Why the Daily Record is wrong about universal benefits

Universal benefits, the Daily Record complains, favour the better off.  That’s a common misconception.  Some universal benefits do: free university tuition, for example, favoured the better off because there were far more better off students than poor ones.  Some universal benefits don’t:  universal primary education tends to favour lower income families more, because younger families, and larger families with young children, tend to be worse off.

When it comes to benefits, it makes sense to think of universal and residual benefits as different ways of paying for the same service.  The benefits have to be paid for, by tax or contributions.  People might have a tax threshold, or it might be converted into a cash benefit.  (Child Benefit was created from the fusion of two different benefits – a child tax allowance and the family allowance.)   Mathematically speaking, tax allowances and benefits boil down to the same thing,  but in the first case people don’t get the money until after the tax calculation, and in the second case they get the money before the tax calculation.  Superficially the first option seems to keep tax rates lower, but that’s only a matter of appearances.  (It may also look as if richer people aren’t getting a benefit – but as they’re paying less tax, that’s all down to smoke and mirrors.)  The catch is that the first option doesn’t get the benefits to everyone, and there has to be an extra means test to make up for the gap – so poorer people get two means tests when richer people only get one.  It also means, unfortunately, that lots of poorer people don’t actually get the benefits.

That doesn’t mean that the Record is completely wrong.  The council tax freeze – which is not a universal benefit at all – is favouring the better off.  However, ‘free’ personal care for older people – which is actually highly selective – no more favours the rich than the health service does.  The central problem with some of the universal benefits in Scotland is not that they’re universal: it’s that they’re not being paid for by higher tax.


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