Universal benefits?

Peter KellnerPresident
May 16, 2011, 5:07 AM GMT+0

At a time when public spending is to be cut, how vital is it to retain universal welfare benefits, such as child benefit, winter fuel allowances and free bus passes for the over 60s? Last week the Coalition Government announced that it would withdraw child benefit from higher-rate taxpayers from 2013. Although immediate spending pressures lie behind this decision, there are longer-term spending pressures that will persist, even when government finances return to balance, as I argue in a pamphlet for the think tank, Demos.

YouGov surveys for the Sun and Sunday Times suggests that most voters are willing to see such benefits curtailed for the better-off in principle – but ministers must be careful how they apply the principle in practice.

First, we set out the Government’s plans for child benefit and asked: ‘In principle, do you support or oppose limiting child benefit so that people with high incomes do not receive it?’ By a huge margin – 83% to 15% – voters liked the idea. But when we explained that child benefit would be retained by a married couple where both earn £30,000 a year, but withdrawn from a family where the husband earns £44,000 a year but the wife does not work, 46% regarded this as unfair and just 41% as fair.

In a subsequent poll for the Sunday Times, conducted after there had been much discussion, and criticism, in the media of the coalition’s plans, we put the point even more starkly: ‘Under the Government's proposals child benefit will be stopped for households where someone pays the higher rate of income tax, which starts at around £44,000. This means that a two-income household where both parents earn less than £44,000 could still receive child benefit despite having a higher income than a household where just one parent earned over £44,000. Do you think this is fair or unfair?’ This time, just 18% said this was fair, while 75% said it was unfair.

In the same survey we tested the wider issue of universal benefits. 56% agree they ‘are an attractive idea, but as public spending needs to be cut, it is better to do as much as possible to protect spending on health, education and the police; so it is right to withdraw cash benefits from those who are better off’. Just 23% think ‘it is vital to keep universal benefits, for they do not carry any stigma, they aid social cohesion, and they apply the principle that all taxpayers contribute to their cost and so we should all draw the benefits appropriate to each stage in our lives’.

In other words, it’s not the idea of means-testing that concerns people, but the impact of specific measures.

What about the benefits for the over 60s – winter fuel allowance and bus passes? In both cases, we offered four options: keeping the benefit as it is, withdrawing it from higher-rate taxpayers, raising the entitlement age to 70, and doing both. In both cases the clear ‘winner’ was keeping the entitlement age at 60 but withdrawing the benefit from higher-rate taxpayers.

So: the Government is in tune with public opinion when it targets higher-rate taxpayers – as is confirmed by the fact that Conservative support has not been dented by the child benefit controversy. However, it still needs to tread carefully. The spat over the ‘anomaly’ of child benefit and one- versus two-earner households should serve as a warning. For every time the Government seeks to withdraw a benefit from higher-rate taxpayers, there are bound to be thousands of losers who are worse off than many who retain their benefits.

This means the attractive simplicity of detecting high-rate taxpayers and depriving their household of certain benefits could carry a big political price. It is an exercise in rough justice – and the danger is that, for many voters, the ‘rough’ will end up repelling them more than the ‘justice’ attracts them.