If the government wants to nudge older people to do the right thing – to keep warm or stay active – it should consider labelling any cash payments or allowances to encourage spending in particular areas
With the population ageing, we often hear grandiose statements about the need to reshape the welfare state or transform health and social care. But, how society performs at adapting to population ageing will really come down to the behaviour of individual older people and the daily choices they make about how they lead their lives.
In other words, central to public policy on population ageing is that hoary old chestnut: behaviour change. Why? This is because demand for things like health and care are so closely bound up with whether or not individuals remain warm, well and active as they age, and how well they adapt to living independently with low-level functional impairments. Public expenditure on older people is directly determined by these daily private choices.
Any good policy wonk nowadays can reel off lists of exciting ways of changing behaviour, but one of the most interesting – and pertinent to the issue of ageing – is ‘labelling’.
What does this mean? If you’re going to give people money and you hope they will spend it in a particular way, give it a label.
The effectiveness of labelling is incredibly difficult to measure. However, last year the Institute for Fiscal Studies published truly fascinating research that found around 44% of the value of Winter Fuel Payments is indeed spent on fuel. Although the payment is given as cash, and economic theory predicts it should make no difference to the way in which individuals allocate their household budgets, the research found evidence that labelling cash transfers from the state as ‘Winter Fuel Payments’ does indeed result in it being spent on fuel.
This is why older people’s campaigners remain so keen on Winter Fuel Payments as one lever to tackle the extraordinary, persistent scandal of 25,000 ‘excess winter deaths’ among the elderly each year. Inevitably, what the research couldn’t show was how much of the remaining money received as Winter Fuel Payments was spent on keeping warm in other ways.
But, if labelling works, this raises an interesting question: should more forms of cash support to individuals be labelled? This is pertinent to public policy on ageing because most of the older population are in receipt of £107 cash from the state each week in the form of the State Pension.
In fact, just as Winter Fuel Payments are effectively a portion of the State Pension relabelled as being for fuel, it is possible to imagine other portions of the value of the State Pension being made as a standalone payment with a label attached to it.
For example, imagine taking £10 per week from the State Pension and, instead, giving people a £10 per week Keeping Active Allowance. This could lead to an outbreak of head scratching among recipients, but it would also cause people to ask themselves: how can I spend this money on keeping active? What am I doing to keep active currently? Even a marginal change in behaviour among the older population could save hundreds of millions of pounds in downstream health and care expenditure.
Of course, it’s important to get the label right. Indeed, labelling things badly can have a negative effect. Attendance Allowance is a disability benefit paid to older people, but to receive it you don’t actually need to be in receipt of care: the money is support for the extra costs of living with a disability. However, research by the University of York found evidence that older people with disabilities but no one providing care for them didn’t claim Attendance Allowance precisely because there was no one ‘attending to them’.
Inevitably, the idea of labelling cash transfers to the population in order to influence behaviour and expenditure choices will strike some as unimaginably patronising. And we shouldn’t forget that people living on a low-income – including the 3.9 million older people living in poverty in the UK – are often incredibly effective at budgeting and managing their limited resources well.
However, it is the nature of behavioural economics that its insights can appear a little patronising, even when they apply across all age groups. Nevertheless, as society adapts to address the effects of an ageing population, ‘labelling’ public support to individuals definitely deserves consideration as a potentially important and effective response.
James Lloyd is director of the Strategic Society Centre