Chancellor's Autumn Statement - first the good news...

Let's look at the most talked about issue first: tax credits

Newspaper headlines excitedly reported the chancellor's annoucement in words like these: 'Tax credit cuts SCRAPPED in victory for working families' (www.mirror.co.uk, for example). Unfortunately the news, while good, is not that good (in fairness, later media consideration was more nuanced).

So what proposals has the chancellor reversed?

In my post of 13th July, I set out the proposed changes to tax credits as follows:

Changes to tax credits for new and current claimants The income taper will be increased from 41% to 48% of gross income: in other words, for every pound over the threshold figure the claimant's tax credits will be reduced by 48p, rather than 41p (before 2011-12 it was 39%); The threshold figure (see previous bullet point) will go down from £6,420 to £3,850: this means that any income over £3,850 will be taken into account now; The income rise disregard will be reduced from £5,000 to £2,500 (at present, a claimant's income can rise by up to £5,000 during a tax year without affecting amount of tax credits paid for that year - this will change to £2,500); No child element will be paid in respect to third (or additional) children born after April 2017. There will be exceptions for multiple births and disabled children. Compared to 2015-16 figures, this will reduce the maximum annual entitlement by £2,780 per child; The powers available to HMRC to recover overpayments will be widened. Changes to tax credits for new claimants only The family element (currently worth £545) will no longer be included for families whose first baby is born in April 2017 or later (I suppose this could also apply to existing claimants of Working Tax Credits only, but who don't start a family until April 2017).

The U-turn is in respect of the first two bullet points only. The income a claimant* can receive before their tax credits is reduced will stay at £6,420, and any income they have above that figure will reduce entitlement by 41p in the pound, not 48p as was proposed.

That's great, and I don't want to poo-poo the acheivements of everybody, including myself (and the House of Lords) in effecting this change. But the other provisions remain:

• The amount a claimant's income can rise before their tax credits are affected is still being reduced by £2,500 compared to the current disregard: this could result in a claimant being £1025 worse off over a year compared to their position under the old rules.
• Entitlement calculations will still not take acount of any children born from April 2017 onwards
• The family element, curently worth £545 per year, which is currently included in the calculation or all clients will families, is still being removed for new claimants from April 2017 onwards
• The powers to recover overpayments will still be widened.

Furthermore, tax credits payment rates, like those of most other social security benefits, were frozen in the budget: There will be no inflationary increase in April 2016, April 2017, April 2018, and April 2019.  The Autumn Statement reports at Section 2.2 that earnings are currently rising at about 3% and are expected to reach 3.9% by 2020. Clearly this is good news for those who are working, and, if their benefit income becomes a smaller proportion of their overall income over time, this looks like meeting the stated aim of the tax credit changes.

However tax credits are not just paid to people who are working: anyone who has children of school age or younger relies on Child Tax Credit if they have a low income. For these claimants there is no good news here.

And, even for those famous 'hard-working families', there is another problem on the horizon...

Universal Credit 

It's not happening as fast as Iain Duncan-Smith planned, but Universal Credit is inexorably spreading across the land. It is designed to replace all the means-tested benefits (except Council Tax Support) including tax credits. This means that gradually more and more people with children (for example) will be getting Universal Credit, not Tax Credits. And the changes that the Chancellor announced in the Budget are not being reversed.

In the Universal Credit system, the amount a claimant can earn before their Universal Credit is affected is called their 'work allowance'.  It therefore parallels the 'threshold figure' in the tax credit system. It differs in that only earned income is ignored, and in that there is a range of different work allowances according to different specific circumstances. In the budget many of these allowances were reduced. Let's see how this might pan out.

If you read my 13th July post, you'll remember Alex and Hilary. They have three children. Alex works 35 hours per week, and earns the national minimum wage (which becomes the national living wage from April 2016). To keep things simple, they've got no housing costs - perhaps they live in a relatives house.

As you can see from the table below, they benefit from the chancellor's u-turn if they're in the Tax Credit system: in fact their overall income rises slightly because of the national living wage, But if they're in the Universal Credit system things are very different. Because the work allowance was reduced in the Budget (for a couple who are both fit for work and have children, it changes from £123 to £91 per week), they see a reduction close to the one they would have faced had they been getting Tax Credits and the Chancellor hadn't changed his mind.

(all payment figures are per week)	TC system March 2016	TC system April 2016 before U-turn	TC system April 2016 now	UC system March 2016	UC system April 2016
Net earnings	£219	£230	£230	£219	£230
Child Benefit	£48	£48	£48	£48	£48
Working Tax Credit	£49	£6	£39
Child Tax Credit	£170	£170	£170
Universal Credit				£233	£184
Total Income	£485	£455	£488	£490	£462
Compared with first column		-6%	+1%	+1%	-5%
Out of work benefits	£333	£333	£333	£333	£333

And finally, more bad news for tenants of social landlords...

In the Autumn Statement the chancellor a change to Housing Benefit for these people. From 1st April 2018, Housing Benefit payments will be capped in the same way that they are for tenants in the private sector.

Perhaps this needs some explanation. Currently, if you rent from a social landlord, the maximum Housing Benefit you can get is equal to the rent your landlord charges you (minus the bedroom tax, of course, if you are considered to have more bedrooms than you need). However, if you rent privately, The maximum Housing Benefit  you can get is not related to the rent the landlord charges, but to a set of figures set locally, dependent on your age, the size of your household, and the location. From April 2018 this same principle will apply to social housing tenants who took out their tenancies on or after 1st April 2016.

You might say, as Osbourne does, that this move levels the playing field for private tenants versus those  of social landlords. Well yes, that's true, although it's a pity - though not surprising - that the field has been levelled by digging into the high side...

Alternatively, you might also say if you are a bit more cynical) that this change simply completes the work that the bedroom tax started, in reducing the security for tenants of social housing.

If you were even more cynical, you might see this move as consistent with other changes, such as allowing the right to buy, that indicate a doctrinaire opposition to the concept of social housing.

I couldn't possibly comment.

Additional Information

If you want to check out the Autumn Statement yourself, you can find it here:

https://www.gov.uk/government/publications/spending-review-and-autumn-statement-2015-documents/spending-review-and-autumn-statement-2015#security-and-opportunity-for-families

For more information about Universal Credit, see  www.benefitsowl.info/universal%20credit.html

*For a joint claim this should be read as 'claimants' here and elsewhere: the two memebers of a couple don't have separate income allocations

The figures in the table were drawn from the spreadsheet of which the figure below is a screen grab.

Conservative Party Conference

The annual Conservative party conference makes its presence felt by pronouncements about benefit claimants, and this year has been no exception.

We've heard from George Osbourne, Chancellor [1], Iain Duncan Smith, Secretary of State for Social Security, and David Cameron (briefly). The first two focused mainly on jobseekers (i.e. claimants on Jobseeker's Allowance and, in some cases, Universal Credit). 

Osbourne and 'Help to Work'

Osbourne's full comments on this are as follows [2]:

"But what about the long term unemployed? Let us pledge here: We will not abandon them, as previous governments did. Today I can tell you about a new approach we’re calling Help to Work. For the first time, all long term unemployed people who are capable of work will be required to do something in return for their benefits, and to help them find work. They will do useful work putting something back into their community. Making meals for the elderly, clearing up litter, working for a local charity. Others will be made to attend the job centre every working day. And for those with underlying problems, like drug addiction and illiteracy, there will be an intensive regime of support. No one will be ignored or left without help. But no one will get something for nothing. Help to work – and in return work for the dole. Because a fair welfare system is fair to those who need it and fair to those who pay for it too."

The relevant DWP announcement is here:
https://www.gov.uk/government/news/help-to-work-scheme-announced-by-the-government

Before we go any further, I'd better contexualise the proposal amongst all the other schemes that currently exist. It's quite confusing...

At the moment, jobseekers are (normally) placed in the 'Work Programme'[3], in which contractors are required to provide a range of measures to help them find work. This programme lasts a maximum of two years. If a claimant does not comply with the requirements of the programme (for example, fails to apply for a job) they can be sanctioned, but they cannot be required to work for nothing. On the other hand claimants can be required to work for nothing as a 'Mandatory Work Activity'[4] for four week placements of up to 30 hours per week: they are 'expected to complete placements which are of benefit to the community, including helping charities or environmental projects'. Finally, in some areas there is also currently something called the 'Community Action Programme' which is in effect, a pilot for what  Osbourne is now talking about, and is also a sort of development of the Mandatory Work Activity but requires 26 week involvement. If you remember the case where a geology graduate was required to work at Poundland it might be helpful to know that she was on the Community Action Programme[5].

Having got that out of the way, we can also note that this isn't actually as new as it's being presented. In  July 2012 the Guardian reported[6] that Chris Grayling, Employment Minister, announced to extend the Community Action Programme across the country, calling it - then -  'support for the very long-term unemployed'.

Leaving aside the value judgements and self-praising included in the speech, what can be said about these proposals?

Jonathan Portes, director of the (left-leaning) National Institute of Economic and Social Research was interviewed on 30th September by Jeremy Vine for his Radio 2 show. His concern was that there was no strong evidential base that could justify the proposal (The scheme is likely to affect about 200,000 jobseekers and will cost £300 million). He noted that the DWP's own research review concluded that there was little evidence that 'workfare' schemes increased the chances of finding work. he also said that the information gained from the Community Action Programme was not supportive. Although some people did move off benefits while on the scheme, after the trial was over they were generally found to be back on benefits, and, indeed, some were now on sickness benefits. He was guardedly positive about the concept of intensive support for people with drug, alcohol, and literacy problems, but noted that any programme of this nature was certain to be expensive and that it was therefore unwise to roll it out without piloting it first. He emphasised that it would only be any use if it improved long-term prospects.

I would largely echo these comments. I also raise the following questions:

• How will clearing up litter, for instance, improve a claimant's chances of finding work?
• How will claimants be able to afford to attend a jobcentre every day, especially in rural areas?
• Which low-paid workers will lose their jobs so that jobseekers can carry out their roles for nothing?

Iain Duncan Smith - Mandatory Attendance Centres

The relevant part of Duncan Smith's speech is as follows [7]

"But today I want to tell you about those who are already showing early signs of not being able to commit to their obligation to work. Prior to the Work Programme we are going to pilot a Mandatory Attendance Centre where selected individuals will receive expert support and supervision while they search and apply for jobs – that is 9 o’clock  to 5 o’clock – 35 hours a week – for up to six months, simulating the working day. These pilots will be targeted at claimants who will benefit from the intensive support - one pilot before the Work  Programme and one for after the Work Programme."

His comments have been accompanied by a DWP press release:
https://www.gov.uk/government/news/claimants-required-to-undertake-supervised-jobsearch-at-new-centres

Note that what is being proposed is a pilot, though no doubt it will be eventually rolled out across the country irrespective of whether it turns out to be helpful or not.

Note also that claimants will be required to attend 5 full days a week for up to six months: again, how will claimants afford the accompanying transport costs?

Duncan Smith was asked about the transport cost issue on Radio 4's the World at One on 01/10/2013. His response was that, firstly, claimants could seek help from the flexible support fund (the FSF)(although they couldn't guarantee that they would all be helped), and that, secondly, the Attendance Centres would be close to where claimants lived. There doesn't seem to be much information available about the FSF, including how big it is, as a Parliamentary Briefing note plaintively observes [8], but I'll be very surprised if the majority of claimants who incur travel costs get them met. And we don't have any details on how close is 'close'.

Actually I have some sympathy with the concept here. It is based on the understanding that jobseekers are not all the same. Some have no experience of the world of work: of coming in at the same time, day after day, of being subject to authority, of not being able to call your time your own. And without this experience, forcing them to take jobs is likely to be futile. And I accept that there are difficult questions about failure to engage, and about whether and how compulsion is appropriate. But in order for this kind of scheme to work, and not simply to be a way to remove people from benefit, the balance between support and compulsion would have to be vastly different from what it is almost certain to be.

David Cameron - young people

These comments[9] were brief, in a long speech, and are not linked to any proposals: but they suggest some worrying (though not totally surprising) changes are on the horizon. 


"There are still over a million young people not in education, employment, or training. Today it is still possible to leave school, sign on, find a flat, start claiming housing benefit and opt for a life on benefits.
It’s time for bold action here. We should ask, as we write our next manifesto, if that option should really exist at all. Instead we should give young people a clear, positive choice: Go to school. Go to college. Do an apprenticeship. Get a job. But just choose the dole? We’ve got to offer them something better than that. And let no one paint ideas like this as callous. Think about it: with your children, would you dream of just leaving them to their own devices, not getting a job, not training, nothing?  
No – you’d nag and push and guide and do anything to get them on their way… and so must we. 
So this is what we want to see: everyone under 25 – earning or learning."


A few years ago young people and their advocates learned that Housing Benefit was to be restricted for people under 25. It looks like soon we'll be thinking of that as the good old days, as it appears that the government's intention is to remove all benefit entitlement to young people who are not in employment, education, or training.

A briefing to journalists after the speech made it clear that removal of Housing Benefit will be in the next Tory manifesto, and removal of other benefits may be in the manifesto.

I think no-one would disagree that an aspiration for all young people to be in work or learning is a positive one. The problem here is reality: what if there are no jobs; no suitable training? What if a young person has behavioural or attitudinal problems as a result of their upbringing?

I also don't accept Cameron's analogy: yes, a good parent would 'nag and push and guide', but if it didn't work out would a good parent throw their child out the door, without money, food, clothes?

Concluding thoughts

This isn't an original observation, but under all the data, proposals, and schemes what really disturbs me is the underlying world view. It is one in which there is a clear distinction between those who take from the community and those who contribute to it; between 'those who need it' and 'those who pay for it';  between the deserving and undeserving poor.

What about the bloke who has done the same kind of manual work for decades but is made redundant when the company closes down, and has none of the skills needed for the jobs available? Is he a shirker?

What about the young woman who spent her childhood caring for her disabled mother?  Perhaps her mother is in a home now, or dead. Is she just a freeloader?

And what about the young single mother with a one-year-old baby?

The bottom line, of course, is that although the rhetoric is about helping people and improving society, the reality is about balancing the government's books by targeting the most vulnerable rather than sharing the burden more fairly. And caricaturing claimants as people who want something for nothing sets them up against everyone else.

Tomorrow the benefit claimant could be me. Or you. Although, probably not Osbourne, Duncan Smith, or Cameron

Sources

[1] http://www.theguardian.com/society/2013/sep/30/george-osborne-jobless-benefit-conservatives
[2] http://www.conservativepartyconference.org.uk/Speeches/2013_George_Osborne.aspx
[3] http://www.dwp.gov.uk/supplying-dwp/what-we-buy/welfare-to-work-services/provider-guidance/work-programme-provider.shtml
[4] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/220276/eia-mandatory-work-activity.pdf
[5] http://www.independent.co.uk/news/uk/politics/governments-flagship-work-scheme-in-crisis-after-poundland-slavery-case-ruling-8492346.html
[6] http://www.theguardian.com/society/2012/jul/29/long-term-unemployed-unpaid-work
[7] http://www.conservativepartyconference.org.uk/Speeches/2013_Iain_Duncan_Smith.aspx
[8] http://www.parliament.uk/briefing-papers/SN06079
[9] http://www.conservativepartyconference.org.uk/Speeches/2013_David_Cameron.aspx