes to poverty reduction precisely because it is universal and basic.  Neither  child care support, nor free school meals, are ‘holistic’ policies. The same arguments extend to a wide range of services – energy, communications, transport.  Public services can make a major contribution in improving the command over resources of people on low incomes.

Poverty in Scotland 2021: a report from the JRF

I was listening today to a seminar for Challenge Poverty Week, covering the latest report from the Joseph Rowntree Foundation on Poverty in Scotland . The report identifies six main ‘priority groups’ which put children at a greater risk of poverty.  The groups are

  • families with children under 1
  • larger households
  • single parents
  • people in minority ethnic groups
  • families with a disabled person, and
  • workless families.

There are no great surprises in that.  I think, from memory, that this pretty much reflects the findings of the Royal Commission on the Distribution of Income and Wealth in the 1970s, with a substitution: pensioners don’t feature, leargely because this is about child poverty, but the position of minority ethnic groups has been recognised.

The next question, however, is what to make of the information. Shona Robison, for the Scottish Government, clearly thought that a focus on these priority groups was the way to break the ‘cycle’ of poverty.  She suggested that the government would be offering ‘bespoke’ responses to families in this position and recommended better paid work as the way out.

There are problems with that.  The place to start, perhaps, is with the statement that these people are at greater risk.  Yes, the risk is higher, but that doesn’t mean either that all these people are poor (the highest proportions are those in minority groups, and people who are disabled) or that people are trapped in poverty.  Low-income poverty is a position that many people pass through.  Very young children are important, because women’s capacity to earn is impaired.  Worklessness is important, but work is no guarantee of coming out of low income.  Precarious work is widespread, and part of the problem.

The other main problem relates to the assumption that people and families can be targeted on an individual basis.  Poverty is a moving target, and most attempts to deal with it by targeting are doomed to failure: people’s incomes fluctuate, their household status changes, they do whatever they can to improve their situation.  What we need is not a set of individualised responses, but a reliable, predictable foundation of the benefits and services that make it possible for people to secure their position.

If not now, when?: a report on social renewal

The title of the new report from Scotland’s Social Renewal Advisory Board is, ‘If not now, when?’  It’s a great title, but not a great report.  There are some areas about which I’d have minor reservations, and others where I’d have major ones.  The minor reservations are, for example, the recommendations that:

      • “It is time to trust (third sector and community) organisations to do good work without onerous requirements.”  Have we forgotten the abuse of charitable status that led to the reform of charity regulation?  Look up ‘Moonbeams‘ on Wikipedia.
      • “There are several themes that run throughout the report, again with links to Christie.  We need to make sure we embed the best partnership and practice.”  Partnership is already embedded.  On the positive side, it can focus attention on issues that get overlooked, such as poverty or learning disability, and it puts agencies into contact (such as the NHS and the police) where there didn’t used to be much.  On the negative side, it eats time and resources, and it can be as much an obstacle to delivery as a help.  The Christie Commission took the misconceived  position that every organisation should have a ‘common set of duties and powers’, including  a general power to ‘advance well-being’ (pp 46-7).  That would make every agency responsible for the work of every other agency.   Do we really want the health service to share the responsibility for developing railways?  If we want agencies to work together, we need an appropriate functional division of responsibilities, effective liaison at the sharp end, and budgeting practices that don’t set up walls between agencies.
      • “Hate crime must be addressed for all affected groups. We want to see significant investment in preventative approaches to hate crime, based on evidence of what works. … we want to see a significant improvement in the accessibility of reporting a hate crime or hate incident over the next five years so that hate crime reporting is more closely aligning with actual incidents. We also want to see an increase in people reporting street harassment to Police Scotland whenever they experience it.” This is saying nothing that isn’t already happening.  Yes, as someone who’s been responsible for maintaining a synagogue, I’ve been on the receiving end of hate crime; no, sharpening the criminal law is not going to stop it.

All right, these points are not really that ‘minor’.  But the ones that got my goat are in a different class.  On universal basic services, the Board has this to say:

“calls on the next Scottish Government to adopt the principles of ‘Universal Basic Services’  … In particular, the Scottish Government should undertake pilots into specific actions that could deliver reductions in energy, travel, housing, childcare and digital costs … These could include: … Social tariffs for broadband and other essential digital services – providing free and discounted digital access to low-income families across Scotland. …”

This misses the point of universal basic services completely.  They’re not meant to be targeted on people on low incomes; they’re supposed to be there for everyone.  I carried on to specific example of broadband, because it shows the point clearly – they’re talking about means-tested or passported services, not universal ones.   We should be looking at open-access, community-based broadband.

And then there is anti-poverty policy, where they recommend that the Scottish Government should “develop an approach to anti-poverty work,
including personal debt, that is designed around the needs of the individual”.  Of course I want to see well-funded advice and support for individuals, but it’s not an anti-poverty strategy.  It’s not even an anti-debt strategy.  People are in debt because (a) their incomes are inadequate and (b) the legal terms on which debt is enforced are pernicious.  The Scottish Parliament has the power to do something about both of those.

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.

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.

The government’s misleading figures about poverty reflect a wider problem

The Prime Minister has been upbraided by the Office for Statistical Regulation (part of the UK Statistics Authority) for his assertion that child poverty is falling, when on all the tests used by the government the opposite is true.  I’m not greatly enamoured of those tests.  I’ve considered the case for the standard test of ‘relative’ poverty, 60% of the median income, in other work – it’s not bad, but we need to accept that it’s a pointer, not an authoritative measure. The claim that the figures for 2010/11 represent a test of ‘absolute poverty’ is particularly suspect.  Having said that, however, there’s no real excuse for blustering that poverty has been getting better, when your own figures say that’s not so.

This is part of a wider problem, and one we’ve seen increasingly in the course of the last few years.  The UK Statistics Authority was formed in the hope that it would be possible to maintain confidence in the integrity of official statistics.  In the course of the last ten years, however, we’ve seen a growing contempt for statistical evidence,  shown in the treatment of figures about crime, social security claims, incapacity, the management of coronavirus and more.  It’s done whenever departments publish figures that are not official, when the press is steered to have a go at popular targets like migration or benefit fraud, and when ministers just make stuff up. There is a cost to undermining public trust: it’s not just that some figures can’t be believed, but that everything becomes open to doubt.