Duncan Smith to face grilling from MPs over misuse of statistics

The work and pensions select committee launches an inquiry after Duncan Smith was rebuked by the UK Statistics Authority for misrepresenting figures on the benefit cap.

With deceptively little fanfare, the work and pensions select committee has announced that it intends to question Iain Duncan Smith over his misuse of statistics. After IDS was rebuked by the UK Statistics Authority for falsely claiming that 8,000 people had moved into work as a result of the introduction of the benefit cap, the committee has "decided to examine the way DWP releases benefit statistics to the media". 

The inquiry into Duncan Smith's behaviour will be carried out as part of its annual assessment of the DWP Annual Report and Accounts (ARA), which is due to be published at the end of June. Since the Work and Pensions Secretary always appears before the committee once the assessment has been published, he is now certain to face questions over his statistical chicanery. The Change.org petition calling for Duncan Smith to be held to account by parliament has now received 96,271 signatures. Let us now hope he is.

In the past month, the Work and Pensions Secretary has claimed that 878,000 people dropped their claims for sickness benefits rather than face a new medical assessment; that thousands deliberately registered for the Disability Living Allowance before it was replaced with the more “rigorous” Personal Independence Payment; and that 8,000 people moved into work as a result of the introduction of the coalition’s benefit cap. Not one of these assertions was supported by the official statistics.

Thousands of people move on and off benefits each month as their health, housing and employment circumstances change but there is no evidence that they do so for the reasons ascribed by Duncan Smith. As his own department stated in relation to the benefit cap, “The figures for those claimants moving into work cover all of those who were identified as potentially being affected by the benefit cap who entered work. It is not intended to show the additional numbers entering work as a direct result of the contact.”

Duncan Smith’s insistence that the reverse was true was dog-whistle politics of the worst kind. By stating that 8,000 people entered employment as a direct consequence of the benefit cap, he painted them as “scroungers” unwilling to work until the state ceased to subsidise their fecklessness. As for those who had not found jobs, the implication was that they were merely not trying hard enough. 

Work and Pensions Secretary Iain Duncan Smith arrives to attend the government's weekly cabinet meeting at Number 10 Downing Street. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

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Let's turn RBS into a bank for the public interest

A tarnished symbol of global finance could be remade as a network of local banks. 

The Royal Bank of Scotland has now been losing money for nine consecutive years. Today’s announcement of a further £7bn yearly loss at the publicly-owned bank is just the latest evidence that RBS is essentially unsellable. The difference this time is that the Government seems finally to have accepted that fact.

Up until now, the government had been reluctant to intervene in the running of the business, instead insisting that it will be sold back to the private sector when the time is right. But these losses come just a week after the government announced that it is abandoning plans to sell Williams & Glynn – an RBS subsidiary which has over 300 branches and £22bn of customer deposits.

After a series of expensive delays and a lack of buyer interest, the government now plans to retain Williams & Glynn within the RBS group and instead attempt to boost competition in the business lending market by granting smaller "challenger banks" access to RBS’s branch infrastructure. It also plans to provide funding to encourage small businesses to switch their accounts away from RBS.

As a major public asset, RBS should be used to help achieve wider objectives. Improving how the banking sector serves small businesses should be the top priority, and it is good to see the government start to move in this direction. But to make the most of RBS, they should be going much further.

The public stake in RBS gives us a unique opportunity to create new banking institutions that will genuinely put the interests of the UK’s small businesses first. The New Economics Foundation has proposed turning RBS into a network of local banks with a public interest mandate to serve their local area, lend to small businesses and provide universal access to banking services. If the government is serious about rebalancing the economy and meeting the needs of those who feel left behind, this is the path they should take with RBS.

Small and medium sized enterprises are the lifeblood of the UK economy, and they depend on banking services to fund investment and provide a safe place to store money. For centuries a healthy relationship between businesses and banks has been a cornerstone of UK prosperity.

However, in recent decades this relationship has broken down. Small businesses have repeatedly fallen victim to exploitative practice by the big banks, including the the mis-selling of loans and instances of deliberate asset stripping. Affected business owners have not only lost their livelihoods due to the stress of their treatment at the hands of these banks, but have also experienced family break-ups and deteriorating physical and mental health. Others have been made homeless or bankrupt.

Meanwhile, many businesses struggle to get access to the finance they need to grow and expand. Small firms have always had trouble accessing finance, but in recent decades this problem has intensified as the UK banking sector has come to be dominated by a handful of large, universal, shareholder-owned banks.

Without a focus on specific geographical areas or social objectives, these banks choose to lend to the most profitable activities, and lending to local businesses tends to be less profitable than other activities such as mortgage lending and lending to other financial institutions.

The result is that since the mid-1980s the share of lending going to non-financial businesses has been falling rapidly. Today, lending to small and medium sized businesses accounts for just 4 per cent of bank lending.

Of the relatively small amount of business lending that does occur in the UK, most is heavily concentrated in London and surrounding areas. The UK’s homogenous and highly concentrated banking sector is therefore hampering economic development, starving communities of investment and making regional imbalances worse.

The government’s plans to encourage business customers to switch away from RBS to another bank will not do much to solve this problem. With the market dominated by a small number of large shareholder-owned banks who all behave in similar ways (and who have been hit by repeated scandals), businesses do not have any real choice.

If the government were to go further and turn RBS into a network of local banks, it would be a vital first step in regenerating disenfranchised communities, rebalancing the UK’s economy and staving off any economic downturn that may be on the horizon. Evidence shows that geographically limited stakeholder banks direct a much greater proportion of their capital towards lending in the real economy. By only investing in their local area, these banks help create and retain wealth regionally rather than making existing geographic imbalances worce.

Big, deep challenges require big, deep solutions. It’s time for the government to make banking work for small businesses once again.

Laurie Macfarlane is an economist at the New Economics Foundation