Wednesday 23 September 2009

Don't cut the middle out

Current proposals to cut back on universal benefits would be a mistake, making us less effective in tackling poverty and in the longer term undermining the legitimacy of the welfare state.

Universal benefits such as child benefit have a far higher take up rate than targeted benefits such as free school meals, making them much more effective at helping those in greatest need. Means testing is also associated with high rates of error by both administrators and claimants and its inflexibility can often hold people back.

Obviously receiving a universal benefit means eliminating stigma …there is no stigma in a benefit that we all receive; there is no public resentment about child benefit and its recipients, no talk of how it subsidises the lazy or goes to feckless wasters.

That’s because we all know people who receive it and have witnessed the difference that it can make. Child benefit and the winter fuel payment are accepted as a part of the deal, a little bit of extra support that we offer our citizens in recognition of the costs they face. Contrast that with housing benefit. Most people never use this benefit and have only very limited contact with people who do. Recipients of this benefit are highly stigmatized; people think of it as a benefit or handout for other people, people not like them. There is resentment that “hardworking” types have to cover other people’s living costs when the rest of us cover our own. Highly targeted and means tested benefits are also associated with disincentives to work – no doubt the current system creates a financial penalty for those moving into work but just the prevalence of the belief it is a disincentive seriously impacts on public support for welfare spending.

As Fabian Society and Joseph Rowntree research has recently shown people have a broadly reciprocal understanding of the welfare state – that we should all put in our fair share and that most people should receive support from the state in recognition of that. When asked to design a benefits system of their own participants (pretty much regardless of income) chose a system very similar to tax credits, offering the most support to the poorest but giving something quite far up the income spectrum so that around 90% of people would receive something. That’s because people feel everyone’s efforts should be recognised and that the middle are under pressure to maintain their position. If we remove that element from our tax and welfare system it will lose the public legitimacy that is vital for continued investment. Cutting back might help us eat into the deficit slightly sooner but it will store up a whole host of problems and in all likelihood only make ending poverty harder.

Guest post from Jemima Olchawski

Read Tim Horton’s warning to Lib Dem cutters in today’s Guardian.

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