Is a benefits cap the best approach to deal with benefit payments deemed excessive?


something the Government would not be keen on, as it has said that it wishes to reduce couple penalties in the tax and benefit system. Crucially, is a benefits cap the best approach


to take to deal with benefit payments deemed excessive? If the government thinks that the system is giving some families overly generous benefit entitlements, it must believe that some benefit rates are inappropriately high. The best- targeted response would surely be to change the specific benefit rates responsible – in this case, this would point towards cutting the amount families receive for having large numbers of children and/or reducing the value of housing costs against which people can claim Housing Benefit. The apparent simplicity of instead just placing a cap on total benefit receipt might look appealing, and may well be politically expedient. But it seems incoherent for a Government to set a system of benefits which it evidently thinks gives some families excessive entitlements, and to then attempt to ‘right this wrong’ with a cap. If starting from scratch, this is surely not the approach one should want to take. And the Government is starting from scratch – the new Universal Credit is to replace almost all of the


existing system of means-tested benefits and tax credits for those of working age. If it has a view on the maximum reasonable level of benefit entitlement for these people, then it should design Universal Credit (and in particular, the child and housing cost additions within it) to reflect that view. It is not clear what is gained from instead layering a cap on top of a system that is designed to allow higher payments. The approach of tweaking particular benefit


rates, rather than imposing a post hoc cap on total benefit receipt, would also force the Government to think carefully about (and be explicit about) the features of the current benefits system that it considers inappropriate. Apart from improving the quality of its solution to the perceived problem, this may also improve the quality of wider debate about the issue. After all, it would make clear precisely what the debate is about. n


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Robert Joyce is a senior research economist at the Institute for Fiscal Studies working in the Direct Tax and Welfare sector. His main research interests relate to income distribution and the design and effects of the tax and benefit system. Email robert_j@ifs.org.uk Telephone 020 7291 4800 Web www.ifs.org.uk


AUTUMN 2013 SOCIETY NOW 15


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