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”
Anonymous
) is barely enough to live on at all,
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So lets see.
Free health care – 1800 a year
Free schooling for your offspring. 2 – 12,000 a year.
Housing benefit.
Free prescriptions.
….
Far more generous with other people’s money than you make out.
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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
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Symptoms correctly described. Cause completely wrong.
Even for the poor their major cost is taxation. For someone on min wage, its 2.5K a year, ignoring indirect taxation.
What is needed is savings. They need to be able to save, and they need to be forced to save.
However, that won’t happen. They spent 12 billion (up from 2.4 billion), on that Olympic swimming pool. Now the poor have to pay the debt off.
That was Labour’s plan, wasn’t it?
Fpvanham
And yet despite all that generosity, what the low paid do earn is only just about enough to get by. I speak from personal experience when i say a single mother on minimum wage with 2 children only just has enough money to get by, as opposed to being comfortable through the generosity of the state, which is the fantasy that you paint. They still have to pay rent, phone bill, for the internet, for mobile phone credit/contracts, electricity bill, for food, toiletries, water, clothes, travel fares/fuel and so on.
You imply that the money spent on free education can be treated like disposable income, which is ludicrous seeing as it isn’t optional, and it’s a minimum requirement for a first world country. Healthcare is paid for through national insurance, which everybody with a job pays, so it’s only free at the point of delivery.
Your argument has one glaring contradiction. On the one hand, you claim that the poor are being kept poor because the government’s forcing them to cough up too much money, yet on the other hand you say the state props them up by giving them money. Given that we have a progressive tax system, it stands to reason that if you were to get rid of both, that the poor would end up worse off, seeing as the biggest part of the tax burden is on the backs of those who can afford to pay . In fact you just said that the rich pay all the taxes, so you contradicted yourself twice over.
Saving makes zero sense unless you have money to spare. If you’ve got enough money to spare to save, then you’re not struggling, so it only really helps if you’ve fallen down the financial ladder rather than having always been there like the majority of the working poor. I don’t support labour, so your silly tribal jibe is null and void.
Anonymous
I speak from personal experience when i say a single mother on minimum wage
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That single mother has 2.5K of employment tax.
Would an extra 2.5K a year make a difference to her? You bet.
However, its not going to happen.
The government has massive debts, off the books mainly, and it will extract that 2.5K to pay for things that aren’t services. Namely pensions and in particular civil servants. 1.3 tn compared to 1.0 tn of state borrowing.
Anonymous
You imply that the money spent on free education can be treated like disposable income, which is ludicrous seeing as it isn’t optional, and it’s a minimum requirement for a first world country.
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However, that person on welfare isn’t paying for it. They get it for free. 6K per year per child
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Healthcare is paid for through national insurance, which everybody with a job pays, so it’s only free at the point of delivery.
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That person on welfare isn’t paying for it because they aren’t paying NI
1.8K per person
NI does not entitle you to the NHS. NI is far more restrictive as to what it entitles you to.
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Your argument has one glaring contradiction. On the one hand, you claim that the poor are being kept poor because the government’s forcing them to cough up too much money, yet on the other hand you say the state props them up by giving them money.
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I’m not making that argument
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Given that we have a progressive tax system, it stands to reason that if you were to get rid of both, that the poor would end up worse off, seeing as the biggest part of the tax burden is on the backs of those who can afford to pay . In fact you just said that the rich pay all the taxes, so you contradicted yourself twice over.
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Nope. I’m saying that in order to become richer, you need to spend less than you earn, and you need to invest the difference.
The state is making them poorer.
Take a median wage earner. What would have happened if they didn’t give the money for NI to the state, but instead invested it. 19K a year pension, instead they get 5K
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Saving makes zero sense unless you have money to spare. If you’ve got enough money to spare to save, then you’re not struggling, so it only really helps if you’ve fallen down the financial ladder rather than having always been there like the majority of the working poor. I don’t support labour, so your silly tribal jibe is null and void.
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And they don’t have money to spare because the state is taxing them to pay for its debts.
By the way, jibe is for sail boats. The word you mean is gibe.
Fpvanham
That might be because i’m not just talking about the unemployed, as they’re not the only ones who receive benefits.
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However, that person on welfare isn’t paying for it. They get it for free. 6K per year per child
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not the argument i’m making- the argument i’m making is that although they’re not paying for it, it’s not as if you can put the cost of it back in their pocket, is it, unless you’d rather give people the choice to forego education altogether?
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That person on welfare isn’t paying for it because they aren’t paying NI
1.8K per person
NI does not entitle you to the NHS. NI is far more restrictive as to what it entitles you to.
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on welfare does not equal unemployed necessarily, and as long as your earnings are above a certain rather low level, you’re paying NI. The point isn’t about entitlement, it’s that some of that money is funding the NHS, hence it’s only free at the point of delivery.
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I’m not making that argument
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That’s exactly what you wrote, that the low paid are being made poorer by taxation, yet at the same time they’re getting more than the amount they pay in tax’s worth of benefits (since you seem to think on benefits is a synonym for unemployed, i’ll reiterate that it includes the low paid employed). You can’t have it both ways.
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Nope. I’m saying that in order to become richer, you need to spend less than you earn, and you need to invest the difference.
The state is making them poorer.
Take a median wage earner. What would have happened if they didn’t give the money for NI to the state, but instead invested it. 19K a year pension, instead they get 5K
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this a serious suggestion we should lower the tax rate to zero? unless you were simply to lift low earners out of tax and make up the deficit by increasing the burden on the wealthier (an argument i presume you’re not making), essential services like education and healthcare would become private, which would cost more and make them poorer. You can’t put money aside if you can’t spend less than you earn, period.
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And they don’t have money to spare because the state is taxing them to pay for its debts.
By the way, jibe is for sail boats. The word you mean is gibe.
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already dealt with this, and yeah i know, typo.