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4 February 2008
In a single interview, the government’s new benefits adviser, investment banker David Freud, has managed to display dismal ignorance of the benefits system, an arrogant disregard for the opinions of those who know a great deal more than him and a truly fantastic degree of avarice on behalf of the private sector.

Freud was the author of a hard hitting report on the benefits system for outgoing prime minister Tony Blair. In it Freud recommended much greater involvement for the private sector in moving the sick and disabled into work. However, with the arrival of Peter Hain as Secretary of State for Work and Pensions under Gordon Brown, Freud was sidelined.

But last week, as soon as James Purnell replaced the disgraced Peter Hain, his first act was to announce that the exceedingly wealthy David Freud was to be his new adviser on benefits.

Freud gave his first post-appointment interview to the Telegraph on Saturday. He promptly proved that he may know a lot about acquiring money for himself but he has very little idea of what sick and disabled people have to do to be awarded their minimal cash.

In his interview he told the Telegraph:

“And it's ludicrous that the disability tests are done by people's own GPs - they've got a classic conflict of interest and they're frightened of legal action."

In fact, as everyone with even the most minimal knowledge of welfare benefits knows, the “disability tests” for incapacity for work are carried out by a private sector company, Atos Healthcare, sub-contracting to the DWP. GPs are specifically told to stop issuing sick notes for their patients once they become subject to DWP medical examinations. Benefits and Work has also never, in the entire history of incapacity benefit, heard of a single claimant suing their GP because they refused to write them a sick note.

Freud told the Telegraph that when he wrote the first draft of his report for Blair:

"I didn't know anything about welfare at all . . . but that may have been an advantage.”

Clearly it’s an advantage Freud is determined to cling onto for as long as possible.

This ignorance of the basic workings of the benefits system is combined with a breathtaking belief by Freud that he knows best what’s wrong with the system and how to fix it.

For example, according to Freud the level of fraud in the system – those getting a “free lunch” in his words - is at least ten times higher than DWP research suggests. The banker claims that there are ‘five to seven per cent of people on IB today who are on the black economy” but offers no studies or research findings to support this bloke-in-the-bar type guesstimate on which he intends to base government policy.

Not only that, but Mr Freud also believes that the “real figure” for people who are too sick to work is nearer 700,000 than the 2.64 million people that Freud claims currently “stay at home and watch daytime TV”. Again, this is based on no research findings whatsoever, but on a ’suspicion’ held by Mr Freud that there should have been no increase in the number of people getting benefits as too sick to work since the 1980s.

Freud proposes a radical change in assessment, which would in future be based on how much profit could be made from a sick or disabled person. Rather than doctors, private sector bounty hunters would dictate who should be moved into work or face cuts in their benefits and who was too sick to be worth ‘expending effort on’. Indeed, according to Freud: “you don't need to make a huge fuss about categorising people - everyone should be able to work.”

There would of course, have to be a cash incentive to get the private sector involved. But according to Freud’s calculations it would be possible to pay “masses” to the private sector to get the “average person” on incapacity benefit into work.

In fact, Mr Freud calculates that the state could pay the incredible sum of £62,000 to the private sector for each incapacity benefit claimant they get back into work for three years. This is, of course, a good deal more than the average incapacity benefit claimant would themselves receive for three year’s work. It would also amount to a total of almost £120 billion flowing out of the taxpayers pockets and into the private sector in the space of three years, if Freud’s dreams materialise.

Given that incapacity benefit only costs the country £12 billion a year and many claimants in low wage work may remain entitled to housing benefit, council tax benefit and tax credits the sums do not appear to entirely add up.

Not surprising then that investment banker Freud also told the Telegraph: “banks are mad, they behave like lemmings, there is always something they all go and do that then explodes.”

Not before they’ve made huge amounts of cash out of it, however. And Freud makes no attempt to disguise the fact that under his plans there are millions to be made. People will “see a gap in the market and make their fortune” he tells the Telegraph enthusiastically. Claimants, on the other hand, will face having their benefits ‘sliced’ if they won’t cooperate.

Freud is clearly cock-a-hoop at present. He dismisses his old enemy Peter Hain as being “worried about the left” whereas the new secretary of state is “showing astonishing energy, there is going to be a much more single-minded ferocity.”

The spectacle of an investment banker growing so enthusiastic about the fortunes to be made by, where necessary, ‘slicing’ the benefits of the sick and disabled is a deeply repugnant and distressing one. So repugnant, in fact, that it may in time prove the undoing of the latest in a very long line of New Labour’s secretaries of state for work and pensions.

We can but hope so.

© 2008 Steve Donnison