| Abstract: |
This report describes a scoping study to understand more about the nature of
the 'costs of compliance' that claimants of social security benefits and
(personal) tax credits incur, and discusses possible ways of measuring such
costs. 'Costs of compliance' refers to the costs - time, money and
psychological costs - that are imposed on applicants for, and recipients of,
benefits and tax credits and on others by meeting all the various requirements
placed on them by social security and tax credit law and statutory
authorities. Our main purpose in this report is to make the case for taking
compliance costs into account in considering the impact of, and changes to,
benefits and tax credits. The study aimed to investigate the extent to which
the principles underlying methods of establishing 'costs of compliance' in
other areas can be applied to applicants for, and recipients of, benefits and
tax credits. These existing methods include valuing individuals' and
companies' administrative costs of complying with the tax authorities; valuing
companies' costs in complying with government regulations; and estimating the
time spent by individuals in complying with government regulations of various
kinds. But we also think it is important for governments to consider
claimants' own perceptions and priorities in terms of the 'costs of
compliance'. Currently, the government recommends that cost-benefit analysis
should be used when assessing the impact of potential policy changes and it
produces guidance for departments on how to put this into practice. New impact
assessments have been introduced recently, which, in principle, should take
into account the monetary value of all the effects of changes, including
allocating a value to non-market items such as people's time. This kind of
assessment should therefore include analysis of the 'costs of compliance' for
benefits and tax credits claimants. In practice, however, impact assessments
do not usually include such exercises. It is important to know about the scale
and distribution of the compliance costs of benefits and tax credits, as well
as taxes, for several reasons. Time spent by recipients fulfilling their
obligations cannot be spent engaged in other activities; a more rounded
measure of the productivity of the benefits and tax credits system would
include such costs; and we could understand more about the reasons behind
non-take-up of entitlements. There could be advantages, too, in terms of
improving citizens' relationship with government. A concern about the 'burdens
on citizens' imposed by their interactions with government is now moving
quickly up the policy agenda in the UK, and a few attempts to measure
claimants' compliance costs were initiated whilst this scoping study was being
undertaken. Within the European Union, member states have also begun to
exchange information and experiences about reducing burdens on citizens more
generally. The Netherlands has developed both its policies and its measurement
methods further than many other countries. This is a scoping study and does
not set out to measure the costs of compliance incurred by benefits and tax
credits claimants. Instead, it explores the nature of the costs of compliance
for claimants of benefits and tax credits; assesses whether such costs can be
measured and, if so, to what extent; and discusses whether impact assessments
of policy changes could include such measurements. We also hope that this
report will act as a catalyst for the further development of these techniques
to improve policy assessment in the benefits and tax credits systems. |