Joseph Rowntree Foundation, 2004, pb 1 85935 142 5, 135 pp, £8.95 (introduction by Nicholas Timmins). Order this book
This is a series of essays, from a variety of think tanks, which respond to the issues raised in the Joseph Rowntree Foundation’s Tackling Disadvantage: A 20-year enterprise (2003: see our issue 2 for 2003 for a review).
In his introduction, Nicholas Timmins suggests that there is now a consensus across the political spectrum: that poverty and social disadvantage need to be tackled; and he recognises that there is a limit to what current (means-testing) policies can achieve. He writes:
“Labour, having been in the past an arch-opponent of means testing, has in practice achieved much of its redistribution in office by using it. There has been a genuine attempt to tackle the complications and stigma of claiming means-tested benefits, not least through the creation and language of tax credits. Yet the critics, some of whose voices can be heard in these essays, are unconvinced, insisting that the price has been unacceptable complexity. And in the case of pensions, there are certainly strong arguments that the Pension Credit, while a clear gain for today’s poorer pensioners, has made decisions about saving far harder for today’s lower income workers. Add to that the recent falls in stock-markets, greater longevity and the underfunding of pension schemes and there is a feeling that Britain’s pension system is at a crossroads. Travelling further down the means-tested road is likely to lead to greater compulsion to save. The alternative route would be for the basic state pension to be rebuilt and turned into something closer to a participation, or even a ‘citizenship’, pension” (pp.18f).
For the institute for Public Policy Research, Sue Regan and Peter Robinson suggest that simply increasing the levels of tax credits and of the minimum wage is not enough, that “a positive conceptualisation of rights and responsibilities is needed to replace the muddy waters left by the demise of the contributory principle” (p.31), that simplification of the benefits system is essential (p.32), and that means-testing must be reduced (p.33).
Roger Wicks, of the Social Market Foundation, shows that both means testing (in the form of tax credits) and universal provision (Child Benefit) have increased in value for poorer families, with the result that income has been redistributed and that the National Insurance system has suffered. He recognises that the Labour government has reduced the stigma related to means-tested benefits by making 80% of families eligible for them in the form of tax credits; but he also recognises the disincentive effect of benefits being withdrawn at the same time as tax and National Insurance contributions are paid. A housing tax credit is suggested – and the problem of its complexity is recognised. A universal (rather than means-tested) asset-based welfare system is recommended (p.55).
Nicholas Hillman of Policy Exchange begins his essay with a discussion of increasing inequality, and he too describes the complexity of tax credit administration (p.69). He continues:
“The irony about the government’s reforms is that the two groups most affected by the enormous extension of means testing – children and pensioners – were already targeted by successful, popular and universal benefits. Despite the declining importance of these benefits in recent years, it is likely that they continue to offer a better long-term model than excessively complicated means tests that cover huge swathes of people” (p.70).
In relation to today’s complex pensions structure, he suggests that
“instead of searching for entirely new solutions, we should seek …… to build on the existing consensus in favour of more generous state provision, less means testing and greater incentives to save” (p.72),
and he goes on to discuss the Pensions Policy Institute’s study of a universal state pension. An overall conclusion is that poverty needs to be tackled by increasing employment incentives.
Jim McCormick’s contribution from Scotland rehearses in a Scottish context some of the debates explored earlier in the volume (for instance, that on the tension between targeting and universalism); and John Osmund and Jessica Mugaseth, writing in Wales, discuss a variety of issues related to poverty – but neither the Welsh nor the Scottish contributions give to the structure of tax and benefits the attention which it deserves, partly no doubt because neither the Scottish Parliament nor the Welsh Assembly have any control over these matters. It would be interesting to see what would happen if they were given these powers. Would we see a variety of different approaches in different parts of the UK ? And would we therefore be more able to study the pros and cons of different systems and be better able to improve the system in all parts of the UK ?
There is bound to be repetition in a collection of essays, and reviewers often pass negative comment on its presence. In this volume the repetition is instructive, and particularly the frequent verdict, from different parts of the political spectrum, that means-tested benefits are bad for incentives and that their complexity is a serious problem.