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Disabled people are sanctioned more than other people, according to research

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A study has found that people with disabilities who claim social security support are 26-53 per cent more likely to be sanctioned than people who are not disabled. According to the research, the main reason behind this is a “culture of disbelief” among jobcentre staff, who fail to take sufficient account of the impact of people’s disabilities on their capacity to meet strict welfare conditionality criteria.

This implies that welfare conditionality has an inbuilt discrimination, as it disproportionately affects people according to their characteristics.

Such discrimination violates the Equality Act 2010:

Ahead of the release of a Demos report by Ben Baumberg Geiger on the Work Capability Assessment on Tuesday, the headline findings on benefits conditionality were featured today in the Observer: ‘More than a million benefit sanctions imposed on disabled people since 2010′.

Ben is a Senior Lecturer in Sociology and Social Policy at the School of Social Policy, Sociology and Social Research (SSPSSR) at the University of Kent. The figures on benefits sanctions can be found in Ben’s 2017 paper ‘Benefits conditionality for disabled people: stylised facts from a review of international evidence and practice’ published (open access) here (p109-111), and the appendices that provide the source for the UK benefit sanctions data is here.

The article in the Guardian also briefly mentions new polling on the public’s attitudes to sanctioning disabled benefit claimants. However, full details of this will be available in the report to be released on Tuesday. 

The recent Work and Pensions Committee inquiry into Employment and Support Allowance (ESA) and Personal Independence Payment (PIP) assessments highlights how disability benefits are not a ‘safe place’ for disabled people, despite ministers using language that implies it is. Warnings from Iain Duncan Smith about “up to a million people ‘languishing’ on sickness benefits, who could be ‘put back to work’ with the right ‘help’, or descriptions in policy papers of disabled people being “parked” on benefits mislead the public.

It is through such political definitions that groups become restricted, face boundaries, become oppressed. Over the last seven years, disabled people have somehow lost the right to self-determination and to express our own group identity. The Government have redefined us and radically rewritten the terms and conditions of the social contract more generally, removing state obligations and duties towards citizens. The Conservative settlement – a fusion of economic neoliberalism with state and social authoritarianism – openly demonstrates an aversion to any notion of social equality and justice.  

Sanctions – the cutting or withholding of lifeline benefits – are applied as a punishment when citizens infringe the conditions of their welfare support by, say, through missing an appointment, being late or failing to apply for enough jobs.

The sanctions regime has been championed by the Government as a means of imposing ‘behavioural change’ on claimants, as they believe that people are unemployed because they need ‘incentives to work’. However, rather than addressing low pay, insecure employment and poor working conditions, the Government has instead decided that unemployed people and welfare itself are the problem: welfare is seen as a ‘perverse incentive’ that prevents people from looking for employment.

Sanctions and wider welfare conditionality were introduced to significantly reduce the basic security and material comfort of people needing social security, in order to push them back into the labour market. This behaviourist turn has transformed a system that was designed to ensure that all citizens could meet their basic survival needs into one that punishes people for non-compliance with politically imposed conditionality criteria, comprised of what the Conservatives regard as acceptable ‘job seeking behaviours’. In this way, Conservatives claim that people are more likely to gain employment. 

However, unsurprisingly most of the experts consulted as part of the Demos project have concluded that welfare conditionality has little or no effect on improving employment  for disabled people, often having a negative impact to the point where disabled people were even less likely to find employment than if they hadn’t been subjected to state impositions. There was also widespread anecdotal evidence that the threat of sanctions can lead to anxiety and have a wider impact on peoples’ health.

Polly Mackenzie, director of Demos, said it was now clear that the benefits system isn’t working for disabled people: “Conditionality is important in any benefits system, but when disabled people are so much more likely to be sanctioned, something is going wrong. Jobcentre advisers and capability assessors too often have a culture of disbelief about disability, especially mental illness, that leads them to sanction claimants who genuinely could not do the job they are being bullied into applying for.

“We need to think again about how we assess work capability. Employers also need to be better at adapting to disabled people’s needs so that more jobs can be done by people with fluctuating conditions.”

A damning research report by the National Audit Office (NAO) in 2016, also found that there was no evidence that sanctions were working. It also said there was a failure to measure whether money was being saved, and that the application of sanctions varied from one jobcentre to another. 

The 2017 Demos study uncovered that more than 900,000 JSA claimants who report a disability have been sanctioned since May 2010. People who claim ESA and have been placed in a work-related activity group – which requires them to attend jobcentre interviews and complete work-related activities – can also be sanctioned. The research found that more than 110,000 ESA sanctions have been applied since May 2010.

Mark Atkinson, chief executive at disability charity Scope, said: “Punitive sanctions can be extremely harmful to disabled people, who already face the financial penalty of higher living costs. There is no clear evidence that cutting disabled people’s benefits supports them to get into and stay in work.

“Sanctions are likely to cause unnecessary stress, pushing the very people that the government aims to support into work further away from the jobs market.”

The Work Capability Assessment (WCA) was introduced in part to bolster neoliberal imperatives related to the supply of labour. The political focus on these economic concerns fails to  prioritise the wellbeing of disabled people. Another reason for the introduction of the WCA was to cut costs. This intention was evident in the ‘scrounger’ and fraud’ narrative that seeped into political and media discourse. Disability welfare is portrayed as ‘unsustainable’, with the Government claiming that resources need to be ‘targeted’ at those ‘most in need’.

However, it is evident from the recent Work and Pensions inquiry into ESA and PIP assessments is that many of those most in need are being catastrophically let down by the current system.

The Guardian reports: Polling for the Demos project found that while the public often supported the imposition of sanctions for disabled people, they did not back the way in which they were applied in practice.

A majority thought that disabled people’s benefits should be cut if they do not take a job they can do, but they were less supportive of sanctioning for minor non-compliance, such as sometimes turning up late for meetings. Even those who supported sanctions preferred a much less punitive approach than the government currently imposes.

The sanctions are taking place in a context where the number of unemployed disabled people being supported with specialist help to find work has actually been halved. according to the companies running the government’s Health and Work programme.

Kirsty McHugh, chief executive of the Employment Related Services Association (Ersa), which represents the employment support sector, said: “The size of the new Work and Health Programme means only one in eight disabled people who want to work will have specialist help to do so. As a society, we have an obligation to ensure appropriate support is available and the report shows that we are in danger of failing disabled people and their families.” 

The analysis shows that there is to be a cut in funding from £750m in 2013-14 to less than £130m in 2017. Ersa says that the cut in funding will severely hamper the Government in its goal of securing work for more than 1.2 million more people with disabilities. It seems that the Government is relying on punitive and coercive measures such as the threat and use of sanctions, to achieve its goal. Disabled people are not permitted to have goals that don’t align with state-defined neoliberal ones. 

The collaborative Demos researchers recommend a reduction in the use of so-called “benefit conditionality” for disabled people and a strengthening of the safeguards to ensure disabled people are not unfairly punished. However, despite the growing numbers of campaigners, charity groups and academic researchers calling for the Government to introduce less aggressive sanctions, the Government remains disinclined to do so.

The theories of ‘behaviour change’ underpinning conditionality have been questioned by commentators, particularly with respect to the assumed ‘rationality’ of citzens’ responses to financial sanctions.

Concerns have been raised that welfare conditionality leads to a range of unintended effects, including distancing people from support, causing hardship and even destitution. There is also ample evidence that those social groups with complex needs, such as disabled people, young people with chaotic lifestyles and homeless people have been disproportionately affected by the intensification of welfare conditionality under successive Conservative governments. Research implies that there are differential impacts based on citizens’ characteristics. 

This observation is also consistent with international evidence, especially from the US, that the most potentially vulnerable claimants are at greatest disadvantage within highly conditional social security systems, for example, those with mental health problems, those with long term illnesses and disabled people more generally.

Welfare ensures that people are able to meet their basic needs. Welfare covers the costs of food, fuel and shelter. It’s a safeguard to prevent absolute poverty. That was its original purpose when it was introduced. It is difficult to imagine how removing the means that people have of meeting their basic survival needs can possibly motivate them to find work. Comprehensive historical research shows that when people cannot meet their basic biological needs, their pressing cognitive priority is simply survival.

In other words, when people are hungry and facing destitution, addressing those fundamental needs becomes a significant barrier to addressing their psychosocial needs such as seeking employment.

For disabled people, who already face additional barriers to addressing their  fundamental needs.  Welfare sanctions for disabled people has created injustices, caused fear and inflicted considerable distress and harm on disabled people.

 


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Frank Field’s letter regarding the DWP’s non-existent/existent data: a Schrödinger kind of paradox

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The data is only real when someone looks for it

Following on from the article yesterday, (DWP spent £100m on disability benefit appeals over 2 year period), I have copied Frank Field’s letter to Esther McVey below, which highlights the discrepancy between what McVey informed the Work and Pensions Committee when they asked her to provide evidence regarding the costs of disability benefit appeals and mandatory reconsiderations in an inquiry into disability benefits, and the details provided, following a timely Freedom of Information request. 

Key facts

  • Department for Work and Pensions (DWP) spent £108.1 million on Personal Independent Payment (PIP) and Employment and Support Allowance (ESA) reviews and appeals since October 2015
  • Ministry of Justice (MoJ) spent £103.1 million on social security and child support tribunals in 2016/17
  • Around two-thirds of PIP and ESA tribunals have been won by claimants this year
  • More than 300,000 PIP and ESA decisions have been changed at review or appeal since October 2015

Figures obtained by the Press Association through a Freedom of Information (FoI) request show that the Department for Work and Pensions (DWP) has spent £108.1 million on direct staffing costs for ESA and PIP appeals since October 2015.  The cost covers mandatory reconsiderations, an internal DWP review, and appeals to tribunals run by HM Courts and Tribunals Service. 

This staggering amount of money is being spent on the administrative costs of a Department fighting to uphold the outcomes of its own incompetent and deeply flawed decision-making. This is unacceptably leaving thousands of ill and disabled people having to fight to receive lifeline support to which, as the high proportion of successful appeal outcomes informs us, they are legally entitled. Furthermore, when provided with a second chance to remedy incompetent decision-making at mandatory review, the Department has persistently continued to uphold the original flawed decision in many cases. 

Since October 2015, 87,500 PIP claimants had their decision changed at mandatory review, while a further 91,587 claimants went on to win their appeals at tribunal. In the first six months of 2017/18 some 66% of 42,741 PIP appeals went in the claimant’s favour, highlighting that both the original decision-making process and mandatory review are failing to effectively ensure eligibility for support is fairly and accurately assessed.

The figures for ESA since October 2015 show 47,000 people had decisions revised at mandatory reconsideration and 82,219 appeals went in the favour of those let down by the current system of assessment and DWP decsion-making.

It’s as if the system is weighted to refuse as many people as possible their lifeline support.

So far in 2017/18, 68% of 35,452 ESA appeals have gone in favour of the claimant.

Conservative peer Baroness Altmann, a former minister at the DWP, said the money could be spent on benefits for those who need them, rather than on the costs of fighting their claims.

“Disability benefits need an overhaul and, of course, we must not let people make bogus claims, but the extent of the appeals we are seeing clearly indicates that something is seriously wrong with the system,” she said.

Figures released to the select committee’s inquiry show further costs to taxpayers.

The Ministry of Justice says it spent £103.1 million on social security and child support tribunals in 2016/17, up from £92.6 million the year before and £87.4 million in 2014/15.

Around 190,000 cases were cleared with or without a hearing in 2016/17, the Ministry told the committee.

The select committee is due to publish the results of its inquiry into PIP and ESA on Wednesday.

Chair Frank Field has written to Esther McVey, the Work and Pensions Secretary, in the wake of the figures to question why MPs were not given such information.

DWP gave the committee the average costs of a mandatory reconsideration and appeal for PIP and ESA.

However, Field, a Labour MP, said the committee was unable to work out the full cost of the appeals process.

This was because it was told information on PIP appeals was not available on whether they were appeals from new claimants or those being reassessed, which have different costs.

The information released to the Press Association was broken down into costs for new claims and those undergoing reassessments.

Here is Field’s letter:

letter head

From the Chair
                                                                                                                            9 February 2018
Rt Hon Esther McVey
Secretary of State
Department for Work and Pensions

PIP appeal data

During our inquiry on PIP and ESA assessments, your Department kindly provided to us estimated unit costs of MRs and Appeals. This indicated that different costs are attached to PIP appeals depending on whether they relate to new or reassessed claims. 

Seeking to understand the financial implications of appeals for the Department, Committee staff inquired on 30 January: 

Of the 170,000 PIP appeals since 2013, how many were for new claims and how many were reassessments?  

We were duly informed:

The information on the number of PIP appeals is from HMCTS published statistics and this information is not available from HMCTS for new claims and reassessments separately.    

We were therefore unable to estimate the full cost of appeals to your Department, although the Ministry of Justice informed us that in 2016/17 its appeals expenditure was £103 million. 1

It was with some surprise, therefore, that we today received data released in response to an FOI request. This provided estimated costs per month spent on PIP appeals—broken down by new and reassessed claims.

You will be aware that we are shortly due to publish our report. That this data was provided in response to an FOI request, but not for our Report, is doubly regrettable since the key theme of our report is the need to introduce much greater trust and transparency into the PIP and ESA systems.

Might you please explain how this occurred?


1 Cost of Social Security and Child Support appeals, of which the majority relate to PIP/ESA.Franks sig

 

 

 

 

 

 


Related

A critique of the government’s claimant satisfaction survey

DWP spent £100m on disability benefit appeals over 2 year period

Thousands of disability assessments deemed ‘unacceptable’ under the government’s own quality control scheme

I don’t make any money from my work. But you can help if you like by making a donation to help me continue to research and write informative, insightful and independent articles, and to provide support to others. The smallest amount is much appreciated – thank you.
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Free speech, safe spaces and hypocrisy

I completely agree with this post

Paul Bernal's Blog

The unedifying ‘scuffle’ at Jacob Rees-Mogg’s appearance at the University of the West of England has provoked a great deal of reaction – some of it distinctly over-the-top. Precisely what happened, who started the fight and why, remains a little unclear – and is not the topic of this post. It is Theresa May’s reaction, to suggest a new law to protect MPs against intimidation, that is more interesting for those of us who are interested in freedom of speech – not only in its practice but its purpose.

The need for a new law is at best contentious – there is already plenty of law to deal with threats and intimidation, public order law, law to protect against harassment and much more – and it is entirely possible that nothing will materialise from Theresa May’s pronouncement other than a few headlines in the Daily Mail. The reasons behind the…

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Neoliberalism and corruption: hidden in plain sight

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BHS was subject to “systematic plunder” by former owners and corporate raiders, Sir Philip Green, Dominic Chappell and their respective “hangers-on”, according to MPs. This led to the collapse of a company that once employed 11,000 people. There was little evidence found to support the reputation for retail business acumen for which Green was rewarded with a knighthood. 

Green had “systematically extracted hundreds of millions of pounds from BHS, paying very little tax and fantastically enriching himself and his family, leaving the company and its pension fund weakened to the point of the inevitable collapse of both.”

Green was found to hold prime responsibility for the pensions black hole after years of refusing to provide sufficient funding, despite pleas from the fund’s independent trustees.

A damning report  published in 2016, after weeks of evidence from former executives and advisers, says the “tragedy” of BHS was the “unacceptable face of capitalism” and raises questions about how the governance of private companies and their pension funds should be regulated. 

Ahead of a joint Business and Work and Pensions Select Committee meeting, Green called the inquiry “biased”, and stated that he “therefore required [its chair, Frank Field] to resign”. Field pointed out that the size of the pensions deficit is a fact, not a matter of opinion, and that Parliament and not Green decides who chairs Committees. 

Referring to the conduct of Green, Angela Eagle, the shadow business secretary, said: “In this situation it appears this owner extracted hundreds of millions of pounds from the business and walked away to his favourite tax haven, leaving the Pension Protection Scheme to pick up the bill.” 

The wider business culture illustrated by BHS’s collapse – ruinous loans from multinational financiers, the bullying of suppliers, complacency and quiescence from highly paid company directors such as Lord Grabiner – has gone largely unaddressed.

The wider framework of corruption

Earlier this month, faced with amendments in the House of Lords to its post-Brexit anti-money laundering Bill, the UK government continued to block and delay vital reforms to address the UK’s role in global corruption and money laundering. 

Another amendment, also backed by Lords, would require the Overseas Territories – which include some of the most notorious UK’s tax havens – to publicly reveal the true owners of the companies registered there. Revealing these true, beneficial owners, would tackle the secrecy that currently shelters and enables the criminal and corrupt.

The UK has already introduced a register of the beneficial owners of UK companies, and in December last year all EU countries agreed to do so too. This amendment would bring the Overseas Territories with financial centres, places like the British Virgin Islands and Cayman Islands, into line with the UK and the rest of the EU.

Rather than backing the amendment, which would bring these tax havens up to what David Cameron once described as the “gold standard”, the government yet again sought to block proposals to combat the UK tax haven’s central role in global corruption and money laundering.

Corruption is “the abuse of entrusted power for private gain.” Many people assume that corruption is something that happens mostly in developing democracies. 

McMafia is multi-million pound series by the BBC, based on the book of the same name by Misha Glenny, who is an Advisor to Global Witness. The show focuses on corruption as the common thread linking the corporate and the criminal.

It explores how lawyers, politicians and the intelligence agencies join forces with money launderers and international crime rings to move funds around the world from London.  Although the content is fictionalised and not based on any particular individual from real life, the themes it draws on are very real. The corrupt activities it seeks to expose is happening –  in the UK, as well as right across the world – and it is destroying the lives of millions of people.

For those of you who don’t believe that the UK has a problem with corruption, ask yourself this: Would there still be commercial banking sector in this country if it weren’t for corruption? Remember the high-profile scandals: Libor rigging, insider trading, mis-sold pensions, endowment mortgage fraud, the payment protection insurance scams, and so on. Then ask yourself whether conning and squeezing the public is simply an aberration or is it in fact an established and embedded business model. 

Where are the senior figures whose established practices, high risk-taking behaviours contributed significantly to triggering the global financial crisis – none of them have been held criminally liable or disqualified for reckless practices. There were no laws in place to regulate and restrain them. Cameron nonetheless continued with the ‘bonfire of red tape’, seeing regulation as a hindrance to “getting things done”. I wonder what sort of “things” he had in mind when he decided that public consultations, judicial review and impact assessments were yet more obstacles for “getting things done”. 

The UK’s unreformed political funding system permits the very rich to buy the success of political parties, and also, there’s the revolving door that permits vulture capitalists like Adrian Beecroft and corporate executives to draft the laws and re-write policies that affect their profits. There are politicians with vested interests in privatisation, some who find additional “outside” work that compromises their role as representatives of the public and presents conflicts with democracy.

Then there are the small matters of the Panama and Paradise Papers. The praetorian and mercenary outsourced delivery of the NHS, welfare, children and prison services by vulture capitalist private contractors, some of whom also administer controversial government policy, while shielding the government from scrutiny for the consequences.

There’s the phone-hacking scandal and the media bribing the police, there’s the price-fixing by energy companies, the Libor rigging scandal, and many other such cases.

Barclays Bank, JP Morgan, Swiss bank UBS, Royal Bank of Scotland and Deutsche Bank have all been fined by financial regulators for rigging practices, which are seen as market manipulation and corrosive to trust in the financial markets. 

Corruption has in fact become an everyday part of British national life, it is systemic within leading institutions.

A former Conservative minister ran HSBC while it was engaged in systematic tax evasion, money laundering for drugs gangs and the provision of services to Bangladeshi and Saudi banks linked to the financing of terrorists. However, rather than prosecuting the bank, the head of the UK’s tax office went to work for it when he retired.

We tend to see corruption as isolated incidents of pathology, rather than an endemic disease of the model of socioeconomic organisation.

Neoliberalism: the institutionalisation of self interest and normalisation of private gains at public expense

Neoliberalism is the ‘doctrine that market exchange is an ethic in itself, capable of acting as a guide for all human action’. (David Harvey, 2005.) A key set of ideas that fuelled the New Right’s neoliberal project are those of public choice theory. Various versions of public choice theory portray the whole idea of public service as itself corrupt. Public choice economists each make the same assumption – that although people acting in the political marketplace have some concern for others, their main motive, whether they are voters, politicians, lobbyists, or bureaucrats, is self-interest. 

A public sector that aims to serve the general public interest and not serve the private interests of individuals is problematic for neoliberal theorists, and among them are the radical libertarian right, who strongly support private property rights and defend market distribution of natural resources and private property. 

James Buchanan, (see: James McGill Buchanan. The man who served the plutocrats, wrecked countries and brought victory to the radical right ), one of the key theorists of public choice economics, discusses this issue specifically:

“There’s certainly no measurable concept that’s meaningful that could be called the public interest, because how do you weigh different interest of different groups and what they can get out of it? The public interest as a politician thinks it does not mean it exists. It’s what he thinks is good for the country. And if he’d come out say that that’s one thing, but behind this hypocrisy of calling something the public interest as if it exists. (See: The Trap (1/3): Fuck You Buddy! by Adam Curtis).

Within the neoliberal idiom, there is a fundamental inability to consider collective interests. Buchanan says: 

“We’re safer if we have politicians who are a bit self-interested and greedy than if we have these [collectivist] zealots. The greatest danger of course is the zealot who thinks that he knows best or she knows best for the rest of us. As opposed to being for sale, so to speak.”

So the theory of public choice runs like this: bureaucrats are inevitably self-interested, but if they deviate towards an ideology of “public service” they are not self-interested enough. Public choice theory attempts to discredit all conceptions of the public or general interest and a central strategy seems to be the introduction of mechanisms promoting institutional corruption.

Furthermore, there is no direct political reward for fighting powerful interest groups in order to confer benefits on a public that may not be aware of the benefits or of who conferred them. The incentives for good political management in the public interest are therefore seen as weak. In contrast, interest groups are organised by people with very strong gains to be made from government action. They provide politicians with donations, campaign funds and campaigners. In return they receive the attention of politicians and very often gain support for their policy goals.

So because legislators have the power to tax and to extract resources in other coercive ways, and because it is assumed that voters monitor their behavior poorly, legislators behave in ways that are costly to citizens. More recently, there has been a growing public awareness, however, that ordinary citizens are paying a pro-rata share of a variety of catastrophically inefficient projects –  the political justification for austerity, for example, is one consequence of a deregulated finance sector and subsequent reckless behaviours of various self-interested actors – that clearly do not benefit more than a small proportion of the population. 

Public choice economics has shaped the neoliberal reforms to the civil service and public institutions, resulting in the slippery sloped internal market in the NHS, the dismantling of the welfare state and outsourcing of many other state functions, student fees in higher education, and the deregulation, bonfire-of-the-red-tape approach of the pro-market regulatory agencies of many other areas of public life, including the financial sector.

Sociologist David Miller, in Neoliberalism, Politics and Institutional Corruption: Against the ‘Institutional Malaise Hypothesis, says: The process of opening the machinery of government to private interests required the influx of new ideas and practical ways of putting them into practice. As a result the neoliberal period saw the rise of a whole range of new policy intermediaries including management consultants, lobbyists, public relations advisers and think tanks. All work mainly for corporate interests, all have had material impacts on neoliberal reform, and all have as part of the same process expanded massively as a result.

Lobbying and PR are omnipresent policy intermediaries. The PR industry grew, initially on the back of privatisation contracts. Lobbying and PR firms and their principals (mostly corporate actors) aim to dominate civil society, science, the media, politics and policy.

“[…] In the United Kingdom, the lobbying industry has – despite recurring controversy about its activities – been largely protected by government, which has refused to adequately require transparency from lobbyists and other influence peddlers.”

Right wing libertarians have a profound dislike of welfare states, they don’t like to pay tax and generally loathe public services, prioritising private property rights above all else. Individual liberty and personal responsibility are their mantras. However, they do like the idea of enforced hierarchical power structures. David Cameron identified himself as a libertarian paternalist, implying a change in direction for his party. He also claimed the brand of red toryism, though this interpretation of ‘compassionate Conservatism’ was a rhetoric style only, rather than a change in policy direction. That has remained staunchly neoliberal. 

Noam Chomsky has criticised neoliberal ideology as being akin to “corporate fascism” because all methods of public control are removed from the economy, leaving it solely in the hands of authoritarian corporations. Chomsky has also argued that the more radical forms of right-libertarianism are entirely theorectical and could never function in reality due to business’ reliance on government infrastructures and subsidies. Yet many right-libertarians claim big business is “a great victim of the state”, and with a straight face. 

Neoliberalism can be seen as a system of reforms that directly enables corruption and the unbridled pursuit of private rather that public interests. Neoliberalism also hides corruption in plain view, by the use of divisive narratives that justify greed, wealth and privilege on the one hand, and inequality, growing poverty based on flimsy and simplistic notions of meritocracy –  incongruent notions of “deserving” and “undeserving” lie at the heart of these narratives, along with prescribed, discrete, class-differentiated systems of “incentives” embedded in policies that ensure wealthy people are rewarded and poor people are punished have become normalised.

In David Milner’s words “corruption was deliberately introduced to serve particular (class) interests.”

Last year, The EU announced an investigation into a British government scheme that provides a loophole to help multinational companies pay less tax. The inquiry centres on a change to the UK’s “controlled foreign company” rules announced by the then chancellor, George Osborne, in 2011. The new rules were described by one expert at the time as a huge change, which meant companies could assume they were exempt from the anti-avoidance rules unless specifically caught

The rule change, which came into effect in 2013, means a multinational company resident in the UK can lower its tax bill by shifting some taxable income to an offshore corporation, known as a “controlled foreign company”. CFCs are offshore subsidiaries that multinationals use to move capital around their global operations.

Although CFCs are not illegal, the European commission believes that the UK breaks EU competition rules, by giving an unfair advantage to multinationals, compared with British companies without foreign subsidiaries. HMRC revealed last year that multinationals avoided paying £5.8bn in taxes in 2016, some 50% more than government forecasts. This figure, which was reported by the Financial Times, does not include treasury losses from changes to the CFC rules that are now being investigated by the European commission.

Hidden in plain sight

Recent research has uncovered around 85,000 properties across the UK that are “secretly owned” by companies incorporated in UK tax havens, including more than 10,000 alone in the London Borough of Westminster.

Campaigners are calling for a property register aimed at lifting the shroud of secrecy, to be put in place sooner than the date the Government has earmarked for its implementation, which isn’t until 2021.

Transparency International is a civil society organisation leading the fight against political corruption. In November last year, they published a report – Hiding in Plain Sight. It outlines Transparency International UK’s analysis of 52 cases of global corruption – amounting to £80 billion – and found hundreds of UK registered shell companies at the heart of these scandals. At the same time the UK’s system to prevent this abuse is failing.

The recent research found 766 companies registered in the UK that have been directly involved in laundering stolen money out of at least 13 countries. These companies are used as ‘layers’ to hide money that would otherwise appear suspicious, and have the added advantage of providing a respectability uniquely associated with being registered in the UK.

Transparency UK’s evidence has indicated that this is no accident. The UK is home to a network of Trust and Companies Service Providers (TCSP’s) that operate much like Appleby and Mossack Fonseca – companies at the heart of the Paradise and Panama Papers – who create these companies on behalf of their clients.

TCSPs register these companies to UK addresses, which are often nothing more than mailboxes. This has created ‘company factories’, where thousands of companies can be registered to unoccupied buildings with little to suggest any meaningful business occurs. We found half of the 766 questionable companies we identified were registered to only 8 separate addresses – in one instance a run-down building, next to a bank on Potters Bar High Street.

The recent Manafort indictment in the US also revealed that one of the companies alleged by the FBI to have been used to launder money was registered to a house in North London.

Duncan Hames, Director of Policy Transparency International UK, said:

“As fingers point to jurisdictions like Panama and Bermuda, it shames the UK that companies are being set up under our noses, with the sole purpose of laundering illicit wealth; money very often stolen from some of the poorest populations in the world, starving them of vital resources.”

“The UK is home to industrious company factories from which unscrupulous individuals provide the corrupt with the means to hide their ill-gotten gains. The UK should recognise it has its own Applebys and Mossack Fonsecas here on our doorstep.”

Weak Defences

With the UK as a destination of choice for those seeking to hide illicit wealth, the UK’s own defence mechanisms have proven to be woefully inadequate. Just six staff in Companies House are charged with policing 4 million companies, TCSPs have a poor track record of identifying and reporting money laundering with only 77 of the 400,000 suspicious activity reports filed last year coming from this sector.

Meanwhile TCSP’s can set up companies in the UK even if they are not registered or based here. This means they avoid being subject to UK regulation, and instead are bound by local laws, which are often unenforced or so weak as to be ineffective.

Duncan Hames said:

“Since the Panama Papers the UK has made some progress in targeting corrupt money but in a complicated and global system it’s often the case that as one area of weakness is addressed, more are discovered by those intent on channelling dirty money. Approaching Brexit it’s essential that the UK sends a clear signal that it won’t be a laundromat for corrupt individuals from around the world. It could start by ensuring it properly resources those who are meant to be our first line of defence, such as Companies House.”

Key Stats:

  •  766 UK companies involved in 52 corruption and money laundering cases worth up to £80 billion
    • Those 766 companies could have cost a total of just £15,000 to set up
    • One quarter of these are still active today
    • Half of these registered to just 8 different addresses
  • Just 6 staff in Companies House police the integrity of some 4 million UK companies
  • TCSP’s filed just 77 of the 400,000 suspicious activity reports last year, which are designed to flag possible money laundering.

Key recommendations:

  • Prohibit non-UK registered agents from setting up companies to avoid TCSPs with no presence here, circumventing UK anti-money laundering checks
  • Use financial incentives to encourage UK companies to hold a UK bank account, discouraging the use of offshore bank accounts
  • Provide Companies House with sufficient resources to identify suspicious activity
  • UK Government should seek to apply a “failure to prevent” approach to money-laundering, meaning TCSP’s are held more accountable for forming companies that are used to launder money
  • Overhaul the UK’s anti-money laundering system.

Existing legislation

The main legislation governing bribery and corruption in the UK is Labour’s Bribery Act, 2010. 

Initially scheduled to come into force in April 2010, this was changed to 1 July 2011, having been delayed twice following objections from, among others, the Confederation of British Industry. The Act repeals all previous statutory and common law provisions in relation to bribery, instead replacing them with the crimes of bribery, being bribed, the bribery of foreign public officials, and the failure of a commercial organisation to prevent bribery on its behalf.

The penalties for committing a crime under the Act are a maximum of 10 years’ imprisonment, along with an unlimited fine, and the potential for the confiscation of property under the Proceeds of Crime Act 2002, as well as the disqualification of directors under the Company Directors Disqualification Act 1986.

The Act has a near-universal jurisdiction, allowing for the prosecution of an individual or company with links to the United Kingdom, regardless of where the crime occurred. It was originally described as “the toughest anti-corruption legislation in the world” , however, some have raised concerns that the Act’s provisions may criminalise behaviour that is acceptable in the global market, and puts British business at a competitive disadvantage. 

Guidance on the Bribery Act, released by the Ministry of Justice, included wording that could exclude some foreign companies listed in London from prosecution. Foreign companies that have subsidiaries in the UK could also escape the Act’s power.

One of the key aspects of the Bribery Act was its ability to catch both UK and foreign companies engaging in bribery anywhere in the world. The condition for the act to apply to foreign companies was that they had a business presence in the UK. Through the guidance on the Act the Ministry of Justice created what many see as a loophole that could insulate some foreign companies from prosecution.

In April 2016, the UK government published its action plan on anti-money laundering and counter-terrorist finance, setting out steps to address such risks and resulting in the commissioning of the Criminal Finances Act 2017 (the “Act”), which received royal assent on 27 April 2017. The Act came into force on 30 September 2017.

However, despite it being widely anticipated that a new offence would be created – of corporate failure to prevent economic crime (which would have incorporated the failure to prevent fraud, money laundering and false accounting) – disappointingly, the Act has not included this offence. It does, however, include two new corporate criminal offences for the failure to prevent the facilitation of tax evasion, whether in the UK (Section 45) or abroad (Section 46). 

The Deferred Prosecution Agreement waters down the Bribery Act

In 2015, a landmark decision – the first Deferred Prosecution Agreement (DPA) was approved at the Royal Courts of Justice, by Lord Justice Leveson. The DPA was introduced as a means of alternative disposal following a criminal investigation into a corporate organisation back in February 2014, under the Crime and Courts Act 2013. It is only available to the Directors of the Crown Prosecution Service (CPS) and the Serious Fraud Office (SFO).

Under a DPA, proceedings are automatically suspended following charge, on the agreement that negotiated terms (which must be approved by the court) will be performed by the company. If the conditions are not complied with, then prosecution proceedings may be commenced. In order to enter a DPA the prosecutor must be satisfied that both the evidential test and the public interest test, as set out in the SFO DPA Code of Practice has been met.

The SFO reported that the DPA approved related to an SFO prosecution against Standard Bank Plc in relation to the alleged bribery of Tanzanian Government Members.  Standard Bank Plc were indicted under section 7 of the Bribery Act 2010, for alleged failures to prevent bribery. Money talks and criminals walk.

As part of the DPA, Standard Bank paid US$25.2 million in financial orders and US$7 million in compensation to the Government of Tanzania. The bank also agreed to pay the SFO’s reasonable costs of £330,000 in relation to the investigation and subsequent resolution of the DPA. The bank’s fines were reduced by a third, because it brought the matter to regulators, and the agreement requires the continued cooperation of Standard Bank Plc with the SFO.  They will be subject to an independent review of its existing anti-bribery and corruption controls, policies and procedures regarding compliance with the Bribery Act 2010 and other applicable anti-corruption laws.

David Green, the SFO director, said: This landmark DPA will serve as a template for future agreements. The SFO contends that this was not a private plea “deal” or “bargain” between the prosecutor and the defendant company. The agreement offers a way in which a company can account for its alleged criminality to a criminal court.  It has no effect until a judge confirms in open court that the DPA is in the interests of justice and that its terms are fair, reasonable and proportionate. DPA’s are intended only to be used in exceptional circumstances and allow investigators and prosecutors to focus resources on those cases where a prosecution is required.” 

In 2016, ‘XYZ Ltd‘ became the SFO’s second DPA , whichwas concluded with the unnamed SME (Small and medium-sized enterprises), referred to only as XYZ Ltd due to ongoing proceedings. The company agreed to pay a total of £6.5m, including a financial penalty of £350,000 and disgorgement of profits of £6.2m of which a significant proportion was paid by the company’s US parent. 

The Rolls Royce DPA, was something of a surprising landmark in the SFO’s approach to dealing with the most serious bribery cases. The judge himself commented that the appropriateness of a DPA in a case of such “egregious criminality over decades” and involving vast sums in corrupt payments could be seen as surprising, begging the question as to whether there was any future for criminal prosecutions for bribery.

Other commentators accused the SFO of a failure of courage in offering a DPA instead of taking the case to trial.  Sir Brian Leveson QC, the president of the Queen’s bench division of the high court, said the case raised questions about whether it would ever be in the public interest to prosecute a company as big as Rolls-Royce.

My reaction when first considering these papers was that if Rolls-Royce were not to be prosecuted in the context of such egregious criminality over decades, involving countries around the world, making truly vast corrupt payments and, consequentially, even greater profits, then it was difficult to see when any company would be prosecuted,” he wrote in his judgment.

The DPAs seem to be “the new normal” for bribery cases, but the SFO claim this is so only where the company demonstrates an exemplary response to rooting out ‘the problem’ and assisting the SFO in its investigation, which the judge in the Rolls Royce case acknowledged had been the case. (See UK Anti-Bribery Newsletter –
Spring 2017 from Travers Smith).

In the case of Rolls-Royce, Robert Barrington, the executive director of Transparency International, said the SFO had presented “a poor case” for the DPA, saying: “This gives the impression that Rolls-Royce is too big to prosecute.”

He added: “There was talk about pensioners and employees, but no mention of the victims of corruption. The poor case could have been offset by details about the prosecution of individuals, but there was nothing about that. If these are not the circumstances for a prosecution, then what are?”

It seems that now, even the law is also open to market forces. People and organisations that have clearly broken the law can simply pay to sanitise their corruption and launder their reputation.

In the UK market economy, everything is for sale, with the wealthiest citizens finding considerable discounts on moral obligations and behavioural ethicality. It’s become very easy to lose track of why some things simply shouldn’t be. The Conservative’s privatisation programme has proved to be a theme park for economic crime and party profit; firms and politicians collude to ensure we have the ‘best’ system that money can buy. 

We hear a lot from the right about how the market place extends liberty, but there is little discussion about the fundamental imbalance built into the system that has systematically disempower many others who can’t afford to pay for their liberty. Or their legal fees and penalties. The market place is not neutral. It’s a place that where class discimination is rampant, traditional power relations are fortified and morally constrained behaviour is only ascribed to and required from the poorest citizens. All of this has profound implcations for democracy. 

The wake of scandals to date, in which large corporations, politicians, and bureaucrats engage in criminal activity in order to profit personally, facilitate mergers and block competition; in which officials accept private payments to facilitate private interests, and for public services rendered, demonstrates only too well the extent to which corruption is driven by the very economic and political reforms that are claimed to decrease it.

 

Related

Conservatives for hire: cashing in on Brexit

The Link Between Money And Corruption Is More Insidious Than We Thought

HIDING IN PLAIN SIGHT: HOW UK COMPANIES ARE USED TO LAUNDER CORRUPT WEALTH

The Paradise Papers, austerity and the privatisation of wealth, human rights and democracy 

 


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Thousands of disability assessments deemed ‘unacceptable’ under the government’s own quality control scheme

351-burden-cuts-by-populationInfographic from The Centre for Welfare Reform

New figures released by the Government indicate that neither Atos nor Capita – the private companies contracted by the government – paid more than £500m to assess people for Personal Independence Payments (PIP) – are actually meeting the target of 97% of assessments conforming to standards. 

The government have released the data to the Commons Work and Pensions Committee, which was due to take evidence from Atos and Capita regarding the assessments yesterday.

While private companies carry out the assessments, it is the Department for Work and Pensions (DWP) that makes the final decision on whether to award people financial support. However, those decisions are informed by the contents of reports that privately contracted ‘health professionals’ write during the assessment process.

Latest audits show that 6.4% of PIP assessments were deemed “unacceptable” in the three months leading up to October 2017.

Furthermore, the two companies have never met the target once, by the standard set using the government’s current method of quality control and measuring performance for PIP assessments.

Audits of the 4,200 PIP assessments take place every three months and are split between three ‘lots’ that are managed by different companies.

Lot 1 is assigned to Atos trading as ‘Independent Assessment Services’ (IAS). The Department for Work and Pensions (DWP) said 6.2% of its assessments were “unacceptable” in the three months to October 2017.

Lot 3 is also assigned to IAS. The DWP said 5.7% of the assessments were “unacceptable” in the three months to October 2017.

Lot 2 is assigned to Capita. The DWP said 7.3% of its assessments were “unacceptable” in the three months to October 2017.

        The government’s own figures on the rate of ‘unacceptable’ PIP tests.                                   (Image: Department for Work and Pensions)

The current performance measure – which sees an independent team pick cases at random – was launched in March 2016. Under the previous method, the private providers audited assessments themselves. 

The National Audit Office (NAO) found last year that the number of completed ESA assessments were below target, despite an expected doubling of the cost to the taxpayer of the contracts for disability benefit assessments, to £579m a year in 2016/17compared with 2014/15.

The NAO said that nearly 1 in 10 of the reports on disabled people claiming support were rejected as below standard by the government. This compares with around one in 25 before Atos left its contract. 

The provider was not on track to complete the number of assessments expected last year and has also missed assessment report quality targets. 

Atos abandoned its contract early following mounting evidence that hundreds of thousands of ill and disabled people have been wrongly judged to be fit for work and ineligible for government support. 

The proportion of Capita PIP tests deemed unacceptable reached a peak of 56% in the three months to April 2015.

For Atos, the peak was 29.1% for one lot in June 2014. 

More than 2.7million people have had a DWP decision regarding PIP since the benefit launched in 2013 – this suggests that tens of thousands went through an ‘unacceptable’ assessment.

The PCS union, which represents lower paid workers at the Department for Work and Pensions (DWP), told MPs during the Work and Pensions Committee inquiry: “We do not believe that there is any real quality control.

“Our belief is that delivering the assessments in-house is the only effective way for DWP to guarantee the level of quality that is required.” 

In evidence submitted to the Work and Pensions Committee, Capita said 95% of assessments are now deemed acceptable – giving the figure for the past year. The company said:

“This represents a significant improvement from previous years and producing quality reports for the DWP remains a top priority within Capita.”

“Additionally, we use a range of intelligence as indicators, to identify disability assessors who may not be operating at the high quality output levels we expect.

“This includes data from audit activity, coaching and monitoring.

“This enables us to continually monitor performance, and take appropriate internal actions… where necessary to ensure we continue to deliver a quality service.”

Atos said 95.4% of tests are now acceptable and more work was needed to ensure the auditing process itself is “consistent”, adding: “We strive to deliver fair and accurate assessment reports 100% of the time.”

However, many disabled people would beg to differ. See for example: Essential Information for ESA claims, assessments and appeals. The comments section alone highlights just how unfair and inaccurate Atos assessments commonly are.

It also emerged that Atos and Capita employ just FOUR doctors between them. Most employees within the companies are nurses, paramedics, physiotherapists or occupational therapists. Capita’s chief medical officer Dr Ian Gargan confessed he was just one of two doctors at the firm’s PIP division, which has 1,500 staff.

He told the Commons Work and Pensions Committee: “Two thirds of our professionals have a nursing background and the remainder are from occupational therapy, physiotherapy and paramedicine.”

Dr Barrie McKillop, clinical director of Atos’ PIP division, admitted they too only had two doctors among their staff. 

Frank Field said: “You’ve got two doctors each, mega workload – maybe there’s a lot of doctors out there who would long for some part-time work.” 

“You haven’t sought them out to raise your game, have you?”

However Dr McKillop insisted Atos’ current model “is a strong one” and people “bring clinical experience in different areas”.

You can listen to yesterday’s Work and Pensions Committee’s PIP and ESA evidence session here. 

The witnesses are: Simon Freeman, Managing Director, Capita Personal Independence Payments, Dr Ian Gargan, Chief Medical Officer, Capita Personal Independence Payments, David Haley, Chief Executive, Atos Independent Assessment Services and Dr Barrie McKillop, Clinical Director, Atos Independent Assessment Services.

You can access the written evidence here.

You can access the written evidence and watch the session online from the previous session here from 22 November.

The inquiry is ongoing. The Committee is interested in receiving recommendations for change both on the assessment process for each benefit individually, and on common lessons that can be learned from the two processes. 

 

Related 

Government guidelines for PIP assessment: a political redefinition of the word ‘objective’

 


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Osborne finally admits he lied and that Labour did not cause the recession

Image result for a big labour boy did it osborne

In the weeks after he took office, George Osborne justified his austerity programme by claiming that Britain was on “the brink of bankruptcy”. He told the Conservative conference in October 2010: “The good news is that we are in government after 13 years of a disastrous Labour administration that brought our country to the brink of bankrutcy.” 

The Conservatives have constantly tried to portray the Labour party as less than competent with the economy, and more recently the government made facetious jibes about “magic money trees” being required to fund Labour’s promising anti-austerity manifesto, which backfired. In fact the Conservatives have even claimed, rather ludicrously, that the opposition is “dangerous”. 

However, back in 2012, Robert Chote, head of the Office for Budget Responsibility (OBR) formally rebuked Osborne for his intentionally misleading “misinformation” and dismissed with scorn the “danger of insolvency” myth that has been endlessly perpetuated by the Conservatives.

It’s worth remembering that the Conservatives’ historic record with the economy isn’t a good one. Margaret Thatcher presided over a deep recession because of her authoritarian introduction of neoliberal policies, regardless of the social costs. Her only solution to an increasingly damaged economy was more neoliberalism. John Major also presided over a recession, and who could forget “Black Wednesday“. 

The global recession of 2007/8 would have happened regardless of which political party was in office in the UK. Osborne had also committed to matching Labour’s spending plans, but he later criticised them.

The financial crash process was started by the neoliberal Thatcher/Reagan administrations with the deregulation of the finance sector. We were out of recession in the UK by the last quarter of 2009. By 2011, the Conservatives fiscal policy of austerity put us back in recession. 

It’s good to see Osborne finally concede that there was no basis for his ridiculous claims in 2010, in a recent interview with Andrew Neil, for The Spectator‘s Coffee House Shots (12 October).

It follows that there was absolutely no justification for the Conservatives’ incredibly harsh and damaging neoliberal austerity programme.

You can listen to the full interview with George Osborne and Andrew Neil by clicking here.

 


I don’t make any money from my work. But you can support Politics and Insights and contribute by making a donation which will help me continue to research and write informative, insightful and independent articles, and to provide support to others. The smallest amount is much appreciated, and helps to keep my articles free and accessible to all – thank you. 

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