The House of Commons Work and Pensions Committee has been reviewing the Project Assessment Reviews of Universal Credit, and their report was published yesterday. In a nutshell, the plans are gobbledegook, there is no evidence, but the DWP assures us it is on track and that things have greatly improved. The press coverage picks out some of the critical comments, but to my mind the report is remarkably restrained. The project was, and remains, years behind schedule. With billions spent, it still has not submitted its business case. The management documents that have found their way into the public domain substantially fail to relate to the task in hand – see John Slater’s comments on my blog. The Committee has had clear evidence that they were deliberately misled about previous progress. Universal Credit was, and is, a national scandal.
I’ll shortly be leaving for a semester in the University of Łódź in Poland. It’s an adventure – an opportunity to learn about a country I’ve not been to before, to learn a language I don’t speak, and to get a different perspective on life. It comes at a time and the effect of Brexit on rights to travel and work in the EU may well mean that it would be much more difficult to do anything of the sort in a year’s time.
My other work includes books on collectivism (close to completion) and on poverty, where I’m currently waiting for input from my collaborators. I’ll continue to watch and comment on issues in the UK, such as the development of social security in Scotland.
A large number of amendments to the Social Security Bill have been tabled by the Scottish Government, along with a smaller number from opposition parties. The Scottish Government amendments, which are more likely to pass, include:
- a duty to promote takeup
- provisions relating to aid and advocacy
- the constitution and operation of an independent Scottish Social Security Commission, which will scrutinise proposed regulations
- qualification of the provision to allow some benefits to be paid in kind, so that it will be dependent on the consent of the recipient
- clarification of rules for reconsideration (but not, regrettably, the two-stage mandatory reconsideration)
- not reclaiming overpayments from people innocently receiving them,
- rules about appeals, and
- uprating for inflation.
Other constructive amendments from opposition parties are less likely to pass, but they are constructive: they include, amongst other things:
- extension of the general principles to cover the relief of poverty and the protection of rights
- definition of the functions of the Scottish Social Security Agency
- reporting issues
- the power to create new benefits, and
- a duty to inform people about their entitlements.
This doesn’t deal with all the issues I’ve previously raised; I am still concerned about the adoption of the Mandatory Reconsideration, and the lack of reference to alienability or diversion of benefits – but the overpayments rules and the provision for detailed scrutiny are much better. It speaks well of the government that they have listened to many concerns, and of the opposition that the amendments are considered and show an evident desire to make the Bill better.
There are times when I wonder what is the point of writing academic arguments – it doesn’t seem to matter what you say, because people will just make it up anyway. In the course of the last year, I’ve commented on a couple of references which have set me up with positions I don’t hold. Today I’ve come across a paper written for a conference in Indonesia which says this:
Paul Spicker argues that poverty is an individual issue caused by the weakness and choice of the individual concerned. Poverty will disappear if market power is expanded to the maximum and economic growth is driven to the highest possible level.
For the avoidance of doubt, I do not hold this position, and I have never held it. I cannot imagine why anyone who has read what I do write should suppose that I might think this way.
An article in Bloomberg claims: “Yup, rent control does more harm than good: Economists put the profession’s conventional wisdom to the test, only to discover that it’s correct.” The reference to the conventional wisdom – “Economics 101” – refers to two basic precepts of economic theory. If prices are restricted, it reduces supply and increases demand. If prices are not set at a market level, it reduces the efficiency of the allocation, leaving people worse off than they might otherwise be. On the face of the matter, that is what the paper seems to confirm. I’m not currently able to access the paper, but what the abstract says is this:
“we find rent control increased renters’ probabilities of staying at their addresses by nearly 20%. Landlords treated by rent control reduced rental housing supply by 15%, causing a 5.1% city-wide rent increase.”
I’ve no reason to dispute that finding. What I do dispute is the idea that this constitutes a general proof of the application of basic economic theory in this field. San Francisco is one city, with one type of policy. In most of Europe, the private rented sector is larger where there are rent controls: see R. Arnott, 1995, “Time for revisionism on rent control?”, Journal of Economic Perspectives 9(1) 99-120. In the UK, the removal of controls in 1957 led to a radical reduction in supply, as landlords took the opportunity to shift to alternative investments. The removal of controls in 1988 had very little immediate effect: leaving aside stock transfers from the public sector, much of the increase in private renting has taken place since 2007, reflecting low rates of return on alternative investments. Putting it bluntly, we already know – or should know – that Economics 101 doesn’t reflect what is actually happening out there in the real world.
The central objection to applying basic economic theory in this context is simple enough: it’s much too basic. It works on the idea that “other things are equal”, and they never are. Rental markets are invariably complex. Rent controls are not the only determinant of rents; they’re one factor of many, including the ability to pay and the existence of alternatives (such as low cost owner-occupation). No less important, a landlord’s decision to rent is never, repeat never, determined by rental levels alone. It has to balance that factor along with capital values (“rates of return” are a relationship between the two), alternative uses of capital, the implications of holding an illiquid asset, and the prospect of capital gain or loss. So the report that some landlords are converting rented flats into new condominiums is not a reflection on rents; it’s a reflection of a complex calculation, which may work out differently in different places at different times.
Tunisia is reported to be improving its social security system. They’ve aimed to offer a stable minimum income, comprehensive coverage and provision for decent housing. The amounts being offered are not large: an increase from 70 dinars a month (less than $29) to 150 dinars earlier this year and now 180 dinars (a bit under $74), a little extra (10 dinars) for each child in school, a fund for loans to house buyers, and exemption from fees for medical care (but I don’t know enough to say how that is actually going to work). The national GDP per capita now seems to be in the region of $10,800 (USD), so the benefits are not likely to be enough to live on. Having said that, the commitment to extended coverage is a big deal: Tunisia has previously been reported as having something on the region of 80% coverage, and the people not covered before included agricultural workers, domestic servants and unemployed people.
The extension of coverage in low to middle income countries in recent years has been remarkable. In a recent lecture, Minouche Shafik of LSE pointed to the rapid growth of a range of welfare measures across the developing world – more than 80 have social security pensions, more than 120 have some unconditional cash transfers. Around the world, she argues, the “state” is coming to mean a “welfare state”.
Martin Ravallion has put together several arguments against ‘straw men’ used to criticise Basic Income (he calls it BIG, for Basic Income Guarantee). The points he particularly tackles are assertions that
- BIG is too expensive
- There are better ways to eliminate poverty
- Targeting is good enough
- A BIG would destroy work incentives
- BIG diverts attention from health and education.
Most of his arguments are good ones. Expense is a matter of how we choose to organise ourselves; targeting doesn’t work; Basic Income is neutral about work incentives. However, not all the arguments are as strong.
The first problem is his assumption that BIG is there to eliminate poverty; most basic income schemes are providing a limited foundation income, not an adequate one. There are good arguments for considering what Basic Income can do for women, for example, which are about something else. Ravallion is also right to say that “A BIG should be among the options to be considered by any developing country in a package of antipoverty policies ” The situation in developed countries is different, in so far as Basic Income is seen as substituting for an existing benefits system. In the case of the UK Basic Income wouldn’t favour the poor – the effect of eliminating benefits would mean that the Basic Income would exclusively help people who do not currently receive benefits, most of whom are on higher incomes. Nearly all the schemes I’ve seen leave some poor people worse off.
The second problem is the assumption that what gets paid for education can be treated as part of the income package – it can’t be. The money spent on BI would have an opportunity cost (as he acknowledges); many of us would like more to be spent on other things (such as child care, disability benefits, public services, infrastructure, environmental protection) which either favour particular categories of recipient, or can’t be attributed as personal income.
Lots of the objections to Basic Income are ill-founded – there are other “straw men” he might have picked on. One is the argument that the whole thing is likely to be unexpectedly complicated. We know from the administration of universal, categorial benefits like Child benefit that it doesn’t need to be. A second, which overlaps with that, is the accusation that the idea is “untried” – it has been, just not comprehensively. The third is the argument that it would call for a penal rate of taxation. Taxation is done by convention, some countries have much higher rates of income than others, and income tax is not the only way that governments can raise funds.
Having said all this, there are bogus arguments and straw men being set up in favour of Basic Income, too. Among them are the arguments that
- We need Basic Income because there will be no work to do. There will always be more work to do, and presently we have major shortages of activities that we just aren’t ready to pay for – among them social care, the maintenance of the public environment, security, child care, and many others.
- There’s no harm in some people living off others. This is Philippe van Parijs’s argument for supporting ‘surfers’. It greatly underestimates the capacity for resentment and hostility – especially when people who deny the legitimacy of the community that is funding them use violence and intimidation to impose their values on others.
- We won’t need tax thresholds if there’s a Basic Income. Yes, we will. Taxing every penny people make threatens to become an administrative nightmare.
- We won’t need existing benefits if there’s a Basic Income. Yes, we will. Benefits don’t just provide people with a basic income. Among them are income smoothing, housing finance, economic management, support for special needs, and many others.
The “Experiments” that are being tried out won’t, and can’t, settle these issues. When old age pensions were introduced, it took more than sixty years before we could get a clear idea of the impact on how they had changed people’s lives. The Scottish experiments should reassure us about practicality, but I’m doubtful that they can tell us much about long-term shifts in behaviour.
A blog from LSE, and a recent article in the Times (behind a paywall), suggest that we should acknowledge that politicians have “good intentions”, even if the policies go wrong: Universal Credit is the model. There are certainly many people who accept the view that Universal Credit was intended to be simpler, more effective and capable of getting people into work. I’m sceptical that that captures the true intention. In 1994, Iain Duncan Smith made a case in the Daily Mail (13 April 1994) for a single, unified benefit in very different terms.
ODD, isn’t it, that as Britain’s standard of living has steadily improved, the number of people claiming State benefits has increased, rather than declined?
… The problem lies in the very way the system works. Far from merely providing people in need with a national minimum level of subsistence, it encourages dependency. … Vast sums of money are lavished on running something which is, inevitably, prone to abuse on a massive scale. What we need are fundamental changes – and soon. …
At present we make payments to the old, the sick and those with children, regardless of their financial situation. This nonsense means that a major part of the expenditure goes to help people who don’t need the money in the first place. … people become trapped, remaining dependent on the State rather than on their working abilities. No matter how much someone wants to work, a job is not a particularly attractive option if it means financial loss. What’s more, the system actively encourages people to change or disguise their lifestyles in order to maximise their benefit entitlement. Who can doubt, for example, that some of the mothers now claiming single-parent benefit are actually living with a partner more or less full-time? … It should make us all angry that while many deserving cases are failed by the system, the greedy and workshy profit from it.
So what can be done… ? … There should be just one, income-assessed benefit, with all the relevant factors taken into account to cater for the needs of the individual and his family. This should be administered by one body, instead of the multitude of offices, each handling one type of benefit, we have now. … The new benefit must also aim to make going back to work a more attractive option for the unemployed. The benefit should not be set too high and would need to be ‘tapered’ so that if people took jobs paying less than current benefits, they would not lose all their benefits immediately.
This is not, of course, the account famously given by IDS, as a New Statesman article showed, but the elements of Universal Credit were there long before his supposed ‘conversion’. The basic argument for what became Universal Credit was that it was going to save money, prevent abuse and discourage dependency – not that it would give people a more secure, predictable income when moving in and out of work.
I’ve pointed to many of the deficiencies in the design of Universal Credit, but the worst problems with Universal Credit are not there just because it is a clunky, means-tested benefit. There are two other aspects of the reforms which have created particular problems. The first was the assumption that benefits were aimed at people who ought to be working instead. Most benefits go to pensioners – something else that Duncan Smith disapproved of in his Mail article. Most of the rest of the benefits have no direct relationship to people who are not working – Tax Credits, disability benefits and housing benefits go to people in or out of work. Most of the rest after that were people who were not expected to work – single parents and people with incapacities, both the target of punitive and work-related action. And most people claiming as unemployed – about 80% – return to work in the course of a year regardless. Universal Credit was initially supposed to go to 7 or 8 million people (the target numbers have been falling); the primary target group for employment-related action was certainly less than half a million, if we include single parents and people on ESA, and less than 200,000 if we don’t. Redesigning policy around readiness to work – a process begun by the previous Labour government – is an imposition of the wrong policy on the wrong people.
The second problem has been the abandonment of the idea that no-one should be left completely destitute. Benefits are being stopped cold for a variety of reasons – sanctions, reappraisals, revisions and, unjustifiably, administrative transition to the new system. Some people have been driven to our “uplifting” food banks. Here are a few more outcomes to lift you up:
- Shoplifter became desperate and stole meat after her benefits were stopped
- Thief committed first offence in three years after her benefits were stopped
- Bridgnorth man with six inch knife hunted rabbits after losing benefits
- Mum died alone in her freezing home after her benefits were stopped
In September, I commented on the controversy about a paper on The Case for Colonialism. This week, a similar argument has exploded in the University of Oxford. A proposal for a series of seminars on the ‘Ethics of Empire‘ has been established in the University’s McDonald Centre. It states that ’empire’ can mean many different things, that both “apologias and critiques” of empire need to be tested against the historical evidence, and that there are lessons to be drawn for contemporary engagement by the Western Powers. (Note that it refers to “apologias” rather than “defences”; this is not an agenda that puts arguments for and against empire on an equal footing.) The seminars that have taken place to date have considered the Assyrian, Roman and Chinese empires.
In reply, a letter to the Guardian has been sent by a large and assorted collection of 58 academics, mainly historians, who object to the premises of the proposal. They claim that that the project is based in ignorance of current scholarship and proposes a “crude cost/benefit analysis” of empire. (I cannot comment on the first, but if it is true, then a dedicated series of seminars featuring presentations of historical empires by international experts should help to diminish the scope of the organisers’ ignorance. I do know something about cost-benefit analysis, and I think I can say more confidently say that there is nothing in the proposal, either explicitly or implicitly, which does argue for such an approach.) The objectors are on stronger ground when they write: “Developing a ‘Christian ethics of empire’ is not an intellectually sound, let alone an academically robust, endeavour ”. The suggestion that the project will offer “a nuanced and historically intelligent Christian ethic of empire” seems to imply that there can be such an ethic, analogous to the idea of a just war; that is controversial, and it may indeed be “political” in the terms criticised in the letter.
It hasn’t helped that the Daily Mail has now stuck its oar in. The objectors are advocates of an “ugly totalitarianism’, and to prove the point the Mail digs out any mud that it can throw: some of them are opposed to Brexit, five are anti-Israel, and several are (gasp!) supporters of the Labour Party. The Mail‘s article, by Guy Adams, is rambling and ill-focused, but at the core it does have a point. The objectors are basically trying to suppress a dispassionate discussion of issues in an academic context, because it is framed in terms that they disagree with. If we can’t discuss the Assyrian empire without prior political genuflections, we’re in trouble.
The government has reaffirmed a commitment to introduce a Universal Service Obligation for broadband, rejecting an offer by BT Openreach that fell short of that objective. On the Today programme today, the minister responsible for digital policy, Matt Hancock, seemed to me to be saying that the way to achieve universal coverage was to encourage competition and more diverse providers. Competition, in its nature, can’t and won’t do that. Competition depends on firms finding an advantage, and choosing what to do and what not to do. The basic comparison to make is with the postal service; universal services mean that everyone should get mail delivered, regardless of location, at a specified price.
Earlier this year, Ofcom looked at the technical issues involved in extending broadband services. Among other things, they noted that none of the main providers would be interested in competitive tendering to administer a UniversalService Obligation. BT Openreach had proposed a rollout where a small proportion of households – 0.8% – would be diverted towards satellite links or asked to meet the costs of connection. That’s a bit like saying that postal services to remote areas will be suspended unless people pay a premium (they already do for parcel deliveries.) Commercially and economically, it always makes sense to unload costs on to the consumer; after all, people in the Western Isles could pick up their post in Inverness. That misses the point of having universal services. The costs of serving remote communities can’t be met without pooling of resources between those communities and others.