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.

 

 

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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.

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.

Some of the complexities of social protection, laid bare

The World Bank’s  Sourcebook on the foundations of social protection delivery systems is a substantial document, but it’s a bit of a curate’s egg: while some parts of it are excellent, others should be avoided.  ‘Social protection’ mainly refers to benefits; it seems to take in social work – part of the same process only in some countries – but doesn’t apparently extend to medical care, and social care for older people is largely dismissed in a page (half on page 254, half on 264-5).  The text is based around a seven-stage process of application and service delivery, shown in the graphic.

I wasn’t convinced at the outset that this  was an ideal way to explain how the process of administering benefits and services was translated into practice; that’s partly because they’ve opted not to use or even refer to some well-established literature about claiming, and partly because the labels they use  don’t quite capture what they intend to refer to.  ‘Outreach’ is about how the intended population is identified, and becomes aware of services prior to claiming; ‘registration’ is mainly about basic documentation; ‘onboarding’ is induction.  These stages aren’t necessarily sequential; many services apply eligibility criteria as a part of acquiring information about the population, and needs assessments are sometimes done to winnow out initial enrolment.  (I think the point is made for me in chapters 7 and 8, which have to track backwards to get a view about information, contact, referral and verification.)

Despite those reservations, I warmed to the model as the book went on, because it does at least give shape and structure to discussion of the issues.  It may be particularly useful for some of the advocates of Basic Income to consider: any viable Basic Income scheme still has to negotiate issues relating to documentation, identity, addresses, banking, how updates and corrections are made,  and such like.  This is the first document I’ve seen in an age which engages with that kind of issue.

There are, however, some problems with the way that the questions are explored, and arguably they reflect the agenda that the authors are implicitly following, much of which assumes that shiny new IT contracts and commissioning are the way to go.  I suspect that some readers will have strong reservations about the criteria the authors of this report set for schemes for disability assessment, which need to be ‘valid, reliable, transparent and standardized’ (p 107) rather than being, if it’s not too wild a leap of the imagination, personal,  dignified, expert or sensitive to complexities. The report promotes  a sizeable range of approaches using digital tech, but  the detailed coverage is fairly casual about many of the familiar problems that relate to reliance on such approaches – the obstacles the technology presents to claimants, the difficulty of determining whether their personal circumstances fit the boxes that people are offered, the role of the officials administering the system (most are not ‘caseworkers’ – a bureaucratic division of labour is more common), and the role of  intermediaries.   It doesn’t consider, with the main exception of enforcing conditionality, the possibility of using existing institutions such as schools and hospitals as the base for service delivery.

There are eccentricities in the way that benefits are described – the bland acceptance of proxy means testing, for example, the idea that a tapered minimum income is a ‘universal’ policy, and the treatment of grievances as a ‘confidential’ issue, when systematic reporting and review of complaints is essential to public management and scrutiny.   Taking the UK as an exemplar for the recording of fraud and error is a bit rich, when the accounts have had to be qualified for years because of it.  The entry that grated most, however, was about a ‘predictive tool’ for child protection, in  Box 4.10.   It claims that they have an instrument that can predict future out-of-home placements “accurately” and “to a high degree”.

Specifically, for children with a predicted score of 1 (predicted low risk), 1 in 100 were later placed out-of-home within two years of the call. For children with a predicted score of 20 (predicted highest risk), 1 in 2 were later removed from the home within 2 years of the call.

Calling this ‘accurate’ is overstating the case somewhat: if 1 child in 2 is going to be removed from the home, the other 1 child in 2 isn’t.    I tried to dig for more information, but couldn’t find it – the source the report cites for this study isn’t public.  From a previous published paper on the same project, it seems that the account given here is a misinterpretation anyway.  The purpose of the scheme was not to predict whether the child ought to be removed to a place of safety, but to stop the people who are answering the telephone hotline from dismissing calls about child abuse that might otherwise seem innocuous.  If similar low-level calls were being made repeatedly, they might all be dismissed in the same way.  This looks more like a problem in logging and managing referrals than it is a problem with casework judgments. But for what it’s worth, predictive tools based on profiling referrals have major limitations when it comes to managing benefit claims, too.  The problem is that there are too many variations and complexities for generalisations about claimants to work at the level of the individual.

Mandatory Reconsideration is “a disproportionate interference with the right of access to court”.

Eighteen months ago, I made a case on this blog that the process of Mandatory Reconsideration demanded by the DWP was unlawful, that it was designed to prevent claimants from access to justice,  and that it stood clearly in breach of the principles enunciated by the Supreme Court in the Unison case.  Now the  High Court has heard a case about MR as it affects Employment and Support Allowance.  Justice Swift demurred from the case I argued for in one important respect:  that even if MR was an “impediment or hindrance” to access to justice, it did not actually deny people the right of access altogether.  Nevertheless, the judge decided that the process was “a disproportionate interference with the right of access to court”, and found in favour of the claimant.

Decisions of the High Court are not necessarily decisive, and it is likely that this judgment will be assumed to apply only to ESA claims.  But the grounds for the judgment are matters of general principle, and they apply  across all benefits to which the process has been applied.   That prompts some questions.   First, what does it take to get rid of regulations that are transparently  unlawful?   Second, why did the process of independent scrutiny, undertaken by the experts of the Social Security Advisory Committee, not raise concerns when these regulations were being introduced?  And third, what on earth was the Scottish government thinking of when it decided to mirror “a disproportionate interference with the right of access to court” in the design of the Scottish social security system?

 

 

Universal Credit isn’t working: the Lords Economic Affairs committee’s judgment on UC

The report on Universal Credit by the House of Lords Economic Affairs Committee will not come as a great surprise to anyone who’s been following the evidence.  (Except, perhaps, me: I submitted an evidence paper  myself in March, and in the wake of moving house, and major illness six weeks after that, I’d quite forgotten that I’d done it until I saw it quoted on page 12.)  The chair of the committee, Lord Forsyth, has suggested that the report approves of UC in its ‘concept’, but that there are problems with its design and its administration.  Given the questions that the committee raises about real-time information, digital access and fluctuating incomes, I think the criticisms go beyond that.  The problems they recognise also include a familiar litany of failures:  among them, the 5 week wait, unpredictable benefit streams(“impractical” and “fundamentally unfair”), conditionality, the two-child limit and inadequate levels of benefit.  Despite all that, the system is “not broken irredeemably”.

The initial request for evidence asked whether UC had achieved its objectives.  As the statement of objectives has frequently shifted for political expediency, it’s hard to say even what the current tests are, but the committee proposes a range of distinct principles: dignity, adequacy, providing a predictable income, flexibility, fairness, achievable ends and comprehensibility.  They suggest that there could be a two-week payment up front, a three month fixed level of payment, and that child support could be taken out of the system altogether – those all seem to me to be good ideas.   But the fundamental problems will remain:  a tapered benefit, an obsession with labour market issues when most claimants aren’t going to be in the labour market, and a reliance on information that can’t be supplied or managed.

The UNDP considers the case for a temporary Basic Income

In previous writing, I’ve expressed reservations  about the idea of a Universal Basic Income, but I’ve also noted that the key objections – the opportunity costs, and the distributive implications – may not apply in the same way in the current crisis.   The United Nations Development Programme has taken forward the idea of a temporary basic income, which might make provision for half the world’s population in 132 developing countries.  They examine three main options: a top-up income (which would be complex, difficult to administer and liable to be inconsistent); a BI which is different in different countries; or a uniform BI paid at a standard rate across the developing world.

None of the proposals would have the long-term effects that proponents and opponents of Basic Income claim would result from such a scheme – people should not be expected to to change their lives, give up work, enter education, start businesses or start a family just because a change in their immediate income is made for six months.  (I’ve doubts as to whether we’d see those effects fully realised in decades – after old age pensions were introduced in the UK, it took the best part of 60 years, two world wars and a health service before we could see the full effects on labour market participation.)    The primary case for offering something like a basic income is much simpler: to maintain enough demand for an economy to function, and to make sure that people in developing economies are included despite the crisis.

There are, however, major obstacles in the way.  Most proposals for Basic Income are so much concerned with the principles that they don’t get into the practical detail of how such a benefit can be delivered – for example, ID, banking, physical addresses or the lack of them,  responsibility for dependents and communications.  That is all challenging enough for a developed economy, and in a less developed one it is easy to see how the ship could hit the rocks.

Yet more failings of Universal Credit

“To govern”, Polly Toynbee writes, “is also to deliver”.  For anyone looking for further evidence of governmental incapacity and incompetence, Universal Credit is the gift that goes on giving.  A new report from the National Audit Office  focuses in the main on the problems facing new claimants, but on the way it points to a series of other issues.   The most immediate problems are

  • The effect of the 5-week delay before first payment.  57% of claimants seek advance payments, which means that their benefit is subsequently reduced to repay the advance; a further 22% delay claiming and incur debts as a result.  So, taken together, 80% of claimants face financial difficulties because the benefit is not designed to provide help when it is needed.
  • ‘Fraud and error’ – a figure which lumps together a load of different problems – is running at 10.5% of payments, almost a record for benefit payments.  Most of this, the NAO reports, is down to fraud by claimants;  we’re not told what type of fraud, but if so, UC is even more untypical of other benefits than it seemed to be at first.
  • The cost of implementing the benefit is increasing: the current estimate is £4.6 billion.

It’s worth reflecting on the last of these.  The Full Business Case for UC had claimed that UC would yield £24.5 bn in people choosing to work more, £10.5 bn in distributional improvements, whatever they are, and £9.1 billion in reduced fraud and error.   The ‘distributional benefits’ are unclear: UC has imposed a terrible cost on the people it has failed to serve, with most claimants suffering financial hardship and (despite some moderation) a ridiculously large number having benefits stopped in the name of discipline – nearly 90% of all  sanctions in 2019 were imposed as a penalty for missing appointments.  The last figure is obviously wrong, and in the wrong direction.  For the first, if there was ever any basis for the DWP’s claim that 200,000 more people would move into work – there probably isn’t – £4.6 billion would cost £23,000 for every one of these.  For the same price, the government could have created rather more than 200,000 useful jobs.