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Councils have an incentive to cut fraud

The Communities and Local Government Select Committee has come up with a report suggesting that the introduction of Universal Credit will cause an increase in fraud. Evidently they are short of topics within their own remit as this is more a matter for the Department for Work and Pensions.

It is one of those Select Committee reports that has enough in it about "concerns" to get some media attention. However, when you read it you see that there are enough caveats and qualifications so that  it is not really making a prediction, or saying anything very much at all.

The Government argues that by simplifying benefits, fraud will be reduced. A DWP spokesman says:

"Universal Credit will cut benefit fraud by £200 million a year and we are confident that our IT systems will be strong enough to protect us from the threat of fraud.

"We have been running pilot projects with local authorities to ensure that those people who can't manage with monthly or direct payments get the support they need."

For the Select Committee there isn't much risk in being "concerned" that there should be more pilots, more information, or more delay. That will always be an easy case to make.

There was though, an interesting debate about how the new regime will mean tenants paying their landlords, rather than the state paying them direct.

Bill Esterson: Why can’t tenants choose to have their housing benefit paid direct to the landlord, if they want to? 

Lord Freud: Because that will institutionalise them very quickly; it already has, i.e. most people who go into social rented accommodation find that in practice it is hard to do anything else but have the rent paid over from the state. 

Bill Esterson: But you believe in choice in lots of other areas, don’t you?

Lord Freud: I believe in choice.

Bill Esterson: Why not this?

Lord Freud: It is the balance of power between the two parties. If you could give me an open choice between an all-powerful landlord and a tenant desperate to move into a particular property, I would be more convinced, but in practice that is not the power position between the two.

Choice should not include being able to slump back and let the state do everything, when you are capable of doing it for yourself. Some might say that if the taxpayer is ultimately paying the bill what does it matter if it goes to the tenant or the landlord. I think the psychological difference is crucial. Mr Esterson, if he was being serious rather than obtuse, shows a complete lack of understanding of the approach of Lord Freud and the Government. His approach is a disservice to his constituents in Sefton who languishing on benefits, even if he sincerely believes himself to be speaking up for their "choice."

Sometimes, of course, the state will need to pay the landlord direct when the tenants are genunely incapable of doing so. In a typically anti-localist sentiment, the committee demands a decriptive diktat from Whitehall about when this will be necessary, rather than allowing discretion. It wants a statutory definition of "vulnerable". Lord Freud is resistant, saying:

“We are aiming to avoid the word ‘vulnerable’ and the definition of vulnerable.  To give you an example, if I am heavily disabled, I am at one level to be considered vulnerable, but I might be perfectly capable of handling my financial arrangements, budgeting and everything else. Our approach is to look much more specifically at the types of support somebody is likely to require and tune our efforts in that direction, having established what their requirement is."

I think that the new arrangement will reduce fraud not just through simplification but also as councils will have an incentive to reduce fraud. Increasingly transparency means those doing a bad job will be held to account.

There is more to it though. It is about treating people as individuals rather than units in a system. This select committee report doesn't even begin to understand the extent of the change that is taking place.


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