Cash payments could replace government services and benefits under new test
Ministers should consider giving people cash instead of providing them with benefits-in-kind such as food parcels, sanitary products and school laptops, a think-tank has suggested.
The Social Market Foundation said that giving people cash and allowing them to spend it themselves can be a more efficient use of public money and gives recipients more dignity and responsibility.
The think-tank said that following controversy over food parcels for low-income schoolchildren in England, UK policymakers should begin ‘cash benchmarking’ policies relating to issues include personal health, fitness and diet.
Cash benchmarking means measuring whether cash payments equal to the value of a social programme would produce better outcomes than a benefit in-kind when designing and evaluating policies. It is increasingly used to assess foreign aid programmes by US development officials .
Cash benchmarking would force the Government to say whether a benefit in-kind is delivering better results than the cash alternative and to examine whether these assumptions hold in reality, thereby answering critics who say that the Government does not trust recipients to spend cash wisely.
Applying a cash-test might mean some policies were changed and replaced with direct cash payments, the SMF said. Possible examples include the Scottish Government’s plan to provide sanitary products to anyone who needs them.
Advocates say that financial payments can deliver better value for money for taxpayers and may better tackle the root causes of poverty.
Cash benchmarking has become more common in poorer countries in recent years, with organisations including the US Agency for International Development using cash transfers as a counterfactual when assessing aid programmes.
The SMF report highlighted three practical ways cash benchmarking could be instituted across Whitehall:
- As a thought experiment – when the Government proposes a policy, it should explicate state why its favoured approach is better than giving cash.
- In government impact assessments: Official analysis of new policies should consider the option of cash transfers as a more challenging alternative to the ‘do nothing’ scenario currently used.
- In policy evaluations: Experiments could involve a cash control group, or compare outcomes to established estimates for the impact of cash.
The SMF also pointed to a recent Regulatory Policy Committee report which said that the Government fails to sufficiently plan to monitor and assess the impact of its policies as it designs them.
To improve this, the think-tank suggested the Government could stagger the rollout of an intervention to allow for comparisons to be made against a cash control group. This would largely apply to targeted individual-level polices, especially those designed to improve health or educational outcomes.
Cash benchmarking would not mean abandoning in-kind provision, the report cautioned. For example, as the Government is a more efficient purchaser of healthcare, the NHS would pass a cash benchmarking test.
But in more dubious cases – including the decision to deliver food parcels through private catering firms – cash benchmarking would force officials to explain why the state is better placed to purchase food than families.
Aveek Bhattacharya, Chief Economist at the Social Market Foundation, said:
“The recent food parcel scandal demonstrates how badly things can go wrong when the government doesn’t trust people enough to give them the money they require to meet their own needs. Such an attitude is particularly misguided given the growing evidence that cash transfers are an effective way to tackle the harms of poverty at their root.
“Aid agencies are increasingly challenging themselves to demonstrate that the goods and services they provide in kind actually provide more benefit than just giving people cash. The UK government should follow their lead in order to ensure that it is taking the best possible approach to supporting its citizens.”
Notes
- The SMF briefing paper, Give me money (That’s what I want): The case for cash benchmarking is published today at smf.co.uk/publications/the-case-for-cash
Contact
- For media inquiries, please contact Linus Pardoe, SMF Impact Officer – linus@smf.co.uk | 07402 576995