To Banker From Bankies: Incapacity benefit, myths and realities | Welfare

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This report offers a view on ‘welfare reform’ in recent years from the perspective of the Clydebank Independent Resource Centre (CIRC). It is being written at a crucial moment in the history of welfare in the UK. The Welfare Reform Bill currently going through Parliament represents, in the words of the Social Security Advisory Committee (SSAC), “a major departure from the principles … that have underpinned UK social protection for almost 60 years”. The plan is to “shake up the benefit system”. The “architect” behind the plan is a former banker, David Freud. He is the banker referred to in the main title of the report. He is also the person to whom ‘the bankies’ (people from Clydebank) are addressing themselves – though of course they are simultaneously, and every bit as importantly, addressing themselves to the politicians who appointed him as their key adviser.
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  Dr Chik Collins School of Social SciencesUniversity of the West of Scotlandwith Janice Dickson & Mary Collins Clydebank Independent Resource Centre Incapacity Beneft:   Myth and Realities Supported and funded by: TO BANKER, FROM BANKIES  List of abbreviations  ACEVO Association of Chief Executives of Voluntary Organisations ADA Approved Disability AnalystCA Carers AllowanceCIRC Clydebank Independent Resource CentreCUCRC Clydebank Unemployed Community Resource CentreCUWC Clydebank Unemployed Workers CentreDLA Disability Living AllowanceDVLA Driver and Vehicle Licensing AgencyDWP Department for Work and PensionsESA Employment Support AllowanceERSA Employment Related Services AssociationGP General Practitioner  IB Incapacity Benet IWQ Incapacity for Work QuestionnaireJSA Job Seekers AllowanceNI National Insurance SSAC Social Security Advisory CommitteeSSP Statutory Sick PaySTUC Scottish Trade Union CongressUAG Unemployed Action GroupWHO World Health Organisation Introduction   2 Part One:  David Freud’s welfare ‘shake-up’ as seen from Clydebank 4 Part Two:   Incapacity Benet: Myth and realities 14 Dr Chik Collins School of Social SciencesUniversity of the West of Scotlandwith Janice Dickson & Mary Collins Clydebank Independent Resource Centre TO BANKER, FROM BANKIES Incapacity Beneft:   Myth and Realities       C      O      N      T      E      N      T      S Published by the Clydebank Independent Resource Centre Supported and funded by Oxfam April 2009Clydebank Independent Resource Centre627 Dumbarton Road, Clydebank G81 4ETDesign by www.contextdesigns.co.uk  Introduction This report offers a view on ‘welfare reform’ in recent years from the perspective of the Clydebank Independent Resource Centre (CIRC). 1  It is being written at a crucial moment in the history of welfare in the UK. The Welfare Reform Bill currently going through Parliament represents, in the words of the Social Security Advisory Committee (SSAC), “a major departure from the principles … that have underpinned UK social protection for almost 60 years”. 2  The plan is to “shake up the benet system”. The “architect” behind the plan is a former banker, David Freud. 3  He is the banker referred to in the main title of the report. He is also the person to whom ‘the bankies’ (people from Clydebank) are addressing themselves – though of course they are simultaneously, and every bit as importantly, addressing themselves to the politicians who appointed him as their key adviser.Freud’s plan was published in March 2007. 4  At that moment bankers in general were highly regarded. However since then things have changed; for we now know that at that moment the UK economy was experiencing a fantastic economic bubble created by the grossest irresponsibility and incompetence in the banking and nance sector. That irresponsibility and incompetence was, unfortunately, facilitated by the misplaced reverence shown by politicians and regulators towards the leading gures in the banking and nance sector. Freud, like too many others (including the leading politicians), took the continuation of the unsustainable boom as given, and based his policy thinking on that assumption. Many, including the SSAC, had serious reservations about the ‘direction of travel’ in welfare policy even when that assumption was widespread. But with the onset of what the Managing Director of the International Monetary Fund has called ‘the great recession’, the latest departure looks plainly wrong-headed. Some of this was reected in the contribution of Labour MP, Frank Field, during the second reading of the Bill in Parliament: “The Bill was conceived in a boom world and by the time it occurs it will be largely irrelevant to our constituents”. Yet this is perhaps too optimistic, for the greater likelihood is that the measures in the Bill will be relevant to many, but too often in a very negative, damaging way.  And, as one journalist recently observed, the Bill is proceeding through Parliament “at an unseemly speed”. Worryingly: “No one apart from a desperate and despairing coalition of poverty groups and trade unions seem to much care that this curiously scanty bill gives the secretary of state for work and pensions sweeping and vaguely dened powers to remove benets from anyone who does not or cannot comply with a raft of ‘work preparation’ activities”. There is little serious debate inside Parliament, and unfortunately not very much more outside of it. Such debate as there is has often been conducted in wildly misleading terms. Frequently such terms reect widespread prejudices about benet recipients, based on serious misunderstanding of their lives and circumstances and serious overestimation of the actual levels of benets. These are prejudices which, as leading surveyors of public attitudes have indicated, the government has itself done much to fuel since 1997. 6  Such prejudices portray claimants as feckless and idle cheats who ‘neither work nor want’ and who need to be coerced out of their ‘dependency culture’ and into work. But, just as misleadingly, recent government reforms are being presented in terms of the “personalisation” of service to individual “customers”, and “individually tailored” advice and support to enable claimants to “take control of their journey back to work”. These latter terms bear just as little relation to the precarious lives of people living on benets as do the widespread prejudices to which they, curiously, are linked. They are two sides of a single, and false, coin – the undeserving and deserving poor. 7  It is in this context that the people at the CIRC have decided to try to make a contribution to the debate, based on their long-standing experience in serving the town of Clydebank. It is a contribution which they believe will help to show how wrong the prevailing policies and terms of debate have been in recent years – when the economy was in boom, and the policy agenda was rather less harsh. And if that is true, then as boom turns to bust and the policy agenda becomes yet harsher, the new measures will be even more wrong. The second part of this report focuses on the experience of Incapacity Benet (IB) claimants – who are very much in the ring line of the current reforms. It presents three case studies which can usefully inform the debate. However, the rst part of the report offers a view, from the perspective of the CIRC, of the Freud-inspired welfare reforms. First, it focuses on Freud: Who is he, and how did he become so inuential on welfare? Secondly, it introduces the CIRC and its perspective on the welfare reform agenda of the government since 1997. This provides the context in which the case studies should be read, and their signicance understood. 1  Thanks to Oxfam for funding towards the research for this report. Thanks also to John English, John Foster, Bernadette Laffey, Gerry McCartney, Lynne Poole, and colleagues at Oxfam – both in Glasgow (particularly Jim Boyle) and Oxford – for comments and advice. The authors retain full responsibility for any omissions or errors. 2  “No one Written Off: Reforming Welfare to Reward Responsibility – The Response of the Social Security  Advisory Committee” (www.ssac.org.uk/pdf/nalresponse.pdf). 3   The Herald  , 17 February 2009. 4   Reducing Dependency, Increasing Opportunity: Options for the Future of Welfare to Work  , henceforth referred to as The Freud Report   (www.dwp.gov.uk/publications/dwp/2007/welfarereview.pdf). 5  Madeleine Bunting, “Workfare has arrived in Britain”, The Guardian , 23   February 2009. 6  See the annual British Social Attitudes Report   series in the years after 1997 – e.g. the 16 th  Report (1999/2000), the 18 th  Report (2001/2002) and the 19 th  Report (2002/2003). 7  Quotations from article by Bunting, as note 5 above. 2/3‘It is in this context that the people at the CIRC have decided to try to make a contribution to the debate, based on their long-standing experience in serving the town of Clydebank. It is a contribution which they believe will help to show how wrong the prevailing policies and terms of debate have been in recent years...’ Introduction  1. The banker: David Freud David Freud is the great grandson of the famous psychoanalyst Sigmund Freud. He started out as a journalist but went into the City of London in the eighties, just when the global nance revolution was kicking off. Initially his basic pay was much the same as when he had been a  journalist. But, as Jane Martinson observes: “By the time he left twenty years later no self-respecting banker would get out of bed for anything less than six gures”. In the interim, Martinson adds, he “worked on some of the biggest and most controversial deals of the 1980s and 1990s” and became vice-chairman of UBS investment banking. Freud himself said to his deputy: “If the rest of the country knew what we were being paid, there would be tumbrels on the street and heads carried round on pikes”. 8  In 2006 Freud published a book about his career. The ‘blurb’ on its back cover includes a comment from the playwright, David Hare, who describes the book as a “morally ambiguous account of twenty crazy years of buoyant capitalism”. 9  Freud admits to what Martinson calls “suspect behaviour” amidst what Freud himself describes as a “pioneering, piratical industry, where we made up the rules”. 10  In his City career Freud frequently got things seriously wrong.  As one reviewer of his book put it, Freud “will be remembered in the City as one of the key players in several of the most embarrassing and badly managed deals in investment banking history”. 11  Investors lost hand over st in Eurotunnel. His revenue forecasts were, in his own words, “completely potty”. 12  At Euro Disney, as The Telegraph  observed, Freud’s nancial plans “went so goofy they almost wrecked his career”. 13  He also played a leading role in the rapid expansion of the Warburg Group. It ended in humiliation and collapse. On the Channel Tunnel Rail Link he got his sums wrong by £1.2bn and had to ask the government for it. He was also involved with Railtrack, appearing before MPs to try to explain that particular mess. Nonetheless, he became a government advisor on the successor to Railtrack – Network Rail. 14  Freud was also duly to be appointed as the key government adviser on ‘welfare reform’ – when John Hutton was at the Department for Work and Pensions (DWP). Tony Blair, still Prime Minister, thought Freud could help him to achieve the kind of fundamental changes to benets which he wanted as his legacy. This was despite the fact that Freud, in his own words, “didn’t know anything about welfare at all”. 15 This in itself indicates the actual thrust of the ‘welfare reform’ agenda. In relation to benets, as in other areas of welfare, the world ‘reform’ is now inextricably linked to  privatisation .  And Freud’s plan was much less about the detail of the benets system than it was about opening up the world of ‘welfare to work’ to the “morally ambiguous” demands of business and nance – getting ‘welfare to work’ for them . Freud had a clear track record in packaging and selling things which others, including the public at large, would have to worry about, and pick up the tab for, later. The Independent    journalist Dominic Lawson saw it thus: “Perhaps David Freud’s greatest respray job was the stock market otation of Eurotunnel. Not only did he come up with a clever way to make shares in Eurotunnel plc seem more than a wing-and-a-prayer speculation, he managed to og the stock at the height of the stock market crash of 1987, even if it did involve getting Bob Maxwell to stuff a couple of his tame pension funds with the stuff... With such a reputation for nding gold in a mound of silage, it was not particularly surprising that John Hutton, the Work and Pension Secretary, should turn to this particular ex-banker when ordered by Tony Blair to come up with something snappy on welfare reform for the prime ministerial legacy.” 16   8  See Jane Martinson, “Confessions of an Apologetic Investment Banker”, The Guardian , 4 August 2006. 9   Freud in the City  , Bene Factum Publishing Ltd, 2006. 10  Jane Martinson, as note 6 above. 11  Alexander Preston, “Chewed up and spat out”, New Statesman , 31 July 2006. 12  Jeff Randall, “How Eurotunnel went so wrong”, BBC News 13   June 2005. 13  “Freud in the City: How Yeltsin on a tank saved my job”, Daily Telegraph , 1   May 2006. 14  References as notes 6, 9 and 10 above. 15  Interview with Rachel Sylvester and Alice Thomson, “Welfare is a mess, says adviser David Freud”, The Daily Telegraph , 4   February 2008. 16  Dominic Lawson, “Welfare Reform Needs Sticks and Carrots”, The Independent  , 6   March 2007. Part 1 David Freud’s welfare ‘shake-up’ as seen from Clydebank 4/5 “More than ever we need a humane welfare state, not privatisation and a punitive conditionality. [It is not] that people should be left in poverty and their children’s life chances destroyed. We don’t argue that families living chaotic lives or suffering psychological trauma, or domestic violence or mental illness should be left to rot for a lifetime on benet. We need a welfare state whose services people feel they have control over and which they can shape to suit their needs. We need earlier intervention to help people with low skills. The benet system is too rigid and fails to deal with the complexity of people’s lives. It’s time to increase the level of benets and lift people out of poverty.” Jonathon Rutherford, “Get on your bike, again: Proposals to make benets conditional, not universalwill exacerbate poverty as the recession bites”, The Guardian , 25 November 2008.
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