In several pieces and presentations last year I pointed to the implications of the ‘no detriment’ principle agreed by the Smith Commission, which means that the Scottish Government will bear the costs of changing policies that otherwise would be suffered by the UK government. In January I gave an example of this: HMRC has charged the Scottish Government for the cost of not doing anything about stamp duty. Now I read this, in a report published by Audit Scotland today:
56. DWP has adjusted its systems and guidance to accommodate the introduction of the SRIT (Scottish Rate of Income Tax). It estimates this will cost £1.7 million. DWP charged the Scottish Government £870,000 for this work in 2015/16, and expects further costs in 2016/17.
Yes: that’s a bill for changing its guidance. Presumably based on average cost rather than marginal cost, because there’s no marginal cost in adding detail to routine updates of guidance. The principle is important, because when it comes to big changes – such as introducing new disability benefits – the DWP is going to follow through with billing for changes throughout the system, and the costs are likely to be prohibitive. How would the British government respond if they get a bundle of equivalent bills from the EU – the cost of removing references to 28 countries from leaflets, or changing address books? They really need to start rethinking their approach to transferring responsibilities.
It’s been reported that Lord Howard, once a hardline Home Secretary who became briefly the leader of the Conservative Party, has had a little local difficulty with the law. When his car was detected speeding, Lord Howard was unable to say whether he or his wife was driving. It’s a route they drive frequently, the notice of committing an offence comes some time after the offence has been committed, and either of them could have been driving. Lord Howard has been heavily penalised for not making the declaration, suffering a penal fine and extra points. The two drivers had the same number of points; they could have agreed a story between themselves; they could have lied. They chose not to. Instead, they gave the honest answer: we don’t know.
Regular readers of this blog will be ahead of me. I’ve argued for years, sometimes to the bafflement of MPs and MSPs, that people claiming social security can’t sensibly answer the questions that the authorities want to ask them. People with disabilities can’t say whether they’re disabled or not (most of them get it wrong). People who are forming a relatonship with someone else often can’t say when that person becomes a partner. People who start work in our new, ‘flexible’ labour market may not know whether they’ve got a job or not, or even if they’re going to be paid. When they fail to answer the black-and-white question, or when they plump for the wrong answer, they’re penalised for it. I trust that Lord Howard will now have the insight to champion their cause.
The Times has reported the prospect of “all out war between the Sturgeon administration and Scotland’s local authorities.” (Councils to be stripped of powers in local government revolution, 11th November 2016, p 19). It may be a little difficult to think of any field where councils have many powers left to be stripped. Local authorities are a shadow of their former existence: after 1945 they have lost powers relating to social security, health, public utilities, and more recently they have lost most of their functions relating to housing or social work. Education has been boxed in by a national curriculum. Planning and licensing have been strangled by the imposition of a quasi-judicial framework, requiring councillors to behave as if they were judges rather than representatives. Residual powers relating to police and fire have been centralised. So current proposals to take out still more functions, or to shift responsibilities for bin collection to ‘towns’, would leave little more than a shell behind.
Some years ago, I asked a group of councillors for their views. Many were deeply resentful of the Scottish parliament, which in their view claimed a democratic legitimacy which they thought they had in equal measure. The current system of local government is already remarkably centralised by European standards – Highland Council, to take the most obvious example, is responsible for a geographical area the size of a small country. I don’t think there is any way to resolve the conflict within the current framework, but there is at least a way to put reform in a positive light. There’s a powerful case for real decentralisation – locating services at a level where communities can get much greater control of the affairs that matter to them. To do that, there needs to be a system of local government that is based on existing communities – towns, villages, and traditionally recognised areas – as a centre for schools, housing and public amenities. That would call for reform both at central and at local government levels.
I’ve spent much of the afternoon listening to the proceedings of the Work and Pensions Committee concerning Concentrix. HMRC had identified 1.5 million Tax Credit cases where they had concerns; they engaged Concentrix, a private firm, to process cases. Concentrix was reported to have sent out a million letters fishing for information, challenging for example whether they were not living with an undeclared partner; the firm’s representative told the Committee that they had sent out 324,000, though over a shorter period. People who did not reply to the letters had their benefits stopped; 90-95% of those who asked for reconsideration had the decision overturned (that was Concentrix’s estimate – HMRC gave a lower figure, of 73%). HMRC had terminated Concentrix’s contract, but they seemed much more concerned about the collapse of the phone line in August than about the huge number of wrong decisions that their policy had generated. Frank Field MP, the Chair of the Committee, told the Independent:
The Committee was astonished by the extraordinary evidence we heard. From Concentrix we saw a company desperately out of their depth and unable to deliver on the contract awarded to them by HMRC. From senior HMRC officials we saw a palpable disregard for the human implications of this gross failure of public service. From the tax credit claimants we saw dignity in the face of appalling and traumatic experiences.
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.
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?
The Register reports a small glitch in the Universal Credit scheme. Access to the online system was closed for more than 24 hours after an upgrade went wrong. A DWP spokesperson described this as a ‘minor issue’.
When the Royal Bank of Scotland crashed access to cash for its customers with a botched upgrade in 2012, it led to a flurry of political statements, consideration by the Treasury Select Committee, the intervention of the regulator and fines for banks. I might have asked, rhetorically, if there was any prospect of treating the DWP in a similar way, but we all know there isn’t.
There is some discussion about using ‘helicopter money‘ to revitalise spending in depressed economies. A letter today to the Guardian by 35 economists argues:
A fiscal stimulus financed by central bank money creation could be used to fund essential investment in infrastructure projects – boosting the incomes of businesses and households, and increasing the public sector’s productive assets in the process. Alternatively, the money could be used to fund either a tax cut or direct cash transfers to households, resulting in an immediate increase of household disposable incomes.
There is a way to get cash usefully to certain people, a little less randomly than the image of the helicopter dropping money suggests. The benefits system has three main routes that might be used to distribute one off payments:
- The Christmas bonus (forget the name, it’s usually paid in early December anyway) goes to recipients of 18 benefits, including pensions, disability benefits and ESA.
- Cold Weather payments are special payments made to claimants of pension credit, ESA, JSA. The cold weather is irrelevant here – the DWP computers aren’t regulated by a thermometer: what matters is the capacity to make one off payments.
- The Winter Fuel Payment (again, forget the name – it’s not about fuel, or cold weather) mainly goes to those above pension age – there are exceptions but those are defeasible.
There may also be scope to supplement Child Benefit with one-off payments, though that is less clear.
Any of these would be much more beneficial than a tax cut. The problem with tax cuts, apart from the work they create, is that they go to better off people. People on lower incomes tend to spend more proportionately on essentials (food, energy and housing), so at least the first use of the money will be in the domestic economy. It may also do a little for poverty, and that is no bad thing.
The Social Security Advisory Committee has published a review of Mandatory Reconsideration. It is a much better report than the press release suggests, because it reviews in detail the problems and issues that claimants have in getting decisions reviewed and corrected. However, the headline element in the Conclusion, picked out by the press release, is that “Properly conducted, Mandatory Reconsideration could be an efficient process that provides opportunity for timely review, the admission or reinterpretation of evidence and the avoidance of costly tribunals.” That is very questionable. Support for the principle of MR confuses the arguments for internal review – which is always necessary for quality control and management of mistakes – with the new, failing system, which delays and obstructs the opportunities for internal and external review.
There are three very fundamental problems with MR. The first is that decisions made against a claimant are implemented before any response or contrary case has been considered. The second problem is that MR does not offer claimants the opportunity to know of and respond to information relating to their case. This is a basic breach of ‘natural justice’, one of the core principles of UK law. The third is that because MR is a mandatory process for claimants, there is necessarily a delay in correcting unlawful action: barriers to access are obstacles to justice, and justice delayed is justice denied.
It is debatable, then, whether the system of Mandatory Reconsideration is lawful. Because judicial review is only available when other recourse has been exhausted, MR would have to be complete before a judicial test would be possible, and the long delays in implementation make this a considerable obstacle. But it does stand in breach of long established principles of administrative law. That is why the UN Committee on Social, Economic and Cultural Rights has just condemned the UK system for “the absence of due process”, in breach of its obligations under the UN Charter. Mandatory Reconsideration cannot be ‘properly conducted’ – it is designed to be improperly conducted.
Audit Scotland has published a report on the operation of the “National Fraud Initiative”, which is mainly concerned with the operation of big data in order to detect fraud by searching for anomalies. The central assumption of the report seems to be that improving the consistency of data will save money by limiting opportunities for fraud.
There is a central confusion at the heart of this approach. Following the reports of the DWP, and by extension the tests applied to local government in benefits administration, the report muddles three overlapping, but quite distinct issues: fraud, error and selectivity. Using data to review inconsistencies identifies potential sources of error. It does not necessarily identify, or relate to, fraud – which depends on deceit.
- measures to refine selectivity are liable to increase error (the more conditions there are, the more there is to go wrong. That is why the rates of error in Pension Credit are fifty times those for State Pensions.) Equally, they and they create opportunities for fraud. They do not, then, improve the efficiency of the system.
- measures to protect systems against fraud are likely, for the same reason, to increase error.
- measures to protect against error may reduce opportunities for fraud, but do not necessarily do so – it all depends on what kind of error is being addressed.
There may be opportunities to save money through big data; but anti-fraud measures are often expensive, and in a situation where many people do not receive the benefits they are entitled to, smoothing out inconsistencies might cost more.