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It is clear that the system of income support must be substantially reformed to significantly improve its adequacy and design. However, any changes to income support will require difficult trade-offs (Boston, forthcoming). These trade-offs are often represented in the so-called ‘iron triangle’ – the three main objectives of an income support system that are difficult to achieve at the same time.
These objectives are to:
These trade-offs are clear over the short term, but they become more nuanced over the longer term. For example, while higher benefit payments increase costs to government in the short term, longer-term savings for government come from the impacts of reduced poverty on the broader wellbeing of people, such as lower costs from better health, higher educational attainment, higher employment and productivity, and less crime. In addition, there will be significant benefits to the wellbeing of people and their families, which, aside from any reduced costs to government, are important in their own right.
In other words, the longer-term costs of doing nothing are considerably larger than the admittedly large short-term direct fiscal costs of reducing poverty.
Consequently, to be explicit about the trade-offs we are comfortable with, it is important that the principles underlying the provision of income support by the social security system are similarly explicit.
We have developed 10 principles for the redesign of the income support system.