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 Universal Credit

Save the Children has identified an anomaly in the rules for Universal Credit. Single parents who currently receive Working Tax Credit while over 16 hours a week will lose on tapers and earnings disregards, with the effect they may be worse off.

It is difficult to be confident about any calculations. The rules for Universal Credit are still obscure; the position of Council Tax Benefit has not been settled; the tax threshold seems likely to change in the near future. There will be other changes, too: the government has signalled that conditionality may be introduced for people who work less than a full working week, which seems particularly likely to affect single parents. It would be surprising, though, if there were not more losers. The only way to reform a system so that some people are better off without others being worse off is to spend more money. The more fundamental the reform, the more it has to cost. My suspicion is that, by the time Universal Credit has been adapted and trimmed to fit, it will prove to be rather less radical than the government hopes. It will be the cuts in benefits, rather than the changing rules, that we’ll notice most.

Developing a benefits system for Scotland

I did threaten, when I set up this blog, that I would use it to float half-baked ideas. This is a first stab – I’m likely to make changes and extend the argument as time goes by.

The Scottish Government has been keen to consider how to expand its role in taxation and economic management, but social security has hardly been mentioned. One of the main uses of tax is for “transfer payments” – moving money from one set of people to another. Pensions, tax credits and benefits have to be paid for. An independent Scotland, or a much more devolved administration – “devo-max” – would need to have its own benefit system. This has not largely featured in any of the discussions. That might be because it is a hot brick, and no-one wants to handle it; but it might also reflect a sense of despair, a feeling that not much can be done about it.

There is a general problem in all administrative reform called “path dependency”: changing things that work can be difficult to justify. Are we going to say, for example, that benefits should not be acting as a form of social insurance (the rationale for Widowed Parent’s Allowance)? That people should not be compensated for disability if they do not have financial needs (Industrial Injury Benefits)? That people should not have their rent paid (Housing Benefit)? It’s doubtful, if we were designing the system from the outset, that we would do things the same way; but once they have started, it’s hard to stop.

A benefits system cannot be designed from scratch. There are people now who are elderly, disabled, unemployed or otherwise in need of support, and they have benefits delivered on the same terms as the rest of Britain. The first thing that they will learn about a new system is whether they are better or worse off than they were before. If a Scottish system cost the same as benefits do now, it would either have to pay the same benefits, or it would have to justify paying less to some people so that others could get more. And people would always compare what was happening to what happens over the border. When the Republic of Ireland became independent from the UK, it mirrored the benefit system blow by blow for most of the next sixty years. Even today, it still has a clutch of benefits that look like benefits in the UK – Jobseekers Allowance (yes, the name is the same), State Pension and Child Benefit – and others that look a lot like the way that the UK system used to look (Invalidity Pension, Maternity Benefit, Supplementary Welfare Allowance). Scotland would most likely end up doing the same sort of thing.

The only practical way to make more fundamental reforms is to pay substantially more in benefits, so that people do not lose out. The strongest contender for a reformed system would be something like a Citizen’s Income – extending the universal principle of Child Benefit to a range of adults. The coalition government is talking about something similar in relation to pensions – a Citizen’s Pension, instead of the combination of insurance and means-testing we have now. The same principle could help people at the margins of the job market without work – the labour market in Scotland has a sector of people who are “sub employed”, shifting between benefits and causal, peripheral and temporary work, and a more secure income would make a big difference. To make it even possible, however, the Scottish Government needs to start thinking about the issues now.

Cutting Child Benefit

The government intends to cut Child Benefit by suspending payments to families where one person falls into the higher tax bracket. There are two main objections to that proposal. One is that it is inequitable: it allows households on higher incomes to retain the benefit while cutting it to some people on lower incomes. The second is that it is impractical; there is no easy way of identifying who should be affected.

The main argument for cutting Child Benefit seems to be that it will help to cut the deficit. If the government wanted to increase the burden on richer families, it has the option of clawing back the benefit through the tax system. It would make more sense to tax all higher rate payers, rather than only those with children. If the government was serious about cutting the deficit, they would be raising tax. The fact they are not talking about raising tax is a strong indication that this is not really about balancing the books. They are focusing on public spending, which is quite a different issue.

Welfare under the new Act

I shared a platform this week with Gareth Morgan of Ferret Information Systems; I have added a link to his blog here. Gareth has done an extensive amount of modelling to examine the impact of specific benefit changes, subject of course to the proviso that what actually happens might prove to be very different. It is likely, however, that the longer the government leaves the messy business of sorting out new rules and regulations for Universal Credit, the more they will need simply to recycle the old rules; it is much easier than developing new ones. That is why some rules have survived to the present day from the 1911 National Insurance Act.

Gareth has also checked the likely outcome of the Liberal’s flagship policy, raising the tax threshold to £10,000. This, he calculates, will be worth £9.71 pw for those on incomes up to £115,000, and £1.37 pw for low paid workers.

Freedom of Information requests

Various Freedom of Information requests have been made recently to the Department for Work and Pensions about the mandatory imposition of work experience. This process has produced copies of the guidance issued by the DWP, including a recent revision removing instructions to JCP staff to mandate claimants. There is a full set of documents covering mandatory experience here and a list of related FoI requests and their returns at http://helpmeinvestigate.com/welfare/ .

I’ve also posted this information to the Social Policy discussion list at JISCmail, because it relates to a long-standing debate in Social Policy. The Social Policy Association published guidelines over two years ago which stated that researchers have to obtain the consent of participants, and allow them to withdraw from the research. I think the guidelines are misconceived, and FoI requests are an illustration of why I think so. First, some information is public, not private; it is not under the control of the people who happen to know it. Second, Social Policy has an important critical function, and that does not depend on the consent of government. Those who are interested in the arguments might want to look at my piece on “Research without Consent” in Social Research Update or the criticism of the SPA guidelines that Dave Byrne and I made in Policy World.

Rising employment, rising unemployment

The latest figures from the DWP show that both employment and unemployment figures continue to rise. In the last quarter, there were 60,000 more people in employment, and 11,000 more vacancies. At the same time, there were 48,000 more unemployed people. Part of the discrepancy might be explained by 78,000 previously inactive people who are now considered to be part of the labour market, including both lone parents and claimants with incapacities who are now required to be ‘actively seeking work’. If not for “welfare reform”, unemployment might have fallen.

Voluntary work experience

The government has been defending the Work Experience programme on the basis that it is voluntary, and that it has excellent outcomes. Neither of those points is clear. In relation to the voluntary nature of placements, benefit claimants are subject to a range of requirements, including the tests of actively seeking work, “taking steps” each week to improve employability and secure employment, following instructions from employment advisers, and having benefits suspended if the placement is not completed. The legal case being taken by Cait Reilly complains that she was instructed to take on an unpaid placement. The figures just released describe a range of mandatory and voluntary activity, with mandatory referrals dominating.

In relation to outcomes, the picture is less clear, because the recent statistical release does not say anything about outcomes. The claim that 50% of people on placements “leave benefit” is suspect. A posting by Jonathan Portes of the National Institute of Economic and Social Research comments:
“well over 60% of young jobseekers leave JSA within three months, suggesting that the record of the Work Experience programme – 50% off benefit in three months – is pretty unimpressive at best”.
He cites other work suggesting that these placements may be slowing down the rate at which people move into work. That is not conclusive, because the figures the work is based on are unclear. It does, however, suggest that the government’s claims about the success of the programme are misleading.

Managing the Work Programme

Some officials working for A4E have been accused of mis-reporting their success in placing claimants in jobs. I have no way of knowing whether the specific allegations of fraud are justified, but this may be a symptom of a more general problem – what happens in a situation where the DWP cannot oversee the outcomes itself. The Office for Government Commerce commented in 2007 that the DWP did not have ”the commercial capacity, the management information or the appropriate organisational structure in place to manage providers and markets successfully.” In relation to the Pathways project, the National Audit Office found that private contractors had underestimated the difficulties of working with the client group, and that the effect of sub-contracts was to limit the control that DWP commissioners were able to exercise over the work. The same problems seem likely to persist in the Work Programme. This is a structural issue.

The return of the roundsman system

There were demonstrations at the weekend to protest the position where young people are forced to take a four-week ‘Work Experience’ in order to remain entitled to Jobseekers Allowance. Tesco’s advertisements said, apparently mistakenly, that the posts would be permanent. Many of the critics consider that such posts should not exist at all. Newly published figures tell us, however, that over 30,000 people, mainly young people, have been sent to such placements.

The idea that people should work for their benefit is most strongly influenced by the idea of “workfare” from the United States. Workfare is based partly in a belief in the value of work, partly in a desire to deter people from claiming benefit. Representing workfare as “work experience” is an attempt to claim a positive value in the experience.

The “work experience” placements differ, however, in an important respect: the economic value of the labour goes not to the government, or the benefits agency, or to the public, but to private employers. Under the Old Poor Law, paupers were hired out to local enterprises as cheap labour. This was called the “roundsman system”. The designers of the “New Poor Law” were convinced that this undermined the position of the independent labourer, and the principles they introduced – including the abolition of poor relief outside the workhouse – were supposed to protect the position of people who worked. The same kinds of fear are prompted by the current arrangements. In the nineteenth century, many employers hired workers by the day. Present-day employers in the UK don’t in general work that way, but they do have “core” and “peripheral” workers, and they can vary their capacity by taking on short term, casual staff. If employers can draw on a pool of temporary, peripheral staff for free, why should they pay for casual employment?

New fraud figures

A new government report explains that fraud costs the public sector £21.2bn a year. It claims that “The majority of the fraud loss is due to fraud against the tax and benefits systems”. That presumably is why Panorama recently mis-reported benefit fraud as being £22 billion. What the report’s introduction does not explain – and what the statement disguises – is that the benefits systems does not belong with the larger figure at all. Tax fraud is estimated at £15 billion; the next largest loss is through procurement fraud, at £2.4 billion; and benefit and tax credit fraud together come to £1.5 billion. Annex 1 has the estimates.