Are benefits offered to encourage people to act in certain ways.

Well depends what type of benefits you are referring to. Some government benefits like Obama phone will encourage people to get the phone because it is free. Thought some benefits are not to encourage people but just to help people and make sure that people feel safe and protected. Like if you lose your job, but you have a family to provide, there is unemployment. Unemployment pays familys who lost their job to pay for essentials. This doesn't encourage people to lose their jobs. This just helps people when they are in need of help.

what are local authorities doing to fix the problem

explanation:

its main object was the establishment of "settlement houses" in poor urban areas, in which volunteer middle-class "settlement workers" would live, hoping to share knowledge and culture with, and alleviate the poverty of, their low-income neighbors.