Understanding the Compliance Costs of Benefits and Tax Credits, by Fran Bennett, Mike Brewer and Jonathan Shaw

Institute for Fiscal Studies, 2009, 107 pp, pbk 1 903274 62 0, £40

The authors describe their research project’s aims:

This report describes a scoping study to understand more about the nature of the ‘costs of compliance’ that claimants of social security benefits and (personal) tax credits incur, and discusses possible ways of measuring such costs. ‘Costs of compliance’ refers to the costs – time, money and psychological costs – that are imposed on applicants for, and recipients of, benefits and tax credits, and on others, by meeting all the various requirements placed on them by social security and tax credit law and statutory authorities. Our main purpose in this report is to make the case for taking compliance costs into account in considering the impact of, and changes to, benefits and tax credits. (p.1)

The report is limited in scope, in that it doesn’t attempt to measure compliance costs, but it performs a most useful purpose: to explore ‘the nature of the costs of compliance for claimants of benefits and tax credits; assesses whether such costs can be measured and, if so, to what extent; and discusses whether impact assessments of policy changes could include such measurements’ (p.1).

The chief method studied is the allocation of monetary value to the time which employers and claimants expend on their relationships with the tax and benefits system; but it’s not just claimants’ time costs that the report discusses: it also recognises ‘stigma, hassle, intrusion, stress, worry, fear … uncertainty’ and ‘conditionality’ as costs. Both quantitative and qualitative surveys and methods are therefore relevant.

If ever the Government undertakes a major review of income maintenance provision in the UK – long overdue: Beveridge’s 1942 report was the last time this happened – then this report and the quantitative and qualitative surveys which we hope will flow from it will be important evidence.

The authors are right to suggest that a deeper understanding of compliance costs would contribute to more accurate calculation of the productivity of the benefits system, a better understanding of the reasons for non-take-up of benefits, and improved trust in government. We hope that the Government and others will follow the report’s recommendations, and we look forward to seeing the outcomes of the research projects which will be the result. We also very much look forward to seeing the results of the current HMRC survey of the comparative costs of applying for child benefit and child tax credits (pp.42, 87). The evidence gathered will be useful to a future review of the tax and benefits system, particularly if a Citizen’s Income is on its agenda.