The Freud Report, by Rory O'Kelly

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CONTENTS Introduction Therapeutic Economic page 1 Differences with other European Countries The Employment Support Allowance Rights and Responsibilities Summary A Personal Postscript page 2 Introduction This paper is based on a talk given to the SE London Fabian Society, expanded somewhat to incorporate and respond to the discussion at the meeting. The Freud Report is concerned primarily with changes to the Incapacity Benefit regime. It has little to do with incapacity in any medical or social sense however. It is focused mainly around a single objective with no obvious connection to public health– ensuring that people in work equate to 80% of the working age population. The author is I believe some sort of banker and a distant relative of Sigmund. He has no obvious qualifications for writing such a report. Presumably he met a Minister at a dinner party or on a tennis court and seemed like the right sort of chap. It is one of those ‘you couldn’t make it up’ stories which one associates with New Labour. This is not particularly significant however as the ideas are basically a reflection of existing Government thinking. Much of the content is about implementation – e.g. the privatisation of DWP functions. This is an interesting expression of New Labour inability to learn from experience. Although privatisation is an important issue however this is one case where it really is more important to look at ends rather than means and focus on the basic rationale behind the 80% objective. The figure itself is obviously entirely arbitrary. Looking more generally however at the objective of increasing employment rates one can see two rationales: therapeutic and economic. Therapeutic The report does run a therapeutic argument; "There is a strong evidence base showing that work is generally good for physical and mental well-being". This is probably true but as a typical statistical statement it offers little help in individual cases. One might compare the well known generalisation that marriage is good for the mental health of men and bad for that of women. However true statistically this is not much use in advising an individual man or woman whether to marry, and certainly there are plenty of counter-examples. Those not working are a minority and cannot be taken to resemble the majority even leaving aside such issues as the significant number of people whose health has been damaged by work. Even if the majority do in fact benefit in health terms from working there is bound to be a minority who do not, and one cannot altogether discount the possibility that they may largely overlap with the group of people who actually are off sick. This can be tested empirically. Statistical generalisations are usually used in the absence of 100% scrutiny of individual cases. Where incapacity benefit is concerned however such scrutiny does exist. To get this benefit a person first has to believe themselves that they cannot or should not work, then has to convince their own doctor and then a DWP doctor. This is a fairly formidable process. The Government and Freud admit, albeit reluctantly, that such scrutiny will find a small number of people who are literally incapable of work. It does not accept that it will find that there are some people who are just about capable but whose health, physical or mental, will be damaged by it. Nonetheless proper doctors (e.g. consultant psychiatrists) will continue to find such people. This sets the scene for an interesting conflict with Human Rights implications if Government applies pressure on people to ignore medical advice. There is also the issue of those for whom seeking work rather than doing it is the health problem. The Government model seems to be a rather crude picture of young people who cannot be arsed to get out of bed in the morning who will benefit from a boot up the backside. It does not cover people who suffer (typically) anxiety states which may or may not be linked to physical illness for whom pressure is intolerable and who are made worse by the threat of sanctions. I have mentioned before the issue of autonomy as a key to health (e.g the ‘Whitehall Cohort’). It is somewhat ironical that we have a Government which loudly proclaims the virtues of a ‘choice agenda’ but seems unable to contemplate the possibility that people might themselves be the best judges of whether it is a good idea for them to return to work or not. By depriving people of autonomy in such an intimate area Government does in fact make people more ill and the more active and dynamic Labour Market policy is the more pathogenic it becomes. Looking at the fundamental principles behind Government policy we can see three. The first is the conventional right-wing economist's view that people always dislike work and prefer leisure and that to get them to work it is necessary to employ compulsion (for the poor) or incentives (for the rich).The second is the belief discussed here that work is good for people and makes them feel better. The third is the belief enshrined in the 'choice agenda' that people are generally the best judges of their own best interests. Looking at it logically it is obviously possible to believe any two of these things, but not all three. However, a dogmatic adherence to logic has never been a New Labour vice. Economic Fundamentally of course the therapeutic argument is window-dressing. The underlying assumption of this report is that it is economically beneficial to get more people to work. It is very hard however to see what basis there is for such an assumption. On unbiased observation it seems clear that we already have too many people working. This country is full of people working very hard for very long hours very unproductively and for very low pay and hating it. It does not seem self-evidently a good idea to exacerbate this situation. Other European countries get similar or better output for less input in terms of hours worked. The Report gives some rather half-hearted attention to the reasons for low British productivity. It seems obvious however that one way to increase productivity is to exclude from the workforce people whose ability to contribute meaningfully is marginal at best. It does seem a curious case of myopia to look at the facts that other countries have smaller proportions of the population working and higher per capita productivity but to see no connection at all between the two things. Obviously in some cases therapeutic argument runs counter to the economic one. Certainly there is a case for providing work for those who want it and who would benefit from it even if they are not very good at it. What is strange however is to force into work people who are not really capable of it and whose work will provide no benefits either for them or for the community. From an economic point of view it is best to keep work for those who are good at it. This is the approach taken by all individual employers in their recruitment policies. It is strange that it should be accepted so readily that society as a whole should take exactly the opposite approach. Suppose we take the economic argument a step further back. Efficiency is a balance between input and output. For any given output the lower the input the greater the efficiency. This is obvious to most of us at the individual level. If we can produce more and earn more while working less most people (even those who quite enjoy their jobs) will want to do so. Take it now to the national level. Compare two similar societies with similar levels of national output one of which has 80% of its population in work to produce this output and the other 60%. Which is preferable? From a serious economist’s point of view the 60% society is clearly better. This would also apply at the individual level – we would mostly want to retire earlier, stop working if we did not feel up to it etc. if this could be done without financial loss. From the Government’s point of view the 80% society is better and asking why takes us to the heart of this whole question. If the entire national output were produced by 60% (or 30%, or 10%) of us it would be necessary to find a way of distributing it across the whole population. To this Government however redistribution is fundamentally wrong on ideological grounds. The only way it can justify giving everyone an income is to make everyone work; except of course those with unearned income, who are seemingly exempt from the general rules about the benefits of work. The way in which this is expressed in the Freud Report is by claims about the extent to which taxation could be reduced by reducing benefit dependency. Taxation however is only bad insofar as redistribution is bad. In principle it could be argued that increasing the workforce would increase national output. This can happen when the workforce is increased naturally in response to demand; e.g. by immigration from Poland. In my view it is unlikely to happen when the workforce is increased artificially, by bringing into it people who are out of it for some good reason. More significantly, it is not a claim which is made at any point in the report. To summarise, the purpose of increasing employment rates is not to make the country as a whole any better off but to reduce the pressure for explicit redistribution. The report is really quite frank about this.

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