Evidence to the Welsh Affairs Committee on Universal Basic Income

I gave oral evidence to the Welsh Affairs Committee at a session on November 3rd, and have only just got round to reading the transcript, which is here. I made three important reservations about Universal Basic Income: the distributive impact, especially if it was to be funded by closing down existing benefits; the impossibility of defining a level that would be ‘adequate’; and the many other purposes that benefits have.

There are two points in the transcript at which the MPs misconstrued what I was saying, and while the format of the session wouldn’t allow me to go off on a tangent to explain, I can clarify the points here.

Q116 was not addressed to me – it was answered by Jonathan Williams.  Q117 was, and Geraint Davies MP seems to have taken me to mean that people should be forced to work. I can’t see where he got that from, which makes it difficult to answer; I said no such thing, and wouldn’t.  I did say that conditionality does not work and was counter-productive.

In Q143, Robin Millar MP thought I was arguing to ‘tweak’ the system. This, at least, is an understandable misapprehension; I should have been clearer. I have argued, here and elsewhere, to break up big benefits into smaller ones.  However, I don’t think that’s a ‘tweak’ – it would be a fundamental reform.  See, for example, my blog on How to abolish Universal Credit.  The rationale for redesigning the system about simpler,  smaller benefits with common pay-days is that then ‘income packages’ – the money people finish with – can be adapted to their needs without massive intrusion or putting everyone on the same conveyor belt.

 

Universal Credit never fails to confuse

A research report from the IPR at Bath University began by trying to examine the impact of the £20 uplift on claimants, but hit a snag; many claimants haven’t a clue about how the uplift works, or even if they were receiving it. “Of the 56 participants, less than half said they were aware of the uplift (25/56); over half (31/56) were either not aware (28/56), or not sure (3/56).”

I didn’t even notice to be honest … because it doesn’t say that on the statement I don’t think … because his wage … can be different every
month, I never really know what we’re going to get UC, it doesn’t stay the same …

This shouldn’t come as a surprise.  Over time I’ve reported a catalogue of problems with the design of the benefit, and this one comes up repeatedly. More than ten years ago, I was complaining that “It can be hard for claimants to know whether they are entitled, how much they are entitled to and – just as important – when they should stop receiving the benefit.” The same point has been made by an All-Party Parliamentary Group.  The IPR report concludes:

We hesitate to call these effects ‘unintended’ or ‘design flaws’ because, in the main, they reflect how UC is intended to work.

“Experts by experience”?

A group of ‘experts by experience’ have developed a series of proposals for the reform of social security.  I’ve just been listening to their presentations.  They claim that

“Commissioners as Experts by Experience cut through organisational and interest group silos and fragmented debates about poverty, instead providing a holistic perspective, with an ability to focus on fundamental core issues and anchored in lived experience of the system.”

I don’t think that’s borne out in practice.  The Commisson’s principles, asking for dignity, respect and adequate benefits, are unexceptionable.  The point which set the alarm bells ringing for me, however, was the proposal to replace PIP with a different benefit to meet the costs of disability. If we look now at the rules for PIP, or at the previous rules for DLA, we should be able to see that the assessment is not an assessment of costs; that the levels of benefit are not related to the costs, but to the severity of the disability; and that another service which does consider the costs, as part of the social care system, has a different reach and scope to these  benefits.  The idea that PIP was meant to meet extra costs largely began with the introduction of DLA, 1993-94.   But the benefits it was based on – Attendance Allowance and Mobility Allowance  – weren’t there to meet extra costs.  Attendance Allowance, despite the name, was always a benefit for severe disability rather than attendance as such, and it was explicitly introduced (in 1970) to supplement the depressed incomes that people with disabilities had to suffer over the long term.   That’s an important principle, that we shouldn’t lose sight of.

When people claim to be ‘experts by experience’, it seems to chime with a lot of the ideas that have informed participation and diversity in the development of policy.  The central claim, which I have  no problem with, is that people with disabilities have expertise relating to their own disability.  That squares with one of the core propositions that has guided social care policy in recent years: Nothing about me, without me.  There’s an influential literature about user participation in policy-making.  Over the years, I’ve done a certain amount of work, as a researcher and policy analyst, based on the principle of empowerment.   A lot of qualitative research consists of listening and recording what people say, and I’ve mentored groups of people in poverty undertaking participative research projects, so that they can do as much.  That’s less a matter of expertise than of attitude: valuing what people say, treating it seriously, conveying people’s feelings and experiences in their own words.   

The claim to be ‘experts by experience’, however, goes some way further than that.  The group  which has formed these proposals had drawn on a combination of people with disabilities and community activists.  The idea that they are “expert” appears to stake a claim that people with  personal experience  have an expert’s general understanding of people with different personal experiences from theirs.  And there, with regret, I must beg to differ. There are three evident problems.  The first is that a group of this kind can’t conceivably represent the range and diversity of experiences out there.  Most benefits go to pensioners: this is a group which is largely of working age. Most unemployment is transitional. Most people with disabilities don’t identify themselves as disabled: they’re ‘managing’, or ‘not really disabled’, or disabled ‘sometimes’. The claim to ‘expertise’ dispenses with the need to cover the range of experience.

Second, activists are different.  This is well-known in political research, where the views of activists are always a bit more pronounced than the mainstream – that’s why they’re activists.  Activists in social security are more likely to be long-term recipients, from which it follows that they’re also in situations that change less rapidly than many others, in more unpredictable and precarious situations.

Third, the kind of ‘expertise’ that people develop is typically formed in relation to current policies and politics.  Claimants’ understanding of the arcane systems they’re being asked to comply with are conditioned by the current shape of benefits.  Very few people will know or remember that there were once earnings-related Unemployment Benefits, or higher rates of Invalidity Benefit for people who suffered disability at an earlier age, or a One Parent Benefit, or a Non Contributory Invalidity Pension; this kind of option disappears from view.

We need, of course, to take the voices of claimants seriously.  They have a right to be heard, and information we can’t obtain without engaging them.  Calling them “experts by experience”, however, is not the way either to get the greatest level of participation, or to get to the meat of a policy.

Is the government replacing its £6bn cut in Universal Credit with a £1bn reduction in the taper?

It’s being proposed, apparently, that the way to compensate for cutting Universal Credit by £20 a week is to reduce the taper from 63% to 60%.  This is, from the point of view of claimants, a very small concession.  It would mean that, if they earn £200pw, they would be able to retain all of £6pw in UC, or potentially less than £4 pw lif they’re then subject to tax, National Insurance or loss of Council Tax Reduction.

This very marginal change will cost, according to government sources, will cost £1bn, in place of the £6bn that the current uplift is costing. The second of these figures makes some kind of sense.  There are currently about 5.8 million claimants of UC, and at £1040 per year the cost would come to just over £6bn.  But the first figure is one I can’t untangle at all, and the scrappy information available on the DWP’s Stat-Xplore site doesn’t help much.

I’ll start with a previously published figure, one which I have to admit I’d simply let pass without even noticing it. It was a claim, when the taper came down from 65% to 63%, that the cost would be £700m. On that basis, each percentage point on the taper costs the government £350m or so.  From that, it seems to follow that pulling down the taper by another 3% would cost  over £1bn.

When I start to think about it, however, that crude calculation doesn’t look as if it can be right. On current estimates (a forecast for this year) there are 2.3 million people  working and receiving UC. Cutting the taper for someone who is already earns £10 pw would allow them to keep an extra 30p in benefit. (If they’re not working, and have no other additional income, they wouldn’t get anything extra.)  To cost £1bn, the average income of people who are working and claiming benefit would have to have an income in the region of £300 pw – more or less, a full time minimum wage – and that would bring them all to the point of paying tax and National Insurance, which would claw back more than a quarter of the apparent benefit.  Are all the working people who get UC on at least a full time minimum wage?  Perhaps others can find the data to support this, but I can’t tell.

The situation is more complicated,  because the rules are complicated.  The work allowances (which aren’t actually ‘allowances’, but let’s not go there) are only there for families with  children, who might well use them, and people with limited capacity, who probably won’t.  There’s a difference in the allowances between people who rent and people who don’t. For higher total incomes, there’s a benefit cap.  It’s hard, then, even to say how many UC claimants are directly subject to the taper, or what their total income will be. The tally will certainly include single persons in employment, and it will probably include low-income families who are buying  a house, but I haven’t been able to extract figures that give me a sensible size for either group.  What I think I can say, at least, is that there isn’t a firm, clear constituent group who will certainly benefit from this concession.

It would be possible, and distributively fairer, not to reduce the taper, but to increase the work allowance, ideally making it available (as it used to be) to people without children. That would give a limited but determinate benefit to anyone  who works while on UC.  A government that was better disposed towards people on low incomes might be more inclined to retain the £20 uplift; but then, a government that was better disposed wouldn’t have introduced this nightmarishly complex system in the first place.

A utopian vision of money for everyone

One of the Zoom sessions I went to today was fuelled by optimism about a most unlikely scenario: the idea that the United Nations should provide people around the world with a universal basic income.  The advocates were arguing that the money could be raised to pay everyone $30 a month, and that it should be.   Their position paper can be read here.

I don’t want to dismiss this as a thoroughly bad idea.  In the course of the last 20 years or so, many countries have been introducing cash support for their populations, that support can make a huge difference to people’s lives, and the support doesn’t have to be conditional. The case is well made in a short book by Hanlon and others, Just give money to the poor (2010), and reinforced by the experience of small area provision in India and Kenya.  (These experiences don’t translate well into a case for the same policy in developed countries, where BI proposals are often being developed in terms that will not improve the incomes of many poor people, and may make some worse off.)

Nor do I see the proposal as being intrinsically unaffordable.  It would call for redistribution from richer countries, but that already happens in the form of Oversesas Development Assistance.  Asking the UN to take it on seems like a long shot, but the UN is at least an appropriate forum for discussion: the UN’s Guiding principles on extreme poverty and human rights marks out their interest in the area.

The core problems are somewhat different.  The first question to ask is obvious: is this the greatest priority? People in developing countries need money, but many of them are poorly integrated into any formal economy where the money can best be spent. Other contenders for support might be health care, education, water, and sanitation – all of which are essential to welfare, but probably better delivered without depending on private, commercial markets.-

The second problem is logistic.  How does one distribute money to seven billion people – or even to four billion?  I raised the point on the forum, and the answer came back: mobile money wallets.  For which people need first to have access to electronic devices, and the means of powering them, and local providers need to have the means to process the payments.   It’s not much of an argument to say this has been done in small communities.  Implementation changes with scale.

Advocates for Basic Income are not all utopians, but the curse of Basic Income schemes has been a common failure to think through how things can practically be done, and what the rules should be.  Who gets the money? Do they have to claim? How is the money paid? How are children to be treated? How can we ensure that the money is used by the person it’s intended for? What happens when someone dies?  These are the sort of details that experiments in BI ought to have engaged with and sorted long ago – not all the nonsense about incentives and behaviour change.

‘Shaping future support’: more on the obsession with work-testing people who are ill

The ‘health and disability’ Green Paper, Shaping Future Support, is nominally addressed to benefits for people with disabilities and ‘health conditions’.  It promises a review of three broad areas – ‘enabling independent living’, support into employment and  experience of the services, but in the wash this mainly comes out as a review of two issues, assessment and employment.

On the topic of assessment, the paper has little to offer.  People find the assessments are repetitive and inaccurate; the main responses are ‘triage’ and developing more telephone and video assessments.  On the first point, I defy anyone to develop a triage process that doesn’t lead to people being asked some of the same questions twice – unless, of course, the purpose of the triage is to block some people from going futher. As for inaccuracy, the central problem is that the DWP is still holding to the idea that their assessors can garner more information in an hour than professionals in continuing care can collect over several months.  There will be a problem for as long as the DWP continues to disregard medical evidence.

The other issue, and the issue which gets the most coverage in the Green Paper, is about employment. I apologise for repeating myself, but it stands repetition. Two million people who receive Employment and Support Allowance have been receiving it because they are too sick to work, and it is not reasonable to ask them to.  I can say that with reasonable confidence, because they have been subjected to a government-set assessment that was designed to establish precisely that point.  I am sure that there will be those in government who will say, ‘ah yes, but they are still capable of work-related activity’.  They may be, or may not, but there has been no assessment of that; there should have been, there was going to be some relevant test, but the DWP decided not to introduce one.  At present the only criterion for being deemed capable of work-related activity is an assumption, that by default people who need less support must be capable of such activity.  So they are set to do things like writing a CV and invited to have their confidence built. Just what people with bowel cancer need.

One other point about the Green Paper is worth noting.  Late on, in paras 300-303, it floats, for no obvious reason, the possibility of combining ESA/UC with Personal Independence Payment – despite acknowledging that the criteria for eligibility, and the assessments, are  quite different.   I suspect, but do not know, that this may herald an attempt to restrict disability benefits to people on low incomes.

Unemployment is not about to triple – is it?

I was idly poring through the most recent edition of the DWP’s Benefit Expenditure and Caseload Tables – I know, it’s sad – when I came across this striking sequence of data, in the table headed “Unemployment benefits”.

2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 2025/26
Outturn Forecast Forecast Forecast Forecast Forecast Forecast
Expenditure, £m (real terms)
20,119 38,564 41,873 42,680 45,298 50,373 57,990
Caseload, 000s
2,330 4,284 4,509 4,544 4,714 5,192 5,953

By that reckoning, both caseload and expenditure will increase to two and a half times their current level.  There will be nearly six million people unemployed.

There are two possible explanations for this.  One, which I think implausible, is that the government is anticipating a massive and prolonged surge in unemployment as a result of the pandemic and Brexit.  The scenario is not beyond imagination, but I don’t think it at all likely,  even if it was true, that the government would build it into their medium-term forecasts.

The second, which is much more likely, is that the figures represent the anticipated caseload of Universal Credit, currently being counted without any distinction between people who are unemployed and the rest. At the moment, Universal Credit is mainly performing two functions: payments to people who are unemployed, and payments to people on low earnings.  As time goes on, it will also be taking in more and more people on ‘legacy benefits’, and the largest group of people in that category  are nearly two million people currently receiving Employment and Support Allowance. There may well be some people on ESA who are really unemployed, but all of them are  sick or incapacitated.  Bear in mind that the basic, central criterion for receipt of the benefit is that these people are sick, and cannot be expected to work.  That’s not just me saying that. This is the text of the 2012 Welfare Reform Act:

37 Capability for work or work-related activity
(1) For the purposes of this Part a claimant has limited capability for work if—
(a) the claimant’s capability for work is limited by their physical or mental
condition, and
(b) the limitation is such that it is not reasonable to require the claimant to
work.     

Anyone who applies for ESA has to show that they have limited capability for work, tested not (as it once was, and should be) by doctors who know their patients,  but by an elaborate points scheme.  The whole point of providing a long term sickness benefit is to make provision that does not depend on people seeking work.

What the forecasts tell us is that the government currently intends to make no distinction between people who are unemployed and people who cannot reasonably be expected to work.  They will all be counted as receiving unemployment benefits.

The Resolution Foundation proposes a rethink of benefits

The Resolution Foundation has published a short report – they call it a ‘briefing note’ – to consider lessons from the crisis for the system of benefits.  They make several key points, most of which I’d endorse:

  • Earnings-replacement is a critically important role of benefits
  • The current system of sick pay is inadequate, and forces sick people to go to work when they shouldn’t
  • The distinction between employees and self-employed people makes no sense
  • The general level of benefits is too low
  • The safety net needs to reflect housing costs and family size
  • Big reforms will inevitably generate problems
  • There is going to be an increased demand for support for long-term sickness.

I’d depart from their arguments in two ways  First, I don’t think the response of the benefit system, and particularly Universal Credit, has been adequate even within its limited sphere of operation.  Half the applicants have found the process difficult, delays have been marked, it’s full of arbitrary hurdles, and it’s riddled with errors.

Second, the report  seems to me to think of universal benefits, earnings replacement and safety net benefits as being alternatives.  It’s in the nature of cash benefits that they can be combined from different sources, in different ways  – what matters is the final ‘income package’.

Universal Credit is not ‘spending’; it’s a transfer payment

At the risk of generating more fog than light, I’ve just tried to squeeze a complicated little argument into a tweet. Benefits are commonly presented, in public accounts and in the media, as a form of public spending.  That’s not strictly true.  Benefits are technically a form of ‘transfer payment’.  The government doesn’t actually spend the money; they pass the money to the people who receive benefits (pensioners, families and so forth) so that they can spend it.

This has one of two effects.  If the transfer is paid for by personal taxation – that’s not the only way for governments to raise money – then benefits are simply redistributive.  On the face of the matter, redistributive transfers are economically neutral  – they have very little effect.  If they do have an effect on economic activity, it’s because people on lower incomes may well spend their money differently from people on higher incomes.   Typically, they save less (so the money is used more) and they spend more on food as a proportion of their income.

If the transfers aren’t paid by personal taxation, the situation is a little more complex.  If the cost can be tracked to a specific form of finance, that may imply a different pattern of economic behaviour, and the transfer payment may not be so neutral.  However, government finance doesn’t work to a strictly balanced budget, and it’s quite possible that the money will simply have been created, like ‘quantitative easing’ or ‘helicopter money’.  In the present circumstances, there’s a very strong argument for government to maintain a flow of money in order to shore up economic demand.  Quite apart from that, of course, the case  for protecting people on low incomes while that happens is strong in its own right.

Stephen Kidd on universal social security benefits

I’ve just heard a superb  presentation by Stephen Kidd, of Development Pathways.  He argues that developing countries should be focusing on universal benefits, like child benefit or a universal pension, rather than the means-testing which is being rolled out in many poorer countries.  The  report, by Development Pathways and the Church of Sweden, is here.

To give a flavour of his argument, here are two graphs.  The first highlights the failure of selective benefits.  The best performing selective programme, in Brazil, excluded 44% of the eligible group.  The worst performing, in Rwanda, used community based targeting, and excluded more than 97%.

The second graph shows something about the tax take.  Offering universal benefits means that people feel included in the support offered by governments – and that means that they are more ready to pay tax.  Kidd argues that universal benefits create trust, and the sense of a social contract.