Tuesday, 14 June 2011


After the shredding of Andrew Lansley by the Royal College of Nursing and David Willetts by the Congregation of Oxford, the next major government policy plank looking likely to run into trouble is Social Security. Meanwhile, the first volleys are being heard in a battle to determine whether or not Scotland will take control of its own Social Security matters after independence or a further devolution settlement. The demonisation of working class people and those with disabilities which commentators like Polly Toynbee and Owen Jones have recently remarked on ought to have made these issues politically straightforward, but this is a context in which the political ground can shift very quickly. What does this mean for the Westminster coalition, for Holyrood, and for those who depend on the welfare state?

Let's start with a simple question. Why change the Welfare State at all? The answer the Westminster government will give you (and one which was earlier espoused, to an extent, by its Labour predecessors) is that it is all a matter of money. The system costs too much (at £152 billion a year) and loses too much in fraud (approximately £1 billion). The danger of buying into this theory is that it's too easy to see those figures in isolation. As with every other public service, we should be asking what we get in return for this investment, what we would stand to lose if we cut the money, and how it fits into the context of comparable services.

First of all, let's set aside the issue of fraud. Fraud is, of course, a serious problem and needs to be tackled, but it should not be a major consideration in policy making for two very good reasons: firstly, that £1 billion is a small amount when compared, proportionally, with losses made by major financial organisations operating in the private sector; and secondly, it is a small amount in comparison with the amount of benefit that goes unclaimed by British citizens who are entitled to it. The value of unclaimed benefits amounted to around £15 billion last year. Some people choose not to claim, of course, but others are not aware of their full entitlement because the system is so complicated.

How did it get this way? This is a natural consequence of Social Security having been a political football for several decades now, kicked around by politicians of all stripes. Many have tried to reform it, for varying reasons, and the end result is that it has become a collection of poorly connected systems assembled around half-complete strategies that are at odds with one another. This is a problem for governments, staff and claimants alike. It's one of the reasons why the system is riddled with poverty traps whereby claimants can end up being poorer if they work. It contributes to claims taking months to process whilst claimants struggle to feed themselves and stay in their homes. It has also resulted in a bloated bureaucracy that costs the taxpayer a fortune. If we want to make Social Security cheaper we should be looking not simply at how much claimants receive, but at how much it costs to deliver it to them.

Simplifying this is a noble aim and there is a lot to be said for Iain Duncan Smith's early ambitions. Unfortunately, like many ministers before him, he has found that this isn't so easy to do in reality – especially within the lifetime of a Parliament. The measures now travelling through Parliament are consequently just another half-baked plan that doesn't really tackle the underlying problems with the system and will end up adding to the existing mess. That the government knows this too is evident in its cautious climbdown over hasty suggestions like the cap on benefits at £26,000 per year. Now that we are told this “was never intended to apply” to households which include disabled people and that it is unlikely to be applied to households with children, it is difficult to see who it will apply to. Despite the shocking figures which the Department of Social Security has now admitted it took, without verification, from the Daily Mail, there is no real evidence that people on benefits are bringing in over £100,000 a year. Most live on very little.

So let's take a look at some of the central problems in the system, how they manifest, and what could realistically be done about them.

First up is the issues of long term recipients of Incapacity Benefit. When Iain Duncan Smith and Ed Miliband express their shock at how some people have been 'left' on these benefits for over a decade it may sound shocking, but what does that really mean? In some cases there is reason to be sceptical about long term claimants. In the 1980s, when Margaret Thatcher's government was worried about the consequences of spiralling unemployment figures, many claimants with relatively minor health problems were moved onto Incapacity Benefit as a convenient way of massaging the statistics. This was a particular issue in depressed areas of the country where little employment was available (it's one of the reasons, for instance, why the number of claimants in Glasgow is so high, when you consider that unemployment reached 85% on some Glasgow housing estates during that period). Some (not all) of these people could now go back to work, though they would of course need extra support to update their skills and to find jobs when they are unlikely to be considered very employable. But this does not apply to all Incapacity Benefit claimants.

It is estimated that approximately a third of current Incapacity Benefit claimants could work, a third will never be able to work, and another third can do some types of work with a lot of support. Though I have never claimed this benefit, I might consider myself in the latter camp – my serious illness means that I am limited to working from home, which in turn effectively limits my earnings. It's not so very bad for me because I have skills that enable me to do this, but many people with long term illnesses and disabilities don't. Any government serious about having them work – and keep working – must provide the necessary training, create suitable job opportunities (by more effectively tackling employers' unwillingness to take on disabled staff, by encouraging the development of more telecommuting opportunities, etc.), and acknowledge that many of these people will be unable to cope with full time hours. The upshot of this is that it may well cost more to help such people into employment than it does to keep them in receipt of Social Security. This is one of the reasons why we have a welfare state – sometimes it's the most practical option.

This brings us to another intrinsic problem with the system – it is built around a model that assumes people will be in full time work or not working at all. Again, Iain Duncan Smith has the right idea with his pledge to support those in 'micro jobs', but at a policy level he has failed to follow through on this. Part time working is heavily penalised at many levels. People working more than one part time job because that's the only way they can earn enough to support themselves are penalised by the tax system, hardly an encouragement to work. Benefit claimants working over sixteen hours a week can have their benefits docked even if they are not earning enough to compensate for their losses – not a problem if they are above the minimum wage but a serious impediment to people who are self employed, for instance. As an individual earns more, they become ineligible for specific benefits such as free dental care, so that they may easily end up being poorer as a consequence of working. They should do it anyway, you may well say (and, indeed, I have long done it anyway), but when one is on the breadline and has a family to support, that's not such an easy call.

Part time working is the best model for many people with long term illnesses and disabilities, for single parents and others with care responsibilities; and it's also very often the only choice people have when full time jobs are scarce. We might prefer that people not claim benefits at all, but it's better people contribute what they can than not contribute at all. Working also tends to result in better health outcomes for individuals and reduced pressure on families, both of which reduce later costs for the state. So these barriers to work need to be removed. How do we find them all? By using the only research tactic that has been consistently ignored throughout these decades of poorly thought-out changes: sitting down the long-term claimants and asking them what has made it difficult for them to work.

One point raised again and again in these situations is the particular difficulty experienced by families. Because partners (whether married, in civil partnership, or not) are expected to support each other financially there is a disincentive for one partner to work when the other is not working (because if their earnings are relatively low they will receive very little financial reward for it) and there is an incentive for families to split up, which then costs the state more because it is more expensive to provide Housing Benefit for two properties and there may be additional bureaucratic costs in relation to child support. It would be one thing to penalise partners like this if their responsibility for one another as dependants were acknowledged in the tax system, but it is not, so they lose out at both ends. The system also loses out because this means that people can be paying taxes at the same time as they are receiving benefits, so the state is taking with one hand and giving with the other and inevitably losing money in administration during each process. Iain Duncan Smith's early proposals included the suggestion that this obligation of support be broken, so that people were responsible simply for themselves and their children; he also proposed ensuring that people would not pay tax until they were above the threshold at which they received benefits; but again, these potentially effective measures were lost in subsequent redrafting as political concerns interfered with his attempt to bring a straightforward management approach to the system.

The danger of allowing political rhetoric to contaminate approaches to Social Security is twofold. First of all, it can create lead to real suffering and a lack of help for the most vulnerable people in our society, something all politicians decry but few seem willing to take action on. Secondly, it encourages short term solutions that fob off the worried taxpayer whilst doing nothing to reduce costs in the long term. Taking away people's benefits if they're fit to work but don't accept jobs might sound like a good idea, but the reality of it is much more complicated. What if they have children – do we leave the children to starve, or take them into care (costing the state a lot more)? What if they start stealing in order to provide for themselves? What if they have been wrongly assessed as fit and their health declines rapidly in the working environment (at least one man has already died of a heart attack after finding himself in this situation)? As so often, this cost saving measure could easily become more expensive than simply leaving things as they were.

There is a real problem with a small minority of benefit claimants who simple can't be bothered to work, but to focus policy around them is economically na├»ve and risks seriously harming those in genuine need. It makes for good soundbites but it doesn't make for good government. Simply put, we need to take the same approach to the benefits system as the banks – fraudsters must feel the full force of the law and we must aim to clarify the rules to make things more difficult for those who simply avoid doing their duty. Meanwhile, we must make take care that the problem minority are not allowed to tarnish the whole system.

Just as we all depend on having access to banks, we all depend on Social Security. It's a safety net for society and it's insurance for us as individuals – that portion of our taxes that goes toward supporting it is not just there to provide for other people, it's there to ensure that we, too, will receive support if we should ever fall on hard times. In a recession, this is something people should be acutely aware of. Politicians and tabloid journalists frequently complain about benefit claimants having a sense of entitlement, but they should feel entitled to draw upon a system that their taxes have contributed to. Why do bankers have a sense of entitlement to large bonuses when their companies are making losses? Why do some of Mr Cameron's front bench colleagues have a sense of entitlement to inherited wealth and, well, titles? If we are to question the entitlement of the poor it should cut both ways.

There are real problems with the Welfare State and there are fictitious ones. It's time our leaders stopped play-fighting with the latter and took responsible measures to introduce genuine reform and make Social Security a better system for everyone.

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