This paper has set out analysis and modelling of a suite of options which were considered as part of the evidence in the process of developing the income supplement policy.
When developing the options we considered what the target population of the income supplement should be, whether it should be based on existing qualifying benefits or an entirely new means test and finally whether it should be paid through an automatic process or an application.
The level of payment was largely driven by the objective to reduce relative child poverty after housing costs by 3 percentage points. Options have been compared in terms of the level of payment, their cost and also against the second objective for the income supplement related to the impact on the depth of poverty for which detailed distributional analysis has been provided.
Several policy options were found to have similar impacts and costs – these included Universal Credit based options and setting up a payment with its own means test based on income. These options were also found to strike a balance between 'coverage' and 'targeting'. The two remaining policy options either offered better coverage but substantially reduced targeting (Child Benefit based entitlement) or vice versa (Council Tax Reduction based entitlement).
The modelling results should be considered alongside other criteria that should be taken into account when designing the income supplement. A less quantitative and more discursive assessment of how the options may compare against some of these was also provided. As set out in TCPDP, policy impacts must also be considered together with the delivery challenges, which are not discussed in this paper. Instead the policy position paper sets out how both the evidence presented here and delivery considerations have informed the decision on the income supplement policy.