Written evidence from The Citizens’ Economic Council on the Cost of Living BPI0025

Introduction

The Citizens’ Economic Council on the Cost of Living (CEC) convened in March/April 2023 to discuss fiscal policy issues arising from the cost-of-living crisis. This submission reports interim recommendations from the CEC related to benefit levels in the UK, particularly focused on the two questions:

•              What principles should inform the design and delivery of the working-age benefits system (e.g. fairness, transparency, inclusivity)? 

•              What should be the purpose of working-age benefits? 

The CEC was a deliberative democratic process where a representative sample of the UK population (39 participants) were gathered to hear high quality information and evidence from UK economic policy experts, and then to discuss and decide on principles that they would endorse for policy going forward. The participant sample was controlled to reflect the proportion of working-age benefit recipients in the UK, hence such recipients were part of the discussion and their views are reflected in this evidence.[1]

The CEC is jointly run by King's College, London and the polling firm Ipsos. Primary funding was provided by two charities - Friends Provident Foundation and Barrow Cadbury Trust - both with interests in promoting economic fairness and increasing citizen voice in UK economic policy. The project is guided by an advisory board featuring a selection of economists, policy experts and academics with significant expertise on UK fiscal policy. This includes a former Chairman of the Office for Budgetary Responsibility, a former Chief Economist at the Cabinet Office and the current Financial Times economics editor, amongst others.[2]

The opportunity to attend the Inquiry roundtable has been flagged to participants in the project in receipt of working-age benefits and I would be happy to discuss other direct ways of soliciting their engagement in this inquiry. The participants are ‘ordinary citizens', but as a result of participating in the project, they are now well-informed about issues surrounding benefits provision in the UK, and so have a unique perspective.

The next section of this submission details interim CEC recommendations. After that, the methods by which the CEC reached its recommendations is described. The CEC project report will be completed in July, detailing final results and recommendations.

Recommendations

Investing in the future: CEC participants consistently highlighted the need to think about working-age benefits in terms of investing in the future of the UK economy. They recommended that benefits should be designed in such a way as to support the education, skills and training of members of society, particularly younger workers, because ultimately it is this which enables people to ‘give back’ in the future by being more economically productive (thereby growing the economy and contributing more tax revenue). Suggestions included better connections between working-age benefit provision and skill development programmes, vocational courses and volunteering, for example. Participants’ focus was on encouraging benefit recipients to develop their potential and contribute more to economy and society in the long-term.

Building resilience: Participants recommended that working-age benefits should be designed in such a way as to help enable households and individuals to become genuinely self-reliant, i.e. less reliant on benefits in the future, and more able to support themselves and their families in future times of economic crisis. So, metrics which assess the ability of the benefits system to do this should be front and center in decision-making. This recommendation was not couched in terms of sanctions and lowering benefit levels to encourage people to work. Rather, participants recommended that benefits should be designed to enable people to take risks and opportunities to better themselves, improve their economic circumstances and contribute more to society and economy, again in the long-term.

Respecting individual circumstances: A persistent theme raised by participants was that the benefits system should be more responsive to the different situations faced by individuals and households. This theme was reflected in two recommendations:

• The headline level of working-age benefits was felt to be much less important than the fuller picture of how all the different benefits a person might be entitled to interacts with all the different kinds of taxation that they face, because it is that interaction which actually determines the final economic outcome for benefits recipients. Accordingly, this fuller picture should inform decision-making.
• Although the administrative costs associated with greater complexity in the benefits system were recognised, participants recommended that ‘cliff edges’ around eligibility to benefits should be softened as far as possible, with more sophisticated sliding scales employed, as this is fairer to each individual recipient and helps to prevent people from ‘falling through the cracks’.

One clear application relates to decisions on universal credit eligibility, which should, according to this recommendation, be made in close relation to decisions on the national insurance primary threshold and the income tax personal allowance (i.e. the marginal deduction rate, see https://commonslibrary.parliament.uk/reducing-the-universal-credit-taper-rate-and-the-effect-on-incomes/ ).

During crises: The CEC did not consider the £20 uplift to universal credit during the pandemic specifically, but did consider a range of welfare spending options open to government during crisis conditions, including targeting support to citizens in receipt of universal credit. After considering these options, the participants endorsed the principle that spending during crisis conditions should be targeted towards those most in need, which included working-age benefits recipients as well as those in receipt of other benefits (e.g. child benefit, disability benefits and the state pension).

Distributive fairness: Although participants consistently highlighted that problems of inequality are best tackled at source (i.e. by raising wages for those on low incomes, growing the economy to create better jobs and making it easier to find good quality employment if unemployed), there was a high level of support for progressivity in the tax and benefits system as a whole. This reflected the majority view that the economy does not always deliver fair outcomes by itself, and hence government has an important role in redistributing some wealth and opportunity from the well-off to the less well-off. This concern was sometimes expressed in terms of the level of economic inequality between regions of the UK.

Improving knowledge and consultation: Participants felt that there should be more opportunities for citizens to have a say on economic policy design via improved consultation, potentially on the model of the Citizens’ Economic Council itself. They also felt that the public should have access to better quality information on all aspects of economic policy so as to help them understand the implications of policy change (e.g. raising or lowering benefit levels) on them and on the economy as a whole.

How the Citizens’ Economic Council reached these recommendations

Citizen participants in the CEC were recruited by sortition: several thousand citizens were approached at random via post, then, amongst those who expressed interest, participants were chosen at random, but controlling for various demographic characteristics (age, ethnicity, gender, location, education level etc.). Final selection controlled for whether respondents were in receipt of working-age benefits, and for their basic attitudes on taxation and benefits, using the latest data on this topic in the British Social Attitudes survey. Participants were also financially compensated for their time to ensure that less politically engaged citizens participated. The result was a set of participants who closely reflected the diversity of the UK population in demographic terms and in terms of economic viewpoints.

The CEC took place online over six 3 hour sessions between the 21st of March and the 6th of April 2023. The overall question the participants were tasked with answering was: how should government respond to the cost-of-living crisis through fiscal policy? Within that overall remit, one session focused exclusively on spending via the benefits system, and the issue of overall benefit levels came up repeatedly throughout the process. Other topics included fairness in taxation and the government's long-term approach to investing in the UK economy.

The project provided citizens high quality information on the topic of concern so that they could come to their recommendations effectively. This is particularly important in the field of economic policy, where research shows that knowledge amongst UK citizens is, on average, very limited,[3] and media reporting is not always accurate or useful.[4] To this end, stimuli provided to the participants included:

•              Eight presentations by experts on the topics discussed, including presentations specifically on benefits in the UK, which were all followed by extensive Q and A.

•              Policy scenarios on benefit spending and taxation assuming a fixed budget, thus encouraging participants to think in terms of the trade-offs government actually makes when facing fiscal policy decisions.

•              Micro-simulated modelling of various changes to the benefits system, showing their likely effect on different kinds of people in the UK economy to inform policy scenarios, focusing on people reliant on the benefits system in different ways.

•              A discussion of what counts as fairness as a basis for structuring the participants' discussion, including the three main ways fairness is articulated in the UK benefits system:

1. Equal treatment – same amount spent on each household/citizen (e.g. child benefit [pre-high income charge, energy bills credit, state pension).
2. According to need – resources from ‘broadest shoulders’ to those who need it (earnings thresholds for universal credit, the degree of targeting of benefit provision in general).
3. According to contribution – ‘you get back what you put in’ (e.g. NIC conditionality for New Style Jobseekers Allowance and state pension).

Throughout the process, the participants joined regular breakout group sessions (between 4 and 6 participants in each group) guided by expert discussion facilitators. In these sessions, citizens discussed the various stimuli they had received: They

•              Made choices on which benefits and taxation policy packages they would most support and discussed why they made those choices.

•              Reflected on the effects of policy changes on the specific people identified through the micro-simulation models.

•              Discussed which were the most important ideas about fairness that should inform government decision-making.

In the final two sessions, the citizens engaged in intensive deliberation over everything that they had heard and discussed previously in order to develop a series of recommendations on principles that they felt were important for government to consider when making fiscal policy decisions. Each breakout group had this discussion separately, then all were convened together to present their ideas and suggestions.

After the sessions concluded, the project team (King's College, London and Ipsos) analysed the data and the individual sets of recommendations from each breakout group in order to establish which principles and recommendations were felt to be the most important across the group as a whole, which ones were less important, and which ones were rejected. Recommendations listed above are interim conclusions. Final analysis and recommendations will be fully detailed in the forthcoming project report.

I hope you will consider this evidence as part of the Inquiry and remain at your disposal to discuss any aspects of it.

May 2023