Amsterdam, a city known for its permissive approach to life, was the venue for a fascinating two day meeting on undeclared work recently. We were invited as the only social partner following our research and campaigns on the informal economy. It was hosted by Regioplan, a research organisation based in the Netherlands, and attended by various bigwigs (mainly from governments) from western European countries, to assess the feasibility of developing an EU platform to address undeclared work.
Community Links blog
Posts Tagged ‘Informal Economy’
Developing an EU platform to address undeclared work
Monday, May 17th, 2010Benefit fraud crackdowns drive people further into poverty
Friday, April 9th, 2010It’s dispiriting to see the Conservatives today follow Labour’s lead in proposing even harsher sanctions for people accused of benefit fraud. As we’ve pointed out before, there are several problems with this increasingly punitive approach.
Firstly, from our experience giving advice to over 12,000 people each year in Newham, we know that almost all those defrauding the system do so out of need, not greed. They need a few hours work to tide them over – to pay a surprise bill, or replace the microwave. Declaring it to the Jobcentre would mean any earnings are deducted from benefits, leaving them with no extra money. Punishing these people is unfair, but also destructive – they need stepping stones to a job and higher income, not sanctions which push them further into poverty. The occasional extreme case of greed you read about in the papers does not reflect the lives of those coming through our doors.
Secondly, benefit fraud is not as big a problem as either party might have you believe. Less than one percent of benefit claimants commit fraud (56,000 out of 5.8m), and more money is wasted each year on error (around £2bn) than is given to people claiming fraudulently. Meanwhile, about £1.2bn is underpaid, meaning people desperately in need of benefits do not receive them. Advertising campaigns that flame the public perception that everyone on benefits cheats the system are actively stigmatising and harmful.
Thirdly, while both parties would argue that sanctions act as a deterrent, they don’t seem to have considered the fate of those they sanction. These, by definition, are not people with wealth to fall back on. Denying people benefits, for 13 weeks or 3 years, is going to force them further into debt and eventually destitution. It’s hard to see how this is addressing the causes of poverty.
In short, politicians might be surprised to discover how much fraud would go down if they sorted out the benefits system so it worked better for the people it’s meant to serve. In the meantime, don’t drive people further into poverty by imposing heavy-handed sanctions on people who, in the main, are just trying to get together enough money to get by.
People working informally need support not stigma
Monday, March 15th, 2010
Anne Stewart works at Church Action on Poverty’s Community Pride Unit, who have done a lot of work looking at the informal economy in the area around Manchester. They are part of Community Links’ Need not Greed campaign.
In a report published by Community Pride in 2008 called Invisible Workers, it was clear that lots of people in many of our inner-city communities are actually working! The reasons they are working ‘informally’ are many and varied. The key issue is that people simply do not have enough to live on and have to find ways of surviving and sustaining each other.
Welfare Commission: humanising decision making and appeals in the benefits system
Tuesday, February 9th, 2010Today the Department for Work and Pensions Select Committee publishes its report on decision making and appeals in the benefits system, the headline press coverage reports that overpayments due to error had soared from £400 million in 2000, while overpayments due to fraud and mistakes by claimants dropped. As part of the solution the select Committee is calling for a Welfare Commission to be set up to simplify the benefits system. We welcome this news and believe that any redesign should place a one-to-one service to claimants at its heart; ensuring efficient and humanised service delivery. We have a few specific recommendations for the Commission to consider
- Reduce the complexity of claim forms,
- Make crisis loans more accessible and immediate,
- Addresses the inconsistency of the earnings disregard across all benefits to ensure accidental fraud is not committed resulting in benefits being automatically stopped.
Last year the Community Links advice services were used by a total of 12,400 local people. At our drop-in advice sessions 37.8% were benefits related cases, of which 73% were a result of DWP error. Our advice services continue to be in high demand, services cost several hundred thousand pounds per year – funded by local authorities and the Legal Services Commission. This cost to the tax payer could be dramatically reduced by the simplification of the benefits system and increased competency with the administration process.
Research by AdviceUK in Nottingham reveals that 42% of the demand at advice agencies in the city is ‘failure demand’ – demand caused by failures in the system of public administration. Reducing this would save significant amounts of money and free up advisors to carry out valuable work with clients, supporting them to resolve their long-term problems.
Many of our clients have used our advice services in the past; some have had their benefits mistakenly stopped on more than one occasion. The knock-on effects are increased borrowing and debt, eviction problems and in many cases people falling into the informal economy, working cash-in-hand to cover costs as a last resort. Debt related advice has doubled, and our advisers believe this is in part due to the recession-related rise in claimant figures, and benefits being stopped or delayed as people struggle to find formal work.
Our campaign, Need NOT Greed has been calling for a simplified benefits system. A system which is easier to navigate could help prevent the rise of informal economic activity caused by people struggling to survive poverty. At the launch of the Need NOT Greed campaign in February 2009 Terry Rooney, chair of the DWP select committee said
“There is a treadmill of being in the informal economy out of Need NOT Greed. The striking thing is that the national benefits system is geared up to serve millions, but everybody is an individual – it’s how you can recognise everyone’s needs and requirements. You need a totalitarian system and there are enormous challenges – but ones that need to be faced and met.”
A local campaigner and user of our advice services said
“the system wears you down, I am constantly just surviving. Every time you pick yourself up and try to move forward the system lets you down again. It’s the same old problems for everyone and none of us round here trust it anymore. How can something you don’t trust be able to help you?”
Rising unemployment is increasing demand for welfare benefits at a time when public funding is under severe pressure. Spending time building productive relationships with people using services is time well spent; not an extravagance. These relationships are instrumental to efficient delivery of public services. We hope that a Welfare Commission is established as it is evident that change is necessary – but change must put the needs of the service user at the heart of the system.
Community Links advises government on hidden economy
Tuesday, January 5th, 2010
The formation of a Hidden Economy Advisory Group was announced in last month’s pre-budget report, and now HMRC have released some more details.
Community Links accepted an invitation to be part of the group; we have lobbied for its creation for many years.
As a community organisation based in east London, we have provided support and advice to local people for over 30 years. We soon realised that many of the people accessing our services were working cash-in-hand, or informally, some while on benefits. We realised that most were doing so because the system was not supporting them sufficiently and they needed the money, not because they wanted to defraud the taxpayer. They told us how the benefit system and low-paid work often left them with little choice but to work informally, and how people are exploited as the cash-in-hand jobs available are usually low-paid and insecure. And we discovered that although the majority would have liked to formalise their work, there are innumerable barriers to doing so – low wages, inflexible rules, low benefit rates.
In the last 10 years we have conducted in-depth research into the issue, measuring its extent in boroughs across London, and latterly across the UK, as well as delving deeper into why people work cash-in-hand, how it impacts on them, and how they can formalise. We have built up a reputation as one of the few organisations in the UK with expertise in this area, and in the last two years our Need NOT Greed campaign has approached government, not being afraid to tell them what’s wrong, while offering sometimes radical solutions.
Throughout our work we are motivated by the desire to help people help themselves out of poverty. We believe that in the majority of cases cash-in-hand work keeps people poor, trapping them in low-paid and insecure work, and often shutting off the prospect of better jobs. And so we’re very keen to help shape measures that might allow people to formalise their work, or remove the need for people to work cash-in-hand in the first place. HMRC are motivated by the estimated £3bn in unpaid taxes by those working in the hidden economy, whereas we are motivated by the prospect of a better life for the people coming through our doors every day. In this instance we believe the two aims coincide – the best way to increase tax revenues is to remove the need for cash-in-hand work, and allow those working cash-in-hand to easily formalise.
I look forward to working closely with the group over the next few months. I want to ensure that we do not demonise those working informally but recognise the complex reasons behind their work, and that our practical and policy solutions reflect the lives of those working cash-in-hand across the country.
Our Social Change Series 3: the informal economy provides an overview of our research and recommendations to date.
What happened when Melanie Phillips met real people on benefits
Tuesday, January 5th, 2010Last night was the first of Melanie Phillips’ two programmes on the ‘British work ethic’ on Radio 4, (listen on iplayer for the next week), which she also described in her column. I was particularly interested because we declined an invitation to help in the making of the programme, but also for her reactions to those people, struggling on benefits, who she met.
It’s very hard making judgements about other people, because there’s always a tendency to forget all the ways in which their life is different from yours. I got the impression that before the programme Phillips imagined people on benefits were mostly lazy versions of herself, with her access to money, support, education, social networks, and her ‘middle class elbows’.
She didn’t realise, for example, that people might not travel outside their town for work because they just couldn’t afford the bus fare. Or that a man might not challenge his doctor over a diagnosis that had left him in pain and on a cocktail of pills for many years. To her credit, in both these situations she admitted to having had her eyes opened. But these are just two examples, and there must be many other ways in which her eyes are still closed.
I’m still not sure she realises, for example, what it might feel like to apply for a low-paid, no-skilled, unbelievably dull job with no chance of progression and the prospect of years spent doing it. She dismisses a young man’s assertion that he wants to do an interesting job with fairly casual disdain, but is it really too much to ask, or atleast aspire to? The problem, perhaps, is that he has no idea how he could progress from an entry-level job into a more interesting one, or even what jobs might interest him. He needs access to jobs and support just as much as the man on incapacity benefit, and far less than Phillips probably did at his age. I’d be interested to hear what he thought of her portrayal of him in the programme.
I don’t want to be too harsh though – her column today shows admirable recognition of many of the problems of the benefits system. And to a great extent we all share the difficulty of truly putting ourselves in someone else’s shoes, rather than just imagining ourselves standing where they are.
In her column she notes that ‘not surprisingly, no one who was on the fiddle agreed to speak to me.’ Our Need NOT Greed campaign works with many people she’d consider ‘on the fiddle’, and we hope she’d be surprised to find that, again, it’s usually the system rather than individuals’ failings that forces them into it. For example, as we highlighted last year, people on Jobseekers Allowance who get a part-time job are only allowed to keep £5 of their wages. In this situation, can you blame someone for not declaring their work? In our experience, informal work is a great sign that people want and are able to work – we now needs a system that makes it worthwhile doing it legally.
The Better Off in Work credit and the Hidden Economy Advisory Group
Wednesday, December 9th, 2009Edit: We only just noticed, hidden away at the bottom of this page, the introduction of the ‘Hidden Economy Advisory Group’ in today’s Pre-budget report. This is fantastic news, it’s great that government is recognising the importance of those working informally, and looking at positive steps to include them in the formal economy. A major success for our Need Not Greed campaign. We’ll keep you up to date with how it develops.
The report also saw the nationwide rollout of the Better Off in Work credit, which tries to make sure people earn more in work than on benefits and has been piloting for the last year in Yorkshire. Our Need not Greed campaign highlights the lack of incentives for many people moving off benefits into work, so this is interesting news, welcomed by the our coalition partners the TUC amongst others. It shows government recognises some of these barriers, but we don’t believe it’s the right solution.
The scheme is aimed at people moving off benefits into full-time but low-paid work. Often these people actually end up worse off, as they lose not just one but several benefits all at once. This is a powerful incentive not to get a job. The scheme ensures people are atleast £40 better off per week in their job than they would have been on benefits, by topping up their income. It lasts 26 weeks, and is administered by the jobcentre.
There are several problems. Firstly, it’s actually a top-up on a top-up, since tax credits are supposed to ensure that work pays. It’s adding even more complexity to a system that desperately needs to be simplified, and for that reason will probably not be accessed by many of those entitled to it, who will never find out about it.
Secondly, it ignores the fact that people can often only access part-time jobs from the jobcentre – over a third of jobcentre vacancies are temporary and part time. These part-time jobs can be a vital step back into work, but the credit does nothing to improve incentives for people moving into them.
And thirdly it doesn’t address the fundamental problem of low pay. Half of poor children live in families where someone works, despite tax credits. A living wage would ensure people don’t have to rely on a top-up to get by.
The scheme has just finished a year-long pilot in Yorkshire and Humberside, and it would be fascinating to see the evaluation results. If anyone knows where they are, do let me know.
Last week we called for people on Jobseekers Allowance to be allowed to earn up to £50 a week before it affected their benefit. Our experience shows this would act as a good incentive for people to take the first step back into work. It was good to see the chancellor recognising the often-perverse incentives facing those getting a job, but the Better off in Work credit probably isn’t the right solution.
Understanding your local area, hidden warts and all
Monday, December 7th, 2009A couple of weeks ago the Local Democracy, Economic Development and Construction Bill was given royal assent, so becoming law. It does two things: firstly it aims to create more opportunities for local people to get involved in decision making; and secondly it gives local authorities a greater role in economic development, including requiring them to assess economic conditions in their area, produce a regional strategy in conjunction with the Regional Development Agency, and cooperate with other councils.
The requirement to assess local economic conditions has been of particular interest to Community Links, because we have carried out research into the informal economy in several London boroughs over the last few years and have increasingly realised its importance to local economies. We estimate up to 20% of people have worked informally, and the sector as a whole could be worth as much as 12% of GDP, or £120bn a year. We decided it was such a crucial yet under recognised issue that we set up our Need not Greed campaign to raise awareness.
So does this new act make it obligatory for Local Authorities to understand and include their local informal economy in their assessments and strategies? Well sort of. The legislation allows for local Councils to determine what they want to assess. It’s only the guidelines that suggest they think about all aspects of their local economy, including the informal economy. This is a shame, so just to highlight how important we think it is here’s an example.
In 2006 Haringey Council’s economic regeneration unit knew there was a gap in their knowledge. They knew people in Haringey must work cash-in-hand, because they’d come across individual cases from time to time. But they had no idea who was doing it, why, or how many, or how it impacted on the department’s work, and therefore it was barely considered in their plans. They asked Community Links to do some research, knowing that we’d done very similar research before, in other boroughs.
We quickly built up links with the Selby Trust, a well-respected local community organisation in Tottenham, who coordinated all the interviews. In talking to 2,600 people in Haringey we found that informal paid work was a significant part of the local economy, mostly in areas like catering, cleaning or childcare. The council used our detailed report to build the informal economy into economic regeneration strategies and activities so they better reflected the reality of life for people in the borough.
To find out what’s really going on in your area see the Community Links website or contact Aaron Barbour on 020 7473 9666 (dd) and aaron.barbour@community-links.org
£5 earnings cap traps people on benefits
Friday, December 4th, 2009Today saw the launch of our Need Not Greed campaign’s demand for the earnings limit on Jobseekers Allowance to go up from £5 to £50. It was discussed on the Today Programme (mp3), and Nicola Smith of the TUC gave a great interview on BBC Radio 5 Breakfast (mp3).
People on JSA face a £5 cap (or ‘earnings disregard’) on the amount they can keep each week when they get any kind of paid work. Above this amount, benefits are deducted at the same rate as earnings, which means claimants who take on part time or occasional work are often little better off.
Our experience shows that this low cap on earnings often removes the incentive to take the first step back into work and can push people into illegal cash-in-hand jobs.
The £5 cap was set in 1988 and has never been raised. We argue that raising it to £50 a week would immediately allow people on JSA an easier route back into work. It would allow them to take on a few hours of temporary work to build up experience, and give people more flexibility when moving off benefits.
At the moment, many people getting these kinds of jobs do not tell the jobcentre, knowing that doing so would jeopardise their income. In doing so however, they’re breaking the law.
However, increasing the Earnings Disregard alone is not enough. We’re asking for this now as a measure which could be quickly implemented and make a large difference to the lives of people trying to move off JSA. In the end nothing but a complete overhaul of the benefits system would really allow people to make that smooth transistion off benefits and into work.
To find out more, you can download a briefing paper about the campaign or visit the Need NOT Greed website.
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