Jim McCormick

Independent Policy Adviser

In choppy waters, reach for a compass. Don’t expect a map to get you where you want to be. Today’s final report from the Expert Working Group on Welfare, Re-thinking Welfare: Fair, Personal and Simple, concludes we should chart a different course on social security if Scotland votes Yes in September. It isn’t a blueprint in the traditional sense, but a set of principles and some policies symbolic of a new type of settlement. And if Scotland votes No, there is still plenty in the report which deserves to influence parties and their future programmes both here and across Britain.

Make no mistake, these are insecure times. The economic recovery is marked by a jobs market which, for too many, offers little in the way of decent pay, conditions and prospects for moving to something better. The housing market is scarred by a persistent under-supply of affordable housing. Though Scotland fares better in terms of housing costs, the private rented sector is increasingly becoming the tenure for young people and families with no other choices. The way in which we fund childcare leads to patchy quality at eye-watering cost. And we all pay for these failures in benefits and tax credits which leave many in poverty despite being in work.

The Expert Group’s deserves two cheers, but not yet three.

  • First, the clarity of purpose about the role of a modern social security system – placing dignity, choice and sustainability at its core – and impressive analysis on the underlying cost drivers offer some much-needed coherence in a debate which usually gets mired in toxic language and punitive policy. The facts of DWP benefit spending in Scotland should be debated in full: the overall budget per head is very close to the GB figure, with more than half being spent on pensions and other retirement benefits. Scotland is ageing faster than GB as a whole, but the difference can be exaggerated. Wales, the North-East and South-West of England have older populations and the demography of the four countries of the UK will gradually converge over the next 30 years. Then comes Housing Benefit (which costs less than the GB equivalent sum) and Disability Living Allowance which is morphing into PIP. Taken together, disability benefits cost substantially more per head than for GB – a fact shared with Wales, parts of the North of England and Northern Ireland. Jobseekers Allowance accounts for about 3% of benefits spending and falling. Now, where’s that fact in the crossfire about ‘skivers and strivers’?
  • Second, specific proposals are a mix of firm proposals and longer-term options. The Group appear to accept the principle of integration behind Universal Credit, but takes it in a different direction. A new Social Security Allowance (SSA) would bundle benefits together with the important exception of Housing Benefit, allow payment on a more regular basis and presume the main carer rather than the main earner would receive payment. By sticking with housing payments to landlords, the risk of rent arrears is cut but work incentives might be blunted by sticking with a separate benefit withdrawal rate. Set against that, support for a long-term switch towards higher capital investment in expanding housing supply as the best way to control overall costs looks right in principle even if tricky to achieve. A similar change of course is proposed on childcare, recognising that a supply-side approach is needed to control costs and raise quality.

The flipside of the coin is the labour market. Poverty won’t be solved by changing how benefits are paid. Work has to become a sustainable route out of poverty in a way that it simply isn’t for those stuck in a revolvingfamily umbrella + saltire (2) door of temporary work and unemployment. Here, the report establishes the simple principle that the minimum wage and benefit payments should rise in line with inflation, so that working people receive the same basic protection as pensioners. It wishes to see coverage of the higher, voluntary rate of living wage expand to all of the public sector and by a process of negotiation to more of the private sector. With more than 400,000 people in Scotland earning less than £7.65 an hour, the need for faster progress is clear even if governments of all stripes are likely to be cautious about the pace of change. The case for conditionality in the benefits system is accepted, but a more humane approach to sanctions is outlined: claimants would have opportunities to engage with a Work Opportunities Service, they might receive a stored value card rather than cash as a sanction and loss of support would become a last resort. That won’t satisfy all who deal with the risk of destitution arising from benefit delays, sanctions and mal-administration in the present system. But it’s a welcome change of course.

Safety net or springboard?

Why not three cheers? The report ducks at least two challenges. The first is the core question of income adequacy. The case for establishing a Minimum Income Standard and/or a Citizens Basic Income is considered but no firm recommendations emerge. That’s perhaps understandable at this stage, but is a debate that needs to take place more broadly. On the other hand, the proposal to raise Carers Allowance to the same rate as JSA is welcome in terms of valuing unpaid work. Second, does Scotland want a system which offers a safety net (even if one with fewer holes) or a springboard? The logic of the report runs towards an active labour market approach which supports people in a tailored way to get the next job when they lose their current one. That implies a focus on improving skills and training, not just more efficient job-search, and closer engagement with employers to boost demand and better use of skills. These aren’t easy or quick reforms. The evidence from countries like Denmark is it costs substantially more per head to equip people for better jobs than the UK has been willing to invest. Would Scotland be willing to make the necessary switch away from other types of spending in order to have a better labour market? Some modelling of the costs and benefits attached to various options might have provided a firmer basis for weighing up the trade-offs.

Litmus Test

Nonetheless, the Expert Group appears to have succeeded in grappling with the complexity of the current system policies and sketching out an alternative system – in places, in some detail. It suggests a more effective system is possible. Is it affordable? The report mainly avoids un-costed spending commitments, instead placing a spotlight on potential savings that could be achieved by a more intelligent approach to jobs, housing and childcare. The litmus test for many will be how disabled people fare in any future system. Currently, job outcomes fall far short of the desire and capacity to work with the right support. It would be unfair to expect this report to resolve the complexity and pain of the Work Capability Assessment and PIP, but support for an asset-based approach to transitions back to work should certainly be developed further.

In the short-term, the report will get caught in the referendum cross-fire. But remember this is the work of an independent group. It reports to the Scottish Government, but isn’t the preserve of one party or campaign. Whenever the dust settles, both supporters and critics of the report may be surprised to find common cause in many of its pages.

Jim McCormick is an independent policy adviser writing here in a personal capacity

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Summer 2014

SURF's Summer 2014 magazine explores the latest developments and new thinking in addressing poverty and inequality.

AA
Creative Scotland
Dundee Partnership
Glasgow City Council
GQ
Highlands and Islands Enterprise
Historic Environment Scotland
Museums Galleries Scotland
Scottish Enterprise
Scottish Federation of Housing Associations
Scottish Gad
Scottish Government
Skills Development Scotland
Wheatley Group