Simply complex

Hands up if you understand the welfare reforms unveiled yesterday by Iain Duncan Smith.  How can a simplified system be so complex to understand? 

Fortunately the public seem to have a grip and polls show a healthy majority agree with the government’s position.  IDS seems to have pulled off a magic trick.  He will simplify the system into a single Universal Credit by 2013, he has promised to improve substantially the marginal rate (how much people keep from extra earnings taking account of benefit withdrawal), he has promised there will be no cash losers, and he has got the public onside. 

I have little doubt that the golden scenario will begin to unravel with a little more analysis.  Labour’s shadow work and pensions secretary, Douglas Alexander, pointed out that the ‘no cash loss’ promise did not appear to apply to new claimants, and of course turnover is high.  The Child Poverty Action Group were most concerned about the removal of hardship payments drawing attention to the main difficulty in withdrawing benefits from people who refuse to take jobs – making children suffer for the sins of their parents (Mr Duncan Smith likes to use the word sin). 

The simplicity aim has wide support amongst advisers, including the CAB.  The government claims that Universal Credit “will support people both in and out of work, replacing Working Tax Credit, Child Tax Credit, Housing Benefit, Income Support, income-based Jobseeker’s Allowance and income-related Employment and Support Allowance”.  As always, the devil will be in the detail.  UC will be a basic allowance with “additional elements for children, disability, housing and caring”.  Experience tells me that none of the add-ons will be simple to understand or to calculate.  The devil will also be in implementation.  A welfare system that is widely regarded in the media as soft and open to abuse is simultaneously experienced by users as inflexible, harsh and punitive. 

With 5 jobseekers chasing each job, how DWP implements the system will be hugely important.  There will be much stronger ‘conditionality’ – the new word for punishment – but “conditionality will be responsive to an individual’s circumstances.”  As the housing benefit system has been bedevilled by the complexity of handling changes in circumstance, how can the new system become more responsive?  The answer unfortunately relies on IT.  UC “will be calculated and delivered electronically, automatically adjusting credit payments according to monthly income reported through an upgraded version of the ….. tax system”.  I believe this is the same system that has delivered millions of incorrect tax calculations and hundreds of thousands of incorrect tax credits.  The test will be how DWP responds to many thousands of calls challenging their calculations and the many real errors that will be made.  

The proposal has ambitions that many will agree with – simplicity, the integration of out-of-work and in-work support – but also many dangers and risks for the poorest people in society.  And I have a particular fear about administrative chaos.  We may not be able to start evaluating those risks properly until the Welfare Reform Bill is published in January. 

Quotations from the White Paper, which can be found here:

http://www.dwp.gov.uk/policy/welfare-reform/legislation-and-key-documents/universal-credit/

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