Employing Psychology to Save the State Money

Article excerpt

Byline: Amol Rajan

NEXT Tuesday, the Behavioural Insights Team in the Cabinet Office will almost certainly become part-private, in recognition of its extraordinary success. It will eventually be split between Cabinet Office, staff and a third entity. Having expanded from eight to 20 staff under the excellent David Halpern, it will hire five more.

Set up in 2010, the so-called Nudge Unit is instigating a revolution in government, saving millions of pounds and hugely annoying exactly the sort of people -- knee-jerk libertarians, cynics and naive spendthrifts -- who most deserve annoying.

The unit mobilises research from the fields of behavioural economics and social psychology to frame the decisions citizens make, particularly in their engagement with the state. Its success has surpassed expectations.

Here are five examples. First, tax. In just two years, the unit has brought forward PS220 million in tax revenues through more efficient selfassessment.

By using brown envelopes instead of white, and handwriting addressees' names, the unit produced a 10 per cent increase in the response rate, and a 16 per cent rise in people declaring tax.

Second, jobs. In Essex, a trial involving 20,000 job seekers found that reducing the number of forms that need filling out on arriving in a Jobcentre, arranging an immediate meeting with an adviser, and asking job seekers to write about their progress, reduced by about 20 per cent the chance of those job seekers being on benefits 13 weeks later.

Third, entrepreneurs. Recently, the Department for Business asked the Treasury for PS30 million to help small businesses through vouchers worth PS2,000. That PS30 million is now subject to trials that are expected to produce the most authoritative survey ever of precisely what type of support from government entrepreneurs best respond to. …