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.

 

The techniques might be new, but the urge to watch and control poor people isn’t.

A Dutch court has ruled that mass surveillance of welfare recipients is a breach of their human rights.  This process has attracted attention because of its concern with technology and surveillance society, but the truth is that poor people have always been subject to surveillance.   In the US, where the Constitution protects people from unlawful searches and seizures, people in receipt of benefits were told in the 1960s that of course they have the right to refuse entry, but that the authorities then have the right not to pay them any benefit.  (The case is in Piven and Cloward’s Regulating the poor.)  In the UK, the obsession with sex in the lower orders has all too often been manifest in the surveillance of couples to see who was sleeping with whom.  I lost one tribunal because the department had a diary of early morning surveillance on the house.  I won another where they were elderly and of mixed race, and the tribunal were content to accept that it was a commercial relationship.   I’ve referred before to circumstances  where HMRC had commissioned the sort of examination of financial records – and jumping to conclusions – that wouldn’t be tolerated for the respectable middle classes.

There are lots of people in sociology who will immediately link this to Foucauldian ideas of ‘discipline’ and surveillance, but I think it’s got more to do with attitudes to the poor: They are not like Us, and They have to be Watched.  At the same time as we’re talking about high-tech surveillance, Australia has been rolling out electronic benefit and transfer cards as a way of controlling the way that poor people spend the little money they’re allowed.  The purpose is to make sure that people don’t fritter their benefits on drink and gambling (not that there’s much reason to think they do). The restraints are  inconsistent with the basic idea of social security or pensions – and,  for that matter, with the kind of free-market ideology which holds that people should be given the money to pay for things like education or health care.  The whole point of cash benefits is that people get to decide how they use them.   The basic case for limiting spending is the assumption that poor people can’t be trusted.

I thought of calling this the ‘new paternalism’, but the truth is that it’s never really gone away.  Five hundred years ago, Juan-Luis Vives was arguing that  the ‘censors’ (or overseers)

 should inform themselves of the life and customs of poor people, whether they be children, young men or elderly. They should know what the children do, how they are progressing, what are their habits and character, what they might become, and, if some of them sin, whose fault it is.  All this has to be corrected. The censors should take care to know if young and old people are living according to the laws they have been made aware of. … They should know whether everyone conducts themselves with economy and temperance. They should reprimand those who spend time at games of chance or who frequent wine or beer taverns.  If one or two warnings are not enough, they should be punished. Penalties will be imposed according to the judgment of those who, in each town, are most prudent … Special care must be taken to protect against frauds by idle people and malingerers, so that they do not have the chance to cheat.

The urge to control the poor was there before social security  came into existence, and it will be there when we are all gone.

Universalising French pensions

It’s not the first time that a French government has tried to inject a greater element of universality into its arcane system of welfare provision.  The Juppé plan, in 1995, tried to curb rising costs partly by imposing spending limits, and by trying to bring the pension rights of miners and railway workers into line with other groups.  It also proposed universal rights to health care and guaranteed access. One prominent trade unionist called that idea “the biggest rip-off in the history of the French Republic. … the end of the Sécurité Sociale.”

The current system of pensions is costly – it’s long been the case that pensioners in France are on average better off than workers.  Clearly, part of the government’s agenda over time has been to cut the cost, and that is the source of many of the protests.   If cost was all it was about, there are other things that the government could have done – raise the pension age, increase contributions, increase the number of contribution periods required, and so on.  But there are lots of other problems in the system.  The shift to precarious labour and the problems of switching between different pensions rules can shut people out. With 42 distinct pensions regimes, the system is horrendously complicated.  It takes years (literally) to work  out what someone’s pension is going to be; often the calculations begin long before a person reaches 60 and are not finished until after the person retires.   As the government plan says,

personne ne sait exactement ce à quoi il a droit. Le système est illisible, complexe, et crée de la défiance.

[Nobody knows exactly what they’re entitled to.  The system is incomprehensible, complex and it creates distrust. ]

The proposed alternative is outlined in the government plan (the link is in French). The main elements are:

  • a universal scheme for everyone – one of the principal aims is to remove inequities between people currently under different regimes
  • a points system, in place of contribution periods, to determine entitlement
  • an increased minimum pension
  • retention of retirement at 62 (that is early by European standards, but  worse than some French regimes currently offer)
  • credit for every hour for which contributions are paid  (seriously!)
  • improved protection for people whose contributions have been interrupted through care, unemployment or sickness
  • full transparency, through a personalised record of contributions and linked entitlements
  • a commitment to balance the books – the current system runs perennially in deficit
  • transitional arrangements for current workers
  • a new system of governance.  There is a commitment to consult about the value of points, but overall the new system will reduce the role of the ‘social partners’ including trades unions.

Something that isn’t explicit in the plan is the distributive element.  It’s been reported that the proposals are regressive:  the contributions required of very high paid people will be 2.8% above 120,000 Euros a year, whereas under that level the contribution will be 28%.  However, the 2.8% is purely redistributive; it will yield no benefits for the contributions.

Both sides of the argument are right.  On one hand, the government is proposing a scheme that should be less complex, fairer and  more inclusive.  On the other, the objectors will be trying to defend a scheme which, for all its irrationality and complexity, has delivered far better benefits than  a more orderly set of schemes could ever have offered.  There will, of course, be vehement protests  – it’s the French national sport, and they do it so well. But the protestors, mainly from the left and the trades unions, are  protesting against the idea of universality and state welfare, and from a British perspective, that’s a difficult position to hold.

The benefit system fails people who lose their jobs

Former employees of Thomas Cook are reported as complaining that the benefit system has failed them.  This should come as no surprise.  Universal Credit is based a fundamental misunderstanding of what benefits are for, and what they are supposed to do.  Part of that misunderstanding was the assumption that benefits are all about work: most of the intended recipients are people who are not in the labour market.  But for those people who are looking for work, the next part is the assumption that those people have to be guided or pushed towards work.  The vast majority of unemployed people move back to work within a year, regardless.   What people needed, and what they didn’t get, was income smoothing to tide them over while they found new employment.  What they got instead was delay, obfuscation, confused advice and periods with no money.

I’ve argued in the past for a different approach to unemployment benefits, including provision for short-term income smoothing and a distinction in the pattern and level of benefits for shorter-term and longer-term unemployment.  The French system, based on a convention of employers and trades unions rather than state-based provision,  has both.   The British approach has long been to assume that one size fits all.