Memorandum submitted by Community Links
When I did welfare benefits advice work 25 years
ago we expected to train new benefits advisors in one week. Anyone
could do it! Today we run two-year long courses and also employ
specialists with expertise and experience in particular benefits.
The system has become massively complex. A typical
claim form was five or six pages long. Today several run to 50
pages or more. This has had several effects:
1. Under claiming amongst the most disadvantagedthe
paperwork is too intimidating and complicated.
2. High rate of failure amongst legitimate
claimantsthey just fill the form out wrong and never know
why they were turned down but assume they weren't eligible.
3. Expensive bureaucracyprimarily
occupied with administering the system but also in the advice
industry. I fear we will soon reach the point where lay people
won't claim benefits without the help of an advisor any more than
most of us would expect to do the conveyancing on a house without
4. Anomalies and absurditiesNo government
intended to create the Poverty Trap but as the system has become
more sophisticated the trap has become a bigger problem.
It seems to me that successive governments have
tried to improve and repair bits of a system which needs rebuilding.
I remember hearing Malcolm Wicks (MP for Croydon North) say some
years ago that there had been 134 additions to the Housing Benefit
system since its introductionno doubt it is a larger figure
today and no wonder it is so complicated. The Child Poverty Action
Group (cpag) annual "Welfare Benefits and Tax Credits Handbook",
at least three inches thick and growing, highlights this growing
There are good bits in the current welfare reform green paper
but they are building on, or shoring up, a structure that has
been patched up for too long.
I wonder what a modern benefit system would
look like if we started with a blank sheet? I am sure it could
be simpler, fairer and no more expensive. Suppose an eminent academic
professor(s) was invited to lead a team that would design a new
system based on principles and criteria laid down by ministers
but designed outside government ie without any existing baggage?
Starting now (March 2006) would be timely as we mark the 60th
anniversary or perhaps it could be developed as a suitably ambitious
project for a new prime minister?
"There are so many people who are entitled
to benefits but don't claim, either because they don't know they
are entitled, or because they find the system complicated and
impenetrable."Jo, aged 27; taken from "Need not
Greed" (2006) p28.
1. A careful and systematic reassessment
of the benefits system is needed: The government acknowledges
that "The present benefits system for people of working age
is too complex.... We need a simpler benefits system" (DWP,
2006, p 92). The current government pledges to rationalise the
system: "Benefits often overlap and have complex interactions
with each other and Tax Credits. The next step is to review the
range of benefits to identify the challenges to creating a single
system with fair and effective solutions" (DWP, 2006, p 92).
2. The National Audit Office (2005) and
Committee of Public Accounts (2006) have both produced strong
reports recommending simplification of the benefits system, which
examine some of the questions raised by this current Work and
Pensions Committee inquiry. The main conclusion reached was that
whatever direction of reform is chosen it will be incredible difficult
3. The Department for Work & Pensions
has established a small Benefits Simplification Unit in mid-2006,
which has a very limited budget and staff, and a remit for only
looking at simplifying current or future benefits legislation,
rather than the mountain of rules and regulations which have built
up over the previous 60 years and cause the bulk of complexity.
There is political acknowledgement that the benefits system needs
to be re-examined and simplified, however the questions remain
how, when, at what cost: financially, socially, morally and politically,
does a simpler benefit system come at.
4. A period of evidence gathering, new policy
formulation and budgeting needs to be undertaken, so we welcome
the Work and Pensions Committee inquiry. However, whatever changes
are recommended, the socio-economic and political ramifications
that an enhanced or new system would entail will need to be fully
explored before going public (including as far as possible the
benefits, risks and unintended consequences). The change will
need to be driven by some very bold political leadership, and
we're not sure that the climate exists to bring about change on
such a huge (and potentially politically risky) scale.
5. The following response answers the inquiries
questions by providing evidence, signposts to other sources of
evidence, and makes recommendations.
"Most people I know from my community treat
benefits offices as unwelcoming places
There's a permanent
mutual suspicion and mistrust between claimants and officials.
The two don't trust each other."Kingston, aged 29;
taken from "Need not Greed" (2006) p27.
6. Community Links has over 30 years of
direct experience and expertise of the working with people and
the benefits system, which has direct relevance for the Committee's
inquiry. Community Links is an innovative charity running community-based
projects in east London. Founded in 1977, we now help over 53,000
vulnerable children, young people and adults every year, with
most of our work delivered in Newham, one of the poorest boroughs
7. Community Links pioneers new ideas and
new ways of working locally and shares the learning nationally
through linksUK, which provides practitioner-led consultancy and
training, research and policy development and a programme of publications
8. Over the last seven years, linksUK has:
conducted over 25 research projects
published 28 books and reports based
on our research
worked with over 5,000 local people
using our innovative "Everyday Innovators" approach
succeeded in securing 12 national
and has successfully tested 11 ideas
for improving delivery of local services.
9. For the history of the UK's benefits
system read Nicholas Boys Smith, "Reforming Welfare"
(2006); and James Bartholomew, "The welfare state we're in"
10. The benefit system cannot be examined
in isolationpeople progress or transition between the benefits,
in-work benefits (ie tax credits) and tax systems. The continuing
culture of government departments not "joining up" merely
adds to the growing complexities as new strategies, policies and
budgets come into play. Compounded over a number of decades, we
have today a complex maze of rules, regulations, loop holes and
traps. HMT, DWP, and HMRC have primary responsibility, however
DfES, Cabinet Office, DCLG and DTI all contribute to the complexity
of the systems. Each of these departments needs to participate
in joint consideration of relevant policy proposals of benefits
11. We recommend that a cross-government
working group, chaired by a cabinet member, be established to
provide the forum and political will to work towards a simplified
12. Government agency database linkages
should be made. The current separation between Revenue & Customs
and the benefits agencies means that it is relatively easy for
administrative error to occur in the payment of state benefits
and the overpayment of Tax Credits or Housing Benefit run-on.
Linkages may include, for example, showing a person's situation
and therefore eligibility for Housing Benefit, Child Benefit,
Working Tax Credit and taxable income and/or taxes paid. This
would also help reduce fraudulent claims.
13. Greater database unification would also
facilitate a smooth transition from benefits to work. A system
that can monitor and track the transition people make from benefits
into work could respond immediately to changes and keep the right
balance between benefits and tax, guaranteeing a basic income.
"They basically told me I had to become
unemployed in order for them (Jobcentre Plus) to give me advice.
But when I did that, they started trying to force me to do something
completely different, like can driving and factory work. I tried
to tell them that I wanted to set up a music school but they wouldn't
listen".Otis, aged 36; taken from "Cheats or
14. Staff training in reforms to the benefits
system is a key issue. Computer systems should make reforms such
as Housing Benefit run-on, and automatic reclaim of benefits for
people in temporary work, smooth. However, a clear understanding
of policy by frontline delivery staff, to inform people of their
entitlement and to reduce error, is needed to underpin this.
15. Changes to the tax and benefit system
to encourage people back to work must be accompanied by efficient
systems, staff training and regular information sharing. For example,
while the current system allows one month of Housing Benefit run-on
in order to encourage people back to work, in practice confusion
between staff in the benefits agency and the Housing Benefit department
means that run-on is not always allocated.
16. There are three causes of incorrect
payments: fraud, claimant error and official error. The distinction
between fraud and claimant error is one of intent and severity,
with claimant error being accidental omissions of necessary information
rather than an intention to defraud the system. Despite the government
concentrating resources on fraudulent activity, error is a more
significant element of the problem. DWP (2007) figures show that
between April 2005 and March 2006, they spent £115.8 billion
on benefits. Of this, 2.2% (£2.6 billion) of overall benefit
expenditure is estimated to have been overpaid. Breaking this
down further, fraud accounts for 0.6% (£0.7 billion), claimant
error makes up 0.9% (£1 billion) and official error amounts
to 0.7% (£0.8 billion).
17. This phenomenon can be analysed at greater
depth by investigating the rates for specific benefits, for example
Income Support (IS), Jobseeker's Allowance (JSA) and Housing Benefit
(HB). In each of these cases the rate of incorrect payments is
higher than the overall figure of 2.2%. Investigating IS and JSA
in combination, 4.7% (£550 million) of overall expenditure
is estimated (by the DWP) to have been overpaid. Breaking this
down, fraud accounts for 2.1% (£240 million), claimant error
is 1.3% (£150 million) and official error makes up 1.4% (£160
million). This is the only case where fraud is the most significant
single cause of overpayment, but it is clearly still less than
overall claimant and official error. In the case of HB, 5.5% (£770
million) of overall expenditure is estimated to have been overpaid,
with fraud constituting 1% (£140 million) of that, claimant
error being 3.1% (£440 million) and 1.3% (£190 million)
is down to official error. Once again, official error is more
significant than fraud. Policy and practice would be more effective
and efficient if they were designed and implemented with this
taken into account.
18. It is estimated that underpayments across
the benefits system totalled 0.8% (£0.9 billion) over 2005
and 2006. Underpayment refers only to claimants receiving less
than they are entitled to; it does not apply to those entitled
to benefits but who do not take them up. It is intuitive to offset
this figure against the overpayments figure when assessing how
much money is being lost from the benefits system, but because
the estimates do not account for overpaid benefit that will subsequently
be recovered, they do not provide a measure of net losses.
19. Fraud is the least important cause of
incorrect benefits payments. Campaigns to increase the take-up
of benefits by those who are eligible but who do not claim through
ignorance or fear are far less prominent than those that seek
to address fraud.
20. Not only is fraud less significant than
error when it comes to the causes of incorrect payments, but incorrect
payments themselves amount to less than unclaimed benefits. Again,
the figures are estimates based on a range of likely values, but
even the DWP's lowest (2006) estimate of unclaimed benefits
for the period April 2004 to March 2005
amounts to £4.78 billion. The higher end figure in their
range is £8.03 billion. Applying the convention of using
the median level as a guide puts the estimated level of unclaimed
benefits at £6.405 billion, more than double the estimated
figure for overpayments in the 2005-2006 financial year.
21. Even though there is a degree of imprecision
in all the figures (due to factors such as sampling error, the
difficulty of obtaining accurate statistics on covert activity
and identifying administrative errors) and they were collated
one year apart, they are still of value in drawing broad conclusions.
It is clear from these figures that fraud plays a relatively minor
role in the benefits system when compared with administrative
error (due to complexity, training and management) and unclaimed
benefits. Greater gain is to be made where the problem is greatest,
so it follows that it would be more appropriate for policy to
address administrative error and low take-up rates, instead of
being so strongly focused on fraud.
22. The effects of the tax and benefits
rules for people on benefits or low incomes can leave people in
the already well-documented dilemma of the " benefits trap"
or "poverty trap", which can "push" and "pull"
people to work informally. (Read Copisarow and Barbour (2004)
and Katungi et al (2006) for more detail)
23. The objectives of the proposed adjustments
to the current policies and tax and benefits rules are:
To re-balance the carrots vs. sticks,
including offering a "nothing to lose" approach to taking
a job or starting and developing a business, ie a defined period
of guaranteed living cost reimbursement.
To co-ordinate the tax and benefits
thresholds more closely, so that the transition is as seamless
as possible for people to graduate from receiving benefits, to
progressing through a "no benefits, no tax" point, to
becoming a tax payer. This will eliminate some current anomalies
in which people's benefits are inappropriately taxed away.
24. This streamlining process will also
involve an elimination of such "distortions" as absolute
caps on permitted earnings disregards, work hours or savings levels
for benefits retention. What is needed instead is a sliding-scale
system which encourages people to work, earn and save as much
as they can, rather than manage down their capacity to become
independent of State support in order to fit into the current
25. There is always a balance to be struck
between legitimate monitoring and creeping bureaucratisation.
At the moment, too many people lose out on their legal right to
state support, largely through ignorance or negligence. Under
the present system, it is difficult to understand and calculate
whether an offer of work will actually boost income when benefits
will be lost. This intimidates people considering leaving benefits
and taking on work.
26. Theoretically, In-Work benefits, taxes
and welfare benefits operate in concert to provide good financial
incentives for single people, couples and parents to take on work,
but in practice fall short when it comes to facilitating opportunities
for promotion and increased earnings. Confusing rules and flawed
administration serve to discourage optimal take-up.
27. If the benefits system were simpler
it would be easier to identify fraudsters, but it has been shown
that this should not be the primary focus, because improving efficiency
and reducing error would increase take-up by eligible claimants
failing to make claims. Uncoupling passported benefits is an obvious
progression; if people did not immediately lose other benefits
when losing Income Support, they would be more inclined to take
the risk of transferring into formal employment.
28. The structures that deal with work,
such as the Revenue & Customs and the Department for Work
and Pensions operate on the tacit assumption that people have
a shared understanding of the ideas around the concept of "work".
29. Our research indicates that there is
variation around the ideas about work. People newly arriving in
the UK may have a different understanding of work. The differences
may be sharper among those arriving from developing countries.
The different understandings of work may make people unresponsive
to institutions that try to encourage people to participate in
UK society and especially into formal paid work. It may render
back-to-work services inaccessible.
30. A system that is sensitive to people's
needs should recognise diversity. The rules, systems and norms
from a particular country may be a point of diversity as much
as culture, language or shared experiences. If services are to
be sensitive to diversity, and to reach out to people whom they
often find hard to reach, they need to be able to deal with the
idea that people have different norms and understandings of very
fundamental concepts. Can we assume that people know how to search
for jobs, that they know what a job agency is? Is this a norm
in their country of origin? Services such as Jobcentre Plus or
back-to-work organisations need to be clear about the idea that
people may have preconceptions that they bring with them from
their country of origin about what work is and isn't acceptable
for someone with their qualifications to do.
31. One of the consequences of a benefits
system which is complex, bureaucratic and slow to respond to people's
changing circumstances, is that it pushes some people into informal
paid work. The benefits system creates disincentives for people
to return to formal paid work. In particular, fears about inefficiencies
in the system can make people wary of building up arrears while
waiting for run-on or reinstated payments on returning to work.
Some people are no better off when working formally, due to losing
32. Read Community Links latest research
report "People in low-paid informal work: Need not Greed"
(2006), for evidence and recommendations, about the relationship
between the benefits system and informal paid work; and visit:
and www.informaleconomy.org.uk (to be launched in June 2007).
33. The Earnings Disregard is the amount
a person can earn before their earnings are offset against their
benefits and it has hardly changed in almost 20 years. Levels
are low; for example, single people signing-on have to declare
any earnings of more than £5 per week before they lose outmeaning
that if they were being paid the Minimum Wage they would not be
able to afford to work even one hour per week.
34. Levels of Earnings Disregard should
be raised and index-linked, enabling people to take transitional
part-time or sessional jobs. Specific proposals on this include
Introduce an "Earnings Credit"the
First Policy Action Team report (DfEE, 1999) recommended an Earnings
Disregard reform using the Australian model of a £1,000 earnings
Establish a "Community Allowance"
scheme whereby local people on benefits are paid to provide key
jobs to improve their community (Steele, 2006).
The recent raising of Savings Disregard
levels to £6,000 is welcomed (HM Treasury, 2005).
35. Housing costs are a major factor in
driving people toward informal working. At present, Housing Benefit
is withdrawn four weeks after a claimant finds work, meaning that
they are confronted with having to pay high rents immediately
after they have got a job they do not yet know they will remain
in for a sustained period. The Housing Benefit run-on period should
be increased to six months so as to maximise opportunities to
locate, attain and retain employment.
"Government should allow claimants to keep
some of the key benefits such as Housing Benefit when people get
into low-paid work, rather than severing them off straight away
and throwing them in at the deep end. When people get a job, you
would want them to keep it, but if they face extreme difficulties
including homelessness because they can't afford to rent, they
may not keep the job, and sooner than later they will be on welfare
again."An advice worker; taken from "Need not
Greed" (2006) p42
36. This works in a similar manner to the
Earnings Disregard in that benefit is reduced according to income.
A person's Housing Benefit (HB) level is based on whether their
income exceeds what they would otherwise receive on Income Support,
Jobseeker's Allowance (income-based) or Pension Credit Guarantee.
If it is, a deduction is made at the rate of 65 pence off HB (as
well as a further decrease of 20 pence in their Council Tax Benefit)
for each pound of excess income. This is higher than the top rate
of income tax.
37. Difficulties are compounded where income
fluctuates because each week's earnings constitutes a change in
circumstances, so it is difficult to be certain deductions are
correct at any given time. These conditions entrench poverty because
they adversely affect people doing contingent work. The Housing
Benefit taper should be lowered to 36pence in the pound
38. Currently, on losing Income Support,
all other passport-ed benefits such as Housing Benefit, Council
Tax benefit, free prescriptions and free school meals, are lost.
This acts as a disincentive to taking low-paid formal jobs.
"Benefits should not be linked. If you lose
Income Support, you lose all other passport-ed benefits such as
Housing Benefit, Council Tax, free prescriptions, free school
meals. It's too much to take in for some of our clients considering
returning to work. They feel they wouldn't cope. Why not say `ok
you will lose this, but keep this benefit for the time being.'"An
advice worker; taken from "Need not Greed" (2006) p43.
39. As part of our current "Interact"
project (see below) we are gathering case studies. An interim
report will be published and available over summer 2007.
40. We recommend that you read Nicholas
Boys Smith, "Reforming Welfare", published by the think-tank
Reform, in November 2006, for international examples of benefits
A SUGGESTED WAY
41. At Community Links we see that there
are three options:
Continue to take incremental steps
in modifying and "improving" existing benefits, which
will continue the present mess.
Develop a new set of values and principles,
and apply to the current system.
Conduct a fundamental review and
develop a new system.
42. A work programme aimed at re-thinking
and simplifying the benefits system would have to be comprehensive,
substantive, rigorous and conducted on such a scale that the findings
and recommendations would be taken seriously (and implemented)
on many different political levels.
43. The work programme would include:
Agreeing the values and principles
underlying the benefits system. Are the original values still
Deciding whether to develop a model(s)
which simplifies the current system or one which starts again
with a blank sheet.
Undertaking an international comparison
of benefits systems or lack of them (focusing on outcomes and
Reviewing the current UK benefits
system, which has already been completed by the National Audit
Office (Dec 05), examined by the House of Commons, Committee of
Public Accounts (Mar 06), and Reform (2006).
Developing and recommending various
benefit system models that could be tested, evaluated and rolled
out across the UK.
Examining the financial and practical
realities, including cost-benefit, of undertaking a new or simplified
44. In order to conduct this work programme
and to persuade the political powers that be, a highly respected,
independent and influential group / commission / enquiry would
need to be established to lead this work. Members could include
prominent academics, voluntary & community practioners and
leaders, and business leaders. Substantial funding (government
and/or independent) would need to be secured.
45. Any benefits system needs to be very
clear on its principles which will inform who it is there to support,
for how long, with how much, for which circumstances. It has to
be simple to administrate and therefore value for money.
46. Political parties need to find the courage,
foresight and determination to push for a new system, because
the current climate might not be that receptive to change, in
fact it could be the opposite, nor is it high up the political
agenda. However action must be takendoing nothing is not
FOR 2007 INTO
47. The Committee might be interested in
our work programme for this year into different aspects of the
benefits system. Projects include:
48. "Interact": We are working
with the Charter Institute of Taxation's Low Incomes Tax Reform
Group, and Child Poverty Action Group, with support from SIED,
to research the interactions people make as they find work and
move through the benefits, in-work benefits (eg tax credits),
and tax systems. Our findings will be published in winter 2007
on the back of a specific campaign about the complexities of these
49. Informal Economy campaign: In 2006 we
convened a national Informal Economy Campaign Coalition, with
70+ members, to influence and change policy that can support more
people, should they wish, to make the transition to the formal
economy. We continue to develop www.informaleconomy.org.ukthe
world's first dedicated website to the informal economy. We contributed
a number of articles and interviews to the academic, trade and
national media (print and radio) about the informal economy. And
later this year we will publish a "menu of practical actions
to harness local informal economies", and launch a campaign
50. CREATE, the Community Allowance: We
are working with BURA, Development Trust Association, National
Community Forum (DCLG) and Slivers-of-Time, to develop the Community
Allowance which will improve neighbourhoods and change lives by
enabling local people on benefits to take on short-term and sessional
work in regeneration without losing their benefits status. We
are lobbying the Secretary of State to include this in the Welfare
Reform Act, and building a network of partners to pilot the Community
Allowance in Spring 2008.
51. Towards a welfare state that works:
We are working with nef (new economics foundation), with support
from the Big Issue Foundation, to capture real life experiences
of those affected by the welfare system. We will publish an innovative
report, towards the end of 2007, that sets out some of the bizarre
anomalies in the welfare systemwhy, for example, should
it cost so much more to send a prisoner to Parkhurst than it does
to send a wealthy pupil to Charterhouse? This will enable us to
launch a national debate about the welfare state that breaks out
of the usual confines of either dull political debate or stereotyping
and demonisationand generates innovative and radical proposals
to move forward.
52. National Audit Office / DWP study into
benefit simplification: A follow up study and report into the
complexities of the benefits system is being carried out by the
NAOpart 2 to a report published late in 2005.
53. Mini-Jobs: Community Links is a member
of a project advisory group for the National Council of One Parent
Families and the Institute of Fiscal Studies, supported by the
Joseph Rowntree Foundation. The project is examining the role
and impact of encouraging more mini-jobs (jobs providing work
for less than 16 hours a week), so moving people off benefits,
and enabling the government to reach its target of 80% employment.
The report will be published later in the year.
Bartholomew J, (2004) "The welfare state
we're in", London: Politico's Publishing Ltd
Boys Smith N, (2006), "Reforming Welfare",
CPAG (2005), "Tackling the complexity of
benefit regulations", evidence paper submitted to the Committee
of Public Accounts, December 2005
CPAG, Welfare benefits and tax credits handbook
2005-2006, Child Poverty Action Group, 2005
Committee of Public Accounts, House of Commons
(2006), "Tackling the complexity of the benefits system",
Thirty-sixth Report of Session 2005-06. London: The Stationary
Office Ltd. HC 765
Copisarow R & Barbour A, (2004) "Self-Employed
People in the Informal EconomyCheats or Contributors? :
Evidence, Implications and Policy Recommendations", London:
Department for Work and Pensions (2006) "A
new deal for welfare: Empowering people to work", Welfare
reform green paper, London: DWP
Katungi D, Neale E & Barbour A, (2006) "People
in low-paid informal work: Need not Greed", Joseph Rowntree
Foundation and The Policy Press
National Audit Office (2005), "Dealing
with the complexity of the benefits system", London: The
Stationary Office Ltd. HC 592
Smerdon M & Robinson D, (2004) "Enduring
change: the experience of the Community Links Social Enterprise
Zone. Lessons learnt and next steps", The Policy Press and
60 The legislation for the benefits system fills about
5 foot of books; and the case law would fill another 10 foot of
books-though unhelpfully the case law is not compiled in one easily
accessible format. Back
note that the sum of monetary figures does not match the overall
figure due to rounding. Back
combining estimates for Income Support, Pension Credit, Housing
Benefit, Council Tax Benefit, Jobseeker's Allowance. Back
note this is not the same period as the fraud and error statistics
cited previously which apply to the following year. Back