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 impact of Work Experience

In February, I wrote to the UK Statistics Authority to express concern about some uncheckable claims being made about the benefits of work experience. The Minister for Employment, Chris Grayling MP, had published an open letter to Polly Toynbee on Politics Home, claiming that “a significant number of placements turn into jobs, with the employer getting to like the young person and keeping them on. … so far around half those doing placements have come off benefits very quickly afterwards.” In the Times on 24th February, he also claimed that “half those young people stop claiming benefits after taking part.” (p.32) This was referred to in BBC’s Question Time on 23rd February as evidence that the scheme was working well. The only evidence, however, was based on a first cohort of 1300 people on placement from January 2011 to March 2011, when by the time of the statement the scheme had been extended to more than 34,000 people.

The DWP has now published more data, this time covering 3490 people in the scheme from January to May 2011. It shows an increase in employment, by comparison with a group of non-participants, from 27% to 35%. There are two main reservations to make about the figure: that it still relates only to an early cohort, who may (or may not) have been easier to place than later cohorts, and that there is no explanation of what being “in employment” might mean in terms of hours or duration (the only test seems to be that the employer has sent a return to HMRC). It is also a lot less than the 50% originally claimed.

Welfare Reform in the Scottish Parliament

My submission to the consultation on the Welfare Reform (Further Provisions) Scotland Bill is here. The main point is technical, but in a nutshell the issue is that the Scottish Parliament, and Scottish local authorities, do not have the power to do things in relation to benefits that English local authorities can do. At present that means that when the Social Fund is abolished, the Scottish authorities will not be able legally to do what they need to do to protect people who are vulnerable.

Simplifying the tax system

Because I’ve been looking at the tax system in the course of the last week, I’ve been considering some of the arguments for “simplification” and the possibility of a flat tax. Some of the allowances and approaches being used are bizarre, and several complications seem unnecessary – for example, the calculation of NIC on a weekly basis when everything else is monthly or annual, the arcane mechanisms for clawback, and the lack of integration with tax credits.

However, I’ve argued in the past that attempts to simplify social security systems are illusory. Benefits have too many aims, they deal with too many people in complex and changing circumstances. The same arguments seem to me to apply with as much force to taxation. Taxation is supposed to do many things at once. Richard Murphy begins with five: raising revenue, repricing, redistribution, fiscal policy and solidarity (though Richard found a way to begin the last two with an “R”). To that I can add at least two others – changing behaviour (incentives, disincentives and subsidies) and conveying a moral position (e.g. in support for families). Add to that the complexity of people’s lives, the things that are being taxed, and the constant changes in circumstances, and I am sceptical that taxation can ever be anything other than complicated.

That doesn’t mean, that nothing could be simplified, or that the system could not be made more comprehensible – for example, by unifying allowances with credits, or by harmonising rates between employment, self-employment and taxation of companies. One thing is unavoidable; in any reform, there will be gainers and losers. If the system costs the same, then some people will be worse off; if no-one is to be worse off, the system must cost more. There is no way round that.

More job seekers

The DWP has sent out 124,000 letters today to tell lone parents with children aged 5 to 7 that they will have to claim JSA instead of Income support, from this May onwards. Yesterday I commented critically about the assumption that the claimant count is expected to fall by half a million in five years …

Taxing pensioners

The government’s plan to reduce the tax allowances of pensioners was clumsily presented. The issue is not, as the IPPR suggested, that pensioners must be expected to bear a greater burden in deficit reduction – that argument seems feeble when the purpose of economies is to support handouts in corporation tax and to reduce the demands made of very high earners. It is, rather, that the distributive implications for pensioners need to be seen in the round. “The net changes made by this government … mean that pensioners are better off.” That is the answer George Osborne has given to criticism, and it is a strong argument.

Pensioners are gaining in some ways, primarily through proposals to increase the level of state pension and in the ratcheting effect of the “triple lock” which means that pensions will rise faster than inflation. They are likely to lose in other ways – through this tax increase, the loss of the state second pension, increases in the pension age, and reductions in housing benefit. (The poorest pensioners, recipients of Pension Credit, will not gain in the short term – but they will nto lose out because of the tax increase, either.) The Chancellor may well be right, but it would be helpful to see the figures laid out more clearly.

Budget 2012

The Budget documents are generally available as soon as the Chancellor sits down, and as always there is a convenient summary in tabular form (though annoyingly, this time it is in the middle of the document, starting at page 50). I am always puzzled by the elements that the press pick out for attention, and those they do not. For example, this morning’s reports include coverage of the measures that benefit Dundee (which is of great interest to me, but possibly not to all of you) while some important measures seem to have passed under the radar. Examples include announcements of

  • a single-tier State Pension, ending the state second pension (para 1.212); and
  • the intention to allow the minimum wage to be eroded by inflation – it will no longer be uprated to maintain its value (1.242).

Although it has been announced more than once that plans to stop mobility payments for people in residential care were to be dropped, the savings from that measure are back in the tables (top of page 53).

I should add that the numbers of unemployed people are predicted to fall by about a quarter in the next five years (para 1.23), and the numbers of unemployed claimants are predicted to fall to 1.2 million. This will happen at a time when more than half a million people currently on ESA will be reclassified as fit for work and required to claim Jobseekers Allowance instead. The figures are not credible.

Missing appeals

I am not sure that a blog is the best place to solicit information, but a query to Rightsnet has not given me an answer, and I am going to try it here as an experiment. It looks from the stats as though a very large number of appeals are lodged about ESA decisions, but then nothing happens – there is no process, no decision and no outcome. I talked a couple of weeks ago with a group of CAB workers who were expressing concern about disappearing forms, submitted evidence going missing and responses not being received. Is this a more general experience?

Raising tax thresholds

There are three main problems tied in with raising tax thresholds. They are all well-known about, but I don’t see them being reported or discussed in the press.

First, it costs a great deal to raise tax thresholds, because it delays the point where rich and poor alike start to pay tax.

Second, the people on the lowest incomes benefit least, because people who pay tax on only a part of their income will not get the full benefit of the increased threshold.

Third, the tax threshold interacts with higher tax rates. Increasing the tax threshold directs more money to rich people than to poor ones, because it delays the points at which rich people become subject to higher tax brackets. It is possible to compensate partly for this effect by lowering the bands for higher tax brackets early. That is what the government has been doing. The threshold for the 40% rate has been applied to progressively lower bands:

Date Tax threshold 40% band Income level at which
40% tax is paid
2010-11 £6475 £37400 £43875
2011-12 £7475 £35000 £42475
2012-13 £8105 £34370 £42475
2013-14 £9025 £32245 £41450

There is a simpler way around the problems. If people are paid the equivalent of a tax relief in cash, and then all income above that is subject to tax, the second and third problems disappear, and it’s possible to pay for the cost of the first by raising the tax. We did this once when we converted child tax reliefs into a cash payment. The allowance is called “Child Benefit”.

Golden oldies

I’m delighted to see that P J Proby has been acquitted of social security fraud. I’m reminded irresistibly of a series of decisions in the 70s and 80s about the replacement of trousers, especially focusing on what was “normal wear and tear.” Examples include a parliamentary debate or the Commissioners’ decision in R(SB) 33/85, when the hapless claimant needing new trousers complained “I felt as if I was on trial for some criminal offence”.

The seam connecting these points will probably only be visible to those over 50. There’s a place for us.

The reassessment of DLA

New announcements have been made about the procedure for transferring people from Disability Living Allowance to Personal Independence Payment. The DWP is anxious to reassure claimants that this will not be a repeat of the ESA fiasco, though the lack of detail about eligibility and assessment procedures does not inspire confidence. They are beginning in 2013 with new claims in five areas. People who are terminally ill, children under 16 and most older people over 65 will be exempt. The guidance says however that “We want to see how the assessment for the new benefit works for people of working age before deciding if Personal Independence Payment should be extended to people over 65.” As older claimants now account for fully a third of of the benefit payments, it is difficult to see how the reforms can produce the Treasury’s predicted economies unless they do.