£6.2 billion was returned to the Treasury in 2002-3 in unclaimed benefits.
Does that mean claimants didn’t need the money?
The Labour government is in the process of introducing new measures through the inclusion in the social security system of tax credits which more than likely will not only deter workers from claiming their full entitlement to benefits, but not claim any at all.
Gordon Brown and his team in the Treasury are trying their hardest to put over the image that these new measures are a direct assault on child poverty when in fact all they are doing is keeping the annual budget for social security stable around the figure of £100 billion, knowing full well that once it starts going over this amount his future career in politics will be on the line. So despite the fact that politicians go through the pretence of improving certain features of social security, it is nothing else than shadow boxing around the issue of child poverty. For there’s no intention, so far as this government (or any other whatever its political hue) is concerned, of doling out any new money.
By the time the full package of the current social security overhaul is completed a new means of administering and calculating entitlement to social security benefits will be in place, where the emphasis will be on the introduction of further means-tested benefits rather than on non-means-tested benefits. Means-tested benefits, besides being far more costly to administer than non-means-tested ones, are subject to bureaucratic hold-ups where the claimant suffers the consequences of waiting anything from 6 to 13 weeks for their claim to be processed, leading to a crisis period when you’re unsure if your claim will be successful or not.
Ever since its introduction in 1948 the social security system and in particular its means-tested benefits has been notoriously associated with compulsion, complexity and confusion and it’s likely that the outcome of these changes will mean more of the same. Indeed, for many claimants the benefits system is in total and permanent disarray where the possibility of obtaining a ‘fair shake’ in an effort to maximize their full entitlement to benefits depends on their individual skills in negotiating a legal minefield with sanity intact.
So it is no surprise that the bureaucratic nightmare associated with social security claims has resulted in a significant increase in the percentage of workers finding it is not worth the hassle. For example, in Rhondda Cynon Taf alone, it is estimated by the census that there are some 6,000 individuals who despite being entitled to some kind of social security do not claim any whatsoever. Nationally, there are also estimates of approximately 800,000 pensioners who fail to claim their full entitlement to a various array of benefits. These are just some of the many reasons why £6.2 billion was returned to the Treasury in 2002-3 in unclaimed benefits. But these figures also suggest that, when considered as a whole, the barriers of compulsion, complexity and confusion are inherent to the social security system. As such they are proving to be effective bureaucratic deterrents for claimants, thus keeping the burden on the capitalist class of meeting the cost of maintenance and reproduction of the non-working section of the working class below what they have estimated. These estimates are in any event is based on a growing domestic economy and, when this is no longer the case, historically social security is hit the first and hardest.
The introduction of tax credits also includes major changes in the administration and payment of social security, and especially who is legally responsible for any mistakes that are made by either the claimants or bureaucrats. Whilst both benefits and tax credits are part and parcel of the social security system, currently the Department of Works and Pensions (DWP) are responsible for the paper chase and payment of benefits, and only responsible for the administration of tax credits, whilst the Inland Revenue is solely responsible for the payment of tax credits. Eventually, it is planned that the DWP will deal only with the administration of benefits and tax credits and the Inland Revenue with the payments of all social security and tax credits. Obviously, during this transition period there is a considerable amount of bureaucratic and legal overlap between the DWP and the Inland Revenue, resulting in further increases in the miscalculation of benefits.
Under the previous Department of Social Security, any overpayments were the responsibility of the local office to correct and if the overpayment was through a miscalculation – made by them – it effectively meant that under the law, as it then stood; the claimant was not compelled to make a repayment. Although this obvious loophole must have cost millions in lost revenue, it most certainly left many a claimant with a knowing smile every giro day. For under the previous law the claimant could not be punished or held responsible for someone else’s mistake. The change in the law now means that the claimant is held responsible for notifying the DWP of the miscalculation even when it’s the department’s mistake. But even when the miscalculation is corrected, the problems for the claimants – especially those on Working Tax Credit (WTC) – don’t end there for the overpayments in tax credits can go on being paid until the end of the tax year. This means in effect that WTC claimants in particular can face a comparative mountain of debt, whether they are responsible for it or not.
But the problems for the 6 million claimants of WTC still don’t stop there. On its introduction Gordon Brown hailed it as a radical step forward in providing a stepping-stone out of the dependency and poverty trap by granting those on low wages a top-up, dependent on their circumstances. What he didn’t say was that when the claimant actually took that step to increase their financial prospects in the labour market they enter a new tax bracket, which is then calculated over the whole year and also puts them outside the scope of WTC. Which meant for the former WTC claimant who followed Brown’s advice, the Inland Revenue could in effect penalize them to the tune of £2000 to £3000 in backdated overpayments of WTC, thus wiping out any corresponding increases in wages.
For the WTC claimant it means, if they don’t want to be faced with a hefty demand from the Inland Revenue, to fine-tune any changes in the job market so that their income corresponds to the yearly tax demand. Presently, approximately 2 million claimants, or around 33 percent of the total claimants for WTC, are facing the prospect of paying these repayments within the next twelve months. If they fail to meet this deadline, which undoubtedly many of them will, they face being saddled with a further bill for the interest on the amount still owing – which is usually over the basic rate of interest charged by the banks. Gordon Brown, the CEO of Financial Operations GB plc, with a client base of 2 million, has probably created the biggest loan-shark business in Europe, feeding off the poverty of those workers who are trying their hardest to improve their means of living.