Andrew Harrop presents the evidence against increasing means-testing - universalism is the key to ensuring a well-funded welfare state.
Andrew Harrop is the general secretary of the Fabian Society
One of the most surprising conclusions from this month’s Fabian Society new year conference, The Economic Alternative, was the strong tide of support for greater means testing, particularly in such times of economic austerity. Speakers including Polly Toynbee, Peter Kellner, Kitty Ussher and Patrick Diamond lined-up to condemn universal welfare entitlements.
A commonly cited example from panellists and delegates was the winter fuel payment. We witnessed a stream of well-off pensioners (still a small minority, when you look at the statistics) express confusion and in some cases dismay that they receive an unrequested, undeserved and unnecessary benefit.
Surely, they say, such spending is wasteful and government would do far better to target resources at the most needy?
The Fabian Society’s new report, The Coalition and Universalism: Cuts, targeting and the future of welfare (pdf) puts the opposite case and shows that reducing the universality of benefits ultimately harms the very poorest in society means-testing is intended to protect.
Using analysis of the level of expenditure, the degree of targeting and the amount of poverty alleviation associated with 11 OECD welfare systems at different times between the 1970s and the 1990s, the data shows, counter-intuitively, that the more you means-test, the less poverty alleviation you achieve.
Figure One
Figure Two
The first graph shows that as the overall level of expenditure on welfare rises, the amount of poverty alleviation also rises.
This is not surprising, but our research also shows that governments that are more generous in welfare spending tend to spread such spending more widely amongst the population. There are very few governments that combine high levels of expenditure with high degrees of targeting.
The second graph is the one that is striking. It shows that governments which target spending more actually do less to alleviate poverty.
What does this mean for us? It goes without saying that the one-off effect of moving from a universal to a means-tested entitlement is ‘pro-poor’, but our evidence strongly suggests that the long term effect is likely to be ‘anti-poor’.
Historically, systems which mainly benefit only the poor have been funded so much worse than more universal systems that they have alleviated poverty less. In other words the greater efficiency of targeting has been more than off-set by the decreased generosity associated with designing welfare systems in which most taxpayers are not recipients and do not have a stake.
More generous welfare systems offer broad entitlements and give middle-income households a stake in a system in which they both pay in and take out. It is this majoritarian system that helps build public support for welfare. By contrast increased targeting of benefits erodes this public support and furthers damaging ideas of ‘dependency’ and of a ‘them-and-us’ mentality.
So far the coalition approach to targeting has been tentative. The restriction of child benefit to low and middle income households has been the most public and controversial measure but there have also been major restrictions to tax credits and growing speculation on the future of the winter fuel payment.
Perhaps wary of tackling the public discontent caused by introducing means testing to popular benefits like older people’s bus passes, the coalition seem to be pursuing a “salami-slicing” approach – cutting away universalism piece by piece – justified always by the imperative of deficit reduction combined with the twin refrains of “there is no alternative” and “we’re all in this together”.
In this light, the fight to protect the most vulnerable from welfare cuts currently being waged in both Houses of Parliament are likely to be skirmishes in an ongoing battle. Campaigners for social justice and progressive values need to think very carefully before advocating means-testing as the ‘least bad’ option. It may make sense today, but will it erode support for welfare spending over decades?
We need to defend the majoritarian basis of the welfare state, otherwise entitlements which poor families depend on most will wither. There should be no doubt as to just how high the stakes are.
See also:
• Growth revision shows economic recovery is off track – Tony Dolphin, January 9th 2012
• Life is already hard for cancer patients. Don’t make it harder – Alex Hern, October 25th 2011
• How disability reforms were whitewashed from Labour’s conference – Daniel Elton, September 27th 2011
• Yet another nasty in the welfare bill: Means testing support for the disabled-since-youth – Declan Gaffney, September 22nd 2011
• Considering income alone is never enough when looking at living standards – James Plunkett, February 2nd 2011
38 Responses to “Busting the means testing myth”
Annette Carter
Busting the means testing myth: Surely, they say, such spending is wasteful and government would do far better t… http://t.co/EW5lSgxk
Robert Bowers
RT @leftfootfwd: Busting the means testing myth, by @andrew_harrop of @TheFabians: http://t.co/iDf377ZK
TruthBeckons
Time to bust the means testing myth again http://t.co/AKI6mV8D
Fpvanham
Given that the biggest benefits i.e tax credits, require you to pay into the system by working, and that unemployment benefit (which now requires you to make at least a token effort to find a job and go on work placements) is barely enough to live on at all, it’s hard to imagine that many people voluntarily living on the dole with the intention of never working, though some do exist. Making sure that everybody who needs the benefits gets them is more important than going after the people who exploit the system, and it’s simply immoral to pursue the latter at the expense of the former.
The point is the rich don’t need any bloody help, because they have enough money to live on and then some. People at the bottom of the ladder who can’t make their way up because of an insufficient wage which only just allows them to pay the bills (and not spend money on say, learning new skills which might improve their employment prospects) often need financial support from the state just to get by- the minor inconvenience of not being able to afford an olympic size swimming pool in your back garden, for example, pales in comparison to the plight of someone who is struggling to buy enough food every week to stay healthy.
As to the article, the analysis of the second graph is flawed. It could be simply that countries with more means testing spend less on welfare aside from the cost cutting effect means testing has, it does not necessarily mean that means testing has a harmful effect. A better way to establish the relationship between alleviation of poverty and means testing would to be to use data from countries that have similar expenditure per head of population on social security, with varying levels of targeting.
Fpvanham
Given that the biggest benefits i.e tax credits, require you to pay into the system by working, and that unemployment benefit (which now requires you to make at least a token effort to find a job and go on work placements) is barely enough to live on at all, it’s hard to imagine that many people voluntarily living on the dole with the intention of never working, though some do exist. Making sure that everybody who needs the benefits gets them is more important than going after the people who exploit the system, and it’s simply immoral to pursue the latter at the expense of the former.
The point is the rich don’t need any bloody help, because they have enough money to live on and then some. People at the bottom of the ladder who can’t make their way up because of an insufficient wage which only just allows them to pay the bills (and not spend money on say, learning new skills which might improve their employment prospects) often need financial support from the state just to get by- the minor inconvenience of not being able to afford an olympic size swimming pool in your back garden, for example, pales in comparison to the plight of someone who is struggling to buy enough food every week to stay healthy.
As to the article, the analysis of the second graph is flawed. It could be simply that countries with more means testing spend less on welfare aside from the cost cutting effect means testing has, it does not necessarily mean that means testing has a harmful effect. A better way to establish the relationship between alleviation of poverty and means testing would to be to use data from countries that have similar expenditure per head of population on social security, with varying levels of targeting.