Friday, November 12, 2010

An introduction to Iain Duncan Smith's Magic Pony Scheme

Iain Duncan Smith published the government's new strategy on welfare policy yesterday. This has two basic strands - a Universal Credit which will simplify the benefits system and make people better off in work than on benefit; and sanctions for people who don't want to work.

The Universal Credit is based on the idea that rather than having lots of different benefits, it would be simpler just to roll them into one, thus reducing fraud and error and making it easier for people to claim. It is the welfare equivalent of a Magic Pony Scheme.

Now Iain Duncan Smith is hardly an example of a steely eyed Master of the Detail, and he is being supported by Lord Freud, who is well known for making slapdash errors about welfare policy. So let's look at the Universal Credit policy, and see whether everyone (except the Bad People who are lazy, sinful and workshy) will, in fact, end up with a Magic Pony. I've just picked out a few areas to show the challenges of implementation - administration of the credit, housing costs, council tax and childcare.

On Administration, there is going to be "an IT development of moderate scale" and close working between HMRC and DWP. The past history of these sorts of projects isn't overwhelmingly encouraging, and the potential for things to go wrong is pretty awe inspiring if people's entire benefits are going to rely on the information being correct, all the time. I suggest that this is an area which will repay careful scrutiny over the next few years.

On Housing costs, there are some basic errors of fact in this section, such as the claim that the Budget made "the lowest third of market rents affordable". The aims include simplifying the system, making sure people don't get into arrears or become homeless and rents will be "fair but not excessive".

Since the Universal Credit will be based on the current system, which achieves none of these aims, it would be nice to hear about how any of this will be achieved. It is therefore slightly disquieting to find that there is not a sentence of detail about how this will happen, and the section concedes that "there are many policy and operational issues to work through in respect of housing. The Government will work closely with Local Authorities and the housing sector as plans develop."

At the same time as the government is planning to ensure that every claim for housing support is determined by the Department of Work and Pensions, it has also decided that every single local authority should develop its own criteria for paying council tax benefit. It is hard to see how this sits with the overall aim of simplifying the benefits system.

As the paper says, "There is more work to be done on the practicalities of the new approach and the Department for Communities and Local Government and the Department for Work and Pensions will work closely together with local government and the devolved administrations to develop detailed proposals." Localising council tax benefit is a separate fiasco waiting to happen - more on this next week.

On childcare, the problem is that childcare costs vary considerably, so including childcare in Universal Credit will make it hard to calculate, but excluding childcare would mean that many parents can't afford to work. The government "would welcome views from key stakeholders and will work with them to establish how support for childcare could best be delivered as part of, or alongside, Universal Credit", maybe through vouchers, or earnings disregards, or a self-service process, or who knows what else - because they certainly don't.

How about something more basic? The white paper doesn't even set out how much people will receive in Universal Credit. It will "broadly reflect" some current benefits, offer "an appropriate amount" of support for housing, promises that if people lose out in the transition to Universal Credit then they will be compensated, but doesn't have any numbers to back up the warm words.


There's quite rightly been a lot of debate about the principles of the government's proposals - is their general approach right, what role should sanctions play and so on. But regardless of what you think about these principles, there must be considerable doubt that this Magic Pony scheme is actually going to deliver.

Iain Duncan Smith started work on this six years ago, and has had the full efforts of hundreds of civil servants since May, working out how to turn his ideas into reality. And they still don't know how much people will receive in Universal Credit, how housing costs will be handled, what to do for carers or to cover the cost of childcare - to take but a few examples. While extolling the virtues of simplifying benefits and centralising the administration, they are letting every local council set their own criteria for council tax benefit. And they are betting that their new computer system will be able to calculate real time changes in earnings without making mistakes.

Like everyone else, I hope that these problems can be worked out, and that we end up with Magic Ponies for all - savings billions on reduced fraud and error and spending billions more on helping people in low paid work. But let's stop talking about "welcoming the principles of benefits simplification" and the populist platitudes, and let's start addressing the woeful lack of detail about how this is actually going to work.


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