Universalising French pensions

It’s not the first time that a French government has tried to inject a greater element of universality into its arcane system of welfare provision.  The Juppé plan, in 1995, tried to curb rising costs partly by imposing spending limits, and by trying to bring the pension rights of miners and railway workers into line with other groups.  It also proposed universal rights to health care and guaranteed access. One prominent trade unionist called that idea “the biggest rip-off in the history of the French Republic. … the end of the Sécurité Sociale.”

The current system of pensions is costly – it’s long been the case that pensioners in France are on average better off than workers.  Clearly, part of the government’s agenda over time has been to cut the cost, and that is the source of many of the protests.   If cost was all it was about, there are other things that the government could have done – raise the pension age, increase contributions, increase the number of contribution periods required, and so on.  But there are lots of other problems in the system.  The shift to precarious labour and the problems of switching between different pensions rules can shut people out. With 42 distinct pensions regimes, the system is horrendously complicated.  It takes years (literally) to work  out what someone’s pension is going to be; often the calculations begin long before a person reaches 60 and are not finished until after the person retires.   As the government plan says,

personne ne sait exactement ce à quoi il a droit. Le système est illisible, complexe, et crée de la défiance.

[Nobody knows exactly what they’re entitled to.  The system is incomprehensible, complex and it creates distrust. ]

The proposed alternative is outlined in the government plan (the link is in French). The main elements are:

  • a universal scheme for everyone – one of the principal aims is to remove inequities between people currently under different regimes
  • a points system, in place of contribution periods, to determine entitlement
  • an increased minimum pension
  • retention of retirement at 62 (that is early by European standards, but  worse than some French regimes currently offer)
  • credit for every hour for which contributions are paid  (seriously!)
  • improved protection for people whose contributions have been interrupted through care, unemployment or sickness
  • full transparency, through a personalised record of contributions and linked entitlements
  • a commitment to balance the books – the current system runs perennially in deficit
  • transitional arrangements for current workers
  • a new system of governance.  There is a commitment to consult about the value of points, but overall the new system will reduce the role of the ‘social partners’ including trades unions.

Something that isn’t explicit in the plan is the distributive element.  It’s been reported that the proposals are regressive:  the contributions required of very high paid people will be 2.8% above 120,000 Euros a year, whereas under that level the contribution will be 28%.  However, the 2.8% is purely redistributive; it will yield no benefits for the contributions.

Both sides of the argument are right.  On one hand, the government is proposing a scheme that should be less complex, fairer and  more inclusive.  On the other, the objectors will be trying to defend a scheme which, for all its irrationality and complexity, has delivered far better benefits than  a more orderly set of schemes could ever have offered.  There will, of course, be vehement protests  – it’s the French national sport, and they do it so well. But the protestors, mainly from the left and the trades unions, are  protesting against the idea of universality and state welfare, and from a British perspective, that’s a difficult position to hold.

The benefit system fails people who lose their jobs

Former employees of Thomas Cook are reported as complaining that the benefit system has failed them.  This should come as no surprise.  Universal Credit is based a fundamental misunderstanding of what benefits are for, and what they are supposed to do.  Part of that misunderstanding was the assumption that benefits are all about work: most of the intended recipients are people who are not in the labour market.  But for those people who are looking for work, the next part is the assumption that those people have to be guided or pushed towards work.  The vast majority of unemployed people move back to work within a year, regardless.   What people needed, and what they didn’t get, was income smoothing to tide them over while they found new employment.  What they got instead was delay, obfuscation, confused advice and periods with no money.

I’ve argued in the past for a different approach to unemployment benefits, including provision for short-term income smoothing and a distinction in the pattern and level of benefits for shorter-term and longer-term unemployment.  The French system, based on a convention of employers and trades unions rather than state-based provision,  has both.   The British approach has long been to assume that one size fits all.

Further evidence that responsive benefits don’t work

A solid paper by Jane Millar and Peter Whiteford emphasises the problems of trying to refine means-tests by recording and responding to changes in circumstances.  The problems of managing simple changes of circumstance, unpredictable incomes and overpayments have overwhelmed a series of benefits designed to be ‘responsive’.  They cite a recommendation from the OECD:

In order to ease access barriers to social protection, policy makers should consider: … making means tests more responsive to people’s needs by shortening the reference periods for needs assessments and by putting appropriate weight on recent or current incomes of all family members.

I’ve been  banging on about this for years – you’ll find about 25 relevant entries about changes in circumstance or fluctuating incomes on this blog,  and a longer argument in my book, What’s wrong with social security benefits?  The benefits that work best, like pensions and Child Benefit, are long-term.  There is no practical way to obtain the sort of information required for responsive income-testing and deliver a system that is efficient, fair and workable.  These systems are designed by those who are convinced that the problems can always be resolved by the technology, when we all know they can’t.  We need to smooth things down, to ask only for information that makes sense to claimants, and to stabilise income.  In other words, we need to be less responsive, not more.

The WASPI women are going to have to be compensated, regardless of who wins the election

There is one fascinating exception to the failure of the parties to engage with fundamental issues: that is, the position of the WASPI women, two and a half million women who have had their expected retirement dates delayed and their pension entitlements radically cut.  This is yet another legacy of bad policy decisions taken in recent years.  It has led, however, to Labour and the SNP making a commitment to compensate the women for the loss of rights that have been earned through contributory benefits.

The current position of the UK government has some parallels with the behaviour of Glasgow Council, which persistently underpaid women who ought to have had equal pay.  Both of these problems have come about because the public authorities were looking for ways to save money, and they thought that it was easier to do that by taking the money from women, largely because women’s incomes are considered secondary to men’s.  In both cases, the injustice is obvious and palpable.  And in both cases, the main ground for resistance now is simply how much it will cost to set the issue right.

The WASPI women are set to appeal from the case they lost in the High Court.  They lost that case mainly because they tried to argue that their treatment was discriminatory; that argument failed because as policy intended to equalise the position of men and women is the opposite.  For what it’s worth, however, I think that ultimately they are going to win, because there are other, stronger objections to the policy.  The case has direct parallels with a human rights case taken in the Inter-American Court of Human Rights, in Five Pensioners v Peru.  The decision in that case centred on the suspension of pensions by the Peruvian government.  Disappointingly, the court did not attach much weight to the idea that social security was a human right; but they did think that there was a human right not be be deprived of one’s property, and that a contributory pension was the property of the pensioner, not the government.

The government can’t rely on its power to make the rules for social security.  The DWP’s rules are mainly determined through secondary legislation, but secondary legislation can’t trump human rights or property rights.  That has implications for any future government.  The bill to compensate the WASPI women is going to be presented in due course, and regardless of the political complexion of the government, it is going to have to be paid.

 

The Conservative manifesto is out

I have very little to say about the Conservative manifesto, because it has very little to say about the issues I am generally concerned with.  The manifesto does say (on page 17) that the Conservatives want to reduce poverty, but not how.  The misplaced emphasis on stopping fraud is hard to reconcile with the benefit system’s real failures.  And somehow, carrying on with the roll-out of Universal Credit and extending the life of PIP assessments doesn’t quite seem to address the core problems with benefits, low income,  destitution or debt.

That might, of course, raise the question of why I have not been more enthusiastic about the policies promoted by other parties.  I’ve previously explained that I was looking for a different approach.  Here, with apologies for repetition, is a list of some of the measures that I believe would have a beneficial effect.

  • To make commitments to the principles of income security, meeting need and social justice.
  • Reconsider what people need benefits for, providing services rather than cash where appropriate.
  • Offer a wider range of benefits to improve the security of people’s income and to meet social objectives.
  • Move away from means-testing, with greater reliance on contributory benefits and universal allowances.
  • Rethink how things are done: aim to have benefits with simpler rules, fewer conditions, fewer personal adjustments and longer time scales.
  • Secure benefits for disability to secure their financial status and their dignity.
  • Protect the position of children in disrupted families by directing benefits to the child
  • Improve provision for the oldest pensioners.
  • Reform occupational pensions, to secure the future of pension entitlements and to ensure that pensions funds are invested in the British economy.
  • Protect people better during the interruption of earnings caused by sickness and unemployment.
  • Separate benefits and employability provision; they are doing different things.
  • Provide more public sector jobs, to do the things that we want to have done.

And here is a rough indication of what the parties have promised on those issues.  It’s rough, because it’s easy to miss things; the manifestos tend to pass over minor topics such as ‘poverty’ in a sentence or less, and costings documents are now routinely hidden  somewhere else.  If I’ve missed something important, please let me know.  I’ll try to refine this table as the election campaign goes on.

Labour Conservative Liberal Democrat Green
Principles Dignity
Respect
End poverty
Get people back to work Financial security
Provide services, not cash, where appropriate Free broadband, extend child care, free personal care, free primary school meals Free child care for 2-4s Free child care, free personal care for older people
Wider range of benefits
Less means testing
Less intrusion
Secure disability incomes “The support they need”
Benefits direct to children School meals
Older pensioners
Reform occupational pensions For miners and postal workers
Income smoothing
Separate benefits and employability
Create jobs Infrastructure development Infrastructure development Green jobs

 

More on the problems of Universal Credit

A report from the IPPR is critical of Universal Credit.  The report focuses on a series of features about UC which are causing problems. They include

        • the five-week wait
        • monthly payments
        • the two-child rule
        • the benefit cap
        • the high taper rate
        • the level of benefit
        • joint payments
        • sanctions and conditionality
        • the management of ‘debt’ to the system.

What’s striking in this list is that only one of those features – monthly payments, linked to monthly assessments – is integral to the design of the benefit.  All of the others have been tacked on, like decorations on a Xmas tree.  But UC has other, built-in flaws – problems that exist because of what the benefit is.  They include

        • the attempt to lump disparate benefits together, with the effect that problems in one part can lead to catastrophic suspension of the whole
        • the dismantling of the support system for Housing Benefits
        • the unpredictable and fluctuating benefit entitlement, exacerbated by the idea that assessments relate to income now rather than historic income
        • the very idea of a taper, which means that people cannot know when they become entitled to a benefit and when they cease to be entitled – a recurring problem with Housing Benefit and Tax Credits
        • the obsession with entry or re-entry to work, when the vast majority of intended claimants will not be part of the labour market
        • the implications of the ‘work allowance’, set too low to allow for continuous contact, and
        • the idea that technology, rather than competent administration, can settle complex human problems.

The IPPR are right to complain that this is “a tightrope over poverty, not a social safety net”.   But they don’t go anything like far enough.

 

Evidence on benefit takeup

The Social Security Committee of the Scottish Parliament is reviewing the issue of take-up, with a particular focus on the introduction next year of the disability benefits they’ll be taking over from the DWP.  I gave evidence to a witness session last week, alongside David Bell and Mark Shucksmith.  The video is here.   My written evidence is in the agenda papers; the verbal evidence is now out in the  Official Report of proceedings.

I’m sceptical that much can be done about takeup.  I’ve long argued that the problems of ignorance, complexity and stigma played as much of a role in relation to non-means tested benefits as they do for means-tested ones.  Putting a kinder face on benefits will not go to the root of the problems.  Disappointingly, the Scottish Government has opted largely to replicate the existing system, with all its muddles, anomalies and confusion.

How Labour might rethink its social security policy

I’ve just received a copy of a book I’ve contributed to, which reviews Labour party policy on a range of topics.  The book is edited by David Scott, and called Manifestos, policies and practices: an equalities agenda; the contributors include Richard Murphy, David Blanchflower, Rebecca Tunstall and Graham Scambler.  I wrote the chapter on social security.

I’ve previously written that “Labour needs to think rather more thoroughly and deeply about what social security is for and how it might be changed.” I’ve been critical about Labour’s policy for some time – it was the Labour government that launched ‘welfare reform’, with its emphasis on work at all costs.  In this chapter, I’ve outlined a set of rather different proposals and approaches that Labour might consider:

  • Re-emphasise Labour’s previous commitments to security, meeting need and social justice.
  • Reconsider what people need benefits for, providing services rather than cash where appropriate.
  • Offer a wider range of benefits to meet social objectives.
  • Move away from means-testing, with greater reliance on contributory benefits and universal allowances.
  • Rethink how things are done: aim to have benefits with simpler rules, fewer conditions, fewer personal adjustments and longer time scales.
  • Secure benefits for disability to secure their financial status and their dignity.
  • Protect the position of children in disrupted families by directing benefits to the child
  • Improve provision for the oldest pensioners.
  • Reform occupational pensions, to secure the future of pension entitlements and to ensure that pensions funds are invested in the British economy.
  • Protect people better during the interruption of earnings caused by sickness and unemployment.
  • Separate benefits and employability provision; they are doing different things.
  • Provide more public sector jobs, to do the things that we want to have done.

Somewhere, in a world quite unlike our own, Universal Credit is working brilliantly

Universal Credit has its defenders, and the Daily Express has come out fighting:

“disruptive” proposals could hammer 30 million Britons, cost tens of billions of pounds and send taxes soaring.

The middle bit of this could be true, because all major reforms have a price tag; introducing Universal Credit had cost more than £2bn by last year, though that figure ignores the false start and ‘reset’.  The very belated Final Business Case claimed that UC will gain £24.5 bn in people choosing to work more, £10.5 bn in distributional improvements, and £9.1 billion in reduced fraud and error.  The National Audit Office has told us that “We cannot be certain that Universal Credit will ever be cheaper to administer than the benefits it replaces”; their 2018 report said that

 the extended timescales and the cost of running Universal Credit compared to the benefits it replaces cause us to conclude that the project is not value for money now, and that its future value for money is unproven.

We now know that the figure on fraud and error is wrong, and that Universal Credit has made fraud and error  much worse; and ‘distributional improvements’ don’t save money, they move it to a different place.  So the only possible saving could be by encouraging people into work, and given that only a very small proportion of claimants are continuously unemployed – the majority of claimants are too ill to work, carers, short-term unemployed or already working on low incomes –  it isn’t going to be anything like £24.5bn.  If I had to guess, I would estimate the net gain, by comparison with the previous system, at something closer to zero.

That leaves us with the extraordinary claim that 30 million benefit claimants will be affected.  Yes, that really is what the Express article says:

It would immediately impact around one million people currently on Universal Credit, but it would likely also have an impact on the 30 million-plus people receiving some form of benefits.

To get anywhere near 30m, that has to include all pensioners, and every child where the families receive Child Benefit.  It seems that the lives of children and pensioners have been turned around by the prospect of a benefit that neither group gets, and they can all look forward to a brighter future, if only this benefit remains in place.  But perhaps I  mistake the argument, and the Britons in question are the occupants of a parallel dimension, like the Man in the High Castle, where everything is subtly different.  Suddenly, everything in the Express starts to make sense.

My submission about benefits takeup

The Scottish Parliament Social Security Committee has issued a call for evidence on the takeup of social security benefits.  I’ve done lots on this in the past, so I’ve dashed something off based on a paper I presented in Belgium a little time ago.  Here, for the truly dedicated,  is the submission.  The key points:

  • Arguments about takeup have often centred on means-tested benefits, but the problems are much more extensive. Non-means-tested benefits are just as vulnerable.
  • The main explanations for non-takeup conventionally include ignorance, the complexity of benefits, limited marginal benefit, and stigma. More detailed accounts consider perceived need, basic knowledge, perceived eligibility, perceived utility, beliefs and feelings, perceived stability of circumstances, and the process of making a claim.
  • The benefits with the best takeup – Child Benefit and State Pension – are simple to access, have few conditions and are delivered for the long term. The benefits with the worst (including e.g. Pension Credit and DLA/PIP) are complex, poorly understood and have several moving parts. While there is scope for greater automaticity, the key problem rests in the design of such benefits.
  • Takeup reflects the complex relationship between people and the public services, and consequently it can be enhanced by outreach and support; but the problems are more fundamental.
  • Benefits should be understood as part of an income package. The route to security is not the integration of complex systems, which implies more complexity still, but the delivery of smaller, simpler, stand-alone benefits with a common pay day.