Category: Social security

This blog includes discussion of issues in British social security policy, along with new material to complement my book, How Social Security Works.

The Scotsman comes around to the idea of a universal benefit

I made a case, last December, for the removal of fees for burials and cremations. The Scotsman has just offered an editorial accepting that argument in relation to children, at least.

The majority of Scotland’s councils have scrapped burial fees for children. … Unfortunately, nine of Scotland’s 32 local authorities continue to charge bereaved parents fees of up to £800 for burials. We are not always convinced by arguments for universality. … But surely there is no debate to be had about the abolition of burial fees for children?

It’s pleasing that they’ve gone that far. I do wonder, however, that we don’t extend the argument a little further. Funerals are almost always a difficult experience, the expense of a funeral is (after a house and car) one of the largest that most people will ever have to incur, the present system for helping people in difficulties is riddled with anomalies, and there is no risk or incentive arguments that would mean it was not appropriate to offer people some help with costs. “We Scots”, the Scotsman argues, “have a good conceit of ourselves as a compassionate, humane lot.” So why stop at children?

Universal Credit: more complexity for self-employed people

Five years ago, I was writing about the unsuitability of the Universal Credit scheme for the circumstances of self-employed people.  Lots of self-employment is fictitious – a fraud by employers – but there’s real self-employment, too.  Income from genuine self-employment tends to be lumpy – unevenly distributed, and slow to match either with costs or the time when the work is actually done.  In the short term, it can be difficult to tell what one’s income actually is. I’ve just had a quick look at my own accounts – fortunately, I don’t have to rely on Universal Credit.  Last year I received self-employed income in five months, got nothing in five more, and paid out in two others.  That last bit is not at all unusual – tax is usually due in January and July.

We are shortly due to have another change in the way that self-employed income is calculated.  The system began with the idea that everyone would have their benefit calculated in ‘real time’, and then, for self-employed people, that they would have their circumstances calculated monthly on the basis of a notional “minimum income floor”, even if they had none – or if, like me, their costs happen to exceed their income in that month.  The new system will  take larger income payments and distribute any nominal surplus to later months.   What it won’t do, as far as I can tell, is to take proper account of losses and liabilities, because the minimum income floor still applies  to loss-making months.  Nor will it be geared to the tax system, because while HMRC has started routinely taking six-monthly payments on account, self-employed people’s liability to tax still typically gets settled well after the event.

The Scottish Social Security Bill, now amended

The second stage of the Scottish Social Security Bill is complete.  Unusually, most of the issues raised as amendments have been incorporated, a clear sign that the legislators have taken comments seriously; there will be a Scottish Social Security Commission to review legislation and regulations, the rules on overpayments have been considerably qualified, and I was particularly gratified to see two new clauses on alienability (48A and 48B).  Mandatory reconsideration is still there before a claimant can appeal, in a piece of macho drafting depending on multiple cross-references to determine what can be appealed and what can’t.  The Bill is not perfect, then, but it is much better for the amendments.

Unemployment benefits are being reformed in France

The government of President Macron has proposed a series of changes to unemployment benefits.  The context is very different to the UK.   Unemployment benefits are not run by the government, but by Unédic, a formal consortium of employers and trades unions.  The benefits are contributory and related to previous income (which makes them generous by comparison with UK benefits); they get reduced for longer periods of unemployment.

The proposed reform makes three substantial changes.  First, it will extend unemployment benefits for the first time to the self-employed.  Second, employees will not longer be excluded from  claiming if they have given up their previous work voluntarily.  The government is justifying this by suggesting that it offers people the opportunity to start a business.  At this stage, it’s not clear whether that will be a formal condition; if it’s not, there are others who may find different uses for it.   (The Thatcher government in the UK used to have a separate system of support for small business start ups, and one person I knew at the time was funded to become a successful writer of comedy.)

Third, there will be new sanctions; a person who refuses two reasonable offers of employment will have benefits halved.  That’s a little more leeway than claimants in the UK get, where claimants are driven to destitution for missing an appointment.    A report yesterday gives two examples of people having benefits stopped for the serious offence of being in hospital at the wrong time.

The Work and Pensions Committee is less critical of Universal Credit than it merits

The House of Commons Work and Pensions Committee has been reviewing the Project Assessment Reviews of Universal Credit, and their report was published yesterday.  In a nutshell, the plans are gobbledegook, there is no evidence, but the DWP assures us it is on track and that things have greatly improved.  The press coverage picks out some of the critical comments, but to my mind the report is remarkably restrained.  The project was, and remains, years behind schedule.  With billions spent, it still has not submitted its business case.  The management documents that have found their way into the public domain  substantially fail to relate to the task in hand – see John Slater’s comments on my blog.  The Committee has had clear evidence that they were deliberately misled about previous progress.   Universal Credit was, and is, a national scandal.

Progress on the Social Security Bill in Scotland

A large number of amendments to the Social Security Bill have been tabled by the Scottish Government, along with a smaller number from opposition parties.  The Scottish Government amendments, which are more likely to pass, include:

  • a duty to promote takeup
  • provisions relating to aid and advocacy
  • the constitution  and operation of an independent Scottish Social Security Commission, which will scrutinise proposed regulations
  • qualification of the provision to allow some benefits to be paid in kind, so that it will be dependent on the consent of the recipient
  • clarification of rules for reconsideration (but not, regrettably, the two-stage mandatory reconsideration)
  • not reclaiming overpayments from people  innocently receiving them,
  • rules about appeals, and
  • uprating for inflation.

Other constructive amendments from opposition parties are less likely to pass, but they are constructive: they include, amongst other things:

  • extension of the general principles to cover the relief of poverty and the protection of rights
  • definition of the functions of the  Scottish Social Security Agency
  • reporting issues
  • the power to create new benefits, and
  • a duty to inform people about their entitlements.

This doesn’t deal with all the issues I’ve previously raised;  I am still concerned about the adoption of the Mandatory Reconsideration, and the lack of reference to alienability or diversion of benefits – but the overpayments rules and the provision for detailed scrutiny are much better.  It speaks well of the government that they have listened to many concerns, and of the opposition that the amendments are considered and show an evident desire to make the Bill better.

 

 

Tunisia’s social security scheme expands

Tunisia is reported to be improving its social security system. They’ve aimed to offer a stable minimum income, comprehensive coverage and provision for decent housing.  The amounts being offered are not large: an increase from 70 dinars a month (less than $29) to 150 dinars earlier this year and now 180 dinars (a bit under $74), a little extra (10 dinars) for each child in school, a fund for loans to house buyers, and exemption from fees for medical care (but I don’t know enough to say how that is actually going to work).   The national GDP per capita now seems to be in the region of $10,800 (USD), so the benefits are not likely to be enough to live on.   Having said that, the commitment to extended  coverage is a big deal: Tunisia has previously been reported as having something on the region of 80% coverage, and the people not covered before included agricultural workers, domestic servants and unemployed people.

The extension of coverage in low to middle income countries in recent years has been remarkable.  In a recent lecture, Minouche Shafik of LSE pointed to the rapid growth of a range of welfare measures across the developing world – more than 80 have social security pensions, more than 120 have some unconditional cash transfers.  Around the world, she argues, the “state” is coming to mean a “welfare state”.

 

Bogus arguments about Basic Income

Martin Ravallion has put together several arguments against ‘straw men’ used to criticise Basic Income (he calls it BIG, for Basic Income Guarantee).  The points he particularly tackles are assertions that

  • BIG is too expensive
  • There are better ways to eliminate poverty
  • Targeting is good enough
  • A BIG would destroy work incentives
  • BIG diverts attention from health and education.

Most of his arguments are good ones.  Expense is a matter of how we choose to organise ourselves; targeting doesn’t work; Basic Income is neutral about work incentives.  However, not all the arguments are as strong.

The first problem is his assumption that BIG is there to eliminate poverty; most basic income schemes are providing a limited foundation income, not an adequate one. There are good arguments for considering what Basic Income can do for women, for example, which are about something else.  Ravallion is also right to say that “A BIG should be among the options to be considered by any developing country in a package of antipoverty policies ”  The situation in developed countries is different, in so far as Basic Income is seen as substituting for an existing benefits system.  In the case of the UK Basic Income wouldn’t favour the poor – the effect of eliminating benefits would mean that the Basic Income would exclusively help people who do not currently receive benefits, most of whom are on higher incomes.  Nearly all the schemes I’ve seen leave some poor people worse off.

The second problem is the assumption that what gets paid for education can be treated as part of the income package – it can’t be.  The money spent on BI would have an opportunity cost (as he acknowledges); many of us would like  more to be spent on other things (such as child care, disability benefits, public services, infrastructure, environmental protection) which either favour particular categories of recipient, or can’t be attributed as personal income.

Lots of the objections to Basic Income are ill-founded – there are other “straw men” he might have picked on.    One is the argument that the whole thing is likely to be unexpectedly complicated.  We know from the administration of universal, categorial benefits like Child benefit that it doesn’t need to be.  A second, which overlaps with that, is the accusation that the idea is “untried” – it has been, just not comprehensively. The third is the argument that it would call for a penal rate of taxation.  Taxation is done by convention, some countries have much higher rates of income than others, and income tax is not the only way that governments can raise funds.

Having said all this, there are bogus arguments and straw men being set up in favour of Basic Income, too.  Among them are the arguments that

  • We need Basic Income because there will be no work to do.  There will always be more work to do, and presently we have major shortages of activities that we just aren’t ready to pay for – among them social care, the maintenance of the public environment, security, child care, and many others.
  • There’s no harm in some people living off others.  This is Philippe van Parijs’s argument for supporting ‘surfers’.  It greatly underestimates the capacity for resentment and hostility – especially when people who deny the legitimacy of the community that is funding them use violence and intimidation to impose their values on others. 
  • We won’t need tax thresholds if there’s a Basic Income.  Yes, we will.  Taxing every penny people make threatens to become an administrative nightmare.
  • We won’t need existing benefits if there’s a Basic Income.  Yes, we will.  Benefits don’t just provide people with a basic income.  Among them are income smoothing, housing finance, economic management, support for special needs, and many others.

The “Experiments” that are being tried out won’t, and can’t, settle these issues.  When old age pensions were introduced, it took more than sixty years before we could get a clear idea of the impact on how they had changed people’s lives.  The Scottish experiments should reassure us about practicality, but I’m doubtful that they can tell us much about long-term shifts in behaviour.

Universal Credit and “good intentions”

A blog from LSE, and a recent article in the Times (behind a paywall), suggest that we should acknowledge that politicians have “good intentions”, even if the policies go wrong: Universal Credit is the model.  There are certainly many people who accept the view that Universal Credit was intended to be simpler, more effective and capable of getting people into work.  I’m sceptical that that captures the true intention.  In 1994, Iain Duncan Smith made a case in the Daily Mail (13 April 1994) for a single, unified benefit in very different terms.

ODD, isn’t it, that as Britain’s standard of living has steadily improved, the number of people claiming State benefits has increased, rather than declined?

… The problem lies in the very way the system works. Far from merely providing people in need with a national minimum level of subsistence, it encourages dependency. … Vast sums of money are lavished on running something which is, inevitably, prone to abuse on a massive scale. What we need are fundamental changes – and soon. …

At present we make payments to the old, the sick and those with children, regardless of their financial situation. This nonsense means that a major part of the expenditure goes to help people who don’t need the money in the first place. … people become trapped, remaining dependent on the State rather than on their working abilities. No matter how much someone wants to work, a job is not a particularly attractive option if it means financial loss.  What’s more, the system actively encourages people to change or disguise their lifestyles in order to maximise their benefit entitlement. Who can doubt, for example, that some of the mothers now claiming single-parent benefit are actually living with a partner more or less full-time?  … It should make us all angry that while many deserving cases are failed by the system, the greedy and workshy profit from it.

So what can be done… ? …  There should be just one, income-assessed benefit, with all the relevant factors taken into account to cater for the needs of the individual and his family. This should be administered by one body, instead of the multitude of offices, each handling one type of benefit, we have now. …  The new benefit must also aim to make going back to work a more attractive option for the unemployed. The benefit should not be set too high and would need to be ‘tapered’ so that if people took jobs paying less than current benefits, they would not lose all their benefits immediately.

This is not, of course, the account famously given by IDS, as a New Statesman article showed, but the elements of Universal Credit were there long before his supposed ‘conversion’.  The basic argument for what became Universal Credit was that it was going to save money, prevent abuse and discourage dependency – not that it would give people a more secure, predictable income when moving in and out of work.

I’ve pointed to many of the deficiencies in the design of Universal Credit, but the worst problems with Universal Credit are not there just because it is a clunky, means-tested benefit.  There are two other aspects of the reforms which have created particular problems.  The first was the assumption that benefits were aimed at people who ought to be working instead.  Most benefits go to pensioners – something else that Duncan Smith disapproved of in his Mail article.  Most of the rest of the benefits have no direct relationship to people who are not working – Tax Credits, disability benefits and housing benefits go to people in or out of work.  Most of the rest after that were people who were not expected to work – single parents and people with incapacities, both the target of punitive and work-related action.  And most people claiming as unemployed – about 80% – return to work in the course of a year regardless.  Universal Credit was initially supposed to go to 7 or 8 million people (the target numbers have been falling); the primary target group for employment-related action was certainly less than half a million, if we include single parents and people on ESA, and less than 200,000 if we don’t.  Redesigning policy around readiness to work – a process begun by the previous Labour government – is an imposition of the wrong policy on the wrong people.

The second problem has been the abandonment of the idea that no-one should be left completely destitute.  Benefits are being stopped cold for a variety of reasons – sanctions, reappraisals, revisions and, unjustifiably, administrative transition to the new system. Some people have been driven to our “uplifting” food banks.  Here are a few more outcomes to lift you up: