Thursday, October 25, 2007

New Deal No Deal For Taxpayers

Public Accounts Committee yesterday

How to get workshy spongers back to work and earning their own keep is one of the oldest problems in welfare. Indeed, it was the principal driver for the Poor Law reforms of the 1830s (see this blog and James Bartholomew's outstanding Welfare State We're In for details). Of course, those reforms were eventually reversed, and under the entitlement culture engendered by today's Big Government, the problem is more acute than ever.

Today there are 4.2m people of working age living in workless households. The vast majority are supported by taxpayers, costing us an estimated £12.7bn pa, including £3.4bn pa on benefits for lone parents (source: NAO Report). That's equivalent to nearly 4 pence on the standard rate of income tax.

Getting these people into work is generally called Welfare to Work, although NuLabour naturally branded their programme with an upbeat Newspeak title- the somehow familiar sounding New Deal.

Now, as taxpayers, we ought to be applauding the New Deal: get those spongers back to work and we could save a ton of cash. The trouble is, the New Deal doesn't seem to be saving us money at all. In fact, according to the NAO's report published in July, it costs us even more than just paying the benefits.

The following table summarises the costs and benefits for each of the ten (!) separate New Deal back to work programmes. "Net fiscal benefit per participant’ estimates the cost effectiveness to the Exchequer of the programme. It is based on the cost of the programme, minus the direct benefits to the Exchequer (such as increased tax receipts and reduced benefit payments when people move into work) and the costs of any additional in-work payments such as Tax Credits" (report para 5.3):

As we can see, only two of these ten programmes end up saving us money. With all the rest, the costs of running the programmes significantly exceed the savings we make. Hardly surprising when one of these programmes has cost £76,540 per job.

Looks like we could have saved ourselves the £6bn the whole deal has already cost (Report figure 1).

So what's going on? Yesterday, Tyler attended the Public Accounts Committee meeting that tried to find out.

The three mandarins on the griddle this time were led by the Department for Work and Pensions' Perm Sec Sir Leigh Lewis. On Tyler's mandarinsgoingtothedogsometer, he came across quite well- think David Starkey as an old-style Anglican bishop. But inside the Department he's apparently known as the Honey Monster. And you can certainly see the resemblence.

Honey or not though, in terms of the nitty gritty he cast very little light on anything. It soon became painfully clear the whole programme is the usual amalgam of wishful thinking and bureaucratic treacle.

Judge for yourself- here's Tyler's verbatim transcript:

PAC Chairman How the dickens can we be getting taxpayer value if the costs exceed the benefits?

Sir Honey Monster Ah well, we think there are many additional benefits which have not been quantified. Lower NHS costs, lower costs from crime, lower costs from global warming, lower costs from foot and mouth etc etc

Chairman How can you possibly know that?

Sir H Monster We've had three major studies conducted by the world respected University of Hugeimpenetrablereports. We paid them a large sum of money to write a load of stuff proving we're right.

Chairman Hmm. Well how do you know your New Dealers haven't simply got jobs they'd have got anyway because of the strong economy?

Sir H Monster Ah well, wibblewibblewibble... and the latest figure is 57.2%

Chairman Hmm. What about churn? Surely most of these people get pushed into a low grade job for about six months, then lose it, and then start all over again.

Sir HM There's absolutely no evidence to support that conclusion. Or more precisely, there's absolutely no evidence. The simple reason being we don't collect any.

Chairman Gah!

[Brief pause while the Chairman's nurse is summoned]

A N Other Hon Member: Sir Honey, since you last appeared bfore this Committee you seem to have been knighted. What on earth was that for?

Sir HM That is for others to judge

A N Other I see. Well, what about all these immigrants- surely they must be taking the jobs your crowd are after?

Sir HM I don't think that can possibly be the case. If I may say so, you are falling for what our economists call the Lump of Labour fallacy. It's well known that immigration boosts the economy (for an exposition of how most economists outside Whitehall now agree that mass immigration actually does take income and jobs from native Brits see this blog).

A N Other Why have you set up such a ludicrously complicated structure? The NAO report says that in Glasgow alone the local programme involves 125 organisations and 325 individual programmes, projects and services.

Sir HM Ummm... have you got any honey?

PS This was the first PAC meeting Tyler had attended for some time. It's good to see proceedings still take place in the grandeur of Committee Room 15, and still under the haughty monocled gaze of Joe Chamberlain. The only thing missing was the Comptroller and Auditor General, who for some mysterious reason wasn't there. Hmm.


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