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.

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 getting people to work  when most of its claimants are either already in work or 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.

The administration of Universal Credit is judged to be irrational and unlawful

In an extraordinary judgment, the Court of Appeal have declared that an element of the assessment of Universal Credit is so irrational as to be unlawful.  Gareth Morgan has explained, at some length, how Universal Credit manages to take information about regular, predictable incomes and rent, and convert that into an irregular and unpredictable stream of income. The point of contention in this case is a small part of that, but the problem the court was looking at is pretty straightforward.  Banks do not operate on bank holidays and weekends, and the Universal Credit assessment ignores that.  That has meant, for people unlucky enough to have an assessment marked down for an awkward date, that regular income will be  counted as too high, or too low, and the amount they receive will fluctuate wildly.  The court was not impressed by the DWP’s arguments that changing the assessment in this case would be expensive or inconvenient.

“The Secretary of State for Work and Pensions’ 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. “

How, we might reasonably ask, did the DWP get in this mess?  There have been three recurring problems.  First, Universal Credit was designed by people in a mental bunker, determined not to share, consult or engage people who understood how benefits work – including their own front-line staff.

Second, the system has been built around the capacity and convenience of the ICT, rather than the tasks that needed to be done.  The technology has never been capable of doing the sort of things that are needed to run a system properly – the failure of the verification system  is an illustration.  The process we now have in place is cumbersome, complex, slow, very expensive and difficult to change.  We did things faster, and cheaper, forty years ago.

Then there is the failure of the safeguard, which depends on the scrutiny of regulations by the independent Social Security Advisory Committee.  I’ve been critical in the past of the SSAC’s approval of policies and regulations that I cannot believe would stand the test of judicial review, such as mandatory reconsideration or the sanctions regime.  (Both policies violate the centuries-old principle of audi alteram partem, or natural justice: no legal penalty should be imposed without first giving the person sanctioned the opportunity to be heard.)  The problem is, I think, that the SSAC tries to reach decisions through consensus, and an insistence on compromise  is fundamentally inconsistent with the role of independent expert advisers in identifying specific issues that fall within their area of expertise.  Illegality should not be treated as being open to negotiation.  The bulk of the SSAC’s work is confidential, but in the light of this judgment they need now to review whether they had identified the fatal legal flaws in the regulations,  and if not why they failed to do so.

I’m not keen on Gareth Morgan’s proposed fix for the problem of dates, which is designed to tweak the assessment for the people affected while minimising disruption to the information that the DWP gathers.  By all means, let’s disrupt this. Real-time assessments are beyond our capacity to deliver; whole month assessments, delivered at the end of the same month, lead to radically unstable income streams; individual variations in payment arrangements lead to complexity and confusion.   I lean towards the French system, which is to use, as far as possible, retrospective information about means, and the same predictable, common dates for everyone: it makes a huge difference to the predictability and stability of income.

Will the current crisis be the ‘making’ of Universal Credit?

A thoughtful blog by Fran Bennett asks whether Universal Credit will come into its own now that more than a million more people have claimed it.  She argues that the benefit has been changed in important respects as a result of the current crisis.   The biggest changes have been the extension of the benefit to cover self-employed people, the abandonment of work requirements, and the reluctant acknowledgement that the benefit is no longer primarily concerned with long term dependency on welfare – if it ever was.

Many of the complaints about Universal Credit focus on mean-spirited, ill-considered rules  rather than the essentials.  The benefit cap, the two child limit and the five-week wait for benefits are all high on the list. But the flaws in the benefit run much deeper.

The central failing of Universal Credit reflects a failure to appreciate that people cannot live on thin air.  Benefits have to provide for financial need; they have to secure essentials;  they have to allow people whose income is interrupted to meet essential commitments, such as housing costs or fuel bills, even if those commitments are higher than a person living on a minimal subsistence income would need.  Universal Credit does not secure even a minimal income.  In normal times, benefits have routinely been stopped arbitrarily. The rise of the food banks is not an accident of nature.    Even with all the changes that the government has made in the current crisis, there are some obvious problems.  People have to go without for weeks before they receive money.  If they  receive an ‘advance’ payment, it is treated as a debt which they must repay, guaranteeing that their future income will be inadequate.  Some people are excluded altogether.

The next set of problems relate to the benefit’s unpredictability.   Universal Credit adjusts to income, and income is intermittent.  The attempt to adjust benefits on a ‘whole month’ basis means that the amount of entitlement can be changed very shortly before its actual payment.  Unless people are completely destitute (and growing numbers of people are), they cannot reasonably be expected to know whether or not they will be entitled, how much benefit they should receive, and when they might cease to be entitled. It is a prescription for confusion.

The third, and possibly the most fundamental flaw in the scheme is its dizzying complexity.  It tries to deal with far to many disparate circumstances, and it does most of them badly.  The treatment of disability, divorce, chronic sickness, housing subsidies, low income and care have been rammed forcibly into a template that was intended to deal with a tiny number of people who were continuously unemployed for long periods.  It inflicts injustice on all of them.

Universal Credit has wrought disaster at every point of its development.   We cannot just stop delivering it, but we push it to the sidelines – putting more money into benefits that can offer a reasonable degree of social protection.  This one never will.

The social protection system is failing. We have to find ways round the problem.

We have moved into lockdown, and the government has still given little thought to how to protect the situation of people on very low incomes.  The main concessions relate to the failing system of Universal Credit: work allowances and benefit levels have been increased, the presumptive income of self-employed people no longer applies, and new sanctions have been suspended.  Universal Credit is not, however, equipped to respond to people’s circumstances even in normal times, and it cannot cope with the surge in applications.

First, people have to apply.    This is a clip posted on Twitter by an applicant looking to verify his identity:  it will take nearly a month for the position to rise to the point where it can be dealt with and then there is a 45-minute window to respond.  After that, there is a five week wait for benefit delivery. Claimants are offered loans to fill in the gaps, which means a long-term reduction in the future amount of support available.

What are the alternatives?  There is a strong case being made currently for something like a Universal Basic Income.  UBI only provides people with cash, but that meets the present situation: there are plentiful supplies of goods, and what we need to do at present is to make sure that people have the resources to buy them.  I’ve objected to the idea in the past, mainly on two grounds: the distributive impact, which is likely to exclude people on existing benefits, and the opportunity cost.  Neither of those reservations really applies to the present situation.  The government could do worse than offering a flat rate payment to everyone.

However, the mechanisms to deliver a universal income don’t currently exist, and in a crisis, we need to be considering what can be done quickly and immediately.  There are three benefits which have widespread coverage, making it possible to make special payments using mechanisms that are already in existence.

    • The Xmas bonus currently goes to 17.5 million people, mainly pensioners, carers and people with disabilities.
    • The Winter Fuel Payment, which might be more adaptable to special one-off payments, goes to 12 million pensioners.
    • Child Benefit goes to 12.7 million children in 7.3m households.

It should be possible, then, rapidly to make arrangements to make special payments,  with minimum fuss and no additional verification, to up to 37.5 million people (17.5 + 12.7 + 7.3).   It’s not ideal, but we need to find mechanisms that are practical and effective; this would cover a lot of the ground that needs to be covered.

This still leaves a large hole: the position of adults of working age who have no children.  The government obviously hopes that employees within the PAYE system can be supported through businesses, using roughly the same mechanism as Statutory Sick Pay – it won’t work, unfortunately, for the most precarious workers, or self-employed people.    I’ve canvassed in the past another option: make the tax allowance convertible, so that people can claim the equivalent in cash.   That should, in principle, cover most of the people left out by the first proposition, with the added advantage that people who already have sufficient taxable income will be paying it back in tax.

Covid-19: a few questions about the government advice

I was asked once to examine a sick sheep.  What I know about the diseases of sheep and other animals wouldn’t cover the head of a pin, but I manfully walked up to the sheep in question.  It promptly got up and ran away.  I was able at least to call back, “It’s alive”.  It’s always nice to find oneself in a position to make definitive pronouncements, and it seems to me that many of the statements coming from government have at least as much authority as I did with the sheep.

The strategy of the UK government is to normalise the illness, as we have done with other killers such as influenza: allow for large numbers of healthy adults to be infected, reserve special defences for people who are particularly vulnerable, and accept that some people will die.

This position is out of step with the WHO advice, which is to contain the illness.  It is not indefensible, but there are a few holes to fill in the policy.

Question 1:  How will we know if the government’s strategy is working?  If there is no routine testing, we cannot say much if anything about numbers – and so, we will find it difficult to say whether or not the policy is working.

Question 2: What is the cost of telling people not to seek help?  The recommendation to self-isolate and soldier on through the course of the disease depends heavily on people contacting services in due course when problems become serious.  That involves more than self-isolation: it depends on self-assessment.  How many people will this kill?

Question 3:  What happens to people who can’t self-isolate?  The advice that is being given asks people to isolate themselves within their home, to keep a distance and not to make contact with others.  That is feasible for about two-thirds of the UK population.   The others don’t necessarily have a space they can isolate themselves in.  Some have no home; some share their bedrooms with others.  And we might point out that the UK government has issued various edicts requiring poorer people to share rooms.  It is the policy of the UK government not to permit people on benefit to be supported if they have spare rooms, and to penalise them financially  if they do.

Question 4: What happens to people on benefits?  As things currently stand,  there are severe penalties for non-compliance with benefit regulations, including the requirement to seek work, to attend meetings and appointments, and to be available.  Benefit claimants have limited room for manoeuvre – there are limits on how many periods of sickness and how long a person can be excused.

Question 5.  Where, in a society in lockdown, will people’s income come from?  In the short term, the problems identified in questions 3 and 4 could be dealt with in part by two immediate measures:  stop the bedroom tax, and stop all sanctions.  There is a more severe underlying problem, however: our economy and our labour market do not deliver regular, stable incomes for many people.   Under the old system of Unemployment Benefit, people reduced to short-term working or interruption of earnings would receive direct help, based not on a personalised means test but a simple question, about whether or not they had worked on that day (any day where someone had earned £2 was deemed to be a day at work).  We no longer have that system.  Successive governments have undermined the principle of social protection.  We need it more than ever.

A submission on the economics of Universal Credit

The House of Lords Economic Affairs Committee has asked for submissions on ‘The Economics of Universal Credit’.  My submission has just appeared here, as an MS Word Document. This is my summary of the main points:

The aims of Universal Credit (questions 1 and 2)
• Universal Credit is a portmanteau benefit, not a simplification.
• It has not reduced costs, reduced error or improved the efficiency of benefit administration.
• ‘Personalisation’ has led to unstable, unreliable income flows.

The relationship of UC to the labour market (questions 6 and 7)
• UC has not evidently reduced worklessness, but the relentless emphasis on work is in any case a distortion of perspective.
• The marginal rate of deduction is very high. There is no good evidence of incentive effects, but arguments on this basis are more concerned with equity than with economic behaviour.

I conclude that “The purposes of UC are defeated by its complexity, and its failure to provide a stable, predictable income.”  I doubt that anyone who has followed this blog over the course of the last ten years will be surprised by that judgment.

This document was in MS Word, a proprietary format, because that was what the Lords Committee specified.  To make it accessible, here is a PDF version.

There are limited new take-up figures; they’re hard to explain.

New take-up figures are available for three benefits: Pension Credit, Housing Benefit and income related ESA (plus Income Support – there are not many claimants left).  There are no figures yet for Universal Credit; it’s going  to be a challenge to get credible figures on a benefit where entitlement keeps changing like the sands of the desert.

Not for the first time, however, the figures that we do have are difficult to believe.  Can it be right that 80% of the people entitled to Housing Benefit (89% of those entitled in social housing, and 72% of people entitled in the private rented sector) receive it?

The most puzzling figures relate to pensioners.  According to the figures 60% of the pensioners who were entitled to Pension Credit received it – but 87% of the pensioners entitled to Housing Benefit received it.  These figures refer, largely, to people with similar ages and financial status.   For this to be plausible, we’d need to accept that pensioners on very low incomes are less likely to claim than pensioners on slightly higher incomes, and that pensioner couples don’t show the reluctance to claim Housing Benefit that other couples do when faced with Pension Credit.

This is going to be complicated, too, by the intended reform of Housing Benefit, which for pensioners is due to be combined with Pension Credit  by 2023.  Watch this space.