Testing means Testing

9.55.15am BST (GMT +0100) Sun 13th Jun 2010

There has been much discussion about various state benefits recently in the context of what could be cut in order to save the government money and the question of means testing has raised its head again.

Every time I hear this subject discussed there is always someone from a body who opposes the idea of means testing whatever specific benefit they are talking about involved. The argument often revolves around for example the fact that if a benefit is universal then take up by those who need it most is higher and also that the admin costs per capita are lower. There are other arguments in favour of universality too such as the one that Frank Field advanced recently for child benefit which is along the lines of it being unfair to take away benefits from higher earners who have "played by the rules".

The problem I have with universality (especially in the current economic context) though is that it is providing benefits to people who do not really need them. Does a multi-millionaire's family really need child benefit? Does a wealthy 60 year old really need free bus travel around the country? Do rich pensioners need the Winter fuel payment? All of these benefits are currently universal.

We are having to look long and hard at cutting spending and increasing taxes. One of the taxes that is likely to go up in the emergency budget the week after next is VAT, perhaps to 20% or even higher. VAT is a regressive and to an extent stealthy tax (as an aside, I would actually prefer income tax to rise if any tax has to go up instead but that aint likely to happen at the moment). Think about what we are saying when we are preserving for example universal benefits for the children of richer families and better off older people. We are effectively asking the poor (who will be disproportionately hit by a VAT rise as a percentage of their income) to subsidise the rich.

Even though changing to means testing would not be enough to completely stop tax rises it would be enough to mitigate them. And at least we would be focusing benefits on those who need them.

Perhaps then the government would have a better claim to be doing things in a way that is consistent with the principle of us all being in this together.

http://markreckons.blogspot.com/2010/06/testing-means-testing.html