Personal finance: Threshold test for New Labour

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The Independent Online
Affluence testing is the latest example of New Labour-speak to edge its way into the lexicon, but if there is meant to be any difference between affluence testing in the 21st century and the means testing which left such deep scars in the consciousness of the working class in the inter-war years, it has yet to emerge.

If affluence testing means anything different it should signify that the threshold will apply at a higher level and impact on people who consider themselves middle rather than working class. But given the progressive inflation of language since the Thirties, it seems reasonable to assume that affluence and means testing are really the same thing.

The means test was introduced by the National Government in 1931 to decide whether families who were no longer eligible for unemployment benefit could claim additional benefits from public funds. As Brewers Encyclopedia says, "the resulting inquisition was much resented [because] it took account of any earnings by members of the household and all monetary assets and penalised the provident".

Means testing was abolished after the Second World War and successive governments have stuck to the principle that if they are old, out of work, have children or are disabled, the well-off are just as entitled to benefits as the poor, and everyone is spared the indignity of having their personal finances subjected to public scrutiny.

Half a century later, however, means testing is seeking to return as a way of reducing the soaring cost of welfare spending. How much easier it would be, the argument runs, to channel benefits to where they are most needed by the really poor if better-off people were not automatically eligible to claim them.

It is an insidious argument but the disadvantages are as great now as they were in the Thirties. The higher the starting point for withholding benefits, the less money would be saved but the lower the threshold, the more thrifty people who had built up savings and income from interest and dividends would be penalised.

The really rich might not really suffer if the state pension was withheld from everyone with assets of half a million and an income of pounds 50,000. But where should the line be drawn, and should it be a hard and fast line or a graduated scale, paying full benefits to the really poor, nothing to the really rich and clawing back part of payment to the vast majority of middle-income earners? That would be the best way of ensuring the resentment of the maximum number of people.

Means testing has already made a comeback in assessing the eligibility of old people to have their long-term care bills paid, and it has not proved popular or fair. It is unlikely to win many friends if it is applied more widely.

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