If it ain’t broke… By Kate Green

24 Sep 09
KATE GREEN | If it ain’t broke… …don’t means test it. Proposals to end universal entitlements, such as child benefit, should be resisted by the government

…don’t means test it. Proposals to end universal entitlements, such as child benefit, should be resisted by the government

Cuts in child benefit are being floated as increasingly likely by think-tanks and comment pieces in the mainstream press. But the commentary appears stuck between the superficial (phrases like ‘middle-class welfare’ ignore the truth that means testing would hurt poor families) and ideological (some eyes are glinting at the idea of cutting social programmes).

Some might be political kite flying, and few politicians have gone on the record. This is hardly surprising. Child benefit is claimed by 7 million families for 13 million children. It would be a foolhardy politician who took from the purses of so many households now.

The public finances are under intense pressure and maybe the hype helps politicians to pursue unpopular options.

But choices still exist – cuts in vital areas of expenditure are far from inevitable. The recent frenzied debate needs both perspective and values. Perspective requires an understanding of what works well; values enable proper recognition of who loses out and who is protected when cuts are made.

The Child Poverty Action Group has always been a strong proponent of child benefit over means-tested options precisely because its simplicity, stability and popularity means it provides best for poor children.

Talk of means-testing smacks not of removing ‘middle-class welfare’ from those who do not need it, but of middle-class indulgence from those who have not fully considered the implications. Child benefit encapsulates both the political and technical advantages of the universal approach.

The political advantage is that the benefit provides a foundation for support for all children – it shows that children increase costs for parents (irrespective of parental income) and that all of society has an interest and a responsibility to support the social and material conditions in which children grow up.

That families can receive child benefit irrespective of income not only frees it from stigma, but guarantees the sharp elbows of the middle classes are harnessed to ensure that service provision is of good quality and investment is maintained.

The technical advantage is the lack of a test of means. The price of targeting is complexity, which means the target is often missed. Almost all children get child benefit, whereas one in ten of even the poorest families miss out on means-tested benefits intended for them. Means testing results in complexity and is prone to error, non-take up and over- and under-payments. Means-tested benefits and tax credits need to be reassessed when relationships change or break up – child benefit is paid to the mother and can provide stability through family change.

If means testing still sounds attractive then think about the high marginal tax rates as every pound of additional income (say, from longer hours worked or higher pay) is winnowed away by the combination of taxation and lost benefits. Child benefit is unaffected by increases in income, so it operates as an effective work incentive, and avoids the complexity and cliff edges of benefits that reduce as income increases.

So before we sleepwalk into a potentially swingeing cut, let’s understand the implications and get the principles right. At a time of uncertainty for families, we should do all we can to put children first. To means test child benefit would markedly reduce its effectiveness. Poor families would inevitably lose out, through greater complexity, error and consequent barriers to claiming entitlements.

Choppy economic waters starkly remind us of the importance of the stability this benefit provides for families – means testing it would be to puncture the best lifeboat we have.

Kate Green is chief executive of the Child Poverty Action Group


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