St Paul's Institute

Keeping Universal Benefits - and taxing them

by The Rt Revd Dr Peter Selby

Posted: 28 Jan 2013

I'd better start by declaring an interest. I have a Freedom Pass, the enhanced London version of the national bus pass. I also receive a winter fuel allowance - the latter with an amusing letter that arrives around November telling me that I'm only getting half the allowance as they know of someone else at my address who is also eligible for the allowance (I'm happy to report that the other recipient and I are married, and are happy to share both the warmth of the house, the bills and the allowance!). But this piece is not principally about defending my 'entitlements' but about trying to think through the issues being raised more and more about the 'fairness' of universal benefits.

First, the debate itself. There are now groups of people who are being blamed for getting benefits that are not 'fair'. We are regularly regaled with pictures of millionaire OAPs riding on buses for nothing, a kind of counterbalance to the pictures of people 'sleeping off a life on benefits' while their next door neighbours get up early to go to work. What these pictures have in common is that they are political strategies which rely for their success in gaining support for various policy changes on setting one part of the population against another. I'm doubtful whether many millionaires are riding our buses for free, and if Ministers didn't put the idea into their heads I doubt whether the first thought of a person walking down the street on the way to the station and passing lots of drawn curtains is that these are 'skyvers' on benefits.

But let's start with the bus-riding millionaires. Bus companies get revenue from those who use them for nothing, revenue they would otherwise have to recoup through their charges to other passengers. So the saving that would be available from means testing this benefit is not quite all it seems. And of course if the increased fares resulted in fewer passengers and the loss of certain bus services that would harm the interests of those who do 'need' (or is it 'deserve'?) the benefit.

The same doesn't apply to the winter fuel allowance. I rather doubt whether people have their heating on higher because they get the benefit, but it does protect some poor people from fuel poverty. The case for abandoning the rather patronising payment of a 'benefit' which recipients are told how to spend (on heating, not food or visits to football) is therefore stronger. People should feel they are independent, receiving enough income to decide for themselves on the heating they need.

However once means testing is considered a good way of 'targeting' benefits to those 'who really need them' there are other, quite difficult, illogicalities that emerge. What are going to be the welfare benefits that are not means-tested? We seem to accept that the benefits we receive from the NHS are 'free at the point of use'. We're not sure whether the State Pension is a 'welfare benefit' or something you've earned by paying NI contributions.

Yet if means testing is a remedy we're also reluctant to use in relation to benefits received in cash, because of all the difficulties it brings with it, are we not left with a sense of unfairness when benefits created to prevent destitution are actually used to feather the nests of the better off? If we are not going to means test the benefit, how do we respond to the real public feelings - even allowing for the way in which they are played on by politicians for their own purposes - in a way that suggests that the concerns have been heard?

Would it not be reasonable to consider what benefits should be provided in kind to everyone - so that everyone has a stake in them - and then provide those free to everyone, without reference to their need or their means: schooling, healthcare, the removal of rubbish. We need those things to be provided for everyone.

Then there are many more 'benefits' which are provided in money form, an d there we have to hand a much simpler means of ensuring fairness than means-testing, and that is the taxation system. Raise the level of benefits and tax them: that would make sure they were treated as the income which they are, and that they don't have to be thought about separately from other income. We know that we all are required to make contributions to the social fabric by the payment of taxes, according to our need.

Bringing into one the taxation and benefit system has always been said to be too complicated - but that is because the complications have not been weighed against the immense complications of our present benefit system. The fact is that rich people don't like taxes and feel more able to attack benefits (because they don't receive them).

The best reason for me to keep my bus pass is that if I lost it I would be much less bothered about all the other people who lost it! A world in which we are all seen as contributors and all seen as recipients is the kind of world we should be aiming for.

About this author

The Rt Revd Dr Peter Selby is the former Bishop of Worcester. Following his role as part of the Interim Directing Team from 2012-2014, he continues as an adviser to St Paul's Institute.

Anthony Sperryn - Posted: 15 Feb 2013

If people knew the true cost of benefits, universal or other, it might be easier to form a proper judgement about them. However, it is difficult to say that there is a "true" cost. So much depends on the accounting conventions, so-called cost of capital and other matters about which most people have an aversion to thinking about, but which are desperately important for knowing what is really going on. Underlying all of this is government failure to decide between what is capital expenditure and what is current expenditure, to account for them properly and to have the facts fully available for the public so that the public can understand or, heaven forbid, decide the priorities.

I would like to make some specific comments about the bus pass. I, too, have one and it not only saves me a lot of money (which I wouldn't spend if I didn't have one), but it enables me to enjoy a measure of social inclusion by getting out. On the other hand, if buses are running throughout the day - to enable working people to go about without using their cars, they are providing an element of service to the community. If those buses are half full, or half empty, during the day, then the marginal cost of transporting bus-pass holders is close to zero. In other words, if I were deemed to have received a benefit worth X per annum, I would say, whether or not I was taxed on it, "Nonsense".

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