How do we get out of the maze of government benefits?

NRC
Illustration Roland Blokhuizen

The government wants to support people on low incomes by supplying benefits. These benefits are supposed to reduce the costs of rent, care and children. Except it isn’t working. Too often the benefits cause financial problems for people who already have very little.

Recently, a group of researchers concluded that the benefits system brings vulnerable groups too often into financial difficulties. "This is extremely painful for a system that is intended to provide financial support to households", wrote a working group of officials from various ministries set up by the government in an investigation into the problems surrounding benefits. The harsh conclusion: the modern Dutch welfare state makes vulnerable groups even more vulnerable.

Incorrect assumptions

Bas Jacobs, Sijbren Cnossen Professor of Public Economics at Erasmus School of Economics, is a critic of this research. He concludes that the assumptions behind the benefits system are wrong: that citizens have a regular income, and that they themselves have enough 'capacity to do and think' to actively provide the right information. Many citizens, on the contrary, have inconsistent incomes and lack the ability to understand the system.

Jacobs himself needed half a day to figure out how the formula for the rent benefit works. The government can be blamed for making it impossible for taxpayers to accurately estimate the amount of their benefits. Each surcharge has its own rules, with different standards and household definitions. What also doesn't help is that the supplements fall under different ministries, says Jacobs.

According to Jacobs, public servants don’t point fingers at themselves enough. "People can lose their entire allowance at once if they have one euro too much income or capital. This is a problem created by the government itself. Moreover, the government cannot live up to the pretence that they are paying benefits as an advance in a proper way. Such a thing is far too complicated for our government. They cause unnecessary problems for people." It can and must be simpler.

A single household allowance as a solution

Peter Kavelaars, Professor of Economics of Taxation at Erasmus School of Economics, was one of the minds behind a single household allowance. "Given the framework within we had to work at the time, this was a far-reaching simplification." The current system is insufficiently transparent and incomprehensible, thus Kavelaars.

According to him, it is of crucial importance that the system is simplified. "This means that we have to go for a lump sum, a predetermined situation, instead of focussing on the actual circumstances." This will make the system broader and less accurate to the specific situation of each individual taxpayer. "That's the price we have to pay for a workable system," states Kavelaars.

 

Professor
Faculty
Erasmus School of Economics
Professor
Faculty
Erasmus School of Economics
More information

Read the full article on NRC, 15 November 2019 (in Dutch.)