Iain Duncan Smith has announced the launch of pre-paid cards, loaded with benefit payments to ensure that money will go to feed families and not “self-destructive habits”. It was an initiative that attracted applause from his Conservative party colleagues. But, asks Professor David Hulme, is it really necessary?
- Hear Prof David Hulme speak at a free event with Alison McGovern MP (Shadow Minister for International Development) and Deven Ghelani on November 7, during Manchester Policy Week: ‘They spend it all on booze and fags – debunking misconceptions of welfare spending in the UK and abroad’.
The need for the cards is based around the idea that the poor will spend money irresponsibly on alcohol and cigarette addiction. But where’s the evidence to support this?
Instead of relying on a large and expensive aid industry to find ways to ‘help the poor’ in other countries, our research has shown it is better to transfer money and resources directly to households in poverty and allow them to decide how best to spend it.
It’s a deceptively simple but powerful idea and it puts paid to the idea that benefits claimants just spend all their money on booze and fags if they are left to their own devices.
Our research shows that social assistance programmes work. They aren’t about throwing money out of helicopters. Recipients can be selected and monitored along the way to make sure the money is being used in the best way.
In a recent paper, World Bank economist David Evans looked at all the evidence on whether poor households really did fritter away their cash on temptation goods. By analysing various studies they found that they did not, despite common assumptions to the contrary.
Duncan Smith would do well to look abroad for examples of welfare programmes that actually work. There has been an astonishing growth of social assistance programmes in developing countries in recent years that have been successful in tackling extreme poverty and protecting the poorest from income shocks. These programmes currently reach around three quarters of a billion people in the South and are making a large contribution to the decline in extreme poverty and inequality worldwide.
Countries with much higher rates of poverty than the UK have had great success at trusting families to spend their benefits wisely. Programmes such as Mexico’s Oportunidades, Brazil’s Bolsa Familia, South Africa’s Child Support Grant, and India’s National Rural Employment Guarantee Scheme are all examples of the approach in action.
They all provide regular cash transfers to households in poverty and aim to improve their nutrition, help make sure children go to school, and encourage expectant mothers to have regular check-ups. Without such transfers, the costs of transport, school uniforms, medicine and looking for a job could well be prohibitive.
Central to the success of one of these largest schemes, Bolsa Familia, is the use of conditions; attend a regular check-up and receive the expected benefit. In Brazil, if you don’t attend school or the doctors, as the condition may be, rather than penalising people and removing benefits as we do in the UK, it’s assumed that the family is in need of additional support and the state works with them to work out what that support is.
George Osborne has also announced further changes to benefits including a limit to the amount of benefits households can receive each and year and limiting job seekers allowance. Our research into social assistance schemes has shown that setting aspirational and positive conditions to benefit payments can be hugely successful, but there is a fine line between supporting people out of poverty and oppressive sanctions and limits to social assistance that do not take into account the complexity of people’s needs.
Social assistance programmes have high set-up costs, whether they are running in a developing or developed country, but if they are well designed and have political support, they can work extremely well.
Duncan Smith’s team has been plagued with over-running, over-budget welfare reforms and that is the burden to the taxpayer. The acceleration of universal credit, as he announced, coupled with the introduction of pre-paid cards, is only going to add to the infrastructure of the UK’s benefit system.
Rather than worry about whether a minority of British welfare recipients are spending their money on booze and fags, the British public would do better to consider whether their taxpayer contributions are supporting a robust, sustainable programme that can be delivered practically.
Duncan Smith is right; we need to “reach out to the margins of society that have been left behind for too long”.
But there needs to be great focus on the steps of support that can help people out of poverty, be that access to education, literacy, minimum wage, child care, support around disabilities and illness and the multitude of complex needs that exist when you are at the margins of society, as we have seen social assistance schemes in other countries.
This will have a more far-reaching effect on lifting people out of poverty than a pre-paid card denying them a fag.