Community Links has published two reports. Just About Surviving studies the cumulative impact of recent welfare reforms on the residents of the London Borough of Newham. ‘People want to work for a variety of reasons: to gain financial security and a steady income, but also for the emotional and social benefits that employment brings, and to be a good role model for their children. They want to escape the perceived stigma of claiming benefits and to have a sense of pride over their work. On the whole, we found that people’s motivation to work was not improved by the reforms or by the loss of income they had experienced due to these changes. The indiscriminate slicing of income instead prompted people to retreat and default to survival mode. Although welfare reforms seriously affected people’s finances, they did not make work seem like a viable or attractive option. In many cases having a job was viewed as equally precarious or simply not possible given people’s circumstances. Everyone that we spoke to was aware of the poorly-paid and precarious nature of the labour market, and those in work were still dependent on financial assistance from the state. Several people we spoke to who were in work reported that they did not feel financially better off as a result. (p.6)
Secure and Ready: Towards an early action social security system, calls for an extension of ‘the universal approach to reduce the risk of people who need support not accessing it and reduce stigma for those being supported’ (p.6). We quote at length: ‘Services or transfers heavily restricted to particular individuals according to income or circumstance might be cheaper in the short term – targeting only those in clear need – but they face three risks. Firstly that people who are eligible and would benefit nonetheless don’t access the service, either because they are unaware or confused about their eligibility or are put off by the stigma attached to using a service closely identified with a minority … . Secondly it is rarely possible to accurately assess need and the crude criteria usually used will often exclude more people who actually need help than they include. For example the duration of unemployment is not necessarily the best indicator of need for employment support. In epidemiology this is known as Rose’s ‘prevention paradox’. Where those identified as high risk make up a small minority of the population, it is likely that a majority of the cases will actually arise from the low-risk group. Universal services are often therefore more cost-effective than targeted ones. Thirdly, the resources needed to accurately determine eligibility and to police compliance make selectivity less efficient than universalism. And finally, the quality of a service is often lower if it is restricted to a minority who are not empowered to demand change, as is the case with employment support services (Danson et al, 2012), resulting in poorer outcomes. The advantages of universalism have led some to argue for a universal social security payment- a ‘basic income’ – which would be paid to everyone irrespective of income. It would certainly be a good example of early action – investing upfront – but its cost leads many people to dismiss it as unrealistic. Nevertheless, a robust long-term, cross-departmental analysis might demonstrate that the investment is more than returned in lower demand on other services. It is certainly worth exploring.’ (p.30)
Liberal Democrat Voice has published a blog post on Citizen’s Income: ‘A number of Liberal Democrat members have got together in support of the Universal Basic Income. … Universal Basic Income is a regular unconditional tax-free payment made to every citizen regardless of their situation. … The advantages of Universal Basic Income and its variants have been argued at length across the spectrum, from left-wing blogs to right-wing talk shows. … The UBI would create a much more flexible and entrepreneurial labour market and drive up employment standards. If people didn’t like a job, they could drop out of it, safe in the knowledge they would be able to support themselves. If they wanted to start a business or improve their skills by training, they could do this relatively easily. Britain’s economy would become more competitive whilst simultaneously raising working standards. (All the evidence from pilot schemes shows unemployment would not significantly increase, as people generally like being active and the UBI would be about the same as existing out-of-work benefits anyway.) Meanwhile, the present system of workers receiving only miserably small increases in income when they enter work (due to out-of-work benefits being removed) would quickly be consigned to the past. Benefit fraud would be practically abolished. Wealth would be shared more equally. Welfare bureaucracy, a daily hell for hundreds of thousands of Britons, would be enormously reduced. People would be able to fall back on UBI to raise children, do community work, or pursue a creative project. And perhaps most important of all, the UBI would end extreme poverty amongst British citizens so long as it was set above the poverty line for individuals. Of course, a big question is cost. According to analysis from the Citizen’s Income Trust, a group of activists and economists who support a UBI, introducing UBI in Britain would cost approximately £276 billion annually, only £4 billion more than the £272 billion cost of the welfare system in 2012-13. The process suggested by the Trust would require integration of the tax and benefit system and would without doubt be the biggest change to the welfare system since the introduction of state pensions. But the present system doesn’t work. It needs a radical solution. In Universal Basic Income, we have one.’ (blog post by Robin McGhee, a prospective parliamentary candidate for Kensington.)
Compass has published a report by Michael Orton, Something’s not right: Insecurity and an anxious nation: ‘A central theme of this report is that insecurity is not inevitable. Neither separately nor combined do globalisation, economic restructuring, financialisation, women’s participation in the labour market, technological advancement, migration or a multitude of other forms of change mean insecurity is unavoidable. The same changes are experienced the world over but their effects are not homogenous because governments can, and do, follow different paths. The good news therefore is that the UK government and politicians have choices they can make which will either intensify or redress insecurity; and if they choose to redress insecurity they have available to them key policy levers needed to do so. The important ingredient here is not the ability of politicians to act, but their willingness to do so, and in turn the ideas available to them and pressure for them to act. It is also important to keep in mind that insecurity is not a recession issue which will disappear with economic recovery. Redressing insecurity requires political action. To redress insecurity, however, requires not policy tinkering but setting a new direction. It was noted above that there is a growing sense that the basic social contract at the heart of capitalism is breaking down. That basic social contract can be recreated fit for 21st century Britain by setting a new policy direction which creates a socio-economic frame that provides people with true freedom to choose how to lead their lives and in which each individual is able to choose what constitutes for them a flourishing life free of the anxiety, fear, deprivation and unequal life chances endemic in an insecure nation’ (p.48).
Joseph Rowntree Foundation researchers have found that ’39 per cent of people in households with children (8.1 million individuals) live on an inadequate income; the number of individuals living in couple families with between one and four children who do not have an adequate standard of living has risen from 24 per cent in 2008/9 to 34 per cent in 2012/13, and almost six million people are now in this category; and lone parent households and families with only one breadwinner are particularly likely to fall below the [Minimum Income Standard] benchmark. More than 70 per cent of lone parent households live on inadequate incomes, up from 65 per cent in 2008/9. Working families with only one earner that have an inadequate income have risen from 38 per cent to 51 per cent in the same period.’
The Institute for Fiscal Studies has published its usual Green Budget: ‘The social security system not only gives support to vulnerable groups but also affects incentives around how much paid work to do, where to live and with whom, and even the number of children to have. Giving exemptions from cuts for groups deemed more vulnerable can weaken work incentives and strengthen incentives for people to have children or claim disability benefits. When considering possible changes to the social security system in the coming years, policymakers should bear these trade-offs in mind, have a clear vision for what they want the social security system to achieve, and ensure that the overall system of support is coherent’ (p.197).
The International Labour Office has published a report, Social protection for older persons: Key policy trends and statistics: ‘Today, more than 20 developing countries have achieved or nearly achieved universal pension coverage, including Argentina, Belarus, Bolivia, Botswana, Cook Islands, Georgia, Guyana, Kazakhstan, Kiribati, Kyrgyz Republic, Kosovo, Lesotho, Maldives, Mauritius, Namibia, Mongolia, Panama, Seychelles, South Africa, St. Vincent and the Grenadines, Swaziland, Timor-Leste, Ukraine and Uzbekistan. Countries like Brazil and China have universal rural pensions. A few countries in Africa are currently piloting universal old-age social pensions, like Kenya, Uganda and Zambia. There are many paths towards universal pension coverage. Most developing countries combine contributory systems with a minimum social pension to older persons without a contributory pension (e.g. Lesotho, Thailand), other countries provide a social pension to all (e.g. Botswana, Timor-Leste). Some countries choose gradual and progressive realization (e.g. Brazil, South Africa) and others opt for fast-tracking immediate universal coverage (e.g. Bolivia, China, Kiribati). There are different paths and heterogeneity in the design and implementation of universal schemes and governments have a wide set of options to achieve universal social protection coverage.’ (p.16)
Think tanks are now an essential part of the political landscape. There was a time when political parties openly debated policy ideas: but no longer. Newspapers, social media, blogs, and twenty-four hour news channels are always circling, waiting to pounce on the first whiff of debate (which they call ‘disunity’, which it usually isn’t), or of a political party discussing an issue and slightly changing its position (which they call a ‘u-turn’, which it usually isn’t). Open political debate within political parties – at least, anywhere near where members of the public might see it – is therefore stifled: and when internal debate does occur, then there will often be someone who thinks that their particular cause will be served by leaking emails or memoranda to the press – and so party leaderships understandably do all they can to prevent such debate happening in the first place. The exception to all of this is the Green Party, in which the membership actively debates and decides policy – giving the media plenty of opportunity to attack the often not fully formed policies.
There used to be another location for policy debate: Royal commissions and similar parliamentary enquiries. These would be established to study often quite broad policy fields and to make recommendations to the Government of the day. Parliamentary enquiries are still used to study particular events, but rarely now to study policy fields. The reason is that if a parliamentary enquiry suggests policy changes that the Government doesn’t like, then the Government is left in the unenviable position of having to implement the policy change recommended, or saying that it will not do so, or leaving the report to gather dust, for all of which it might be criticised.
It is in this situation that think tanks have become increasingly useful. They will often be loosely related to political parties, and so will frequently study policy issues that the party wishes to think about. A party in government might take a think tank report off the shelf and decide to make the changes recommended: but because think tanks are not integrated with the political parties themselves, it is no problem either to the party or to the think tank if a party decides to take no notice of think tank reports.
An option open to think tanks, and not to political parties, is that they can choose to work together. A good example of this is the conference held on the 2nd March 2015 by the right-leaning Bright Blue and the left-leaning Fabian Society. At one of the sessions of the conference both the General Secretary of the Fabian Society, and the Assistant Director of the Adam Smith Institute, said that they thought a Citizen’s Income to be worthy of consideration, and that both of the think tanks were actively working on the issue. The other member of the panel, Alison Garnham, Chief Executive of the Child Poverty Action Group, agreed with them. This unbidden and unco-ordinated agreement between think tanks and CPAG suggests that the think tank and campaigning worlds are coming round to the idea that a Citizen’s Income might be an important mechanism for reducing poverty and inequality and might be of service to our society and our economy in a wide variety of other ways too. We look forward to their reports, and to political parties not leaving them to gather dust.
In a report entitled Poverty and Devolution, the Institute for Public Policy Research suggests criteria for deciding whether a benefit could be devolved to a more local level (as Council Tax Relief has been recently). If a benefit is contributory, or if it acts as a countercyclical stabiliser, as Jobseeker’s Allowance does ( – that is, the amount spent on it rises during an economic downturn), then it should not be devolved; but if a benefit relates to already devolved functions, or the amounts paid relate to local circumstances (such as housing markets), then devolution to more local levels might be appropriate. In relation to this last criterion, both employment support and Housing Benefit could be considered for devolution.
We would like to suggest a further criterion: that devolution should not be considered if devolution would complicate the administration and impacts of either the benefit in question or of the administration of other benefits. Take the example of Council Tax Relief. The localisation of regulation, as well as payment, of Council Tax Relief to local authorities has complicated the already complex relationship between Council Tax Relief and other means-tested benefits (including Tax Credits), and particularly in relation to the transition to Universal Credit. One of the reasons for implementing Universal Credit was to provide a consistent taper rate across the entire population of means-tested benefits recipients. Locally regulated Council Tax Relief has compromised this objective; and because many claimants receive Council Tax Relief as well as other means-tested benefits or Tax Credits, and the calculation of each of these benefits takes into account income from other sources, including other benefits, both the administration of benefits, and the amounts that claimants receive, have become less predictable. To localise Housing Benefit would pose the same problems.
A benefits system founded on a Citizen’s Income would make it much easier to devolve benefits. Housing Benefit and Council Tax Relief would for most claimants be the only means-tested benefits that they were on, and because the amounts of a household’s Citizen’s Incomes would be entirely predictable, a household’s Citizen’s Incomes would not affect the administration of the localised benefits. Neither would the calculation of the localised benefits affect someone’s Citizen’s Income.
Because households’ Citizen’s Incomes would float the vast majority of households currently on Jobseeker’s Allowance off all means-tested benefits apart from Housing Benefit and Council Tax Relief, tests for work readiness or work search would no longer be required, and sanctions would become redundant. Employment support would still be required, and we agree with IPPR that this would be best managed locally. Many local authorities already offer this service. To take just one example: for nearly twenty years, Greenwich Local Labour and Business (GLLaB) has been matching Greenwich residents to local job opportunities, and, where local skills gaps are revealed, GLLaB organises the necessary training. No sanctions are required.
There could be no better context for the localising of means-tested benefits than a Citizen’s Income scheme.
The Institute for Fiscal Studies’ Green Budget
The Institute for Fiscal Studies’ annual Green Budget sets out in as objective a way as possible the options facing the Chancellor of the Exchequer as he approaches his budget announcement, and both the publication’s overall message and its detail are always worthy of careful study.
However, there are parts of this year’s Green Budget that we would like to question. On p.213 we read that ‘one high-profile change has been the introduction of a means test for child benefit’. This is not strictly true. What has been introduced is an additional tax charge on higher rate tax payers living in households that receive Child Benefit. Child Benefit remains a universal and unconditional benefit. Clarity over this is important, particularly because the Green Budget goes on to argue that as Child Benefit is already means-tested it should be combined with Universal Credit. But Child Benefit is not means-tested, and it should not be. To means-test it, or to combine it with Universal Credit, would add to the employment disincentives that the Green Budget quite rightly suggests that we should avoid (p.197).
We are pleased to be able to agree with the Green Budget‘s detailed argument and conclusions in relation to the Winter Fuel Allowance, and with the authors’ verdict that ‘the debate around winter fuel payments seems to have become totemic rather than a serious discussion about whether less can be spent on supporting the elderly through the benefits system’ (p.223).
A welcome new chapter in this year’s Green Budget is chapter 6 on the changes in the public accounts that bring them more into line with current business practice. This change is welcome because it enables government assets to be properly accounted for, and it also creates more clarity as to the boundary between government expenditure and expenditure provided by government for non-governmental organisations ( – though the chapter recognises that it will not always be easy to decide where this boundary will be). However, one boundary that the new structure has not questioned is that between income tax and spending on social security benefits. A tax allowance results in revenue foregone. If the personal tax allowance were to be abolished, and cash payments of the same value were to be paid instead, then the Government’s fiscal position would not alter and individuals’ disposable incomes would not change. Therefore revenue foregone should be counted as social security expenditure – or, alternatively, spending on income maintenance should be separated from income tax receipts before they are reported. To maintain the current boundary between tax receipts and social security spending prevents rational decisions being made about the best approach to income maintenance. Perhaps a future edition of the Green Budget will contain a single chapter on the combined effects of Income Tax, National Insurance Contributions, and social security expenditure on income maintenance, rather than the separate chapters that we have always seen until now.