Dealing with the interactions between benefits

The discussion today in the Devolution (Further Powers) Committee tackled some thorny issues, including some I don’t begin to have the answer to – such as what kind of financial relationship could support an effective devolution of powers and what arrangements will be needed for inter-governmental coordination.  It did occur to me, however, that there is a more general problem lurking behind the difficult questions.  In principle, there shouldn’t be a problem in delivering benefits separately from two agencies at once.  It happens in loads of contexts.  For example, occupational pensions typically come from a range of different funds, all working to different rules; it works, more or less, as long as they’re able to do that without tripping over each other’s feet.  So why can’t the same be done between governments?

There are two main practical reasons why benefits interact with each other.  The first is the use of means testing.  If one benefit goes up when another goes down, there’s a potential transfer of burdens between different agencies.  That’s the objection that the White Paper makes to alterations in the tax rates, which will affect the level of Universal Credit payable.    So we need to have a basic agreement that benefits from one source will be disregarded by someone calculating benefits in another.  That’s not quite enough if both agencies are trying to run means-testing – if someone’s income goes up, they might be able to lose money both from Universal Credit (65% deduction) and from Council Tax Reduction (20%) at the same time.  That can be resolved by negotiating the terms of the calculation for each benefit. A simpler solution is for one of the two agencies to foreswear means-tests altogether.

The second problem is passporting:  we use certain kinds of status (disability, caring, full-time education) to qualify for others.  That makes life easier for claimants, because there only has to be one assessment of eligibility instead of two. (We don’t use the mechanism as we could in the interaction between DLA/PIP and ESA – but I don’t think that making systems work for claiamants has been very high on the policy agenda.)   There is not much choice here but to agree common criteria for different benefits.

Once we’ve addressed these basic issues, it should be possible to define different benefits, paid from different sources – even if they overlap (as pensions do).  Sensitivity and responsiveness to personal circumstances become the product of different combinations of benefits, rather than attempts to vary the terms of each benefit.  And once we accept that principle, other advantages start to appear.  If there are several little benefits, rather than one big benefit, mistakes and interruptions in delivery become less serious for claimants.  Eligibility criteria can be managed for each component benefit without creating artificial boundaries.  IT and administration can be simpler for each benefit.    These, of course, are some of the reasons why big, catch-all benefits – like Universal Credit – are a bad idea.


Submission to the Devolution (Further Powers) Committee

I’ve been invited to give evidence on the welfare clauses at a session next Thursday.  I’ve taken the opportunity to improve the paper – or at least to expand it,  though that’s not the same thing.   Here it is.

The basic arguments are similar, but I’ve tried to go through the clauses in more detail.  I’ve benefitted from exchanges with Gareth Morgan, Jon Shaw of CPAG, and several organisations dealing with disability.    I can’t claim to be confident about any of the interpretations, and that in itself is a source of concern; wherever there are doubts, those doubts are liable to expose vulnerable people to problems, uncertainty and loss of security.

Further note:  The transcript of the evidence session has been published and is here.  I have to apologise that my contributions are so frequently convoluted and opaque.  I can only say, in my defence, that so are the draft clauses I was talking about – but I really must try to talk in plainer English in future. 

Gordon Brown's Five-Point Plan for Welfare in Scotland

The reports in the press (e.g. the Express or the Telegraph) told us that Gordon Brown was proposing a five-point plan for ‘welfare’, going further than the Smith Commission.  However, the main power they reported – the power to top up reserved benefits – was already in the Smith Commission’s recommendations; it has been dropped from the subsequent White Paper.

The five points are laid out on a Labour Party website.  They are

  1. The power to top up reserved benefits
  2. The power to introduce new benefits
  3. The integration of employment and welfare policy, particularly with reference to youth unemployment and long-term unemployment.
  4. The full devolution of Housing Benefit, and
  5. Further devolution to local communities.

The first power has been the only one to be reported in most newspapers, but it is probably the least important.  It was part of the Smith Agreement (para 54), but it  is not included in the White Paper.  Topping up would be heavily constrained by the lack of administrative capacity to do it and the ‘no detriment’ principle, which means (among other things) that Scotland would have to bear the costs of converting the computer and adminsitrative systems. The power to introduce new benefits is much more important; it is also in Smith (in the same paragraph) but it has been reneged on.

The main innovations in the plan are in the last three points.  The integration of employment and welfare is something that both Labour and Conservative governments have tried to do.  It sounds plausible, but previous efforts at integration have gone in the wrong direction; most unemployment is short term, and treating everyone as if they had personal issues has been catastrophic for social protection.  The devolution of Housing Benefit would mean that it must be taken out of Universal Credit – that would be difficult, but no bad thing.  Devolution to local communities – presumably that means local authorities – is genuinely interesting, and worth investigating further.  It has been happening with the development of the Scottish Welfare Fund and Council Tax Reduction.  There is a good case for integrating some of the work done with disability and social care with the benefits system; the main obstacle to doing that lies in the limitations of powers relating to disability benefits in the White Paper.


Evidence to the Devolution (Further Powers) Committee

This morning I made a presentation to the Devolution (Further Powers) Committee about the proposals in the White Paper, An Enduring Settlement.  The session was taken under Chatham House Rules. I’ve now been able to update it for a public submission: here it is.  The key differences between the Smith Commission and the White Paper are outlined in a table:


The Smith Commission The White Paper
New benefits in devolved areas  New benefits in devolved areas
of welfare responsibility
Benefits for carers  Benefits for unemployed carers
Benefits for disability and those who are ill Benefits for people with ‘significant’
functional impairments
Universal Credit:
direct payments to landlords
Universal Credit
to whom payable
Industrial Injuries Disablement Benefit Industrial Injuries Benefits, excluding
prescribed industrial diseases
Cold weather and Winter Fuel Payment Cold weather payments
Topping up reserved benefits  Additions to Housing Benefit/ housing costs


Since I wrote the paper I’ve been able to discuss the issues about disability with a range of Scottish disability organisations.  There are three key issues:  the eccentric definition of a ‘disabled person’ in clause 16, the limitation of carers to people not in education or gainful employment, and the dropping of references to illness.  Use of the definition of a disabled person in the Equality Act 2010  (which is referred to in clause 22) would deal with some of the problems.

The first draft was prepared in a hurry; I was asked to do it last Friday for submission by Monday, and while I usually spend time trying to make my stuff more readable and comprehensible, my early drafts are usually just as impenetrable as everyone else’s.  My apologies, then, if reading this is a bit like wading through treacle.

A little more on devolving benefits

Reports in the Scotsman (on p 20) and the Herald both refer to my last blog entry.  For the record, I didn’t say that the draft clauses in the White Paper are all gobbledegook – I was referring to a specific, mis-worded paragraph.

I’ve been challenged about the basic argument, so I think I ought to say a little more about it.  What the White Paper is trying to do in this section is to impose new rules to regulate the interactions between benefits and taxation.  The argument may seem fair at first: it’s that we can’t have  arrangements whereby the policies of one government take away money if another government puts it in.  The problem is that benefits and services interact in many ways, and this is going to happen unavoidably.  If older people go into hospital, some benefits are suspended: does that mean that the national benefits system should compensate the Scottish health service? If someone gets placed by employment provision and support, the benefits bill falls: should there be a transfer of resources from the UK to Scotland to pay for it? Would the converse apply if Scotland’s responsibilities for unemployment were to be relieved by a better UK macroeconomic policy?  And if people have JSA or ESA suspended, they are likely to make demands on local support services: should the DWP refund the local authorities and the Scottish Welfare Fund?  If we follow through the rationale in the White Paper, every interaction of the sort should be matched by a compensatory transfer.  The principle is unworkable, and that raises questions as to whether it’s reasonable. It seems to me that it’s an attempt to qualify the force of devolution, and to make it harder to vary the terms of benefits.



The commitment to devolution has been watered down still further

The Scotland Office has released a command paper, Scotland in the United Kingdom: an enduring settlement.  It contains the draft clauses for legislation to enact the commitments made in the Smith Commission’s report.  It was being reported last November that the Cabinet had vetoed a range of proposals made by the Smith Commission:

 The Scottish Parliament will have the power to vary the personal allowance, the carer element, the child element, including the disabled child addition, the childcare costs element, the limited capability for work and work-related element and work allowance of UC [universal credit], child benefit & guardian’s allowance, maternity allowance, and the operations of Jobcentre Plus in Scotland, including the responsibility for designing and implementing the policies it applies.

The Command Paper whittles the list down further, in two ways.  The first is that it hedges in some of the measures with conditions, intended to ensure that the Scottish Government acts in conformity with the UK government.  Here are two examples.

Benefits paid net of income tax  – some benefits are paid net of income tax, so if the Scottish Government changes income tax in Scotland, this will have a direct impact on the level of benefits that the UK Government will be liable to pay. Under
this ‘no detriment’ principle, the Scottish Government would receive any savings from lower UK Government benefit spending or meet any costs of higher UK Government benefit spending.

This is gobbledegook.  If benefits are paid without being subject to tax, changes in the tax rate have no effect on what is paid.  If they are paid gross and then subject to tax, like public service pensions, the liability to pay falls ultimately on the individual and the requirement on the UK government to pay the pension remains the same (which is true of any occupational pensions scheme).  It seems to mean – I am grateful to Gareth Morgan for explaining it –  not “benefits paid net of income tax”, but “benefits where entitlement is calculated on the basis of income net of tax”.   Universal Credit goes up when net income goes down, so if the Scottish Government raises tax, part will be refunded for people on low incomes receiving UC.  The calculation will be complex, the amounts of money involved uncertain; the central point is that the Treasury is looking for ways to hold back the Scottish Government from introducing tax differentials.

In relation to employment programmes, the paper states:

These programmes influence how quickly unemployed people get back to work, and therefore have an impact on the UK benefit bill. This is reflected in current funding arrangements whereby the Work Programme is funded by savings made in benefits spending …  While future negotiations with Scotland need to be conducted, we must ensure that this aligns with the no detriment principle. Any funding arrangement must ensure that Scotland receives funding on an equivalent basis to the rest of the UK.

The Work Programme has done nothing to speed the process by which people return to work.  In its relations with Northern Ireland, however, the Treasury has sought to impose fines on the Assembly for the presumed cost of non-compliance with Westminster rules.  They are preparing the way here to do the same to Scotland.

The second strike in the Command Paper’s approach is done through the specific rules it proposes to introduce.  The way that the clauses have been put together is through making specific exceptions to the existing Scotland Act, but Schedule V says that the Scottish Government doesn’t have a general power to offer financial assistance, and that remains the case. Smith said that there would be “Powers to create new benefits and top-up reserved benefits”.  Chapter 4 of the Command Paper says that ” The clauses put forward in this chapter will provide powers to create new benefits or other payments in devolved areas of welfare responsibility.”  They don’t.

I made the case for a general power to develop new benefits in my submission to Smith.   I gave the example of a funeral grant, but it might just as easily have been about fuel for rural areas, early retirement for people with disabling conditions, educational maintenance or a wide range of other benefits.  The key question is not whether any or all of these should be done, but whether the Scottish Parliament should have the power to decide; as things stand, it doesn’t have the authority to do so.  Smith implied that Scotland would get that power; the command paper doesn’t include it.

What happens instead is explained in para 4.3.10:

Paragraph 54 of the Smith Commission Agreement sets out that the Scottish Parliament will have “powers to create new benefits in areas of devolved responsibility”. These powers are conferred by clauses 16 (disability and carer’s benefits), 17 (Regulated Social Fund) and 19 (discretionary housing payments).

Even if we accept this much narrower understanding of what the commitment to new powers might mean, there are no powers to create new benefits in these areas. The draft legislation exempts provision for specific categories of beneficiary, meeting a specified set of conditions; it doesn’t give the Scottish Parliament the power to decide.  Let me give an example.  Clause 16 is concerned with disability benefits, which Smith had recommended should be devolved.  The rules for carer’s benefits, however, are confined specifically to circumstances where the carer is over 16, not in full time education and not gainfully employed.  In other words, Scotland gets to have a carer’s allowance only if it fits the same terms as the current carer’s allowance in the UK.  That will undermine attempts to integrate the system with self-directed support and individual budgeting where those conditions do not apply.

This is symptomatic of a wider failure.  The central reservation of Schedule V is that  the Scottish Parliament does not have the power to offer financial assistance to its citizens, and that principle remains intact.  If you want to devolve benefits – and it looks increasingly as though the government doesn’t want to, not really – you have to grasp the nettle and create the powers, not dole out exceptions clause by clause.  It all falls some way short of even the rather restricted settlement in Smith.  This is not what was promised.

PS: This post was written shortly before the reports of a speech by Nicola Sturgeon, who made some of the same objections in similar terms.    The post was not written to reflect the position of the Scottish National Party.

Smith: What might have been?

There have been several reports that the Smith Commission’s proposals have been overruled.  Some of them relate to abortion, which doesn’t seem to have been the substance of any consensus.   There is a meatier accusation, however, that tax and welfare powers were all watered down at the last minute, following a veto by the UK Cabinet.  A draft from the Tuesday preceding publication on the Thursday is cited, both by the BBC and by the Independent,  as saying this:

The Scottish Parliament will have the power to vary the personal allowance, the carer element, the child element, including the disabled child addition, the childcare costs element, the limited capability for work and work-related element and work allowance of UC [universal credit], child benefit & guardian’s allowance, maternity allowance, and the operations of Jobcentre Plus in Scotland, including the responsibility for designing and implementing the policies it applies.

This doesn’t look like a direct extract from the Commission report; it jumbles together different kinds of provision that the report deals with separately.  If it’s right, however, it’s disturbing.  The Cabinet appear to have taken the view that they had the right to remove recommendations, not because the powers should not be transferred, but because  they might be exercised in ways that  they disagreed with.  That is not what the process was supposed to be about.


The Smith Commission

The Smith Commission has reported.  It was tasked to “deliver more financial, welfare and taxation powers, strengthening the Scottish Parliament within the United Kingdom”.  The powers that are promised in relation to benefits are limited:

  • The size of the areas being devolved is limited.  HM Government’s Scotland Analysis identified nearly £18bn of expenditure on benefits and tax credits for 2012/13.   Smith  proposes devolution of about £3bn out of that £18 bn.
  • The powers that are being delivered are hemmed in by the framework of the systems they are currently part of.  Income tax variation will be subject to UK rules on allowances and liability.  Although there will be some variation, Housing Benefit is not being devolved; it will be locked into the structure of Universal Credit.
  • Several important areas have been reserved, including the structure of the DWP and the imposition of conditionality and sanctions.

At the same time, there are some interesting movements towards devolution:

  • The devolution of a substantial package of benefits covering disability and related issues: Attendance Allowance, Carer’s Allowance, Disability Living Allowance (DLA), Personal Independence Payment (PIP), Industrial Injuries Disablement Allowance and Severe Disablement Allowance.  I had argued for devolving a group of inter-connected benefits, rather than taking Attendance Allowance in isolation; I’m pleased to see this here.
  • The creation of powers to develop new benefits as appropriate, which I’d also argued for specifically;
  • The devolution of employability provision, which will take hold as current contracts expire.

The continued reservations seem to indicate that the Commission began with a presumption against devolution, rather than a presumption in its favour.  The only reason I can see for reserving conditionality and sanctions seems to be a fear that the Scottish Government might have chosen to do something differently.

Topping up benefits won't work

Gordon Brown argued, before the referendum, that more welfare powers should be devolved to Scotland; he particularly identified Housing Benefit and the Work Programme as contenders for devolution. Yesterday he added that the Scottish Government should have the power to ‘top up’ benefits.  It was possible to top up Housing Benefit to compensate for the ‘bedroom tax’ because the benefit is administered by local authorities, and the Scottish Government was able both to specify the rules, and to pay the local authorities to administer the benefit. Unfortunately, this won’t work more generally; the scope for topping up is very limited.

No benefit can be paid effectively by two agencies: the agencies would need equivalent access to information about names, addresses and household circumstances.   Part of the problem is means-testing – people’s eligibility for JSA, ESA or Pension Credit depends on rapidly changing circumstances, which an outside agency can’t know about – but it would be still be difficult to top up more stable benefits such as Child Benefit or Industrial Injury Benefits, because the second funder would still need to be able to say who was eligible  and how much for.   It follows that topping up has to be done either by paying out an new benefit payment, or by paying over funds to an administering agency with the requirement to deliver benefits on newly specified criteria.  Wherever delivery is the responsibility of a UK-wide agency it will be necessary for the operating service first to distinguish potential claimants with Scottish entitlements, and next to offer distinct rates or calculations for those claims.   The mechanisms don’t exist to make this possible.

The devolution of social security benefits: submission to the Smith Commission

I have now finished my submission to the Smith Commission, and there is a copy of it here.  The main points are these:

  • Benefits are complicated.  They serve a wide range of needs and circumstances, delivered to meet a wide range of objectives.  Any reform of benefits that is based on a single principle, or on a narrow focus, is liable to compromise other principles.
  • If benefits are devolved, they must be expected to vary in their terms and conditions.  The ‘parity principle’ applied in Northern Ireland states the opposite; that would not fulfil the remit of the Smith Commission.
  • If devolution was confined only to the delivery of specified benefits, the power of a devolved government to alter those benefits would be limited by finance, administrative constraints and interactions with other benefits.
  • The devolution of powers implies not only that the criteria and conditions for benefits may be modified, but that new benefits will be permissible.
  • Any reform which does not deal with the package of benefits overall for identifiable categories of claimant will lead to inconsistencies and anomalies.
  • Specific proposals to devolve only Housing Benefit and Attendance Allowance have not been thought through sufficiently. The devolution of Housing Benefit will require changes in Universal Credit; the devolution of Attendance Allowance must extend to DLA/PIP.
  • There is a danger that a detailed specification of powers will get in the way of further reforms in the existing structure of benefits.
  • Change is difficult.  The benefits system deals with a huge variety of circumstances, often providing for people on very low incomes who are highly vulnerable to the effects of change.  Everything has to be done carefully.