MEANS TESTED AND
UNIVERSAL BENEFITS
How should we allocate welfare benefits?
This presentation looks at
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21st challenges to Beveridge’s welfare vision
Different approaches to the welfare state
Examples of universal and means-tested benefits
The debate over which benefits should be means-tested
FOUNDING PRINCIPLES OF THE
WELFARE STATE
The founding principles of the welfare state were that
the state would look after each individual “from the
cradle to the grave.”
The Beveridge Report advocated collective
government assistance to individuals from “cradle to
grave” funded by social insurance.
State benefits would be paid to the sick, the old and the
unemployed. These would be paid for from taxes and
national insurance payments from the working
population.
Post war reconstruction
BEVERIDGE’S FIVE GIANT EVILS
Disease (lack of health care)
Idleness (unemployment)
Want (poverty)
Squalor (poor housing)
Ignorance (lack of education)
21ST CENTURY CHALLENGES
Beveridge’s founding principles were designed in the 1940s.
By the 1990s, British society had changed in many ways.
How do we pay for:
Long term care for the elderly?
The long term unemployed?
Lone parents?
Beveridge’s welfare state could
not foresee these challenges!
SHOULD THE RICH PAY MORE?
Left, Lakshmi Mittal, the UK’s richest “resident”. He is a non domicile. Right, Jimmy Carr, the comedian who
was criticised by the Prime Minister for his tax avoidance scheme.
The UK is home to some fabulously rich people who, due their non-domicile status or clever tax avoidance
schemes pay little or no tax. City bonuses to investment bankers have returned.
According to George Monbiot, tax avoidance in the United Kingdom deprives the Exchequer of between £25bn and £85bn a
year. That’s more than the UK spends on the entire NHS.
Tax avoidance
THE INDIVIDUALIST PHILOSOPHY
POLITICAL
CHALLENGE
TO THE
WELFARE
STATE
The individualist philosophy is not new. It is, in principle, no different from the “laissez faire” approach
of the 19th century.
Individualists believe that the state should have as little to do with the workings of society. It should
tax as little as possible and leave individuals to be responsible for their own wealth and health.
DAVID CAMERON’S “BIG SOCIETY”
“Circumstances; where you’re born, your neighbourhood, your school and the
choices your parents make have a huge impact. But, social problems are often
the consequence of the choices that people make”
David Cameron, Glasgow, July 2008
David Cameron on poverty
Following on from his theme of “Broken Britain”, Prime Minister David Cameron
has developed the idea of the “Big Society”. In some ways it is the Conservatives’
own third way; between the individualism of Margaret Thatcher and government
help for those in need.
Cameron seeks to “heal” the so-called broken society by encouraging greater
individual responsibility (a traditional Conservative approach) and use of the
voluntary sector to help those prepared to face up to their problems.
DEFICIT REDUCTION
In June 2010, Chancellor George Osborne delivered his
“emergency budget” to reduce the size of the country’s
budget deficit.
The UK, like most countries, has had a budget deficit for
some time, but this boomed after the Labour
Government spent money on saving the big banks
during the “credit crunch” of 2008.
The main aspects of the Coalition Government’s
economic plan until 2015 are:
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VAT increase (back to 17.5%)
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Public sector pay freeze
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Child benefit cuts
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Housing benefit cuts
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Disability Living Allowance cuts
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Tax cut for lowest paid
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Capital Gains Tax increased
Public sector workers have been protesting at cuts to
services, proposed increases in pension contributions,
the end of the final salary pension scheme and the
raising of the retirement age.
UNIVERSAL BENEFITS
Universal benefits are those which people receive
automatically, with no reference to their economic
circumstances.
In July 2012, Child Benefit (CB) amounted to £20.30 a week
for the eldest child and £13.40 a week for each additional child
with payments continuing until the age of 19 for those in fulltime education. About 7.7 million families with children
currently get CB, costing about £12bn a year.
CB is a tax-free payment to anyone bringing up a child or
young person. In theory, the Beckhams, should they return to
the UK, would receive CB for young Harper Seven, as well as
for their other children.
It is not affected by income or savings, so most people who
are bringing up a child or young person qualify for it.
From January 2013, those earning over £50,000 will no longer
be entitled to full CB. For every £100 earned over £50,000,
1% of CB will be deducted. The Government estimates that
85% of families will continue to receive CB in full.
MEANS-TESTED BENEFITS
Means tested benefits include;
•Working Tax Credit
•Child Tax Credit
•Pensions Credit
•Housing Benefit
•Council Tax Benefit
•Income Support
TOO COMPLICATED?
Tax Credit forms can be very complicated meaning
some people do not claim.
Others have been getting too much!
In February 2008 the House of Commons Accounts
Committee reported that £1 billion of tax payers money
had been wasted in errors or over payments.
The report says that some £65bn has been paid in tax
credits since 2003. Of that, £6bn was overpaid in the
first three years. By the end of 2010 HMRC had
collected £2bn of the overpayment but written off
£700m.
Of the £3.3bn still to be collected, the committee says
£1.6bn is unlikely to be recovered.
INCAPACITY BENEFIT
In July 2012 2.58 million people were
officially unemployed; 8.1% of the
labour force.
This does not include the 1.6 million
who receive Incapacity Benefit (IB),
those who have chosen to stay in full
time education or teenagers who are not
entitled to Jobseekers Allowance (JSA).
The tabloid press have, predictably,
sensationalised data released by the
Coalition Government that many
Incapacity Benefit claimants could, with
the proper support, work.
THE UNIVERSAL CREDIT
The Welfare Reform Bill was given
its Royal Assent in March 2012. It’s
main features include:
A single universal credit to come into
force in 2013. It will replace
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The Universal Credit
Income-based Jobseeker’s
Allowance
Income-related Employment and
Support Allowance
Income Support
Child Tax Credits
Working Tax Credits
Housing Benefit
There will also be an annual benefit
cap of about £26,000 per family.
SNP’S COLLECTIVIST POLICIES
The SNP Government has been remarkably collectivist.
Prescription charges have abolished. Road bridge tolls
have been abolished.
The Graduation tax has been abolished and Scotland still
has no tuition fees for higher education.
Free school meals for S1-S3 are planned (subject to local
authority funding!)
WHAT IS THE BEST WAY TO ALLOCATE
BENEFITS?
Which benefits, if any, should be universal or means-tested?
Are benefits too high or too low?
Do we have a problem with welfare dependency or this is this made up by the tabloid press?
CAN WE AFFORD SOME OF OUR POPULAR BENEFITS?
In Scotland we have two very popular but
very expensive universal “benefits.”
All students in Scotland, regardless of
their income, have their university fees
paid. Is this a subsidy for the better off?
Likewise, the National Entitlement Card
provides all over 60s in Scotland,
regardless of their income, free travel on
buses in Scotland. Is this also a subsidy
for the better off?
Should we consider means-testing these
benefits and “ring fence” the funds for
early years support for the poorest?