A protest about the two-child limit

I have signed, along with 108 others, a letter published in today’s Times.  This is the text:

Today, the Government publishes statistics on the number of families affected by the two-child limit. This policy substantially reduces support through tax credits and universal credit for low-income families with a third or subsequent child born since April 2017. The two-child limit breaks the fundamental link between need and the provision of minimum support. It implies that some children, by virtue of their birth order, are less deserving of support. It leaves affected families £50 a week worse off, and will push 300,000 more children into poverty by 2024.

The two-child limit means unprecedented cuts to the living standards of the poorest children in Britain. We know it is affecting children now. Families report struggling to pay for basic living costs and being forced into debt, and children missing out on healthy food and activities. Children growing up in poverty, or pushed further into poverty as a result of the policy, will be likely to do less well at school, have poorer health outcomes and worse life chances. It is quite simply one of the most damaging changes to the social security system ever.  

The two-child limit should be abolished before it harms more children.

Reducing payments for families with more than two children does not, of course, mean that the first two children will have support while the third child will get nothing; that is not how families work.  It means that support is reduced for the whole family, and every child in the family is effectively being penalised.

The problems with Universal Credit can’t be fixed by loans or advances.

PRESS RELEASE: UC APPG responds to childcare announcement

From the APPG I have the news that people on Universal Credit will be able to get a loan or advance to pay for their child care.  Whenever someone gets a loan or an advance they have to pay it back, usually by deductions from their benefits.  That means that, whatever their benefit entitlement may be, in the future they will get less than that entitlement.

I apologise for stating something that should be painfully obvious to anyone after a moment’s thought.  (‘Painfully’ was not the first adjective that sprang to mind.  I thought it better to moderate my language for public consumption.)

A report on Universal Credit

The All Party Parliamentary Group on Universal Credit has published a detailed report on Universal Credit, including something in the region of 50 reasonable proposals to help the system work better.  The group has notable expertise in the field, and there is no recommendation I wouldn’t agree with, but I don’t think it goes anything like far enough.  The fundamental design flaw, which they point to at the outset, is this:

many claimants say they cannot understand how their UC is worked out, and it is subject to so many variations that it is far harder to budget on UC that it was on tax credits.

That instability of income is built in to the system.  Some of the fluctuations would be damped down by the group’s proposals, including modifications to work allowances, a review of the treatment of self-employed people and 53-week years, but they would not prevent the wild fluctuations in the amounts being paid month by month. To stop that happening, the system needs

(a) to make payments on a uniform date, rather than a personalised one which varies with weekends and bank holidays;

(b) routinely to make rental payments direct to landlords, as Housing Benefit did; and

(a) to relate entitlement to a preceding period, rather than the current one.  As this report says,

This mismatch of pay cycles and assessment periods and the ‘whole-month’ approach to changes of circumstances, can leave people struggling to budget with unpredictable and arbitrary awards.

 

Universal Credit and a pattern of fraud

A major fraud has been reported affecting Universal Credit.  Over the course of the last eight and a half years, I’ve frequently commented on the vulnerability of the UC system to fraud and error, despite repeated assertions from the government – and the falsification of the business case – to claim the opposite.  This fraud is different from most, because it represents organised criminal activity that is neither attributable to claimants nor to DWP officials.  The criminals  pretend to be other people, both claimants and people who have not claimed, to register for short term loans before any checks might be made.  (This is not, for the most part, ‘identity theft’; it is personation.  A fraud of this sort is typically a fraud on the DWP, not on the claimaint.)

It should have been obvious from the outset that computer-based identification wouldn’t be sufficiently secure for the purposes of the DWP.  There was something close to an admission of this more than  three years ago, when Verify, the successor to the failed “Identity Assurance”, was cut adrift.  But the problem is not only down to poor tech.  The situation has been produced by a system that relied on online verification, rather than claims in person; that left claimants without resources for well over a month; and replaced a system capable of processing the vast majority of claims within 14 days with one that struggled to do it in six weeks, and sometimes could take as long as three months.   Universal Credit is error-prone by design.  Its vulnerability to deception is only a part of that.

 

 

A Scottish supplement to benefits for children

The announcement of a Scottish “child poverty” benefit has to be welcome.  In principle, it will increase the incomes of many families by £10 per week per child, starting with children under the age of six.  Focusing on the under-sixes is good; there’s a clear relationship between the age of the youngest children and low incomes.   So is the promise that it will be there for every child in a family.

The main problem with reliance on qualifying benefits is that receipt is going to reflect the deficiencies in that system.  One clear problem is takeup.  I’m not convinced by the HMRC claim that CTC goes to 85% of all potential recipients (if it’s true, it’s more accessible than any other means-tested benefit), but that still leaves out the 15% who don’t get it.  A second problem is that entitlement is intermittent, particularly for benefits assessed on the basis of income; and benefit entitlement can be interrupted by sanctions, which shouldn’t be relevant for this supplement.    Dealing with changes in circumstances – including moving out of Scotland – could also be problematic.

In practice, the details are still vague; I’ve been greatly helped by a reference supplied by Ian Davidson, who pointed me towards the Position Paper posted on Wednesday by the Scottish Government.  The qualifying benefits will be:

  • Child Tax Credit
  • Universal Credit
  • Income Support
  • Pension Credit
  • Working Tax Credit
  • Housing Benefit
  • Income-based Jobseeker’s Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA).

Those benefits are all under the control of the DWP, with a particular emphasis on Universal Credit; Scottish benefits, including Council Tax Reduction and Disability Assistance, will not qualify claimants for the Scottish Child Payment.

One way to resolve the problems of means testing – just make the details up

I’m definitely slowing down; it’s the nearly the end of May and I’ve still got seven hundred pages to work through of the CPAG handbook.

I’ve been struck this time by something I really ought to have noticed before now, which is the system’s gradual, creeping dependence on imaginary money: ‘notional’ income,  earnings or capital, ‘deemed’ income, treating loans as income, attributing to people the benefits they haven’t claimed, ‘underlying’ entitlements, treating payments that are owed to a claimant as if they had actually been paid, and so on. For those of you who habitually don’t spend their time curled up with the Handbook, here are a few examples:

If your main work is self-employment but your earnings are low, your UC may be worked out on higher earnings than you have.  (p 119)

You may be treated as having notional income if … you work free of charge or for less than the going rate ( p 129)

If you fail to apply for income to which you are entitled without have to fulfil further conditions, you are treated as having it from the date you could have obtained it. (p 451)

Capital (unless it is disregarded) is assumed to provide a set rate of income – called ‘deemed income’ (p 477)

You may be treated as having notional capital if:

  • you deliberately deprive yourself of capital in order to claim or increase benefit
  • you fail to apply for capital which is available to you
  • you are a sole trader or a partner in a business which is a limited company (p 501)

You are treated as having ‘notional earnings’ if it is not possible to work out your actual earnings from employment or self-employment when your claim is decided (p 564)

Student loans for maintenance count as income if you could get a loan by taking ‘reasonable steps’, even if you choose not to apply for one.  (p 871)

The basic principle is that if people’s income is too complicated, too unstable or too uncertain to declare, the process of means-testing is going to plough on regardless.  They may not actually have any income, but we can still pretend that they have one. It’s a wonder that we’ve not thought more about make-believe food.  It’s the obvious answer to foodbanks.

How to abolish universal credit

An inquiry in London is asking how Universal Credit can be replaced.  I’ve previously supported calls to ‘pause’ or stop its roll-out.  Unfortunately, with more than two million people enrolled, we’re well past the point where it can be stopped or cancelled in its present form. The most important change passed when UC moved past its previous focus on unemployed people and started to enrol other people with a wide range of needs.   Most people who are unemployed cease to be unemployed within a few months, but longer-term claimants are much more likely to be chronically sick or disabled.  They need stable, secure protections. Universal Credit is not good at providing them, because of the  fluctuations in the level of support provided, but the support cannot just be removed while a new system is sorted out.   Transfers from existing benefits can be stopped, but new enrolments can’t be – there have to be benefits available for sickness, unemployment, low earnings.

What can be done, then, to deal with this catastrophe?  Forget the easy, unified solutions; that’s how the mess was made in the first place.  The only practical approach is to start to dismantle the system by moving to new, compartmentalised benefits dealing with the principal contingencies.  Start with invalidity, or long term sickness: it needs to be removed from the principle of work-testing, because the whole point of the provision is that it is supposed to deal with people who it’s not reasonable to expect to work.  Most of the regulations introduced for ESA or UC  have been screamingly inappropriate.  Think about child care; it may be best to take it out of the benefit system altogether.  The changes to Pension Credit are new – couples where one person is still of working age can transfer back to the pension system with no loss.  Housing Benefits are still largely in place – they won’t be for long, and local authorities have been losing expert staff, but the long-heralded abolition of Housing Benefit for pensioners hasn’t happened yet, and that system could keep going.

I’m not going to go through every aspect of the benefit in the same way, but the principle should be clear.  Whenever  you have a complicated problem, the way to deal with it is not with a single, complicated answer.  To deal with an unmanageable  problem, break it up into slightly less complicated ones; break those up in turn into smaller ones, and keep going until there’s a group of problems that it’s actually possible to deal with.

This is, of course, the opposite of what Universal Credit was supposed to do.  The approach is made a little easier by the fact that Universal Credit is not, and never could have been, a unified system: it already has compartments for different aspects of the service (unemployment, employment, housing and so forth).  The system can’t be abolished overnight.  It has to be taken apart piece by piece.

Winners and losers from Universal Credit

In any benefit reform, there are likely to be winners and losers; unless there is a substantial increase in the budget, the gains for some can only be made because others are being paid less. A fascinating report from Mike Brewer and his colleagues at the Institute of Fiscal Studies looks at the difference between short- and long-term gains and losses from Universal Credit. The difference is important, because Universal Credit has in theory been designed to maintain contact with large numbers of people over extended periods of time.

What the IFS report finds includes

  • greater lossers for people on long-term low incomes,
  • losses for people with disabilities
  • short term losses for self-employed people with low earnings, that are less likely to last as their circumstances change, and
  • some large gains and losses in the short term, which are not always reflected in the long-term outcomes.

The report is concerned with entitlement, rather than the actual amounts of benefit received – the serious problems there have been in practical delivery, and the impact of conditionality and sanctions, are going to mean that many more people are worse off than they ought to be on paper. Short term losses matter, too. For people on very low incoimes, a short-term loss means, in practice, that people have periods of severe privation, often going without food and accumulating debts.

Some reservations about Basic Income

Yesterday I was at the launch of the report from a seminar series organised by the Scottish Universities Insight Unit in conjunction with Citizen’s Basic Income Scotland.  My role has been as the resident sceptic; I prepared a series of background papers and a paper outlining the reasons for my doubts, and how they might be overcome.  The results are in the report, Exploring Basic Income in Scotland, available here.  There are my papers on Basic Income and Human Rights and Equality on pp 12-17, Care  on pp 47-52, Housing on pages 62-65.  The longer paper on Reservations about Basic Income is on pp 90-104.

The summary of those reservations goes like this:

Even if we accept all the arguments for Basic Income in principle, there are serious issues to resolve relating to cost, distribution, adequacy and practical implementation.

  • Cost. Basic Income schemes are all very expensive. The first question to ask is not whether we can afford BI, but whether we should – whether the money would not be better used in some other way.
  • Distribution. All the Basic Income schemes which have been developed to date make some poor people worse off. That mainly happens because they try to pay for BI by cutting or reducing existing benefits. Any scheme which does that it is going to benefit some people on higher incomes more than it benefits people on lower ones.
  • Adequacy. The treatment of existing benefits and of current tax allowances cannot work as intended. Basic Income cannot meet all the contingencies currently covered by social security benefits. It should not even try to do so.
  • Implementation. BI will not be without its complications. It is time to address them.

Basic Income cannot be ‘adequate’, but it does not need to be; it only needs to be basic. A modest income could be provided without damage to poor people, so long as it does not affect the status of other benefits.

 

Nothing personal: a proposal to convert the personal allowance from tax to benefits

About ten months ago, I put an argument for a convertible tax allowance on the blog – here is the link. The New Economics Foundation has just floated a very similar idea, in a report called Nothing Personal. The main difference between their proposal and mine is that they are proposing not an optional conversion, but a universal one.  That would have the advantage of ensuring coverage, but it would also have two large disadvantages.  One is that it would call for much more extensive direct administration, because it doesn’t use the existing PAYE system in the same way. The other is that the personal allowance would be reduced to zero, requiring declaration of every penny earned.