Dealing with the interactions between benefits

The discussion today in the Devolution (Further Powers) Committee tackled some thorny issues, including some I don’t begin to have the answer to – such as what kind of financial relationship could support an effective devolution of powers and what arrangements will be needed for inter-governmental coordination.  It did occur to me, however, that there is a more general problem lurking behind the difficult questions.  In principle, there shouldn’t be a problem in delivering benefits separately from two agencies at once.  It happens in loads of contexts.  For example, occupational pensions typically come from a range of different funds, all working to different rules; it works, more or less, as long as they’re able to do that without tripping over each other’s feet.  So why can’t the same be done between governments?

There are two main practical reasons why benefits interact with each other.  The first is the use of means testing.  If one benefit goes up when another goes down, there’s a potential transfer of burdens between different agencies.  That’s the objection that the White Paper makes to alterations in the tax rates, which will affect the level of Universal Credit payable.    So we need to have a basic agreement that benefits from one source will be disregarded by someone calculating benefits in another.  That’s not quite enough if both agencies are trying to run means-testing – if someone’s income goes up, they might be able to lose money both from Universal Credit (65% deduction) and from Council Tax Reduction (20%) at the same time.  That can be resolved by negotiating the terms of the calculation for each benefit. A simpler solution is for one of the two agencies to foreswear means-tests altogether.

The second problem is passporting:  we use certain kinds of status (disability, caring, full-time education) to qualify for others.  That makes life easier for claimants, because there only has to be one assessment of eligibility instead of two. (We don’t use the mechanism as we could in the interaction between DLA/PIP and ESA – but I don’t think that making systems work for claiamants has been very high on the policy agenda.)   There is not much choice here but to agree common criteria for different benefits.

Once we’ve addressed these basic issues, it should be possible to define different benefits, paid from different sources – even if they overlap (as pensions do).  Sensitivity and responsiveness to personal circumstances become the product of different combinations of benefits, rather than attempts to vary the terms of each benefit.  And once we accept that principle, other advantages start to appear.  If there are several little benefits, rather than one big benefit, mistakes and interruptions in delivery become less serious for claimants.  Eligibility criteria can be managed for each component benefit without creating artificial boundaries.  IT and administration can be simpler for each benefit.    These, of course, are some of the reasons why big, catch-all benefits – like Universal Credit – are a bad idea.


2 thoughts on “Dealing with the interactions between benefits”

  1. Might have known Universal Credit would be a bad idea, coming from the brain of that no brainer, IDS. Excuse me, but he seems to have wwrouvht havoc wherever he intervened.

  2. Is the UK Universal credit system going to differ from say the Nordic system? I read how there is little to no stigma attached to benefits in these countries but the contrary seems to happen here. Welfare recipients are demonised. As yet I haven’t come across any positivity here for Universal payments and after following your posts I can see why. They will not choose to make the system any easier for claimants as you have pointed out already.

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