Examination of Witnesses (Questions 60
- 79)
WEDNESDAY 2 MAY 2007
MS FRAN
BENNETT, MR
DONALD HIRSCH
AND MS
SUE ROYSTON
Q60 Justine Greening: This is what
I mean—there are lots of areas. Part of it is looking at
the process and how you can make it right first time?
Ms Bennett: Absolutely, and, of
course, if you make it right first time, again it is a kind of
invest-to-save, win-win situation because you do not get so many
complaints and so many reviews and so many appeals further down
the line, which, of course, are very labour intensive and frustrating
for claimant and administrator alike—so improvements in
administration. Obviously, the difficult issue around that at
the moment is that the Government is trying to save on administration,
and that is the tension that we are working with at the moment,
but it can have its on-costs, if you save too much on administration,
in terms of the complaints and reviews and appeals later on, and
I think that point needs to be made very strongly.
Q61 Justine Greening: Donald, you
would like a shorter term thing?
Mr Hirsch: I think what is coming
out of this discussion is that, if you wanted to make some changes
in entitlement and solve it that way, you have to do that in quite
a big way and have a new system which is perhaps more generous.
You almost start again. If you are not going to do that, then
I think what is coming out of this conversation is that making
little changes in entitlement is perhaps not nearly as important
as trying to create more stability in the system, more clarity
in the system and more support for claimants within the system.
To follow from what Fran has just said about administration, I
think there is a real risk that one looks at the administrative
costs as though they are unnecessary, that the more money that
goes straight to claimants the better. It is not at all clear
that that is how you get efficiency, and the desire to reduce
the number of people working on things, of course you can do things
more intelligently through IT, but I think we have to have perhaps
a more flexible approach to those sorts of costs than simply saying
just try to reduce them per se. It is trying to make sure that
it is cost effective really.
Q62 Justine Greening: Do you think
there is a danger that all the Gershon savings are happening independently
from what the Benefit Simplification Unit was doing and actually
this was a brilliant opportunity to have the benefits simplification
feed absolutely into Gershon in a positive way?
Mr Hirsch: Yes.
Q63 Justine Greening: One thing that
came up when we were discussing this as a Committee a couple of
weeks ago was simplification of things like common time periods
for payment and reassessment rather than different benefits being
reassessed under different circumstances and over different time
limits. Do you think that is potentially an area that we could
look at where there is some commonality in the way in which benefits
are assessed and then reassessed themselves?
Ms Royston: I think it helped
that they changed housing benefit, and that went on straightforwardly,
however, I think there are greater priorities in terms of alignment
than that.
Q64 Justine Greening: What would
those be in your mind?
Ms Royston: Certainly I would
like to see more alignment between tax credits and the benefit
system. For me I think that would be the priority. If people are
being persuaded back into work, once somebody is in a low-paid
job, they very much have to do what the employer says in terms
of hours in work, so things change. That, I think means how their
benefits and Tax Credits change and interact become a very complex
area and we would like to see more work done on alignment.
Q65 Justine Greening: One thing I
have seen in my constituency and my MP surgery is that when tax
credits are miscalculated, that ironically means that, even if
benefits were worked out correctly on the basis of the original
tax credit, they then have to be recalculated as well?
Ms Royston: Yes.
Q66 Justine Greening: So there is
a total knock-on effect?
Ms Royston: Yes, if the computer
will not stop paying somebody tax credits, then income support
or housing benefit have to take that money into account even though
the person is going to have to pay back the tax credits because,
in the tax credit system, if the person knows it is an overpayment,
then they have to pay it back. So, the person has reported it,
they want it to stop, the tax credit system cannot stop paying
them, so they lose their housing benefit and council tax benefit.
Q67 Justine Greening: Do you find
that they are able to retrospectively correct that when they are
faced with the tax credit. They then, of course, have to pay the
tax credit overpayment back?
Ms Royston: They have to pay it.
Q68 Justine Greening: So they are
left really losing out?
Ms Royston: They lose out, yes.
Housing benefit cannot pay them that money back. Housing benefit
has to treat the income as it is actually coming in. There are
just so many areas where there are problems with tax credits.
Q69 Justine Greening: That sounds
like a clear area where the claimant ends up with less money than
they were entitled to purely because of errors within the process
in the system?
Ms Royston: Yes.
Q70 Chairman: Are you saying that
housing benefit cannot be recalculated on the actual income.
Ms Royston: That is it, yes. It
cannot. It has to treat the actual income that has come in—
Q71 Chairman: I am talking about
subsequently?
Ms Royston: No. They cannot go
back and recalculate.
Chairman: I must let you know I managed
to do it then.
Q72 Justine Greening: I will let
the Chairman pursue that with you later. Donald, the Joseph Rowntree
Foundation mentioned benefit up-rating and the differences in
the way that even happens as being one of the, I think you said,
greatest yet least noticed anomalies in the present benefit system.
How do you think the Government should go about tackling that?
Should it be simplified? Do you think there are some broader conclusions
for other simplification efforts from that?
Mr Hirsch: It feels very unfair
that a Government that thinks that people deserve certain things
in certain circumstances should have about five different ways
in which it changes those entitlements over time, with huge impacts
over a very long period. We all know from the debate about the
uprating of the state pension how much effect there has been of
only up-rating it by prices rather than earnings over a whole
generation, and that is actually being repeated through other
parts of the benefit system. Clearly, the Government does have
some priorities, like, for example, in the case of children, to
give money to the lowest income families so that the most means-tested
bits are being up-rated the most generous, and that is fine if
those priorities are made clear, but I think there has to be much
more clarity about why things are being up-rated in different
ways and what impact that is going to have over the longer term.
The other interesting effect on simplicity or complexity of doing
things in the present way is that it seems that when something
is not particularly wanted or favoured that it is left to wither.
The ultimate example is the five shillings a week that you get
when you are 80, which is still five shillings. Of course, there
was a time when they might have thought this was not a very logical
thing to do but could not go about abolishing it, and that is
why you get 25p extra on your pension at that age. What happens
effectively is that we have a system with all the little old bits
hanging off, and I think that does add to the complexity itself.
Q73 Justine Greening: Do you think
we should have a clear out?
Mr Hirsch: Indeed.
Q74 Justine Greening: Either align
it or be clear on what were we are trying to achieve?
Mr Hirsch: Yes.
Q75 Justine Greening: So if benefits
are allowed to wither, if that means that they are not meant to
be viewed as high priority, they should go and the money should
be loaded on to benefits that are high priority, perhaps tackling
your issue about income?
Mr Hirsch: Yes, there is an issue
about honesty, if you like. There is also, of course, an issue
about preserving people's entitlement and not having a sudden
drop in their income. I think when something is being phased out,
you can phase it out a bit more explicitly rather than over generations.
Also, I think there are other things which are in between, like,
for example, child benefit. Occasionally, as in fact in the present
Budget, the recent Budget, there is a little jump, but over time
it goes up with prices but not earnings. I think if the rationale
were made clearer, people, both claimants and also the public,
might understand a bit better and be able to get more of a stable
view about what the purpose of these different benefits is.
Q76 Greg Mulholland: Moving from
what Justine was talking about in terms of incremental change,
I want to put some questions to you about more fundamental change.
First of all, can I ask you, Fran, in terms of experience from
previous benefits unifications, what do you think we can learn
from those about the process of simplification?
Ms Bennett: I think most reforms
are described as simplification, perhaps even if they are not.
Certainly one of the concerns that we had in the 1980s about the
change from supplementary benefit to income support—those
of us here who can remember that—was simplification meaning
rough justice. I think that is always something to look out for.
You need to be careful, if you are simplifying, that that does
not involve rough justice for some of the most vulnerable claimants.
It relates to Donald's point about how generous you are prepared
to be with your system, and simplification works much better in
a generous system than it does in a system which is less generous.
So, I think that is one of the lessons we can learn. I think there
are two other lessons which we have learnt from more recent reforms.
One is that we do not seem to be very good at large-scale IT projects.
I will put it no more highly than that, since, obviously, the
Committee has a lot more experience of that than I have. I think
it needs to be a real point of concern that when we are talking
about the kinds of people we are talking about who are affected
by child support or tax credits, we really should have learnt
our lesson by now that we need to be very careful about how those
systems are set up and how they work. The third thing we can learn,
and this is why I very much look forward to being able to read
Sue's report and also why I think the insight research idea of
the Government is so important, is that we have learnt that we
have to go with the grain of people's lives and, particularly
for people on low incomes, we have to recognise how they budget,
which is week-to-week and not year-by-year, and we have to recognise
how much their incomes fluctuate. As I said before, we have to
recognise that lot of people, for example, who come to the advice
centre I am involved with are illiterate or barely literate. All
those things I think we need to very much understand, and I think
the way in which you do that is in more participatory kinds of
research. The Government may well evaluate specific initiatives,
but it does not necessarily look holistically from the perspective
of the claimant at the impact of all initiatives together. The
Government, obviously, does do customer satisfaction surveys,
but those customer satisfaction surveys, I do not want to say,
tick-box because that sounds too negative, I think they are very
important, but they do not get the in-depth experience of how
claimants see the world and what is important to them, which I
think is very important.
Q77 Greg Mulholland: In terms of
potentially radical reforms, there are two things I want to get
your thoughts on. First of all, the potential in the UK of a single
working age benefit. Can I ask if you think that is something
that has potential in this country and, if so, what are the advantages
and disadvantages of that? That is to all of you.
Ms Royston: I do not have a great
deal of thoughts on it, but I would see one advantage to it. At
the moment, there is a big difference between incapacity benefit
and JSA. We see people, typically somebody with a mental health
problem, and it is extremely frustrating, who, it might be, has
been very depressed, is getting better, goes back into work, has
a PCA at just the wrong moment and, as a result of that, is suddenly
thrown off IB, the result of this upset is he goes back down into
depression, gives up the permitted work, goes back on to IB because
his doctor says he is a lot worse. As to the working age benefit,
instead of having this cliff edge from one benefit to the other,
if there could be a slope of conditionality. There would still
need to be EMPs doing tests, but, as someone was getting better,
the conditionality would increase rather than this amount of conditionality
on JSA and this amount of conditionality on IB or ESA. I would
see it as a great advantage if we could have a slope of conditionality
rather than a cliff.
Ms Bennett: I think there are
obvious attractions. I think they would have to change the acronyms,
because I think a benefit called SWAB would be a bit of a problem!
There are obvious attractions, but I think there are different
perspectives on this depending on who you are. I think academics
and Government are particularly interested in the different conditionalities
for benefits and the artificial boundaries between benefits—the
kind of thing that Sue has just been talking about—but they
do not necessarily go on to also consider what is incredibly important
for benefit claimants and for practitioners and advisers, which
is actually how do you qualify for that benefit in terms of eligibility
conditions—is it means-tested or non means-tested basically—and
at what level that benefit is paid. I think those are absolutely
critical issues that we must not lose sight of in wanting to have
a single framework for working age benefits, if you like. It is
absolutely crucial for claimants, particularly women, how you
qualify for that benefit, whether it is means-tested or not in
particular, and also it is important for people that, for example,
incapacity benefit is higher than jobseekers allowance. If a single
working age benefit means going down to the level of jobseekers
allowance for everybody, then that is a different picture from
whether it is levelled up. I think the danger with this proposal
is that it is a kind of Holy Grail, as the integration of tax
and benefits was for the last decade perhaps, and that we get
into the frame of mind which says: if you cannot do that you cannot
do anything about complexity or reform of benefits or whatever,
and I think it would be a shame if we did do that. New Zealand
is introducing this kind of thing, and it still has differences
between claimants. There are going to be work-ready people and
work development people and work exempt people. So, whilst getting
rid of the cliff edges and artificial boundaries is very attractive,
as Sue says, you may still need a range of conditionalities within
your benefit system, and I would argue you need as much non means-tested
benefit as possible and as high a level of benefit as possible,
and those are also of critical importance to claimants.
Mr Hirsch: I agree, the level
is very important. Perhaps a precursor to some sort of single
working age benefit is actually getting better about thinking
about what people need, and perhaps part of this is trying to
think more about what people need rather than how they happen
to have got on to benefit or where they are in their journey.
Regardless of where they are in their journey, if they are not
working, they are going to have a certain level of need. The Joseph
Rowntree Foundation, I hope, is making a major contribution to
this with our study, which we mentioned in our submission, on
minimum income standards, and I think if we can get greater clarity
about how we would start thinking, which we never have done, about
what is the basis for the level of benefits, then we could get
a bit closer to saying: "What is a baseline working age benefit?",
which some people may need supplemented, for various reasons.
Q78 Greg Mulholland: That leads straight
on to the other even more radical suggestion of a citizen's income.
I noticed in the Joseph Rowntree Foundation's submission it says,
"This is politically inconceivable." Can you briefly
explain that and can I ask you, Fran, if you agree with that?
Mr Hirsch: What we actually said
was not that some form of minimum citizen's income was to a degree
inconceivable, but we did a simple modelling of what it would
mean to give people their basic entitlement and then have a single,
flat tax rate on top of that. We calculated that that would be
46%. We did not think the country was quite ready for that particular
form. There are other ways you could do it, in terms of continuing
to have differential tax rates. The main thing about it is that
there is a big trade-off. At the moment we have some form of minimum
income in different ways in and out of work, although not for
everybody in work, and we then withdraw that very quickly and
then we put people on a nice, gentle tax rate. That does not seem
a very logical way round of doing it. The trade-off is that you
do not start of by withdrawing it quite so quickly; but that means
that people within the middle of the income distribution would
have higher marginal rates of withdrawal and that is the kind
of political difficulty. It may well be rational and logical;
whether you can sell it to the public, I think, is a very tricky
thing, for that particular reason.
Ms Bennett: I basically agree
with Donald. Again, a citizen's income has got huge attractions
and it has got a lot of supporters who are very Messianic about
it and it is at one end of the integration of tax and benefit
spectrum really. So, on the one hand, you have negative income
tax, which is very means-tested, joint assessment and so on, and
at the other end is citizen's income, which is a payment, like
child benefit in a sense, to every adult on an individual, non
means-tested and unconditional basis, and I think all those three
things are important. In a sense, the way in which we have child
benefit is easier than citizen's income because it does not involve
people of working age and it is possible to envisage citizen's
income for people who are not of working age in a way which I
think is more difficult to envisage for people of working age;
and that is particularly because of conditionality. That is why
it is relevant to the single working age benefit debate, I think,
which may be going part of the way towards that but the lack of
conditionality for citizen's income is probably, I think, an even
bigger political issue for the current Government than the fact
that it would be non means-tested and individual.
Q79 Greg Mulholland: Can I pick up
on that specific point. Do you think it is possible, therefore,
to extend the principle of citizen's income to other parts of
the benefit system? You say not working age people, but could
it be applied to other parts and, if that is the case, which ones?
Ms Bennett: I think it would have
been easier to extend it to pensioners, for example, although,
obviously, if you want to retain the loyalty to paying National
Insurance contributions, which governments appear to find it easier
to raise money from than personal income taxation, to make your
main benefit dependent on contributions, which is the pension,
into a citizen's income instead, might prejudice the greater willingness
of people to pay National Insurance contributions, and I suspect
that was the reason why, in the recent programme of pension reform,
the Government decided not to go down the route of the citizens
pension but actually to retain a very modified contributory condition
for the basic state pension, which is 30 years rather than what
it was before. They are not going to do another pension reform
immediately, I do not think, so I think the opportunity has passed
for introducing it into that area. I think, like Donald, it is
more difficult to see it happening in terms of working age people
at the moment.
Ms Royston: I do not think I can
add a great deal to this. I can see the attractions.
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