A welfare state which aims to meet the diverse needs of millions of vulnerable people will never be simple. Yet our current benefits system is stunningly complicated. It is when complexity becomes dysfunctional, making it hard for staff and claimants to navigate the system, that difficulties arise. We conclude that the UK benefits system has an unacceptable amount of dysfunctional complexity and that its simplification should be a key priority for the DWP.
The DWP alone administers around 40 benefits, allowances and grants, many of which have different eligibility criteria and governing rules. The tax credits system and other bodies add a further layer of complexity. There are recurrent problems of interaction between benefits, conflicting rules and entitlements which are affected by other parts of the benefits system. The process of administration can contribute further to complexity. Many rules reflect administrative constraints and poor administration causes problems.
Some good work is underway within the DWP on incremental and operational improvements. Work has started to make it easier for claimants to report changes, and to begin a long-overdue move towards a single point of contact for this purpose. The Department has established a Benefit Simplification Unit (BSU), which has produced a Simplification Guide for staff involved in policy making and a Progress report which outlines some of the changes to benefits rules that the BSU has been instrumental in introducing. Some alignment measures were announced in the 2007 Budget.
Nonetheless, the BSU is reactive, concentrates on proposals for new policies rather than systematically reviewing the existing structure, and is under-resourced, having only four full-time staff. Different DWP Ministers are responsible for better regulation, welfare reform and simplification and there is no systematic attempt to address the combined and overlapping complexities of the benefits and tax credits systems.
We believe there are opportunities for merging some benefits, aligning the rules of eligibility and, where means-tests are necessary, the information required from claimants.
We favour easier access for claimants with easily navigable on-line claim forms.
The impact of complexity on official error figures is a persistent problem for the DWP and this combined with complex administrative processes, and inadequate training, can create significant operational difficulties. From the claimant perspective, customer error and the ensuing repayments can contribute to financial hardship and complex rules and interactions act as work disincentives.
Incremental reform of the benefits system, whilst valuable in the short-term, cannot address far-reaching systemic complexity. Small-scale changes can improve the rules of some benefits, or the work incentives for some claimants, but they cannot reasonably be expected to have a long-term impact on wholesale simplification. Indeed, given the shifting sands of social security, as new legislation is introduced, the very reforms that were aimed at simplification can end up creating further complexity.
We conclude in this report that whilst efforts are being made to simplify benefits, the piecemeal approach that the Government has taken so far is "nibbling at the edges" of our vast and hugely complex social security system. We do not deny that tackling dysfunctional complexity is an epic task but we are disappointed that the Government has not set out a clear vision of a simplified system. If simplification is indeed a priority, the Government should outline what a simpler system might look like, steps to reach this goal and set out a timetable to achieve it. To contribute to this debate the Annex to the Report sketches out one possible model of a simplified system, which would also incorporate tax credits.
We ask the Government to consider the case for more radical reform, such as the development of a single working age benefit, by undertaking modelling to identify whether this is a feasible goal for the UK. We note the role the Pensions Commission had in working through alternative systems, assessing options and achieving consensus about the future for UK pensions and propose the establishment of a Welfare Commission. We think that only by undertaking a full examination of the possibility for fundamental change, can the Government determine the best approach to simplification.