Why is it you are convinced there are “cheap and affordable” ways to means test it and yet the Government, OBR and independent economists disagree with you? What is it that convinces you that you know better?
For example, a member of DWP staff on this thread told you that the DWP estimates means testing PIP would require 7000 to 8000 additional staff, the cost of whom would far outweigh the savings that they estimate of £2 million per year because so few people who are severely disabled are higher earners and those who are generally don’t claim the PIP they are entitled to anyway because it is such a humiliating and invasive process. This £2 million saving as a result of means testing would fund only 50 of those staff’s salaries, less in fact as that doesn’t cover employer NI, pension contributions etc. Then all of these extra DWP staff will need offices to work in, computer equipment, heating, insurance, HR functions, IT support functions etc.
That’s the ongoing cost every year, before you factor in the cost of putting an IT system in place. Just to give you an idea, HMRC estimates that the recent change to child benefit eligibility thresholds is going to cost them £2.7 billion to implement. That is just for changing the threshold of an existing system, with the IT infrastructure already in place (and doesn’t include the ongoing costs of them doing the extra work annually i.e. processing all of the additional tax returns, processing forms to stop child benefit payments/ restart them, eligibility, investigations, complaints, corrections of errors… etc which is roughly £1.5bn per year). And for child benefit this is relatively simple because it is administered via the existing HMRC IT system. Means testing PIP would be much more expensive because PIP is administered via DWP IT systems which are totally separate and not linked up to HMRC IT systems. Integrating these two would be almost impossible and require effectively replacing both in their entirety with one unified system because the only means-testing system that the DWP has at the moment is the functionality to receive monthly earnings reports from HMRC (that’s the extent of integration they could achieve), the rest has to be done manually, e.g. checking of bank statements for assets etc. Replacing the DWP and HMRC systems would cost tens of billions of pounds even if the Government had competent software engineers (newsflash - they do not). To give you some idea of scale, Reeve’s tax rises in the autumn statement came to a total of only £4 billion. So how do you propose this is funded?
This is just to give you any idea of internal costs to the Government of implementing your bright idea. It is extremely obvious that the costs would far, far outweigh the savings even looking only at the internal costs of simply setting up and administering the system.
Then you have to consider the economic effects of such a system. As has been explained to you, means testing PIP would create another cliff edge in the tax system which creates a disincentive to work, therefore lower employment participation. It would make it impossible for many of the people who do claim PIP and work to continue to do so, forcing them onto universal credit so rather than saving the PIP money they currently receive, they would then receive PIP and have to claim universal credit for their living costs (which they currently cover themselves by working) and lower overall tax revenue because they’d no longer be paying tax.
This is why Governments are now realising that means testing is counterproductive and that such cliff edges need removing from all levels of the tax and benefits system, and why the Government proposed the recent reforms to universal credit which were designed to try to remove just such a cliff-edge. There are plenty of economic studies on this. For example, Jeremy Hunt commissioned independent economic research on why UK productivity levels are so low (the main cause of falling living standards) and it noted that there are significant disincentives to work built into the tax system at various levels for example, the universal credit taper rate being so high it is barely worth people working more hours, the child benefit withdrawal having the same effect at that threshold meaning marginal tax rates can be as high as 80%, the withdrawal of the personal allowance and childcare funding at £100k which raises marginal tax rates for people with children to over 100% i.e. if they earn more their net income goes down. Obviously nobody will work more when the incremental increase in earnings is so low, or even negative. So you end up with people cutting their hours, or retiring early and dropping out of the workforce entirely, or emigrating. HMRC data shows bunching of earnings just below each of these thresholds so the effect is demonstrable from the data, that people obviously change their behaviour as a result of the perverse disincentives, so it lowers productivity and overall tax revenue meaning less money is available to fund services, growth is lower and everyone is poorer as a result.
Why are you convinced that all of the ONS data, OBR data, HMRC data, DWP data, and all of these independent economists are wrong and you are right?
Can you please share with us all your “cheap and affordable” way of means testing that would solve all of these above issues, costs and negative effects and actually result in lower costs to the taxpayer?