Thursday, 13 August 2015

The end game of welfare reform

Over the next few months the Welfare Bill will wend its way through Parliament.  The reduction of benefit paid to people in the Employment and Support Allowance Work Related Activity Group (who have been found unfit for work but who may be able to return to employment at some point in the future) is just the latest in a long line of efforts by government to reduce the numbers on long-term out-of-work sickness payments.

In the early 1990s, pundits and politicians bemoaned the increase in the numbers of people claiming Invalidity Benefit (the forerunner of today’s Employment and Support Allowance), claiming that this had to be due to dubious claims.  Prime Minister John Major stated in 1993: “Frankly, it beggars belief that so many more people have suddenly become invalids, especially at a time when the health of the population has improved. I make no apologies for looking at this area of expenditure.” 

It was argued that the bill for Invalidity Benefit had increased because some people were placed on the benefit who were actually capable of working, and that there had been a growing ‘dependency culture’ because the level of the benefit acted as a disincentive to find work.  There was much emphasis in public debate on how many people on Invalidity Benefit were really the ‘hidden unemployed’ rather than too sick or disabled to work.

Invalidity Benefit was therefore replaced by Incapacity Benefit and an ‘All Work Test’ introduced.  In Parliamentary debates, emphasis was placed the need for more ‘objective’ assessments of fitness to work.  However, the new assessment did not in fact reduce the numbers claiming long-term sickness benefits, so the All Work Test was replaced with first, the Personal Capacity Test in 2000 and then the Work Capability Assessment in 2008 (when Incapacity Benefit was replaced by Employment and Support Allowance). 

None of these changes have led to a reduction in the numbers of people receiving long-term sickness benefits. 

Conservative, Labour and Coalition governments have consistently ignored evidence that the most important factors preventing people with long-term health problems from getting and keeping employment are: employers’ attitudes and practices; difficult and inappropriate working environments and conditions; personal and family difficulties, which encompass not only the debilitating impact of ill health but also factors which often accompany it such as debt, housing problems, caring responsibilities and so on.

For example, in 1993, the Policy Studies Institute -  commissioned by the Conservative government to carry out research on the reasons for the increase in numbers on long-term sickness benefits - concluded:
The explanation for the increasing cost of IVB lies in the economy as a whole, and in the hiring and firing practices of employers, rather than in a change in the behaviour of individual claimants or their doctors. The increase has not been caused by excessive ease of entry to the system, but by difficulty of exit. What is perceived as a problem for the government (increased costs) may actually be a problem for the claimants (inability to find appropriate work). 
 (Richard Berthoud, 1993. Invalidity benefit Where will the savings come from?, Policy Studies Institute Research Briefing, pp5-6.)

In terms of the chances of keeping your job if you become ill or disabled, again there is research which indicates that it is the ‘hiring and firing practices of employers’ rather than the ‘behaviour of individual claimants or their doctors’ which are more important. Longitudinal analysis published in 2003, this time commissioned by the Labour government, found that people who became sick or disabled while in employment were more likely to lose their jobs if they lacked employment protection, lived in an area with high unemployment, were older or had mental health problems.

However, there is a wider agenda at work in the drivers of welfare reform, namely the desire to promote the delivery of income protection provision via profit-making companies operating in free markets. Few of the narratives of opposition to the attacks on welfare reform focus on this ideological commitment to ‘the market’ but insurance companies and right-wing think tanks have been attempting to influence governments in this direction for over 20 years. 

One document which articulates this quite clearly is a report published by the Adam Smith Institute in 1995. Titled The Fortune Account, this sets out proposals to replace ‘state welfare’ with an insurance system “operated by financial institutions within the private sector”.

Wholesale privatisation of out of work sickness benefits found very little political support at the time but this did not stop insurance companies influencing changes to the welfare state which they perceived to be in their interests. One insurance company in particular had a direct input into both the 1990s Conservative reforms and those of New Labour.  Unum - a large US based insurance company - helped to develop both the Tory government’s All Work Test and its successors introduced by Labour.  As the All Work Test was rolled out, Unum was quite explicit that it hoped to gain customers as a result, with the Chairman writing: 

The impending changes to the State ill-health benefits system will create unique sales opportunities across the entire disability market and we will be launching a concerted effort to harness the potential in these.

And in 1995 the company placed an advert for its own income protection insurance:

April 13, unlucky for some. Because tomorrow the new rules on state incapacity benefit announced in the 1993 autumn budget come into effect. Which means that if you fall ill and have to rely on state incapacity benefit, you could be in serious trouble.

[These quotes come from the Paul Foot Private Eye article reproduced here]

UnumProvident, as it became following a merger, had a major influence on the Work Capability Assessment (as Jonathon Rutherford explains in his 2007 Soundings article, 'New Labour, the Market State and the End of Welfare).  The company introduced the Labour government to changes it had made to its own methods of assessment following increasing claims as a result of mental ill health and long-term conditions such as ME. Based on the bio-psychosocial model of ill health and disability, the WCA assumes that behavioural attitudes are key to ‘recovery’ and getting back to work, and that conditions and sanctions attached to receipt of benefit will bring about the necessary behavioural change. 

The motivation for ‘welfare reform’ in 1993 was to reduce public expenditure and decrease the size and role of the state.  And this has remained the desire of Labour, Coalition and Tory governments. 

In 1995 Adam Smith report which advocated Fortune Accounts pointed out that

Any new system has to be one which is within the domain of the politically feasible. It has to be one which governments would think acceptable to their electorates.

Over the last 20 years, the ‘scrounger’ rhetoric applied to people who are too ill to work, or who cannot get work because they are directly/indirectly discriminated against by employers, has been steadily increasing. After years of ramping up hostility towards people on long-term sickness benefits, the recent announcement of reducing payments to people in the Work Related Activity Group of ESA was swiftly followed by Downing Street briefing that the government was supportive of the idea of “making workers pay into flexible saving accounts to fund their own sick pay or unemployment benefits”.  It would seem that the Conservative Party believes it may now have reached a point where it can move to end the provision of income protection funded by taxation and available to all (which will undoubtedly please the insurance companies who have been major donors to Cameron since he took over as leader of the Conservatives in 2005).

The 1995 Adam Smith report stated: 
Some party, some government, will have to replace the welfare state by a less destructive alternative. The Fortune Account is the shape of its replacement.
Those who have been trying for years to influence governments to replace collective provision with private insurance may now feel they are moving into the endgame.