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.
The case for exempting some people from reassessment
On 8th February I suggested that some groups might reasonably be exempted from the process of reassessment for ESA, and mentioned in particular “young people with severe disabilities from early ages or people with defined conditions like cancer”. The recent statistical release tells us that these groups have a quite different profile from most other claimants. As things currently stand 12% of all claimants are being placed in the “support group”, those who are not expected to work. In the case of “neoplasms”, or cancer, that rises to 67.7% of assessed claims; in the case of “congenital” or “chromosomal” conditions, it is 66.7%.
ESA Appeals
I have been looking at the January 2012 statistical release for the review of Employment and Support Allowance. According to the tables
- 1,023,000 claimants have been reassessed (table 1a)
- 622,000 have been found fit for work (table 1a)
- 521,000 of those found fit for work have appealed (table 3), and
- 38% of those cases heard so far (80,000 out of 210,000) have been successful (table 3).
The implication is that we are are looking at a very large number of decisions that are provably wrong – more than 30% of all decisions that people are fit for work. The DWP and claimants have been forced through an expensive and time-consuming appeal process to set things right. This is a shambles.
Further note. I have amended this entry to remove a predictive figure. This was a quick, back-of-the-envelope calculation. I’ve been delighted – but taken aback – by the interest that my guesstimate attracted, but the more I look at it, the less confidence I have in any possible prediction I might make. In particular,
- the rate of decision-making has slowed,
- the statistical information in the tables does not cover the same time periods, and none of the information is particularly up to date
- the level of new appeals seems to be falling
- the success rate seems to be falling, and
- as gwenhwyfaer comments, large numbers of appeals appear to be disappearing from the process without explanation, and I cannot assume that they will eventually have decisions made.
The crime of forming a relationship
This is from a press statement by Lord Freud, reported today.
Pretending you are a single parent to get benefits when you are actually living with a partner is stealing money from the people who genuinely need help. Sometimes these claims can be fraudulent from the outset, but often a person’s circumstances change gradually and they don’t tell the Department. Either way, it is a crime and one we are determined to put a stop to.”
So gradually forming a relationship, and not knowing quite what the position is, is a crime.
Freud goes on to say:
Universal Credit will simplify and automate the benefits system to make it less open to abuse and ensure this money is going to those who need it the most.
It is hard to see how the introduction of Universal Credit will make a difference to the situation – with one main exception. In the past, claimants have only been liable to repay benefits if they have failed to disclose a material fact. Universal Credit is going to include measures to allow the government to recoup overpayments, irrespective of whether or not a claimant has reported their circumstances, or whether they can reasonably be expected to know or understand that an overpayment has been made.
The Greek tragedy
The continuing crisis in Greece has been presented in questionable terms. First, we have been told that the alternative to ‘austerity’ is a disorderly default. Defaults do not have to be disorderly. New York and Cleveland, both members of a different currency union, have defaulted on their debts in the past; the dollar was unharmed, and they were not forced to adopt a new currency.
Second, we are told that Greece will have to leave the Euro. Greece cannot be forced not to use the Euro. Money is what people accept as a unit of exchange, and if people in Greece opt to trade in Euros, they cannot be stopped. Some countries use other countries’ currencies informally; some (like Ecuador, which uses the US dollar) do it formally. Germany might have more success in insisting that Greece should use a different currency from them if Germany itself was to leave the Euro, but that seems unlikely.
The economic policy that the EU, and Germany and France in particular, are forcing on Greece has led to a major depression – and the problem does lie in that policy, not in Greece’s deficit. Austerity is the worst possible answer to an economic depression; and austerity which is targeted on the poor is indefensible morally as well as economically. If France and Germany want to ensure that Greece does not default, to protect their own banks, they need to take steps to shore up the Greek economy. At present, they are doing the opposite.
The review of provision for mortgage interest
In December, the government issued an informal call for evidence about mortgage interest relief. There are still two weeks left of the consultation period. By comparison with the costs of Housing Benefit, which pays a substantial proportion of rent, the cost of mortgage interest payments (£400m) is limited. In just about every case, people who become entitled to it have received much higher incomes, and the issue of incentives to work hardly seems to apply.
Mortgage interest is part of a system of social protection; the aim is to make sure that people are insured against radical changes in circumstances. The government is rebuilding the welfare system around a very different kind of model, which emphasises safety nets and incentives to work rather than the need to protect people. The system stopped protecting owner-occupiers effectively when mortgage interest was withdrawn for most of them; there has been a growth of mortgage protection plans to make up for the deficiency. An important concession to growing unemployment has been the reduction of the waiting period, which had been extended to 26 and in some cases 39 weeks, back to 13 weeks. Among the ideas that are now being canvassed are a two-year time limit for the receipt of help, which would force people to move house, and a charge against the property that could be realised on resale, which may force them not to. Neither fits the the easy certainties which have characterised some other announcements about the plans for Universal Credit. The government is discovering, slowly, that there are different principles for different cases, and that one size does not fit all.
"No business is good business": undermining QE?
The level of money in the economy has an important influence on demand, and so on economic production and growth. The Bank of England has expanded its quantitative easing, injecting money into the British economy, by a further £50 billion, taking the total to £325 billion. At the same time, reports which focus on the rewards given to RBS’s Chief Executive have been emphasising what a splendid job he has been doing in rationalising the bank’s balance sheet, shrinking its holdings by £600 billion to date, with a further £200 billion to come before long. That seems to square with a view attributed to some banks – “no business is good business”. These two figures are not commensurate or directly comparable – RBS is disposing of assets as well as loans, outside the UK as well as within it – but the relationship is close enough to raise questions. While the BoE is injecting money into the economy, RBS is working assiduously to take money out. And that raises the question, not whether Stephen Hester is being overpaid, but much more seriously, whether he is being paid to do the wrong things.
HMRC
Attacking HMRC on a range of issues, a Times editorial comments: “Tax Credits have repeatedly been overpaid because changes in individual circumstances occur too frequently for the bureaucracy to keep up.” That’s quite true. But the Universal Credit scheme, contained in the Welfare Reform Bill currently passing through Parliament, relies centrally on the principle that it will be possible to respond to changes in people’s needs as they happen, “in real time”. It is not possible now, and it is not going to happen like that.
The government has sidled away from the promise of a computer system that will cope with everything – no system could be expected to record changes in household circumstances as they happen. What they are currently relying on is the development of a faster PAYE system, which generally depends on income coming from employment. Changes to overpayment rules mean that claimants who are overpaid will have to repay money regardless of whether they could reasonably have known they had been told the wrong thing or were being paid the wrong amount – a situation which the Ombudsman has previously criticised for the instability it creates for low-income households.