Britain is going through the most radical upheaval of the benefits system since its foundations were laid at the end of the 1940s. In Broken Benefits, Sam Royston argues that social security isn’t working, and without a change in direction, it will be even less fair in the future.
Drawing on original research and high-profile debates, this much-needed book provides an introductory guide to social security, correcting misunderstandings and exposing poorly understood problems.
It reveals how some workers pay to take on additional hours; that those who pay national insurance contributions may get nothing in return; that some families can be paid to split apart; and that many people on the lowest incomes are seeing their retirement age rise the fastest.
Dr Sam Royston is Director of Policy and Research at The Children’s Society and chair of the End Child Poverty coalition, and spends much of his time trying to make the benefits system work a little bit better for children and families.
He regularly gives evidence to Parliamentary Select Committees on welfare reform issues, and his work often appears in the national press.
Here’s my conversation with Sam Royston, author of Broken Benefits, in episode 298 of Informed Choice Radio.
Martin: Well, welcome back to Informed Choice Radio. I’m delighted to welcome today Dr. Sam Royston. Sam, welcome to the podcast. Can we start with a bit of an introduction. I know you’re Director of Policy and Research at The Children’s Society. And you’re also Chair of the End Child Poverty Coalition. What do those roles involve?
Sam: Well, as Director of Policy and Research at Children’s Society I kind of lead our policy and research work and our influencing work with parliamentarians and kind of local governments. With the End Child Poverty Coalition, we work to hold the government to account on what was a legally binding pledge to end child poverty by 2020. Now that commitment’s been scrapped. But we still do what we can to reduce child poverty in this country, and at the moment are doing things like campaigning on the benefit freeze and doing some work around the high cost of credit that low income families face, particularly using shops in the rent to own sector.
But what really led me to write this book, Broken Benefits, was that I felt that there was something a bit wider than either of those roles, which was about how social security was being reformed at the moment and the background to some of those reforms that are being introduced, that I kind of felt needed a slightly broader look, and to set it into a wider context, which meant that I ended up spending all my spare time, basically, for a year or so, trying to get this book together and take that wider look at what’s going on.
Martin: Well, could we start with a bit of history about social security in Britain. I assume that when Labour are in power in government that the spending on social security goes up and when the Tories get in for a bit it goes down. Is it sort of a natural evolution on that? How has the benefit system evolved in Britain over time?
Sam: Well, I mean it tends to be a little more complex than that in that a lot of the big factors which affect social security spending are things like unemployment rates and the number of pensioners that there are, for example. So some of the things are big social drivers of overall spending. But this kind of issue of how the benefit system has evolved, well it’s got a really long history, is the first thing to say. I think we often think of social security appearing from nothing in the late 1940s. But of course it didn’t. It goes back well, well before then. In fact, you could say the first real provision of poverty relief goes back to prior to the dissolution of the monasteries in the 16th century where you had a kind of system of church law that provided poor relief on a not what you would call secular statutory basis, but within the rules that the church themselves enshrined.
Following the dissolution there was this whole improvisation for a period, which was one of the principle factors that led to the introduction of the Elizabethan poor laws, which said that individual local authorities, local areas had to make some provision of relief to their local citizens. That really stayed in place until early 20th century reforms where you had the introduction of old age pensions and things like that. It was only once all of that had been in place and all of that had gone into the system that actually in the late 1940s there was a feeling that we need to rationalise this, we need to make it all work, make it all part of one holistic social security system. That’s what the kind of, what are often called the beverage reforms set out to achieve, was to bring it all back together.
It’s really surprising, in writing the book I found was really struck by firstly how much remains from the 1940s reforms in the current social security system, and even more so perhaps, just how many trends repeat themselves over time. By over time I mean over 100s of years. Things like this question of who’s deserving or undeserving of help and the systems, which pops up ever since 16th, 15th century, and is still one of the principle questions that people ask about today.
Martin: So that’s maybe one of the common misunderstandings, misconceptions about benefits, that there is a very modern system, but actually as you say, it’s got a huge amount of history and that history has carried forward into some of the things that happen today. Are there other common misunderstandings when it comes to benefits?
Sam: I think one of the really big ones today is that this perception that social security is something which is only paid to non-working households. I remember a conversation that I had with somebody three or four years ago now where I was talking to them about the support that they received and what they thought about the social security system. They said, “Well, social security, benefits are something basically for other people. I don’t get benefits, maybe I should be getting a bit more.”
You know, I started to ask, “Well, do you receive child benefit?” They’re like, “Well, yes, I receive child benefit.” I was like, “Well, do you receive tax credits?” It’s like, “Yeah, well, tax credits as well.” Then, “Do you get housing benefit or support with housing costs.” It’s like, “Well, I get that. But those aren’t benefits.” Kind of thing. I think that there is this misconception that actually benefits and all of the money that goes into the social security system is just on out of work benefits like jobseeker’s allowance, like employment and support allowance. Actually the vast majority of support doesn’t go into those unemployment benefits. Certainly for families with children it goes into working families who need some extra support in order to top up inadequate earnings. I think the … Sorry, go on, Martin.
Martin: The book is called Broken Benefits. I was interested to hear why you think the benefits system is broken, why is it not working?
Sam: Well, fundamentally it comes down to a lack of investment, I think. You look at the introduction of universal credit, for example, this new massive welfare reform which is trying to bring together six different benefits. Many of the problems that have been introduced with universal credit are simply down to lack of money to do it properly. You only have to look at something like something the government’s consulting on at the moment, free school meals provision under universal credit. So who will get free school meals once the universal credit system is introduced. Actually they’re creating all kinds of problems about if you earn over a certain amount then suddenly you lose your free school meals, which can leave you worse off overall, and all of those kind of problems, and they exist all over the universal credit system, could be solved with a bit more investment.
You see some of the problems, it’s funny I was talking about kind of trends and things repeating over time, hear some of the criticisms of universal credit today, and some of the problems it’s causing, very, very reminiscent of tax credits back in 2005-6 where in the end Tony Blair even made an apology in parliament, something that Tony Blair wasn’t enormously fond of doing, an apology in parliament about how badly the introduction of the tax credit system had gone. But the difference was back then that in some ways many of the problems were the same, but the solution was they invested a lot of extra money in the tax credit system in order to make it work. Suddenly you had a lot of those problems not disappear entirely, but reduce. What’s really worrying about universal credit at the moment is that there doesn’t seem to be that same ability or will to make that additional investment, which could make it work better.
Martin: So affordability is clearly a big issue with a broken social security system. What about fairness to different political parties, people of different persuasions might look at the benefits system and some may believe it’s fair to allocate it the way they do and some may believe it’s unfair. So how does fairness play a role?
Sam: I think there is a massive issue with fairness in the social security system. I think a lot of the focus in recent years has been on social security providing just a basic safety net, something that prevents destitution amongst those who are really the very worst off, and it has to do that. But an effective social security system can go well beyond that. It should also be correcting for inequalities of need that can’t be met through the labour market. Effectively, circumstances under which people have higher levels of need, so need a bit more income as a result.
You only have to think, for example, of a disabled worker, for example, somebody who is working and perhaps earning exactly the same amount as somebody else doing the same job, but has higher levels of need, some attached directly to their work, others about their home life as a result of their disability. They need additional support in order to have the same standard of living, even if they’re not that, that badly off, even if they’ve got a reasonable level of income, there is still this principle that actually a fair social security system would be one that provides them with some of that additional support in order to correct for those differences in need. That’s what I hope the kind of social security system we build for the future looks like, not just one that’s focused purely on destitution, but one that addresses fairness as well.
Martin: We often hear, don’t we, from the current government that it’s a benefit system that pays to work. Do you think that’s really the case?
Sam: I think that there is a real challenge about ensuring that the social security system supports making work pay and supports people into work and earning more. One of the real pities about the introduction of universal credit is that it was well intentioned in design, it was intended to ensure that when people earned more they genuinely got more money. Ian Duncan Smith raised on several occasions this problem that under the old benefits system, if you earn an extra pound, if you’re a worker, it’d often be the case that you’d lose up to 96-97% of that through deductions from your benefits. So you’d only be left with 4p for every extra pound that you earned. It’s a real problem. It was genuinely a good problem for the government to identify and for them to take on for universal credit.
But going back to this issue of underinvestment, the trouble is that universal credit has been done so much on a shoe string that actually they’ve just recreated many of those problems, they’ve just, in many cases, made some of them worse. It’s now the case that there are circumstances where if you move into work or if you take on additional hours not only are you only keeping 4p or so of each extra pound that you earn, but you’re actually left worse off as a result of earning more. Some of the [inaudible 00:13:03] caused by things like an earning threshold with regard to free school meals are strong examples of that. Some of these problems could be solved with a bit of additional investment, and it seemed such a shame that some of these core principles on which universal credit was founded are being undermined simply because there’s not the money to do it properly.
Martin: So under the current system, which I understand is being reformed, how does state support change when we move from being out of work, receiving out of work benefits, to starting work and being in work?
Sam: You’re right to say this is a kind of huge area of reform, particularly because of the introduction of universal credit. In the past, if you moved into work you’d normally stop receiving one set of benefits and start receiving a different set. So in particular you’d stop receiving say jobseeker’s allowance or employment and support allowance if you’re out of work as a result of illness, and instead you’d start receiving working tax credit, which would help support some of your in work provision.
Now there was always a grey area. There were benefits like housing benefit and child tax credit that were paid both in and out of work. But fundamentally you shifted effectively from one benefit system to a new one. In some ways one of the good things about universal credit is that it takes away that distinction or attempts to take away that distinction between in and out of work benefits. Instead you get universal credit if you’re out of work and you continue to get it when you’re in work, you just get less of it to take into account your additional earnings.
Martin: Now, for us in the world of financial planning, a really hot topic in recent years has been reforms to the state pension and particularly the state pension age. It’s been particularly vexing for a certain cohort of women born in the 1950s, we refer to them as WASPI or Women Against State Pension Inequality. How are changes like this, do you think, making older people older?
Sam: Well this is a really interesting area because actually I think that there is quite a structural problem with the way in which state pension change have gone about, which hugely disadvantages people, and particularly men actually, from low income backgrounds who could be facing a much, much longer wait for retirement. Now the reason for that is that as they have equalised the state pension age for women with that for men, so taking it from 60 up to 65, they’re moving it to 66 before the end of this decade, they have also increased what’s known as pension credit. This is the low income benefit paid to pensioners, and was previously paid to both men and women once they reached the age of 60. Now as that has been shifting up you have seen the effective retirement age for people on a low level of income effectively being equalised with that for people on higher levels of income who don’t necessarily have that entitlement to pension credit.
Now the really big concern about that is that those people on the lowest levels of income who are both seeing the state pension age rise the fastest, but are also seeing life expectancy rise the slowest. So you are seeing increasing numbers of 60-66 year olds who in many cases are simply too ill to work and are never going to be back in a position where they’re able to reenter the labour market, instead of being allowed to retire at 60 and having a decent period of retirement by being entitled to receive pension credit, instead being expected to claim out of work, unemployment or sickness benefits until they reach 65 or 66.
That is effectively taking a huge proportion of the retirement and particularly healthy retirement away from low income households who aren’t seeing the rises in life expectancies which provide some of the justification for increasing state pension age for other kinds of household. I think this isn’t a problem that’s actually been caused in the last few years. This has been a problem that goes right back to the decision to equalise the state pension age for women back in the 1990s, and then the legislation in the early 2000s to introduce that. It’s not any individual government that’s responsible for this. But something needs to be done to recognise that actually low income people tend to have a lower level of life expectancy and as a result there needs to be some kind of recognition of that in the age at which you’re able to retire if you come from a low income background or if for other reasons you have a lower life expectancy. It’s really important that we see some change to take account of that.
Martin: Now, previous on this podcast we’ve heard from Professor Guy Standing, who writes a lot about universal basic income. Do you think that UBI could be a solution towards fixing this broken benefits system?
Sam: I think we need to understand some of the problems that universal basic income is trying to solve. For me there are two key issues which people who talk about universal basic income raise. The first is over-conditionality, that by having a universal basic income you wouldn’t attach the same expectations for example of moving into work, of taking on additional work and taking on extra hours, and potentially basing sanctions if you’re not doing what’s expected of you. You would free people up to kind of have more flexibility in how they treat their movement in and out of the labour market. That’s a good intention.
The second question is, there’s too much complexity in the benefits system, and you need to make sure that actually as people earn more they’re still keeping some of their entitlement in order to simplify how earnings and benefits interact. So they know, if I earn more I’m going to keep all my earnings because it’s not going to affect my benefits as well.
So there are these two key problems, it feels to me, universal basic income is trying to solve. For me, I don’t think either of those problems requires a new benefit in order to address them. The first problem can be addressed through conditionality requirements on existing benefits. So I think we have a far too tough sanctions regime, for example. Something where you can base the loss of or significant reduction in the already inadequate minimum levels of support provided through unemployment benefits for a period of up to three years in some cases, just seems wrong to me. But you could address that by saying, actually, for example, in future rather than applying a sanction for three years, we’ll apply a sanction up to the point that somebody does what is being asked of them, up to the point at which they reengage with the labour market effectively.
Or if you wanted to be really generous you could say, actually we won’t have sanctions at all, we won’t have expectations for people who are out of work to seek employment at all. But that would be up to policymakers to decide. But that requirement doesn’t create the need for a universal basic income.
On the second point, this point about improving work incentives, well again, that can be done within the structure of existing benefit, so it would be very simple in universal credit for example to do something similar to what we have within the family element of tax credits, that you say, actually, rather than losing this particular amount of support when your earnings reach 30 or 35,000, we’ll say we take a package of part of your universal credit and you don’t see that touched by your earnings until your earnings reach £50-60,000 as applied with the family element in child tax credit.
So I think that there are tweaks that could be made within the current benefits system, which could address some of the core problems that universal basic income is trying to solve, without, firstly, making a massive change to the structure of social security, which could create, again, the same kind of upheavals that we’re seeing at the moment with universal credit. Secondly, without spending a huge, huge amount of additional money on people with higher levels of income rather than trying to spend more of that money on people on lower levels of income. So I think that it comes from a well intentioned place and I think it’s trying to solve some real problems. But I think with a bit of understanding about how the current benefits system works, you can see ways of addressing those problems without the kinds of reform that universal basic income is talking about.
Martin: Now I know within the book you’ve included some real life stories, which of those particularly stood out for you that illustrate the real issues at stake?
Sam: I think that at the moment some of the most striking stories for me have been around some of the assessment processes for receipt of disability benefits. People talking about the impact that work capability assessments for employment support allowance, for example, have created. Some of the astonishing situations where people with difficulties walking being told, you know, “You have to travel three hours first thing in the morning in order to just get your assessment for the level of disability that you have.” When people talk about some of those problems you do just think, there must be a simpler way of doing this that takes more account of the real impact that undertaking some of those assessments actually has on people’s health itself.
The second really striking thing at the moment is the way that people talk to me, when I was writing the book about some of the housing problem that they’re faced, particularly as a result of freezes in rental support for people renting in the private rental sector, increasingly it is very clearly becoming impossible for many people to rent a decent standard of home, and very much reliant on getting support from local authorities with things like discretionary housing payment to top up other forms of support just to get the kind of place that’s even tolerable to live in. It is becoming a real, real worry, the amount of support that people are provided with that.
In 2010 you could see that housing support, you could rent a kind of average house of a suitable size for your household in your local area with the housing benefit that you’d receive if you had no other income. By 2020, some calculations I did based on rising rental prices and what’s happened to increases in housing benefit for people in the private rented sector, renting the same property in 2020 you’d expect a shortfall of about £130 a month. I mean, really big gaps forming between being able to afford a decent home and the amount of support that the social security system is willing to provide.
Martin: I know in your role you obviously spend a lot of time talking to MPs and ministers and lobbying, etc., but if we made you Prime Minister for the day, what steps would you take in order to reform this broken benefits system?
Sam: One of the things that’s concerned me recently is that there is a lot of understandable attention being given to just reversing some of the cuts that have been made in recent years and rather than thinking a bit more aspirationally about some of the new things, the different things we’d like the social security system to achieve, to have more of a vision for what we want out of the social security system. I think that some of the things that I’d like to achieve would be some of those kind of longer term, more aspirational goals. So things like a flexible retirement age to respond to variations in life expectancy, which you could achieve for example by disentangling the pension credit age from the state pension age, would be one way of addressing that. Free school meals for everyone on universal credit would both make sure that young people are getting the health and educational benefits of a decent school meal at lunchtime, but would also solve some real work incentive difficulties in universal credit.
I think that there is a big role in combating high cost credit through the social security system. One of the things that perhaps people tend to be less aware of is that actually the social security system plays a really big role in providing interest-free credit, in 2010 provided about £800 million of interest-free credit through crisis loans and budgeting loans. Now that’s about half what it was.
I think that there could be a really big role for the state in combating the provision of high cost credit that many low income households rely on because they’re unable to get interest-free credit, by lending it to people and effectively taking it back through ongoing benefit payments. I think that that could help people to respond to fluctuations in income.
Self-care premium for disabled people without a carer. So additional support for disabled people without a carer. This being something that’s been really heavily cut within universal credit is provision for that group, and they do need some additional support in order to pay for the kinds of care costs that people who have a carer effectively get from that carer. I think that that would be something that would really help to avoid social isolation of some of the most disadvantaged disabled people in society.
Finally, doing something about contribution based benefit provision, to make sure that people who pay national insurance contributions get something in return. At the moment in an awful lot of cases, particularly for people on a low income, they get nothing or even end up worse off receiving contribution based benefits rather than getting means tested support. That’s simply because contribution based benefits that they receive, just contribution based JSA, contribution based ESA, just get deducted in full from their means tested provision. But they’ll also often lose other forms in entitlement as well.
So for example, tapering receipt of contribution based benefits against means tested provision, so rather than reducing your income based JSA pound for pound as a result of your contribution based benefit, reducing it by say, 60 or 70% instead would make sure that people who do pay in get something out as a result of making those national insurance contributions. So that’d be the final one that I’d suggest. So just a few there.
Martin: That’s fantastic. Sam, thank you so much for your time today. It’s a really important subject. I think it’s great we’ve brought this onto the podcast to cover it. I would encourage people to get hold of a copy of your book, and on that note, where can they buy a copy? And also, how can we connect with you online?
Sam: So you can get a copy from the publisher website, so that’s policypress.co.uk. Or it’s available on Amazon as well. Best to connect with me online through my Twitter handle is @sam_royston, so R-O-Y-S-T-O-N, on Twitter.
Martin: Great stuff. We’ll make sure we include those links in the show notes.