Universal credit: interim developments

The pattern of Univeral Credit is slowly taking shape, though there are still large gaps. A series of briefing notes have been published, with the latest batch on 10th October – getting on for a year after the scheme was announced. Recent announcements have told us, for example, that Carers Allowance will be paid separately, rather than being integrated into UC; that child care costs will continue to be paid, on something like the present basis (though reduced); and that there will be higher suppot for some long term claimants.

An important new departure, however, is that there will sanctions, for the first time, applied to people who are working but not earning at least the equivalent of a full time minimum wage. Those people will be encouraged to look for additional work, and may be required to accept it. This provision is likely to affect women in particular, who are more likely to be on low part time earnings. The details are in Briefing Note 13.

Reassessing people on Incapacity Benefit

One and a half million claimants of Incapacity Benefit are currently being reassessed prior to transfer to the Employment and Support Allowance. On 27th April, a DWP press release explained that most claimants who were being reassessed were either being found fit for work, or failing to complete the assessment process. Neither finding should be taken to imply that claimants are malingering. Incapacity Benefit is a provision for long-term sickness; it is not confined to people with permanent conditions, and many do get better over time. The statistics can be viewed at http://research.dwp.gov.uk/asd/workingage/esa_wca/esa_wca_25012011.pdf. There are high rates of non-completion of the process, for example, for people with infective diseases, injuries, or pregnancy. That is exactly what we should expect. More worrying is that many people are being found fit for work when they have serious medical problems, such as cancer, incontinence or degenerative diseases. Part of the problem here is the process of reassessment, which has been criticised for being impersonal, mechanistic and insufficiently informed by medical evidence; but part is the nature of the work test, which looks not at whether a person’s ability to work has been impaired, but at whether that person is deemed to be able to do any sort of work, anywhere. People who contract serious disorders need protection – time, space and support. All the emphasis in the new system falls on pressing people to return to work.

It is disturbing, too, that the release of this information should have been managed deliberately to paint benefit recipients in a negative light. A government statement on 21st April criticised the 80,000 claimants whose main reason for incapacity was alcoholism, drug use or obesity. It seems that people who do these things sometimes become ill as a result; the only noteworthy thing about that finding is that the government should want to draw particular attention to it. The information released on 28th April had been previously released in a press release in January, when it was announced in similar terms. This is beginning to look like a propaganda campaign.

Capacity for work

I have been in correspondence with Carer Watch, a network of carers which has raised concerns about the tests used for Employment and Support Allowance. ESA is available for people who cannot reasonably be expected to work – the issue of reasonableness is part of the statutory definition of the benefit. Nevertheless, the legislation has introduced a series of tests, including work-focused interviews and “action plans” related to work seeking, which make work-related demands on people who cannot be expected to work.

I think there is a discrepancy between the Welfare Reform Act 2007 and the regulations. People who have limited capacity for work are supposed to be given help in moving towards employment, for example by preparatory and supportive actions. However, the regulations focus on actions that are directly related to work, rather than on actions that will increase people’s capacity where that capacity is limited. They are specified in terms of either getting people to obtain work, or of keeping people in work. Either of those options, by definition, is not reasonable for ESA claimants.

A failure to consult

The government produced its Welfare Reform Bill on 17th February, containing provisions for Universal Credit, the extension of sanctions against unemployed people, and the abolition of Council Tax Benefit and Disability Living Allowance. It is now clear that Universal Credit will be a portmanteau benefit rather than a true simplification, with distinct rules for Jobseekeer’s Allowance, Employment and Support Allowance and Housing Benefit.

Most of this had been signalled, in advance, though for the second time the Secretary of State has jumped the gun on a consultation. Universal Credit was announced in November before the consultation on the proposals had closed; the abolition of Disability Living Allowance was announced with two days left of the consultation period.

The government’s disregard for the process of consultation means that it has been making avoidable mistakes. In the case of Universal Credit, it has left several loopholes and ambiguities unclosed: it is still not clear what will happen to childcare costs or how council tax rebates will be taken into account. In the case of the replacement of Disability Living Allowance by Personal Independence Payments, the position is vaguer still. The government was particularly concerned about the increase in claims for DLA. Most of that increase reflected its growing use by people with psychiatric problems, but the proposals for replacing the care component with an allowance for daily living fail to consider the issue of psychiatric problems at all. The consultation returns would have warned the government of what it still needed to tackle. The rush to judgment is foolish, and the reform looks ill-considered.

Reforming Disability Living Allowance

The government is reforming Disability Living Allowance, replacing it with a Personal Independence Payment. It is probably fair to say that DLA has lost its focus. The component elements were initially intended to cover care needs and mobility needs. The benefit is increasingly used by people with mental illness. People over working age, who now account for third of the costs of the benefit.

The proposed reform, however, is based – like several other proposed reforms – in the belief that the appropriate approach is to improve assessment, to make the tests more sensitive to individual needs, and to make the system more responsive to changes in circumstances. This is the opposite of what the government ought to be doing. Personalised assessments are administratively complex, cumbersome, and often unfair. People find it difficult to descrIbe their circumstances, and impossible to place their needs in a scale relative to others. They do not understand why their condition is assessed as severe or less severe, and it is not reasonable to expect them to do so. Many conditions fluctuate; conditions like multiple sclerosis, or arthritis do not have a consistent effect on capacity over time and cannot sensibly be responded to as if they did. The direction of movement should be towards greater automaticity, not less. The benefits assessment should offer fixed awards for specific conditions for set periods.

See Cm 7984, Disability Living Allowance reform, London: The Stationery Office

Equal pay and Housing Benefit

A legal case raises some interesting questions. Several benefits, including Housing Benefit, supplement the incomes of people living on low wages. Hull had been paying low wages to its female employees, but councils have been rushing to implement the equal pay legislation enacted in the 1970s, and Hull is one of the employers which has seen the light. However, the council reasoned, if their female employees had been paid in the first place, they would not have been entitled to the same benefits. In Kingston upon Hull City Council v DLM (HB) [2010] UKUT 234 (AAC), the council successfully argued that as the back payment of pay was income for a previous period, the benefits should be retrospectively reassessed, and the payment was accordingly reduced.

The decision seems to me flatly wrong. Benefits which are overpaid cannot normally be recovered if there is no fault or error, and the judge explicitly acknowledged there was none. It also seems doubly perverse that it should be possible to cut payments retrospectively while another rule, the ‘anti-test case rule’, denies back-payments for wrongfully determined claims.

A Citizen's Pension?

At the same time as the government is planning to focus working-age benefits on means-tested benefits – a “Universal Credit” – it is also making proposals to remove means-testing for pensioners. The principle of a universal pension was pioneered in the Citizen’s Pension of New Zeland, and that, more or less, is likely to be the model for future development. There are strong arguments for such a scheme: it will be simpler to manage, take-up will be better, and it avoids the perverse incentives associated with means-testing. It should go a long way towards avoiding poverty in old age, without penalising people for saving or having made alternative arrangements.

However, the government is suggesting that the new pension will not affect the position of existing pensioners; it will only apply to new claimants. The State Pensions scheme is not based on a fund: current contributions go to pay current benefits. The claim of those who are working to have decent pensions in the future depends on what they do for pensioners now. The arrangement the government is proposing suggests that pensions will be better when their generation retires, at the expense of those who are then working, but that they are not ready to protect the position of current pensioners. This is indefensible.

The government could just abolish National Insurance pensions instead. However, removing entitlements that people have paid for will raise a storm of protest from those who feel their contributions have gone for nought. (The same problem blights the transitional arrangements: when the scheme is introduced, the new claimants will also have paid contributions.) There is a way round the problem: start introducing the scheme, not for younger pensioners, but for older ones. If the scheme opens with a universal pension for everyone over 90, the problems with equity largely vanish. During the transition, younger pensioners can be told their benefits are time-limited, which is consistent with the principle of insurance. And the qualifying age can gradually be reduced to the level the government wants to support, avoiding the vexed problems of raising pension age.

The Universal Credit

The government’s plans for reforming social security benefits have been mis-sold. They have been presented as if the primary focus was getting unemployed people into work – along with people with serious physical and mental disabilities, who are most of the people identified as being long-term claimants of working age. The proposals for Universal Credit are about something different. They represent a unification of basic means-tested benefits – Jobseekers’s Allowance, Employment and Support Allowance and Income Support – with benefits in work, mainly Working Tax Credit, Child Tax Credit and Housing Benefit.

The crucial problem for any scheme that claims to simplify benefits is that they are liable to over-simplify. This scheme is no exception. Benefits cover a wide range of circumstances. They are not just about getting people into work: they are concerned with lots of other issues, including meeting needs, helping people whose incomes are interrupted, economic management. They are complicated because people’s lives are complicated.

This leads to the second key problem: the scheme is quite impractical. The government believes that a new computer programme will make it possible to respond to changes in “real time”, with implementation beginning in 2013. The computer programme does not yet exist – even on paper – but even if it did, it could not do want the government wants it to do. A computer programme, no matter how good it is, can only go as fast as the information that goes into it. People’s circumstances change with starting rapidity. They find it difficult to say what their situation is – whether they are now disabled, whether their partner has really left them, whether or not the prospect of employment means that they now have a job. Building a system on the hope of firm, confident answers cannot work.

There is no reason to believe that this scheme will increase incentives to work. There is no reason to suppose it will reduce fraud or error – quite the contrary. And there is no real basis for supposing it will make any difference in getting people to work instead. The government’s hopes for the new scheme look like wishful thinking.

The curious case of Child Benefit

6th October 2010

When the Chancellor announced, shortly before the Conservative party conference, that Child Benefit would be withdrawn to families with high earners, it was clear that no-one expected the storm of protest. Iain Duncan Smith had called the idea of paying benefits to richer people “bonkers”, and up to that point the newspapers had seemed to agree.

The government’s reasoning made some sense. Child Benefit is effective because it is simple, takeup is virtually universal and it has no discincentive implications. Means-testing Child Benefit would be self-defeating, and pointless – there is already a means-tested benefit for families with children, in the shape of Child Tax Credit. The government was looking, then, for a simple administrative trigger that could make a practical distinction, and they thought they had found it. The central argument for keeping Child Benefit, however, its its universality – a point the press have not, to this point, seemed to understand. We don’t means-test people using schools, hospitals or roads for many reasons, but the most obvious one is that it would be nightmarishly complicated if we tried to do it. Child Benefit is built on the same logic. Every alternative is more difficult, more complicated, and more burdensome.

Many of the complaints have focused on the unfairness of the proposal – the implication that two earners might retain the benefit when a single high earner cannot. There are two problems. One is that Child Benefit is still mainly received by women, and stopping benefits to women because of men’s earnings is not popular. The other is that every attempt to respond to changes in people’s circumstances comes with complications. People with fluctuating earnings will not know whether or not they are entitled; people who become unemployed will be entitled at some points and not at others. Some people will only know that they are in the higher tax bracket and the end of the tax year, and adjustments will have to be made. These issues have blighted the Tax Credits scheme and inevitably they will blight this change.