Blockchain and benefits payments: A step too far?

Mobile app could be used to track benefit claimants spending habits, as opponents express data privacy concerns.

Photo credit: J D Mack via photopin cc

Earlier this year, the government set out proposals in a report regarding how Blockchain Technologies’ distributed ledger technology which provides “efficient and transparent” digital records of cryptocurrency transactions, could be used for public services.

In their report called Distributed Ledger Technology: Beyond block chain, the government’s scientific adviser says: “Distributed ledger technology (DLTs) offer significant challenges to established orthodoxy and assumptions of best practice, far beyond the recording of transactions and ledgers.

“These potentially revolutionary organisational structures and practices should be experimentally trialed — perhaps in the form of technical and non-technical demonstrator projects — so that practical, legal and policy implications can be explored.”



“Areas where we believe work could be taken forward include the protection of national infrastructure, reducing market friction for SMEs [Small and medium-sized enterprises] and the distribution of funds from Department for Work and Pensions and other government departments.”

A distributed ledger is a database that can record financial, physical or electronic assets for sharing across a network through what is claimed to be entirely transparent updates of information.

Its first incarnation was Blockchain in 2008, which underpinned digital cash systems such as Bitcoin. The technology has now evolved into a variety of models that may be applied to different business problems.

Speaking at Payments Innovation Conference earlier this month, Lord Freud, one of the main architects of the welfare “reforms” said:

“Claimants are using an app on their phones through which they are receiving and spending their benefit payments. With their consent, their transactions are being recorded on a distributed ledger to support their financial management.”

The Department for Work and Pensions (DWP) has been working with Barclays, Npower, University College London and a UK-based distributed ledger platform startup called GovCoin to create an app which tracks people’s benefit spending.

The ongoing trial, which is designed to demonstrate “the practical applications of the technology,” began in June. It’s another Conservative experiment on people claiming social security.



Jeremy Wilson, the vice chairman of corporate banking at Barclays, said: “This initiative focuses on adding an additional layer of richer data and identity onto payments, so that a deeper and more effective relationship can be established between the government and claimants.”

I wonder exactly what that “effective relationship” will entail? I bet it’s not one based on mutual respect and democratic dialogue. I also wonder if the Department for Work and Pensions will be issuing people who have no income with Smart phones.

How will the collected information on spending be used? Are we going to see people claiming social security being named and shamed for buying Mars bars, a bottle of wine or a book? Or birthday and Christmas presents for their children? Will the state be sanctioning people that make purchases which the government deems “unnecessary”?

He added: “We are keen to see how the positive potential of this service develops and adds to our wider efforts to explore the uses of distributed ledger technology.”

Distributed ledger technology was identified as a way of potentially “saving billions of pounds a year from welfare fraud and overpayment errors.“

Oh, that whoppingly over-inflated 0.7% of claimants again. Just imagine how many trillions we would save if we used technology to get a grip of tax avoidance.

The technology is hoped to provide a cheap and easy way of getting welfare claimants without bank accounts into the system as well as verifying their identities, and would also provide a “transparent account of how public money was spent, transform the delivery of public services and boost productivity,” the government’s chief science adviser, Sir Mark Walport, said in a report last January. Those same words are used every time vulture capitalists are circling a public service.



Walport said: “Distributed ledger technology has the potential to transform the delivery of public and private services.” More words from the vulture capitalist crib sheet of glittering generalities.

“It has the potential to redefine the relationship between government and the citizen in terms of data sharing, transparency and trust and make a leading contribution to the government’s digital transformation plan.”

The government distributes £3.8bn in payments every day. However, there are some concerns over how protection of data and privacy with the technology will be “managed.”

The Open Data Institute welcomed the findings on the whole. However, it warned that the government must be wary of the challenges involved in blockchain technology and apply it in an effective way.

They say: “We agree that blockchains could be used to build confidence in government services, through public auditability, and could also be used for widely distributed data collection and publishing, such as supply chain information. Smart contracts also hold great potential; what if your train tickets were smart contracts that meant you paid less for delayed trains?”

Smart cards and smart contracts, the more things change, the more the Tories stay the same.

Further: “However, in our research we have seen cases where people are trying to bolt old, failed or impossible policy and business ideas onto the new technology or to unnecessarily reinvent things that work perfectly well.”



The institute also warned of the privacy issues raised by incorporating private data and suggested the government better develop and solve these challenges by focusing on industry specific groups such as the finance or healthcare sectors.

Having failed in introducing the punitive smart card more than once, the Conservatives are now resorting to a stealthy introduction of a variation to curtail the freedom of poor people claiming social security, using cryptocurrency, state regulation and an unprecedented, Orwellian level of state monitoring and control of what people who are struggling to make ends meet are buying.