Posts Tagged 'social security'

The Tax Credits system needs fixing: addressing Universal Credit is not enough

Sam Royston, author of Broken benefits, argues that the government must reform the  flawed Tax Credits system before they can even begin to improve Universal Credit.

It is tempting to think that a “devastating picture of administrative chaos, computer errors and political misjudgements” in the social security system must be a reference to Universal Credit over the last few months. It well could be, but this is, in fact from George Osborne back in 2005 emphasising that problems with the Tax Credits system had become so serious he believed that there were serious questions over the future of the responsible Minister.

Many of the problems were to do with the way in which Tax Credits are calculated and paid. Whilst, as we shall see, many of the problems were addressed at the time, cuts to the benefits system mean that they have been rapidly re-emerging in recent years.

Why were Tax Credits such a mess when they were first introduced?

Tax Credits are an annual award – the total amount a claimant is entitled to is calculated for the whole year. However, people, and particularly those living on the lowest incomes, need to receive payments more frequently than once a year. For this reason, they are normally paid on a weekly or four weekly basis, based on an estimated entitlement for the whole of the year.

Since Tax Credits are means-tested, the claimant’s household earnings over the course of the year can affect the overall amount due – predicted annual entitlement is based on what the claimant thinks their income will be for the year.

“At the height of the Tax Credit problems, around £1.9 billion was overpaid to households in receipt of Tax Credits.”

The difficulty arises at the end of the year, when the award amount is checked against the household’s actual income for the year. If the household’s income is lower than the estimate, then the award may have been underpaid and is topped up to the actual entitlement. If the household’s income is higher than the estimate, then this can result in the award being classed as overpaid and the government asking for some of the money back.

We aren’t talking about small amounts of money – in 2004, at the height of the Tax Credit problems, around £1.9 billion was overpaid to households in receipt of Tax Credits.

To reduce the likelihood of overpayments occurring, the Tax Credit system has a built in “buffer zone” (known as the “income disregard”) which means that a household’s income can rise by up to a given amount during a year without affecting their Tax Credit entitlement. In the mid 2000s, as a result of the amount of Tax Credits being overpaid, the government decided to increase the income disregard from £2,500 to £25,000. In effect this meant that if a claimant had been paid Tax Credits for a few months at the start of the year based on their previous year’s earnings of £10,000, and then changed job so that by the end of the year they had earned £35,000, their overall Tax Credit entitlement wouldn’t be affected.

Some overpayments are in fact impossible to avoid without a buffer zone – a household that has a low income for most of the year and then gets a sharp but unforeseeable increase in income may have already had more than their yearly entitlement before the rise in their income.

What’s gone wrong with welfare reform?

Despite this positive effect, following the 2010 election, the coalition government decided to reduce the size of the overpayments buffer zone – first from £25,000 to £10,000, and then to £5,000.

“They are treated as if their earnings are the same as the previous year – which could cost them more than £1,000 at a time.”

Astonishingly, the coalition government also decided to introduce the reverse of a buffer (an anti-buffer?) which disregarded falls in income of up to £2,500 from 2012. This means that when (for example) a worker sees their hours reduced so that they earn £2,500 less than they did the previous year, the earnings figure used to calculate Tax Credits is not immediately adjusted down. Instead they are treated as if their earnings are the same as the previous year – which could cost them more than £1,000 at a time when they are likely to be struggling.

As the income disregard has been reduced, overpayments (again, unsurprisingly) have increased. As large a proportion of Tax Credit claimants face overpayments than during the height of Tax Credit problems in 2005, with one in three claimants facing an overpaid award, and £1.6 billion of overpayments in 2015-16. This includes some exceptionally large overpayments – including around 50,000 families overpaid by more than £5,000.

Tax Credit awards overpaid as a proportion of total awards
2003/04 – 2015/16

awards-overpaid

In 2005 when these problems were first recognised, the then shadow (and later actual) Chancellor of the Exchequer called for the resignation of the Minister responsible. The response of the government was dramatic – not only did the Prime Minister apologise, but the large increase in the size of the income disregard was a direct response.

In 2015, when he himself was faced with a similar scale of problems within the system, the response of the Chancellor was to further reduce the level of the income disregard, back to the 2003-4 level of £2,500. We don’t yet know the impact that this will have on overpayments, but the Chancellor expects to save quarter of a billion pounds from this measure at its peak in 2018-19.

Giving credit where credit’s due

“It isn’t good enough to just focus on improving Universal Credit – the Tax Credits system needs fixing.”

It is tempting to think of the Tax Credits system as a thing of the past, focussing instead on the profound mess which is being made of the introduction of Universal Credit. However, it is important to remember that more than 4 million families (with more than 7 million children), still rely on vital Tax Credits to make ends meet – and will do for the next few years at least.

Nor will these families escape their overpayments when they transfer over to Universal Credit – they will come with them and be automatically deducted from their Universal Credit entitlement.

It isn’t good enough to just focus on improving Universal Credit – the Tax Credits system need fixing. For a Government which wants to improve the fairness and simplicity of the benefits system, removing vital income disregards which prevented families from falling into benefit debt is a move in entirely the wrong direction.

 

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What effect do sanctions & conditionality have on disabled people?

Guest editor Ben Baumberg Geiger introduces the new Journal of Poverty and Social Justice special issue, focusing on disability and conditional social security benefits.

 

Ben Baumberg Geiger

“There are times that policy runs ahead of academic knowledge.

Indeed, this is often the case, for policies must first be introduced before social scientists can study them – and if policy makers were restricted to policies that had been tried and tested, then policy innovation would be impossible.

Yet such innovation can come with considerable risks, as new policies can be introduced and widely imitated, only for social scientists – after some delay – to show that such policies are difficult to implement, can fail to achieve some of their aims, and may even have unforeseen and harmful consequences.

In a new special issue of the Journal of Poverty and Social Justice, we focus on one area where this might be happening: conditionality for sick and disabled social security claimants. While, historically, disabled benefit claimants were largely exempt from seeking work, high-income countries from Australia to Norway have increasingly required disabled claimants to take steps towards finding work, under the threat of financial penalties.

“…high-income countries from Australia to Norway have increasingly required disabled claimants to take steps towards finding work, under the threat of financial penalties.”

The conventional wisdom repeated by bodies such as the OECD is that this is a necessary step towards reducing high benefit claim rates, and, moreover, helps improve the finances, health, and social inclusion of disabled people themselves.

However, there are several challenges to this story. By any principle of justice, claimants cannot reasonably be required to perform actions that they are incapable of doing, but it is difficult for benefits agencies to know exactly what someone can or can’t do. If they get this wrong, conditionality for disabled people can create injustices, and inflict considerable stress on disabled people. Moreover, conditionality may move disabled people further away from work, by both undermining their relationship with their employment support caseworker, and making them less willing to take risks in performing tasks that they are not sure they are capable of doing.

 

Two conflicting stories – but what does the evidence say?

Until now, there has been very little published research trying to establish which of these accounts is correct. This is the aim of the special issue, which includes four research papers looking at experiences from around the world. In the UK, Aaron Reeves looks at on the impacts of conditionality for disabled people claiming unemployment benefit. In Denmark and Sweden, Sara Hultqvist & Iben Nørup look at the different forms of conditionality implemented for young disability benefit claimants. In Germany, Patrizia Aurich-Beerheide & Martin Brussig look at the (failed) implementation of conditionality for disabled people in Germany. And my own paper (see below) brings together these papers with a wider review of evidence and practice, to come to some initial conclusions about what we know so far.

“It is crucial for the wellbeing of disabled people around the world that deeper knowledge and more informed policy go hand-in-hand.”

The special issue also includes four further, slightly more unusual papers about the UK, perhaps the country where these issues have become most hotly contested. Indeed, conditionality for disabled people has been the subject of an award-winning film (I, Daniel Blake) and an award-winning play (Wish List), both of which are reviewed in the special issue (by Alison Wilde and Kim Allen respectively). Jed Meers covers a recent Supreme Court judgement about the ‘bedroom tax’ in the Supreme Court. And we felt it was important to convey the lived experience of conditionality, so a team from the Welfare Conditionality project describe two real-life stories of people who took part in their research.

So at the end of this, what do we know? In my (open access) review paper, I summarise the evidence into four ‘stylized facts’:

1. Requirements for disability benefit claimants are common, but sanctioning is rare (particularly outside of the UK and Australia).

2. Assessment and support are critical in making conditionality work on the ground, and can be combined into ‘passive’, ‘supportive’, ‘demanding’ or ‘compliance-based’ systems.

3. The limited but robust existing evidence suggests that sanctioning may have zero or even negative impacts on work-related outcomes for disabled people.

4. Individual case studies in ‘compliance-based’ systems suggest that sanctioning in the absence of other support can lead to destitution, and that conditionality can harm mental health.

While we need to know more, it is already clear that we cannot assume that conditionality for disabled benefit claimants is easy to implement, nor that it will have purely positive consequences. Policy may have run ahead, but research is now starting to catch up. It is crucial for the wellbeing of disabled people around the world that deeper knowledge and more informed policy go hand-in-hand from this point.

This is an edited version of the (free) introduction to the special issue, and is simultaneously being posted on the Policy Press blog and my own Rethinking Incapacity blog. The full special issue can be accessed here.

 

You can read the Disability and Conditional Social Security Benefits’ special issue of the Journal of Poverty and Social Justice here. 

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The truth about benefits sanctions

300,000 people have had their benefits suddenly stopped by sanctions in the last 12 months, many of whom have been plunged into poverty, unable to heat their homes or even eat.

On today’s National Day of Action Against Sanctions, Ruth Patrick highlights the reality of welfare reform as laid out in her new book, For whose benefit? The truth is that our punitive welfare reform agenda leaves people further away rather than closer to the paid labour market.

DSC_1268

Ruth Patrick

“While Cameron and Osborne may no longer be in charge, their welfare reform agenda continues apace. This month sees the implementation of another wave of reforms, which will further weaken Britain’s social security system.

Over recent years, politicians have robustly defended successive rounds of welfare reform. They argue that reform is needed to end supposed cultures of ‘welfare dependency’ and prevent people from being able to ‘choose’ benefits as a ‘lifestyle choice’. In making their case, politicians draw upon simplistic but powerful demarcations between ‘hard working families’ and ‘welfare dependants’, and suggest that welfare reform will help those on out-of-work benefits join the ranks of the hard working majority.

As David Cameron put it back in 2014:

“Our long-term economic plan for Britain is not just about doing what we can afford, it is also about doing what is right. Nowhere is that more true than in welfare. For me the moral case for welfare reform is every bit as important as making the numbers add up: building a country where people aren’t trapped in a cycle of dependency but are able to get on, stand on their own two feet and build a better life for themselves and their family.”

But does Cameron’s moral case stand up? And has welfare reform actually helped people make transitions from ‘welfare’ and into work?

Continue reading ‘The truth about benefits sanctions’

Age: the topic that neither Clinton nor Trump dare address

 

kate_demedeiros_taskforce_may52015

Kate de Medeiros

There is one major topic in the American presidential election that neither candidate – nor the media for that matter – have dared to touch upon: age.

Kate de Medeiros, author of The short guide to aging and gerontology, asks ‘why?’

Age – specifically older age – has been conspicuously absent as a line of personal attack between the candidates, as a demographic target of would-be voters, and as an articulated position regarding health care and pension policies.

Don’t get me wrong. In some respects, I am glad to see that the ageist rhetoric which has clouded other U.S. elections hasn’t appeared this time, at least not explicitly.

Perhaps because the two candidates are so close in age (Trump is 70 years old; Clinton, 68), or because the oldest people in the American baby boomer cohort (those born between 1946 and 1964) are now 70 themselves, we’re not hearing whispers of dementia like in the 2008 election. Then, the 71-year-old John McCain, running against a 47-year-old Barack Obama, was often referred to by contenders and the media as ‘confused’, ‘out of touch’, and lacking vigor and energy.

Of course, chronological age alone says very little about a person or their functional abilities. Although Trump has repeatedly stated that Hilary Clinton ‘doesn’t have the look’ or the ‘stamina’ to be president, it’s unclear if his remarks were based on her gender and a double standard of ‘beauty’, on her age, or something entirely different.

Continue reading ‘Age: the topic that neither Clinton nor Trump dare address’

Celebrating the British Welfare State?

The UK has recently looked back over the last sixty years in the context of the Queen’s Diamond Jubilee celebrations. At The Policy Press we have been thinking about what the last sixty years have really meant for Britain, and would love to know your thoughts – by leaving a comment on this blog, emailing tpp-marketing@bristol.ac.uk or on Twitter @policypress.

Here, author Paul Spicker (How Social Security Works, Social Policy) takes a look at what has happened to the British Welfare State over this time:

The British Welfare State was intended to be an ideal. Asa Briggs identified three key elements by which it would act:

“First by guaranteeing individuals and families a minimum income irrespective of the market value of their work, or their property. Second by narrowing the extent of insecurity by enabling individuals and families to meet certain “social contingencies” (for example sickness, old age and unemployment) which lead otherwise to individual or family crisis, and third, by ensuring that all citizens without distinction of status or class are offered the best standards available in relation to a certain agreed range of social services.”  (Briggs A., ‘The welfare state in historical perspective’, European Journal of Sociology, 1961, 2, pp.221-258)

Although he refers three times to “individuals” and “families”, the Welfare State was conceived in collectivist terms. It depended on the idea that some things are done better through collective action, that government needed to serve the public, that it should try to ensure basic universal standards, and that it should do things as best it could.

The assault on the Welfare State by the New Right, and the shift in politics that has taken place since, challenged the conceptual foundation of the Welfare State, not just its practice. The market economy is now taken as the norm. The Treasury’s Green Book advises:

“Before any possible action by government is contemplated, it is important to identify a clear need which it is in the national interest for government to address. Accordingly, a statement of the rationale for intervention should be developed. This underlying rationale is usually founded either in market failure or where there are clear government distributional objectives that need to be met. Market failure refers to where the market has not and cannot of itself be expected to deliver an efficient outcome; the intervention that is contemplated will seek to redress this. Distributional objectives are self-explanatory and are based on equity considerations.”  (HM Treasury, n.d., Green Book, at http://www.hm-treasury.gov.uk/d/green_book_complete.pdf)

It appears, then, that it is not good enough for government to justify their actions because they would benefit people, because they protect people’s rights, because the government has a moral commitment – or even because it has been elected to address an issue. We have lost sight of the fundamental principle that government is there to do things for people.

Paul Spicker.

Paul Spicker’s book How Social Security Works is available for only £15 until the end of June only. Order your copy here.

Interview with Mr Rys, former ISSA Secretary General, on the occasion of the publication of his book Reinventing social security worldwide

An extract from the ISSA newsletter, Update

Mr Rys, thank you for agreeing to this interview and giving ISSA members the opportunity of learning more about your views on some key issues of social security policy and on the future development of the institution.

What was your motivation in writing this book now?
I would single out three main motives for writing this book. In the first place, I noticed that the younger generations of policy analysts did not seem to have a full picture of social security concepts which prevailed at the time of its expansion. Due to such gaps in the knowledge of the historical background of the institution, they sometimes considered as new emerging issues certain questions which had been researched and debated many years ago. My conclusion was that people of my generation have not succeeded in passing down the full accumulated knowledge of the subject and that some effort should be made to improve the situation.

The second reason was the wish to provide a correct historical account of the beginnings of international sociological research in the field of social security in the sixties and seventies of the previous century. As head of the research service of ISSA, I had the opportunity to develop a certain number of projects which made considerable impact on the promotion of social security research worldwide. This history reflects a collective effort of ISSA member organisations and forms an integral part of the institutional memory of the Association.

The third motive was the sudden outbreak of the world financial crisis during the last stages of the preparation of the manuscript. This event supplied a new evidence to prove some points made in the first part of the book regarding the mistaken belief in the reliability of the financial markets as providers of income capable to replace social security benefits. And perhaps more importantly, it underlined the danger concealed in recent trends in the evolution of social security which consist in a progressive abandonment of the principles of social insurance. The institution comes out always weaker after each repeated crisis and gradually loses its capacity to fulfil its original mission. Given the importance of social security for the preservation of the existing world socio-economic order, steps should be taken to review its functions so as to make the institution politically widely acceptable and economically sustainable.

What are the main messages you wish to convey?
The chief message concerns the need to preserve social insurance in its role of the main social security technique. Its contributory system with benefits granted as of right ensures to all beneficiaries their full human dignity while promoting the spirit of participation and self-help. Many social policy reactions to current social needs keep mixing social insurance principles with those of social assistance and encourage the use of social insurance benefits to cover needs, which are beyond their scope.

In order to regain confidence in the institution, it would seem necessary to reduce the volume of income redistribution through social security measures between different income classes of the population and transfer all income redistributive functions to the taxation system. This policy should be accompanied by an increased transparency of income flows generated by social insurance and regular information of insured persons concerning their future benefits.

What lessons do you see for social security in the light of the global financial and economic crisis?
One of the main lessons concerns the irreplaceable role of the state as a final guarantor of social security rights of the individual. It is not the case of the state as a direct provider of benefits but rather that of the state as an active supervisor of all measures. In the same way as in the financial and economic sector, the state must closely supervise and control the private and occupational welfare institutions so as to ensure that they correctly fulfil their functions.

Another lesson points in the direction of the need for building up financial reserves to permit the institution to function normally during the periods of economic crises. In view of the close dependence of social security on the performance of national economy, it is inevitable that the income of the institution decreases when the volume of benefits paid is at the maximum. Such financial reserves should hence be constituted outside the regular financial system of the institution possibly out of levies on some excessively high salaries or on earnings from speculative investments.

According to the ILO, 70 to 80% of the world population has no social security coverage. How would you answer the challenge of covering those in the informal sector and poor particularly in developing countries and countries in transition?
This challenge is real and there is no point in trying to hide the difficulty of providing an adequate answer. According to Beveridge, social security was meant to combat only those physical and social risks of human existence which exist even when the state of the society as a whole is as good as it can possibly be – it has never been created as an instrument for combating global poverty or even societal dysfunctions such as mass unemployment. These are basically two different sets of problems requiring different defensive approaches. However, the socio-economic and political reality in developing countries commands that the two targets be tackled at the same time. Under these circumstances, classical social insurance schemes should no doubt continue their advances, even at a slower pace, to protect the growing skilled manpower, indispensable for the creation of national wealth, while other source of finance such as general taxation should be sought to deal with the problem of global poverty. In this perspective, the main task of governments would be to keep an appropriate balance between these two types of social protection approaches.

Vladimir Rys is the author of Reinventing social security worldwide: Back to essentials


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