Should We Worry About Child Benefit Changes?

Today, Child Benefit stops being a universal benefit and joins the large number of other means-tested social security payments. Winter Fuel Allowance looks to be the next universal benefit to go (having already been pruned). Both these changes (both actual and prospective) raise difficult issues for those concerned with tackling poverty and inequality which haven’t really been explored amidst discussions of the “plight” of families on £50k.

So are universal benefits worth having even if millionaire bankers get them?

Well, the rationale for universal benefits, along with the rest of the welfare state, is that everyone is entitled to a decent standard of living, and that everyone has a duty to contribute to providing it. But the welfare state is much more than having some people who give and some people who take. It is a system to which almost everyone contributes and from which everyone benefits (both directly and indirectly) – people really are in it together and as such have responsibility for their fellow citizens as well as themselves.

Universal benefits are also more effective and efficient than means-tested benefits. They reach almost everyone whereas means-tested benefits have much lower take-up rates, and are associated with stigma. They are relatively stable, giving some security to people living with otherwise uncertain incomes or circumstances. Payment is based on entitlement, not proof of means, and is simple to arrange and deliver. Universal benefits have much lower risks of error and fraud than means-tested benefits, and because they don’t vary with people’s circumstances they incentivise work and have fewer ‘perverse incentives’ e.g. to keep earnings below a threshold.

On the other hand, opponents of universal benefits argue that they encourage people to expect hand-outs rather than rely on their own efforts, while the need for the wealthiest to contribute the most does not reward effort. There is, inevitably “dead-weight” i.e. benefits are paid to people who really do not need or even want them, such as the mansion-owner who gets a Winter Fuel Allowance, whilst means-tested benefits can be targeted on people who need them most.

Over the years, some benefits and services have fluctuated between being universal or means-tested, although the drive in both the current and previous UK governments has been very much towards means-testing whereas the Welsh Government is very much more ‘universalist’.

So where does that leave Child Benefit and Winter Fuel Allowance?

The changes are undoubtedly another nail in the coffin of universal benefits, and with a large take-up, both are popular benefits that help households when their budgets are squeezed. There is too a strong sense amongst those losing Child Benefit that the Government has broken the unwritten contract between citizen and state – Child Benefit was tangible proof to higher earners that at least they get something out of the welfare system. And such a cavalier change to the rules must also prompt an unease about what next?

Yet changes to Child Benefit are by no means the most draconian of reforms. There are loses of universal benefits that are much more significant in principle, such as the imposition of time limits on contribution-based Employment and Support Allowance. There are also benefit changes that are dramatically more draconian in practice, such as the ‘under-occupancy rule’ for Housing Benefit. And, as means-testing goes, a threshold of £50k before benefits are lost must be one of the highest around.

In principle, then, the changes to Child Benefit and possible changes to Winter Fuel Allowance are unwelcome because they erode the principle of universal benefits and are a unilateral breach of the ‘deal’ citizens expect of Government. But as for making me really, really outraged – it’s the changes to Housing Benefit, Disability Living Allowance and Employment and Support Allowance that will do deep and lasting harm to ordinary people whose income is a fraction of that £50k Child Benefit threshold.

Author: Victoria Winckler, Director of The Bevan Foundation


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