Here's a transcript of my welfare reform talk from the last democracy club.
Welfare Reform and the NHS
Sefton Democracy Club Meeting
Maghull Town Hall
28/6/11
7pm
Hi all, I’m going to talk a little; mainly about welfare reform. As some of you who regularly attend will know; My name is Kat and I run the Southport Anti-Cuts Coalition – for transparency’s sake it is probably necessary that I lay this on the table first!
Firstly, what is welfare? In this context the relevant definition is “statutory procedure or social effort designed to promote the basic physical and material well-being of people in need”.
When we talk about the “welfare state” we must keep in mind that this encompasses not just traditionally stigmatised “benefits” such as incapacity benefit and jobseekers allowance but also those that are more socially acceptable such as winter fuel payments, tax credits and the state pension. Strictly the term could also be argued to include the NHS, education and various charitable organisations.
The Coalition Government claims that cuts to the welfare state are necessary because of Labour’s overspending (David Cameron, David Laws e.t.c.) and that in many cases under the current system, work doesn’t pay, public services have become bloated and bureaucratic and costs of education, health and benefits have reached record highs without achieving the desired public benefits. They want to change this and are taking steps to completely reform the NHS using the Health and Social Care Bill, education using the Academies Act and University funding changes and welfare using the welfare reform bill.
The claims that spending on welfare benefits is rising are true. The graph below portrays a frightening picture of spending if we look at it in the context the government is suggesting, in purely monetary terms:
However, one might expect welfare spending in purely monetary terms to rise; with inflation, as the population rises and as the Government’s duties to its citizens increase for example. Simply looking at spending doesn’t really tell you much at all – only that spending has risen. What is necessary is to put spending in context of the country’s income and other factors.
This graph shows the same data set but reconfigured as a % of Gross Domestic Product (a broad measure of the country’s wealth), which puts the spending in better context:
What is interesting is that on this chart, total welfare spending has remained fairly static since 1993, implying that the recent welfare policies of the Major, Blair and Brown Governments have not been dissimilar.
This graph does not support the idea that spending is unusually high. Indeed looking at the graph shows that incongruous peaks correlate with recessions, so that even the recent rise might more logically be attributed to the economy than to welfare policy. The data does not provide convincing support for an argument that welfare policy needs reform because there has been a culture of “overspending”. If there is a “workless” culture the data indicates it has not begun under labour and that labour have made headway in tackling it.
This graph shows unemployment statistics but separated into two groups claimants and the unemployed:
Note how since the mid 90s the two lines have become further and further apart. This indicates that fewer unemployed people are claiming benefits. Is this desirable? Well on the face of it if society can support the unemployed rather than the state that is better right? The problem is that there are consequences. One of the most important areas that our taxes should support is welfare spending. Welfare should be there to support those who are out of work and if their families are supporting them rather than the state this is putting double pressure on the families concerned meaning that they risk falling into poverty perhaps invisibly, which has long term consequences for health and other social problems.
Unemployment also means less tax. We should be concerned about unemployment whether or not people are claiming benefits but if the unemployed do not claim unemployment benefits they also fall out of the system and potentially do not receive s
My perspective on “worklessness” is that it is a direct consequence of the decimation of the manufacturing industry and the switch to individualism. There are fundamental differences in the security of people’s employment that we created by this change.
Another interesting point, if you look at the data since 1990 (shown in the table below) – from 1993 the total welfare bill has been split into two groups; welfare and pensions. It should also be noted that some of the benefits measured in the “welfare” group will be going to pensioners as well as those of working age (housing benefit, carers allowance e.t.c.) but some things such as attendance allowance are included in the pension statistics.
Welfare Spending
Fiscal Years 1990 to 2011
| Year | GDP | Welfare -total percent GDP | Pensions -total percent GDP |
| 1990 | 570.283 | 9.26 | a | 0.00 |
|
| 1991 | 598.664 | 9.87 | a | 0.00 |
|
| 1992 | 622.08 | 11.28 | a | 0.00 |
|
| 1993 | 654.196 | 7.42 | a | 5.28 | a |
| 1994 | 692.987 | 7.64 | a | 5.96 | a |
| 1995 | 733.266 | 7.20 | a | 5.64 | a |
| 1996 | 781.726 | 7.11 | a | 5.81 | a |
| 1997 | 830.094 | 6.71 | a | 5.96 | a |
| 1998 | 879.102 | 5.95 | a | 5.92 | a |
| 1999 | 928.73 | 5.90 | a | 6.66 | a |
| 2000 | 976.533 | 6.04 | a | 6.73 | a |
| 2001 | 1021.83 | 5.65 | a | 7.18 | a |
| 2002 | 1075.56 | 5.48 | a | 7.28 | a |
| 2003 | 1139.75 | 5.74 | a | 7.01 | a |
| 2004 | 1202.96 | 6.14 | a | 6.80 | a |
| 2005 | 1254.06 | 6.20 | a | 6.89 | a |
| 2006 | 1325.8 | 6.13 | a | 6.78 | a |
| 2007 | 1398.88 | 6.00 | a | 6.66 | a |
| 2008 | 1448.39 | 6.06 | a | 6.89 | a |
| 2009 | 1395.87 | 6.73 | a | 7.86 | a |
| 2010 | 1473 | 7.15 | b | 7.96 | b |
| 2011 | 1544 | 7.08 | g | 7.94 | e |
| Legend:
a - actual outturn
b - estimated outturn in HM Treasury 2010 budget
e - estimate in HM Treasury 2010 budget
g - "guesstimated" projection by ukpublicspending.co.uk |
back to chart |back to tab
The splitting of the data into working age and pension spending makes quite a difference to intepretation. Welfare expenditure excluding pensions is actually predicted to measure less as a % of GDP in 2011 than in 1993 despite the recession, public sector cuts and the resulting job losses.
The rise in total welfare expenditure from ’93 to ’11 (highlighted in red) is more accurately attributable to rising expenditure on pensions, which have seen a 2.66 percentage point increase in that time bringing them to a predicted 7.94% of GDP in 2011 (other benefits are predicted to account for 7.08%).
Welfare spending during this period was highest in 1994, fell until 2002 and has never reached 1994 levels despite the recession. Rather a blow for those ministers such as David Cameron and David Laws who have blamed labour government “overspending”. This population graph from the telegraph shows clearly one reason why spending in both actual and real terms might have been forgiven for increasing:
“Welfare” to most people would not now include pensions and the Government do not include pensions in their welfare reform bill. Choosing to focus instead on working age benefits.
The Welfare Reform Bill was introduced to Parliament on 16th February 2011. The DWP website states its aims:
The main elements of the Bill are:
- the introduction of Universal Credit to provide a single streamlined benefit that will ensure work always pays
- a stronger approach to reducing fraud and error with tougher penalties for the most serious offences
- a new claimant commitment showing clearly what is expected of claimants while giving protection to those with the greatest needs
- reforms to Disability Living Allowance, through the introduction of the Personal Independence Payment to meet the needs of disabled people today
- creating a fairer approach to Housing Benefit to bring stability to the market and improve incentives to work
- driving out abuse of the Social Fund system by giving greater power to local authorities
- reforming Employment and Support Allowance to make the benefit fairer and to ensure that help goes to those with the greatest need
- changes to support a new system of child support which puts the interest of the child first.
The Bill, which is due to enter the reports stage, has attracted much attention. Some parts such as the plan to cut the housing benefit of those who have been unemployed for over a year have already been dropped but many groups are still expressing concerns.
The Christian charity CARE has analysed the bill and produced a report. There are things CARE welcome such as the reduction in the couple penalty, which may occur as a consequence of the two parent focus of universal credit and the simplification of the system. However, they highlight that the implementation of the new Universal credit, contrary to claims that it will always make work pay, will negatively affect incentives to work for two parent families because the marginal deduction rates (how much benefit is lost as a person enters work) are at very high at 76.2% - much higher than OECD average.
The aim of the Universal Credit has always been stated by Ian Duncan-Smith as “to make work pay” but this has been dealt another blow by the Centre for Social and Economic Inclusion research which expands on the report produced by CARE (as reported in the Independent on 13/6/11 “Reforms 'will leave thousands of families worse off'”). The article states that:
“Research by the Centre for Social and Economic Inclusion has found that single parents and families with two or more children could lose as much as £5,000 a year as a result of the changes.
Families in London – where childcare and housing costs are significantly higher – will be particularly badly affected, according to the analysis commissioned by London Councils, an umbrella organisation representing all local authorities in the capital.
It found that a single parent with two children living in the capital would be £5,168 a year worse off under the Universal Credit if in a full time job on a minimum wage, using childcare, than under the 2011 system. Nationally a lone parent in the same situation would be £4,300 a year worse off.
A couple who both work full time and have two children will be £2,333 a year worse off in London and £1,528 nationally.
The report also suggests that for some groups there would be little incentive to move from benefits into work – a key aim of the Universal Credit. For example, a lone parent with two children in London would be £2,165 worse off if they worked, under the new system, because of high costs of childcare. Nationally they would be £657 worse off.”
Shelter, the housing charity, are concerned about plans to remove the link between the cost of housing and Local Housing Allowance – the government plan to, instead of determining LHA rates based on the actual cost of housing locally, to determine national inflation based rises in rates annually - in line with the Consumer Price Index, which rather shockingly, does not consider housing costs like the Retail Price Index does (one explanation for why RPI is normally higher than CPI). The Chartered Institute of Housing frighteningly estimates that by 2020 every tenant’s housing benefit will be too low to cover their rent.
The way Local Housing Allowance is calculated has already changed - previously a person was entitled to housing benefit of 50% the local market rate, this has been cut to 30% making it already nigh on impossible to find any housing – worse than the common fear that the needy would be effectively pushed into ghettos of poorer housing in cheaper areas. The Government’s aim is that 30% of the rental market should be available to housing benefit tenants however the idea that by setting rent allowances at 30% of the market rate this will be achieved is erroneous – as anyone will know the rental market does not work this way, properties are not evenly distributed across a range of rents. Normally there is “a price” for a certain size of property with a few that are priced lower because they are less attractive in some way and a few that are priced at a higher rate because they are more attractive.
Those claiming housing benefit are normally claiming because of their increased need. They may be disadvantaged by disability or low paid employment or have a large family to support. It is likely that they may require better housing and that the reasons that housing is priced at a lower rate make those accommodations unsuitable for example if a person with mobility problems has to take a flat on the 2nd floor. Also, is it right that families should be exclusively housed in flats? A lack of access to outside space could conceivably impact everything from obesity to education and even certain crime rates.
The caps on housing benefit and the limiting of entitlement to 4 bedroom properties, despite need, will hit larger families hardest who are already more likely to face poverty anyway. Whatever anyone might argue about the pros and cons for society of having a large family, once the children are born putting them into enforced poverty will not have a beneficial effect on society and there is no evidence that the policy will act as a disincentive for having children. It also poses the question - is it right to use already existing large families and their children as a social experiment in this way?
I believe that the limiting of benefits is not likely to influence any positive change in either child or adult poverty levels. It is likely to cause greater hardship amongst large families, which will have lasting and limiting effects on those children’s life expectancies, educational achievement health and earnings. My own experience, and likely anyone else’s experience of the cost and the work of raising a child could tell you that it is very unlikely that having a large family has anything to do with getting extra financial benefit.
A large family is hard work, an isolating and difficult experience, which often demands sacrifice from the parents. It is hard to imagine a small increase in finances would offset all of this. The costs of the extra child also vastly outweigh the extra financial help and large families are more likely to be as a result of a lack of education, irresponsible or reckless family planning, cultural and religious beliefs and personal choices – none of which will be tackled by this measure.
This also begs the question about whether it is the Government’s place to interfere in private familial issues and whether it has a right to attempt rudimentary social engineering at all.
Some argue that it is only fair and right that people dependent on state support move to poorer housing in cheaper areas but this goes directly against the expectation that the unemployed are meant to move to where the jobs are since houses are more expensive in areas where there are jobs. It also makes it harder for those on low incomes to maintain their employment. The ability to find and maintain work could be further hindered by cuts to other welfare, public transport, the VAT rise and rising fuel/car insurance costs.
It is important to remember that it is not only the jobless who claim housing benefit but also those on low incomes Those on a low income could seriously struggle to maintain their employment and force more children into poverty if forced to move away from their work.
This housing/welfare policy could seriously damage the employment chances of a generation of the poorest families, widening inequality, destroying social mobility and consigning pensioners and families to inappropriate housing
Non-take up of housing benefit, which is an indicator of poverty, is also rising. Amongst working age households this figure was at 20% and pensioners 17% of eligible households in 2008/9 (8% and 5% respectively in 1998/9). Amongst low income households (pensioners and working age recipients) almost as many don’t claim as do (19 and 22% of total expenditure).
To make it worse Richard Exell writing for touchstone about housing benefit reforms in July 2010 states “What makes these proposals particularly dispiriting is the fact that, at the end of it all, the Housing Benefit cuts may not even achieve the savings the Coalition is aiming at. The Building and Social Housing Foundation hints that these changes lead to increases in other areas of spending, including discretionary housing payment (paid to help families at risk of homelessness) and knock on effects in health, education and criminal justice. The BSHF report cautiously recommends that these areas should be “closely monitored to ensure that the changes to housing benefit are not leading to increased expenditure in these areas.””
The new “Personal Independence Payment” is also facing controversy. Designed to replace Disability Living Allowance, which currently does not require medical assessment for some conditions, the PIP will require costly and regular medical assessments taking into account “aids and adaptations”. Disability Now say
This may mean that a wheelchair-user who can freely push their own chair may be deemed to not have restricted mobility.
Rich Watts, Director of ECDP – a user-led organisation in Essex – said that the reforms “confirm the very worst apprehensions that we held.
“There is no getting away from the fact the Government has decided it wants to spend less on DLA and is justifying where it is going to draw the line to save the 20% they’re looking for,” he says.
“The idea that the reformed DLA system provides “unconditional” support is palpably nonsense. Moving from the system (where people can self-assess) to one where the explicit aim of the reform is to reduce the number of recipients and spend by 20% is quite the opposite.”
The PIP and the replacement for ESA are seemingly going to be based on the much maligned “Work Capability Assessment”. Currently the WCA is carried out, in most cases, by a private company called ATOS Origin. Complaints have been made about the processes used to assess medical needs, particularly of those with chronic illnesses such as M.S. and M.E., mental and terminal illnesses because the assessment focuses on a person’s physical health on the day of the assessment and not enough on the opinion and experience of your usual doctor. There have been a high number successful appeals against WCA decisions and there have been worries about the qualifications of the medical assessors that they use.
Like many private health clinics and companies, ATOS recruit assessors with the minimum necessary qualifications and do not require they have any specialist qualifications or experience despite providing a specialist service. It is hard to have confidence that this is anything but a cost cutting exercise.
Changes to the social fund are most shocking. The social fund provides things like maternity grants, community care grants, budgeting loans and crisis loans. Since April 2011 the crisis loans system has been restricted. Crisis loans are loans paid to anyone in a crisis situation and a decision can be made the same day. They must be paid back. From April crisis loans have ceased to be paid for items such as cookers or beds in an emergency, meaning benefit claimants will have to apply for a budgeting loan, which takes a minimum of 20 days. Those not claiming benefits and without any other source of income, precisely the most at risk, will have no access to crisis loans for these purposes.
The changes to child maintenance include replacing the CSA with the Child Maintenance and Enforcement Commission (CMEC) and charging parents with care an upfront fee of £100 followed by 5-12% of the maintenance paid by the absent parent for using the agency. This is designed to incentivise private collaboration but it is hard to see how it will in fact achieve this given that the CSA is unreliable and confrontational and parent who are able to generally make their own arrangements anyway. All it does is penalise children. The Government should not be taxing child maintenance.
Oxford English Dictionary
