the impact of welfare reform on scotland · housing benefit: local housing allowance non-dependant...
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THE IMPACT OF WELFARE REFORM
ON SCOTLAND
Christina Beatty and Steve Fothergill
CRESR, Sheffield Hallam University
The Impact of Welfare Reform on Scotland (April 2013)
The Local Impact of Welfare Reform (June 2014)
The Cumulative Impact of Welfare Reform on Households in
Scotland (March 2015)
The Impact of Welfare Reform on the Scottish Labour Market (September 2015)*
* with Donald Houston, University of Glasgow
Four reports
Housing Benefit: Local Housing Allowance
Non-dependant deductions
Household benefit cap
Disability Living Allowance
Incapacity benefits
Child Benefit
Tax Credits
1 per cent up-rating
The pre-2015 reforms
Housing Benefit: Local Housing Allowance
50th to 30th percentile for setting rents in private sector
Cap on rents based on property size
Abolition of £15 ‘excess’ payments
Age limit for shared accommodation up from 25 to 35
CPI indexation
Non-dependant deductions
Higher deductions from HB to reflect contribution that non-dependant
household members are expected to make to housing costs
The pre-2015 reforms (1)
Household benefit cap
Cap on total payments to working-age claimants, set initially at £26,000 a year
Disability Living Allowance
Replacement of DLA by Personal Independence Payments
More stringent and regular medical test
Reduction in number of payment categories
The pre-2015 reforms (2)
Incapacity benefits
Employment and Support Allowance (ESA) replacing previous benefits
Tougher medical test – Work Capability Assessment
Re-testing of existing claimants
New conditionality in Work-Related Activity Group
Time limiting of non-means tested benefit for ESA claimants in Work-Related
Activity Group
Child Benefit
Three year freeze
Withdrawal from households with higher earner
The pre-2015 reforms (3)
Tax credits
Adjustments to thresholds, withdrawal rates, supplements, income disregards
and backdating
Changes to indexation and up-rating
Reduction in childcare element of WFTC
Increase in working hours requirement for WFTC
1 per cent up-rating
Up-rating by 1 per cent rather than CPI for three years for main working age
benefits and LHA element of Housing Benefit
The pre-2015 reforms (4)
Housing Benefit: under-occupation (‘Bedroom Tax’) Arrangements to avert impact on claimants in Scotland
Council Tax Benefit A hit for Scottish Government and local authorities, not claimants
Universal Credit Essentially a re-packaging of existing benefits
Not expected to result in net reduction in benefit entitlement
Most of impact will be felt well beyond 2015
Income Support for lone parents Transfer to JSA at same rates
RPI to CPI up-rating Wider public sector accounting reform
Not included……
July 2015 Budget announcements
Reductions in tax credits
Lower Household benefit cap
Lower ESA payments for claimants in work-related activity group
Four-year freeze in most working age benefits
National Living Wage
Increased personal tax allowances
……..but will add some comments later
Not included……
Treasury estimates of the overall financial saving arising from
each element of the pre-2015 reforms
Government Impact Assessments
Benefit claimant numbers and expenditure, by local authority
Additional official statistics
DWP evidence from pilot schemes
Measuring the impacts
1. The overall financial loss
Overall financial loss, GB (updated)
Per working age adult £m p.a. (£ p.a.)
Tax Credits 4,210 105
Child Benefit 3,030 75
Disability Living Allowance 2,870 70
1 per cent uprating 2,700 70
Incapacity benefits 2,480 60
Housing Benefit: LHA 1,670 40
Housing Benefit: ‘bedroom tax’ 350 10
Council Tax Benefit 340 10
Non-dependant deductions 210 5
Household benefit cap 130 5
TOTAL 17,980 450
Source: Sheffield Hallam estimates based on official data
Financial loss from pre-2015 reforms
(£m per year)
Tax Credits 350
Disability Living Allowance 320
Incapacity benefits 280
Child Benefit 240
1 per cent uprating 230
Housing Benefit: LHA 80
Non-dependent deductions 20
Household benefit cap 4
TOTAL 1,520
Source: Sheffield Hallam estimates based on official data
Overall financial loss, Scotland (updated)
Loss
(£m p.a,)
Per working age
adult (£ p.a.)
North West 2,410 530
North East 890 525
Wales 1,010 520
London 2,750 490
Yorkshire and the Humber 1,610 475
West Midlands 1,670 470
Scotland 1,520 440
East Midlands 1,260 435
South West 1,390 420
East 1,440 385
South East 2,020 365
Great Britain 17,980 450
Overall financial loss by region (updated)
Source: Sheffield Hallam estimates based on official data
Overall financial loss by district (updated)
Source: Sheffield Hallam estimates based on official data
Scottish local authorities (updated)
Financial loss from pre-2015 reforms
per working age adult £ p.a.
Glasgow 580 W Lothian 460 Perth & Kinross 365
Inverclyde 570 Dumfries & G 450 Stirling 350
W Dunbarton 550 Midlothian 450 Eilean Siar 350
Dundee 540 Fife 440 Orkney 340
N Ayrshire 540 Falkirk 430 E Renfrewshire 340
N Lanarks 510 Argyll & Bute 410 Moray 340
Clackmannan 500 E Lothian 400 E Dunbarton 320
E Ayrshire 500 Angus 390 Aberdeen 300
Renfrewshire 480 Highland 385 Aberdeenshire 290
S Lanarks 470 Borders 380 Shetland 270
S Ayrshire 470 Edinburgh 370
Source: Sheffield Hallam estimates based on official data
Overall estimated loss £m p.a.
Glasgow 239 Aberdeen 46 Midlothian 24
Edinburgh 124 Falkirk 44 Argyll & Bute 22
N Lanarks 113 Dumfries & G 42 E Dunbarton 21
Fife 103 E Ayrshire 40 Stirling 21
S Lanarks 96 Perth & Kinross 34 Moray 20
Highland 56 S Ayrshire 33 E Renfrewshire 19
Renfrewshire 55 W Dunbarton 33 Clackmannan 17
W Lothian 53 Inverclyde 30 Eilean Siar 6
Dundee 52 Angus 28 Orkney 5
Aberdeenshire 47 Borders 27 Shetland 4
N Ayrshire 47 E Lothian 25
Source: Sheffield Hallam estimates based on official data
Scottish local authorities (updated)
Less deprived More deprived
Relationship to deprivation (updated)
Sources: Sheffield Hallam estimates; 2012 Scottish Index of Multiple Deprivation
Tax Credits
Source: Sheffield Hallam estimates based on official data
1% uprating
Source: Sheffield Hallam estimates based on official data
DLA
Source: Sheffield Hallam estimates based on official data
Source: Sheffield Hallam estimates based on official data
Incapacity benefits
Council Tax Benefit
Source: Sheffield Hallam estimates based on official data
20 +
10 to 20
0 to 10
0
£ per working age adult p.a.
Greater London
Housing Benefit: Bedroom Tax
Source: Sheffield Hallam estimates based on official data
Housing Benefit: LHA
Source: Sheffield Hallam estimates based on official data
Housing Benefit: Non-dependent deductions
Source: Sheffield Hallam estimates based on official data
Benefit Cap
Source: Sheffield Hallam estimates based on official data
Child Benefit
Source: Sheffield Hallam estimates based on official data
2. The impact by ward
Overall financial loss per adult of working age, £ per year
Calton (Glasgow) 880 Garscadden (Glasgow) 690
Springburn (Glasgow) 780 Govan (Glasgow) 690
North East (Glasgow) 750 Baillieston (Glasgow) 680
Drumchapel (Glasgow) 740 East Centre (Glasgow) 680
Southside C (Glasgow) 730 North East (Dundee) 680
East End (Dundee) 730 The Lochs (Fife) 670
Shettleston (Glasgow) 720 Linn (Glasgow) 670
Buckhaven (Fife) 700 Paisley NW (Renfrew) 660
Canal (Glasgow) 700 Inverclyde N (Inverclyde) 660
East Central (Inverclyde) 690 Clydebank C (W Dunbarton) 660
Source: Sheffield Hallam estimates based on official data
Impact by ward – worst hit 20
Overall financial loss per adult of working age, £ per year
Meadows/M’side (Edinburgh) 220 Dunblane (Stirling) 210
Banchory (Aberdeenshire) 220 E Garioch (Aberdeenshire) 210
Bridge of Don (Aberdeen) 220 Westhill (Aberdeenshire) 210
Netherlee (E Renfrew) 220 Hazlehead (Aberdeen) 200
Newton M S (E Renfrew) 220 St Andrews (Fife) 180
Source: Sheffield Hallam estimates based on official data
Impact by ward – least hit 10
Relationship to deprivation
Sources: Sheffield Hallam estimates and Scottish Indices of Deprivation 2012
Glasgow
Edinburgh
Aberdeen
Fife
3. The impact by household type
Housing Benefit: LHA (private rented sector)
Low-income households, mostly working age
Under-35s, mainly men
Large families
Non-dependant deductions
Low-income households with grown-up children living at home
Household benefit cap
Large out-of-work families in high rent areas
Disability Living Allowance
Less severely disabled of working age, mostly older, mostly out-of-work
New claimants initially, existing claimants from 2015 onwards
The groups typically most affected (1)
Incapacity benefits
Out-of-work, mainly older adults with less severe health problems who are found ‘fit for work’
ESA claimants in the WRAG group – mainly older, ex-manual workers – who lose through means testing
Child Benefit
All households with children (a little)
Households with higher earners (a lot)
Tax Credits
Low-to-middle income families with children, including working households
Part-time workers on less than 24hrs a week
1 per cent up-rating
Everyone on the main working age benefits
The groups typically most affected (2)
2011 Census
the number of households in 15 household types
districts and wards
Family Resources Survey
proportion of each household type receiving specific benefits
DWP Housing Benefit Data (SHBE)
Stat-Xplore
available by household sub-groups
Sheffield Hallam impacts of welfare reform
numbers affected and financial loss
districts and wards
Estimating cumulative impact on households
Average financial loss £ p.a.
Pensioner couple 30
Single pensioner 40
Couple – no children 380
Couple – one dependent child 1,430
Couple – two or more dependent children 1,480
Couple- all children non-dependent 490
Lone parent – one dependent child 1,770
Lone parent – two or more dependent children 1,850
Lone parent – all children non-dependent 530
Single person household 490
Other – with one dependent child 1,410
Other – with two or more dependent children 1,500
Other – all full-time students 0
Other – all aged 65+ 30
Other 490
Source: Sheffield Hallam estimates based on official data
Financial loss by household type
Glasgow £ p.a. Edinburgh £ p.a.
Pensioner couple 30 30
Single pensioner 50 60
Couple – no children 520 300
Couple – one dependent child 1,830 1,380
Couple – two or more dependent children 1,900 1,420
Couple- all children non-dependent 540 320
Lone parent – one dependent child 2,280 1,720
Lone parent – two or more dependent children 2,360 1,880
Lone parent – all children non-dependent 720 450
Single person household 680 440
Other – with one dependent child 1,840 1,300
Other – with two or more dependent children 1,950 1,380
Other – all full-time students 0 0
Other – all aged 65+ 30 30
Other 660 440
Source: Sheffield Hallam estimates based on official data
Financial loss – Glasgow & Edinburgh
Approaching two-thirds (£960m a year) of the total financial loss
falls on households with dependent children
Around 40 per cent (£600m a year) falls on the sick or disabled
via DLA and incapacity benefit reform – and they lose from other
reform too
Almost half (c. £730m a year) falls on in-work households
(NB. There is some overlap between these groups)
Impact on sub-groups
4. The impact on the labour market
Has welfare reform resulted in higher employment and
lower unemployment?
Overall impact on Scottish labour market
Cumulative impact of all the pre-2015 reforms
First assessment anywhere in UK
Key question
The Westminster Government uses two main arguments to justify
welfare reform:
It saves the Treasury money, and reduces the budget deficit
It encourages out-of-work claimants to find work, and claimants
in-work to seek more hours or find higher paid work
If there’s no discernible positive impact on the labour market, the
second argument falls
Why this matters
Welfare reform is one of several things happening simultaneously
– economic upturn since 2012
Approach is based on big variation from place to place in financial
losses:
If the welfare reforms are having an important impact on labour
market outcomes it should be possible to observe a much
greater impact in the places where the reforms hit hardest
Assessing the impacts
Not all the pre-2015 reforms have come to full fruition yet
90% of loss from changeover from DLA to PIP
30% of loss from incapacity benefit reform
Not all the pre-2015 reforms likely to affect work incentives
Exclude removal of Child Benefit from higher earners
Practical complications
Sources: DWP and Sheffield Hallam estimates
Out-of-work benefit claimant rate
Feb 2011 - Nov 2014
JSA
ESA
JSA and ESA claimant rates
Feb 2011 - Nov 2014
Sources: DWP and Sheffield Hallam estimates
Grouping of authorities
Ayrshire: East Ayrshire, North Ayrshire, South Ayrshire
Fife and Central: Clackmannanshire, Falkirk, Fife, Stirling
Greater Aberdeen: Aberdeen, Aberdeenshire
Greater Dundee: Dundee, Angus, Perth & Kinross
Greater Edinburgh: Edinburgh, East Lothian, Midlothian, West Lothian
Greater Glasgow: Glasgow, East Dunbartonshire, East Renfrewshire, Inverclyde,
Renfrewshire, West Dunbartonshire
Highlands & Islands: Argyll & Bute, Eilean Siar, Highland, Moray, Orkney, Shetland
Lanarkshire: North Lanarkshire, South Lanarkshire
Southern Scotland: Borders, Dumfries & Galloway
Economic activity rate
Employment rate
ILO unemployment rate
Wider labour market variables
2011 - 2014
Sources: LFS and Sheffield Hallam estimates
Jobs in each area
late 2010 - late 2013 (1) Local authorities
(2) Groups of local authorities
Sources: BRES and Sheffield Hallam estimates
Bigger losses from welfare reform are associated with bigger falls
in the overall out-of-work claimant rate
But this relationship only applies to JSA, not ESA
No observable relationship with labour market participation or
employment rates
No relationship with employment growth
So…….
Feb 2011 – Nov 2014
Feb 1998 – Nov 2004
Aug 1993 – Aug 1996
Comparisons between upturns
Sources: DWP and Sheffield Hallam estimates
Bigger than average reductions in JSA numbers in areas of high
unemployment are a normal feature of economic upturns
So the big reductions in JSA unemployment since 2011 in a
number of Scottish local authorities cannot be attributed to
welfare reform
Which all means…..
GDP
Employment
Comparison of recessions and recoveries
Sources: ONS, LFS
On balance, the evidence provides little support for the
view that welfare reform is having important and positive
impacts on the labour market in Scotland
The labour market impact
Final comments
Reductions in tax credits
Lower household benefit cap
Lower ESA payments for claimants in work-related activity group
Four-year freeze in most working-age benefits
In all, £12bn a year of new welfare benefit cuts
Further big financial losses to claimants in Scotland (£1bn+ p.a.)
But why should these new cuts have any greater positive impact on
the labour market?
The new cuts in welfare
The financial losses arising from welfare reform are very large
indeed
The largest losses fall on the poorest places
Some types of households are hit much harder than others
Little evidence to date of a positive labour market impact
All pain, for not very much gain?
Key conclusions for Scotland