Means-testing is not inevitable

The Chancellor of the Exchequer’s budget statement on the 29th October [1] contained nearly thirty mentions of Universal Credit, the major change being a one thousand pound increase in the Work Allowance (the amount that someone can earn before Universal Credit begins to be withdrawn). The Chancellor has recognised that not withdrawing benefits as earned income rises increases the incentive to earn additional income. The change therefore recognises one of the serious problems with means-testing.

Opinion on Universal Credit is divided. The Centre for Social Justice continues to think Universal Credit to be a good idea, although it has recognised that changes need to be made in order to ‘reduce the stress of transition for many claimants’. The Economist, too, thinks that ‘Universal credit has a lot going for it. Streamlining benefits into one monthly payment will eventually make the system easier to administer’. However, as Paul Spicker points out, ‘streamlining’ suggests that the same rules will apply to everyone, whereas in fact different groups – unemployed people, people who are ill, people who cannot afford their housing costs – are still subject to different complex sets of rules, causing the entire structure to be overcomplicated. ‘The myth that Universal Credit was sound in principle refuses to lie down and die’.

If we assume that means-testing is the best basis for a society’s income maintenance strategy, then at first sight Universal Credit looks better than the large number of different benefits that it is designed to replace. But what if the assumption is mistaken? The disincentives, poverty traps, stigma, social division, and bureaucratic complexity that are inevitable accompaniments of means-testing suggest that if another basis for an income maintenance strategy is available then a transition towards it could only be good for our society and our economy. Unconditional incomes would be that alternative basis. Today, about one third of households receive means-tested benefits of some kind. An easy to implement Citizen’s Basic Income of £63 per week for working age adults (with different amounts for other age groups) would reduce that number by seven per cent, and would reduce every household’s means-tested benefits, meaning that it would be easier for every household to come off them. For the time being, it would not be possible to implement a revenue-neutral Citizen’s Basic Income scheme that would remove all households from means-testing without imposing unacceptable losses on too many low income households, but that doesn’t mean that we shouldn’t begin to build an income maintenance strategy on an alternative basis.

Means-testing is not inevitable.


[1] For further comment on changes made to Universal Credit in the budget, see Paul Spicker, ‘The budget doesn’t do much for benefits