Frankly you are frightening people

The policy changes of the British government’s recent spending review are set out in a Treasury report. Attached as an appendix is a ‘distributional analysis’. You can get the whole thing here.

The Treasury has also published an equality impact assessment. It has to be said it looks like a pretty poor effort. Since 2006, it’s been a legal requirement for the government to assess its own measures in this way. As it happens, the coalition didn’t bother to carry out any sort of equality impact assessment for the post-election budget; as a consequence – and thanks to the efforts of Yvette Cooper and the Fawcett Society – we may now see a judicial review of the budget (although not of the spending review). The Fawcett Society’s assessment is that the government’s policies will directly affect women much more than they will directly affect men. They may well be right. This Guardian story has more details.

By contrast, there’s no law requiring the government to make a distributional analysis of what it does, so at first glance it looks as though they’re simply doing us a favour with that one. Perhaps the coalition saw it as having potential to persuade us that the cuts will be fair. If so, it hasn’t worked very well: you don’t need to do any sums to see that the Treasury analysis omits to include the impact of cuts to housing benefit, disability benefit(s), tax credits and council tax benefit. The IFS has been doing some of the hard work with numbers – taking account of all the things just mentioned that should have been in there to begin with – and you can see their preliminary findings here. In short, the government says that their spending review is progressive, but they’re wrong: it’s regressive.

My own small beer assessment, echoing Alex’s recent comment over at Crooked Timber, is this: the distributional analysis codifies long-standing conservative prejudices in a novel way. In what follows I’ll focus on paragraphs B.6 to B.28 of the report, which is a section that aims to show the distributional impact of changes to departmental spending. Paragraphs B.16 and B.17 say:

The modelling shows that all households benefit substantially from expenditure on public services. The mapping of the baseline consumption of public services (benefits in kind) … demonstrates that the consumption of services is skewed towards lower income households. This is explained by the following:

• demographic factors: lower income groups contain a higher proportion of children and pensioners, who are the most intensive users of welfare services;

• other factors affecting need, such as long standing illness, which is reported more in lower income groups;

• the targeting and means testing of certain services, such as social housing, social care and free school meals; and

• differential use of private alternatives, including private schools and health care.

The first thing to note is the use of the word ‘benefit’ and the phrase ‘benefits in kind’. They’re being offered up as substitutes for the more familiar ‘services’ or ‘public services’. Normally, in the context of welfare, ‘benefit’ means money. So what’s the coalition up to here? A fairly frequent theme in my parents’ house (it came up about once a term) was that people who paid to send their kids to private schools were doing everyone else a favour. Twice over, in fact. Once by continuing to subsidise public schooling through taxation, and again through lessening demand. Call this the ‘what dad said when the school fees came due’ principle. The coalition has taken the first half of this prejudice closer to bureaucratic reification by calling a universal non-monetary provision a ‘benefit’ and assigning it a monetary quantity. It used to be that the rhetoric of privatisation was about choice. This was when services that few would dream of attempting to do without (electricity, say) were being privatised. We’re probably beyond that now. In the Tory future, it seems, privatisation will be about private services – 16-18 schooling, say – that many people will have to do without, simply because they won’t be able to afford them. Those public services that remain will be tagged with a number prefixed with a pound sign, to emphasise just how generous, just how god damned progressive the government really is.

I disagree with this attitude, of course, just as I disagree with the notion that poorer people are better off than you might have thought because they get to consume more services. This is the second half of the ‘what dad said …’ principle. That it’s now official can be seen in the paragraph I’ve quoted, and also in that it’s supposed – at least I think so – to form the basis of our understanding of the graph in figure B.3 (p. 95) of the report. The graph shows a slope across quintiles that’s progressive rather than regressive. There are two problems here. The first problem is this. The government’s argument is that since the reduction in the total of non-monetary provisions received by poorer households will be smaller – as a proportion of what they received before – than the reduction in the total received by richer households, the spending review is progressive. However, when you consider any single non-monetary provision in itself, it may be far from obvious that it has redistribution as its aim. For example, health care. It seems that we don’t give people medical treatment because they’re poor, by way of compensating them for their lot in life; we treat them because they’re sick. This certainly seems true at the point of use – NHS doctors don’t hand out income questionnaires before admitting patients – and I suspect it’s also true at just about every level of NHS administration, up to and including ministerial level. If this is what we all believe, then we shouldn’t count such a provision into a quantified calculation that aims to show an overall progression or regression. We’ve already decided that it isn’t to be measured like that.

The second problem also has to do with incommensurability. Even if you believe that you can include a non-monetary provision into a distributional analysis, you still need to decide what the numbers are supposed to attach to. The report’s authors seem to have used numbers that reflect costs. But what have costs got to do with distributive justice? What we’re evaluating is who’ll get to have a better or worse time of it than they did previously, which is something that needn’t be connected to provider costs at all. Something along these lines clearly gets at the consciences of the report’s authors, since they say:

… there are a number of caveats to [our] methodology. It does not reflect the value people place on the services they consume nor how effective those services are at delivering desired outcomes (for example, low value programmes that are being stopped are measured at the same rate as high value programmes that are being kept)

You can do your own thought experiment on this one. Say you get sick, such that you need complicated and effortful hospital treatment. You get the treatment and it makes you healthy again. A lot of money has been spent on you, possibly. Do you feel grateful? Maybe so. But do you feel better off? Do you feel richer? If so, by how much? And would you rather have had the money? There’s an entanglement with counterfactuals here. It makes itself felt in the apparently absurd construction: ‘low value … measured at the same rate as … high value’.

Finally, it’s worth noting that the report reheats the old Tory favourite: aspiration. The idea is to get us to think of the lowest quintile / decile households as being rich in potential, and as such, not really in poverty. Am I excessively sarcastic? Well, Nick Clegg calls it ‘long-term fairness’, and I don’t see how I could beat that for taking the piss. Others, including the IFS, have commented already. I’m confident this’ll be coming up regularly over the next couple of years, since the coalition clearly thinks it’s a powerful concept that they’ve got hold of, and the criticisms just don’t wash. After all, just look how successful they are, being exemplars of the ‘jam tomorrow’ ethos.

9 thoughts on “Frankly you are frightening people

  1. “we shouldn’t count such a provision into a calculation that aims to show progression or regression. We’ve already decided that it isn’t to be measured like that”

    That would be a more convincing argument if you could demonstrate that doctors, nurses and cleaners work for nothing, that builders donate the hospitals and equipment manufacturers send their goods out of the kindness of their hearts. Alas they all DO measure their goods and services in cash. Whether healthcare has ‘distributive justice’ (eugh) as its aim is neither here nor there (though I wouldn’t like to live in a country where that WAS the aim).

    It’s not actually unreasonable to include healthcare in a balance of what-you-pay-in vs what-you-get-out, once you’ve decided such a calculation is appropriate. I’m more concerned that the withdrawal of some universal benefits is likely to encourage that kind of ‘what’s in it for me/him/x ?’ thinking, which doesn’t bode well in the long term for a welfare state.

  2. “However, it’s far from obvious that a universal non-monetary provision such as health care has distributive justice as its aim.”

    And yet, Adam Oliver, at LSE Health and Social Care, London School of Economics, in a paper entitled “Increasing National Health Service funding: implications for welfare and justice.”, says “Two of the fundamental purposes for establishing the National Health Service (NHS) were to increase social welfare and improve social justice. Decisions to increase NHS investment should ideally be taken with these fundamental objectives in mind.”

  3. “I’m more concerned that the withdrawal of some universal benefits is likely to encourage that kind of ‘what’s in it for me/him/x ?’ thinking, which doesn’t bode well in the long term for a welfare state.”

    Strange, I found that the most heartening part. If people start actually wondering about how their tax money is spent that can only be a good thing surely? Unless of course you’re of the ilk that believes people should just hand over their money to their progressive betters to spend as Guardian readers see fit.

  4. Some good people at Left Foot Forward have a go at the distributive analysis:

    What’s wrong with the Treasury’s approach and claims? It makes little sense to express the impact of cuts to public services (Chart B3) as a proportion of the total amount of public services received by households (rather than as a proportion of household income).

    In our view this is conceptually flawed: you cannot add the value of public services received to someone’s household income in order to produce a grand measure of their standard of living, since the public services people receive are related to their underlying needs. It doesn’t follow that someone is better off because they are ill one year and so receive more NHS services than someone who is fit.

    If we want to know who is hit hardest – and who escapes most easily – in the real world we surely want to know instead what proportion of their income the lost services represent. Imagine a household has to pick up the cost of services lost out of its own pocket; what matters is how much this is relative to their household income. This will be a very real consideration to people facing, say, rises in bus or rail fares because of spending cuts reducing the public subsidy.

    Without being wrong, I’m not sure this gets it quite right either. What they say in the second paragraph as quoted above is fair enough: you shouldn’t assume that you can quantify totals of public services provided before and after the cuts (by quintiles) and say that people will be better off (or worse off) to the extent that they continue to receive those things. As the Left Foot Forward writers say, those services may include things we think are best allocated purely on the basis of need. But I don’t think you can go on to assume that a related calculation is automatically OK: that is, a calculation where you sum only the services that are to be cut (by quintiles) and assume that those who would have received them will feel obliged to pay for substitutes. Perhaps if the cut services were all to be things like bus subsidies you could assume this, but you’d want to check. Perhaps they have.

  5. “It doesn’t follow that someone is better off because they are ill one year and so receive more NHS services than someone who is fit.”

    What makes people better off is the *availability* of public service in time of need. With the NHS, both the fit person and the sick person are better off, since without the NHS they would both be obliged to pay personally for health insurance, ill or not.

    They are better off by precisely the amount that they don’t have to pay.

  6. CW wrote:
    > In the Tory future, it seems, privatisation
    > will be about private services – 16-18
    > schooling, say – that many people will have
    > to do without, simply because they won’t be
    > able to afford them.

    At any given time, there is a finite amount of wealth. Accordingly, a finite set of services and goods may be purchased. People prioritize; they buy that which is most important to them.

    If people cannot afford something which we could argue is pretty important, like schooling for their children, then they are pretty short on wealth. A question then to ask is : why?

    At that point I would point towards the State and the massive burden of taxation. Income tax, national insurance (employer and employee), council tax, VAT, petrol tax, etc.

    We can then say – well, the State uses that wealth to provide these services, like education; only now of course, we’re arguing the State no longer even does this – *but that it continues to tax as before*.

    The problem is not that the State does not provide education; the problem is the State over-taxes and provides an extremely poor return on that tax.

    The basic problem is the State provided services – the welfare State, the education State, the health State, the police State – provide appalling value for money. This is inevitable, since the people who use the service are not the people who directly pay for the service, so the encumbent provider is laughing – they can do what they like. There’s nothing their consumer can do.

    These services over time become larger and larger, more and more expensive, and less and less useful. In the end, it all falls apart – massive taxation, mininal services. Then even those minimal services can no longer be provided; but taxation continues.

    This is the inexorable end of socalism. *It doesn’t work.*

    I would also say, as an aside, what about individual choice? if I had kids, I sure as hell wouldn’t put them in public schooling. Why not reduce tax and let people choose the education their children receive? Better than that One State chooses for all.

  7. They are better off by precisely the amount that they don’t have to pay.

    Thinking in terms of insurance (in fact the Treasury report itself brings up insurance by way of pointing out that the richer already purchase more of it) has its own problems. What would the premiums be? If the insurance would be optional, not everyone would take out cover. How many? This affects the calculation. (If the insurance would be mandatory, on the other hand, this is tantamount to saying that the provision will continue, as opposed to being cut, only under a different tax regime, most likely something approaching a flat rate regime. And the coalition certainly doesn’t want to say that current provisions are equivalent to a flat rate from which everybody benefits equally; instead, they want to convince us that the poorer currently benefit more.)

    The other problem is that not every provision straightforwardly assimilates to an insurance model. Education, for instance. On the whole, people decide to have children, who then need educating. I don’t see how you could easily come up with an insurance model for this.

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  9. Hi Charlie,

    Do the poor benefit more? Do they use proportionally more public transport? More libraries? Healthcare? I don’t know. Maybe they do. It doesn’t seem an unreasonable hypothesis, at first sight.

    In the case of healthcare, for example, the poor might benefit more than the rich insofar as they might suffer from worse health. Perhaps this tends to be true, but is hardly a point a politician would wish to make, I am sure.

    I agree that there is probably not a good insurance model for education. Education is in part, an investment in the future prosperity of a nation. It has an immediate benefit to the parents of those being educated, and later on, to those who have then finished being educated. But there is also a benefit to the childless that is realised even later, in the nation’s general prosperity (in the form of improved social services, perhaps?)

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