Michael Simmons

As many as one in 20 Universal Credit payments to working Brits are wrong. Claimants are at risk of destitution when they’re underpaid and accused of fraud when they’re overpaid, as the Department for Work and Pensions has been using a flawed data stream provided by HMRC to calculate Universal Credit payments. This week The Spectator revealed how HMRC’s PAYE earnings data is error strewn and fundamentally unreliable. Now it has emerged this system, used to calculate Universal Credit, risks criminalising benefit recipients and automated computer systems make it impossible for claimants to put the record straight. Insiders warn of a scandal waiting to happen – one that officials seem unaware of.

Ten years ago, HMRC unveiled what was billed as ‘the biggest change’ to the tax system since PAYE began in 1944. The taxman mandated employers to report their workers’ pay every time they ran payroll. Introduced to support Universal Credit by providing earnings data in close to real time, it has since been used to support a raft of other public policies too, including Covid furlough. But this change to PAYE Real Time Information (RTI), as HMRC calls it, has been a disaster for households on Universal Credit, taxpayers, public finances and confidence in HMRC and the senior civil service, as the quality of tax data has effectively collapsed. At the root of the problem is dodgy data on the earnings of the UK’s 30 million employees.

For perhaps the first time in its history, the Office for National Statistics does not know how many employed, unemployed and economically inactive people there are in the country. This morning, the monthly labour market figures were due to be published. But late last week news slipped out that the employment portion of the release would have to be delayed. The reason: plummeting survey response rates. You simply cannot make decisions about which levers to pull if we do not know how many people are in work Each month, Britain’s statisticians work out how many people there are in the workforce based on responses to a national ‘Labour Force Survey’. But for the last few years, the quality of that survey has diminished.

Public sector pay growth has jumped 9.6 per cent, the fastest rate since current records began 22 years ago. Private sector wage growth, meanwhile, is slightly more modest at 7.9 per cent. The NHS bonus – a one-off payment of between £1,650 and £3,500 given in June – helped lift overall wages up by 8.2 per cent, higher than inflation (at 7.9 per cent), the first time that has happened since March last year.  That bonus was agreed by the government in an attempt to put an end to industrial action among health workers. Around 160,000 working days were lost in June alone, the majority in the NHS. But with the bonus and the sheer size of the NHS payroll (at 1.4 million, it’s the largest workforce in Europe) overall national pay figures have been pushed up.

Threadneedle Street will have all the economic limelight this week as the Bank of England sets interest rates tomorrow. With this morning’s grim inflation update, a rate rise looks all but certain. But this morning, the Office for National Statistics (ONS) released an update on Rishi Sunak’s third pledge: to get debt falling. The figures show another target quickly escaping Sunak.  Public sector borrowing in the month to May rose to some £20 billion, almost £11 billion more than the same month last year. That makes it the second most expensive May on record. Meanwhile, in the first couple of months of this financial year, the government borrowed just under £43 billion – some £20 billion more than April and May last year and £2.

Wages are slowly closing the gap with inflation, up 7.2 per cent in the year to April versus inflation of 8.7 per cent. It adds up to a real-terms decrease. It's the 18th real-terms fall in a row – though the fastest nominal rise on record outside the pandemic. The new minimum wage (up nearly 10 per cent to £10.42 an hour) was a factor. The economy created 250,000 more jobs with the number in employment rising to 33.1 million. This shows signs of the worker shortage crisis softening a bit – the number of people either in work or looking for it rose to 34.4 million, the highest since October 2020. Meanwhile, the number of vacancies softened to 1.05 million – down a tad from 1.08 million but still almost twice as high at any point in the previous decade.

One of the UK’s biggest economic problems is having so many people out of work – and the slowest return to pre-pandemic workforce levels in Europe. This is costly and slows growth, as taxpayers foot the bill for benefits while employers struggle to fill vacancies. Today’s figures show that it is getting better – but slowly.  The official unemployment count crept up to 3.9 per cent in the latest statistics. This is, ironically, a good sign as it shows more people are actually looking for work (about 12 per cent of the working-age population are on out-of-work benefits, although this is a figure that ministers seldom update and never publicise).