1. The ‘costs of compliance’ of benefits and tax credits
Fran Bennett (University of Oxford)
Mike Brewer (IFS)
13 June 2008

2. Outline Overview of project and methods Our motivation
There is a cost to receiving entitlement to benefits and TCs
Cost benefit analysis should reflect this
Methods exist for
valuing individuals’ and companies’ costs of complying with tax authority
valuing companies’ costs of complying with other government regulations
estimating time spent by individuals in complying with government regulations
Current policy context
Our goals for today/what we want from you

3. Overview of project
To investigate the ‘costs of compliance’ for claimants of benefits and tax credits
“Costs of compliance”: time, money, psychological costs in finding out about, claiming, maintaining, coming off benefits & TCs.
Sometimes called “administrative burden” or “compliance burden”
NOT about whether people are “compliant” (ie not committing fraud)
Team:
Fran Bennett, Robert Walker (DSPSW, University of Oxford)
Mike Brewer, Jonathan Shaw (IFS)

4. Overview of project NOT trying to estimate these costs. Instead:
what is the nature of the costs that people incur/face when starting/maintaining/stopping a claim for benefits or TCs ?
review methods used to estimate compliance costs in other areas
review literature on non-take-up of benefits and tax credits
recommendations on how to estimate costs of compliance’ for claimants of benefits and tax credits given policy context
will consult with advisors, hold seminars with interested parties

5. Applying ‘costs of compliance’ to benefits and tax credits
For example:
time: telephone call/form-filling/office visit
money: telephone calls, transport to office, fees/interest payments when delays
psychological costs: worry, stigma, intrusion, disrespect…
But:
what about “conditionality”?
what about administrative problems?

6. Cost benefit analysis and benefit design
All other things equal, it would be better to have lower compliance costs
CBAs of hypothetical policies:
“reduce number of offices with face-to-face contact, increase contact by telephone & internet”:
Trade off rise or fall in government’s administrative costs with distribution of rises and falls in individuals’ compliance costs (and other measures of quality of service received)
“ask fewer questions about income sources on IS claim form”
Trade off reduction in targeting against fall in government’s administrative costs and distribution of falls in individuals’ compliance costs

7. Existing methods Case studies Random surveys Standard Cost Model
Burdens on businesses
Random surveys
Burdens on businesses, esp of taxes
Distribution of costs and their covariates but not necessarily their causes
Standard Cost Model
UK: burdens on businesses; The Netherlands: burdens on citizens
Bottom-up tool to estimate total costs and impact of changes, and identify what causes costs
Non-take-up studies
Rational/optimal take-up: claim benefit iff value of extra money exceeds “costs”

8. Current policy direction
Impact assessments and reducing burdens on businesses
Benefit simplification
DWP now actively investigating ‘burden on citizens’
Efficiency savings (Gershon review)
Transformational Government: customer insight/relations management
(including Tell Us Once, about contact)
Welfare reform (growing conditionality)

9. What we would like from you
Comments on:
The nature of the costs that people incur/face when starting/maintaining/stopping a claim for MTBs/TCs ?
The methods used to estimate compliance costs in other areas and their applicability to MTBs/TCs ?
Links with other research or policy initiatives
Suggestions on how to get government to take this seriously
Any other observations…

10. End