Universality vs targeting

When redistributing taxpayers’ money by way of benefits governments can go opt for universality or targeting.

The advantage of universality is that administration is simple.

The disadvantage of universal benefits is that they are very expensive and take no account of need.

Those with more than enough get butter and jam while those without enough still struggle to get bread.

The advantage of targeting is that more money can be given to fewer people, making it easier to help those most in need.

The disadvantages are that administration is more complicated, and therefore costly; and that some people in need might miss out.

In New Zealand superannuation isn’t targeted. One reason for that is that targeting would punish the thrifty.

Really wealthy people would be fine and really poor people would get help. But some of those in the middle who had saved for their retirement would find themselves no better off than those who had not.

That is a good reason for universality for the basic pension but it shouldn’t extend to extras like the winter heating payment which the government is going to pay to all beneficiaries, including superannuitants.

It’s contradictory that they don’t want the rich or even middle income people getting a tax cut but they’re going to give wealthy pensioners money towards their power bill.

Another contradiction is the fee-free study. As Bill English pointed out in parliament last week, the government didn’t want him to have a $1,000 tax cut but will pay his son’s university fees which will cost many thousands of dollars more.

Then there’s the $60 a week baby bonus which is also universal.

The good part of that is that poorer single income families who don’t qualify for parental leave payments will get it. The bad part is the wealthy who don’t need it will also get it.

All these extra payments would be far better targeted to give those in real need more and leave those who are more than capable of looking after themselves to do so.

 

 

One Response to Universality vs targeting

  1. Andrei says:

    Have to disagree – universality means this can be simply implemented with no increased bureaucracy

    When you means test things there are always anomalies with people on the borderline, cheating and the need to detect it, people managing their affairs in order to qualify etc etc

    Keep It Simple Stupid or KISS is the way to go – unless you are a fan of Big Government with armies of form shufflers and rubber stampers of course

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