Why give money to people who ‘don’t need it’? The case against intensive means-testing | CPAG

Why give money to people who ‘don’t need it’? The case against intensive means-testing

Published on: 
05 November 2019
Written by: 

Lizzie Flew

Senior communications and campaigns officer

Having a targeted safety net – or means-testing – can consistently miss the mark. While it’s supposed to target social security payments, it is not always the most effective way to reach the people we might define as ‘needing help most’. Perhaps counter-intuitively, more universal support, such as child benefit for families with children, or personal independence payment (PIP) for certain people with disabilities, may reach more of the target group, but simply and without stigma.

Means-testing is complicated. To assess whether someone is eligible, and whether they are complying with any conditions, the system needs lots of information about people’s incomes and lives. This can make claiming difficult, and lead to errors. We can see this in universal credit today. What is billed as a simpler system is actually pretty complicated. We learned in research on food bank use that it is often when something goes wrong with complex benefits like universal credit that people end up in acute income crisis. We met many people at food banks for whom the only reliable source of income they could depend on was child benefit.

Partly because of the complexity and difficulty in claiming, take-up rates of means-tested benefits are often lower. Whereas child benefit has a take-up rate of 93 per cent, the take-up rate for housing benefit is only 59% for eligible couples with children. Lots of people in need are missing out.

Another reason for low take up is stigma and intrusion. People who receive means-tested benefits have to share more of their lives with the government. This includes financial information and intimate relationship details, and now the two-child limit has a clause whereby you can still be eligible for support for a third or subsequent child if that child was conceived as a result of rape or coercive control, but only if you’re prepared to disclose that.

And finally, the poverty trap. For every pound you earn you lose a percentage through means-testing, which makes it hard to feel better-off. In universal credit, this is 63 pence in the pound and more once you include the council tax support taper. A pay increase is less cause for celebration if you know that your means-tested support will be withdrawn at such a high rate, making you not much better-off.

Having said all that, we are a long way from the rights-based series of entitlements that the founders of the welfare state had in mind – entitlements that would prevent the need for a means-tested top-up. Even a universal basic income type model would require additional top ups to prevent those on very low incomes from becoming worse-off. So what’s the answer? On top of benefits that should be truly universal, like child benefit for families with children, there is a lot we could still learn from the light touch targeting approach of tax credits. Particularly for people in paid work, longer awards would offer more certainty of income and require less regular means-testing for busy people.

Alongside light touch targeting, it is vital for the government to encourage take up. Rather than forcing families to jump through hoops for the support they need, the government should be removing barriers and actively encouraging take up.

Higher take up would mean more people getting the support they need. A reformed tax system could help make this affordable. More universal provision of social security, increased non-means-tested support, alongside progressive taxation, are key to a system that is well-funded, reliably reaches those who need it without unnecessary hurdles, recognises the additional costs of, for example children and disability, and does not cause stigma or income crises.

Read more in our briefing