beta

You're viewing our new website - find out more

Publication - Report

Welfare Reform (Further Provision) (Scotland) Act 2012: annual report 2016

Published: 30 Jun 2016
Part of:
Communities and third sector
ISBN:
9781786523341

Report on the impacts of the Welfare Reform Act 2012 on the people of Scotland.

36 page PDF

563.7kB

36 page PDF

563.7kB

Contents
Welfare Reform (Further Provision) (Scotland) Act 2012: annual report 2016
2. Impacts of the Welfare Reform Act 2012 in Scotland

36 page PDF

563.7kB

2. Impacts of the Welfare Reform Act 2012 in Scotland

2.1 Introduction

This chapter presents a brief summary of the impacts, as they are understood to date, of the key changes introduced by the Welfare Reform Act 2012 (the Act). It also highlights specific changes in UK welfare policies and instruments introduced by the Act since the 2015 Report. Sections 2.2 to 2.9 focus on separate provisions in the Act, whilst sections 2.10 and 2.11 summarise the findings of the Welfare Reform Tracking Study 2016 [9] and Emergency Food Aid Programme actions.

2.2 Universal Credit

Background

Universal Credit ( UC) is a new, integrated, working-age benefit which will, when fully implemented, replace six existing means-tested benefits [10] .

UC is being gradually introduced across the whole of the UK, and is now available in all jobcentres for single jobseekers without children. In May 2016, around 28,100 households in Scotland claimed UC - an increase of over 27,400 since May 2015. The number is expected to rise to 700,000 at full roll-out which the DWP estimates to take place by 2021. There is significant uncertainty around this date due to on-going technical complications, particularly with the real-time IT 'Digital Service' system . Phases One and Two of the national roll-out of the 'Digital Service' will take place between May and December 2016.

Inverness is the only area of Scotland to offer UC beyond out-of-work single claimants with no children and is expected to move to Full Service [11] in June 2016, with the other Highland jobcentres following in November. As part of Phase One 'Digital Service' roll-out, Musselburgh is the second area in Scotland offering UC to claimants with families (March 2016).

Latest policy changes

Measures announced in the Summer Budget 2015 have reduced the generosity of UC, reducing the 'Work Allowances' from April 2016. The 'Work Allowance' is the amount of money a household can earn every month before their UC award begins to be gradually withdrawn. This means that current and future in-work claimants will be relatively worse off under UC than they would have otherwise been in the absence of this policy change. For example, under reasonable assumptions [12] , and taking into account the introduction of the 'National Living Wage' in 2016/17, a lone parent with two children working 35 hours per week under UC could be over £300 per year worse off in 2016/17 [13] .

Impact

The impacts remain unclear, with only 3% of the expected future caseload in Scotland currently claiming UC. Initial evaluations by DWP suggest a number of positive effects of UC, with UC claimants being 8 percentage points more likely to have been employed at some point in the first nine months of their claim compared with similar JSA claimants (although this could partly be due to more people accepting short-term temporary work when on UC). [14] However, once fully rolled out UC is expected to have mixed financial impacts with 'winners' and 'losers' in terms of benefit entitlements.

The Institute of Fiscal Studies estimates that, across the UK, 2.1 million in-work households will get less in benefits due to the introduction of UC (£1,600 average annual loss) and 1.8 million households will get more (£1,500 average annual gain) [15] . Out of work households' total benefit entitlements are more likely to be unaffected by UC compared to working households. These impacts are based on the UC post-Summer Budget 2015 policy changes.

Devolution of Universal Credit flexibilities to Scotland

UC will involve a move from fortnightly to calendar monthly payments and direct payments of Housing Benefit to tenants rather than social landlords. However, following the passage of the Scotland Act 2016, the Scottish Government will now have the power to make administrative changes to UC that can change this (see section 4.2).

2.3 Abolition of the Council Tax Benefit and changes to the Social Fund

Background

Before the passage of the Act, Council Tax Benefit ( CTB) was a DWP administered form of social security which provided claimants with help to meet liability for Council Tax up to 100%.

The 'Social Fund' provided assistance for people with exceptional or intermittent needs and consisted of two components: a 'Discretionary Fund' - which provided Community Care Grants and Crisis and Budgeting Loans - and a 'Regulated Social Fund' - which met intermittent costs such as maternity, funeral, winter fuel and cold weather expenses.

The Act abolished both CTB and the Discretionary Fund from April 2013 (apart from Budgeting Loans which will continue to be paid by DWP until Universal Credit is rolled out). Non-ring-fenced funding was made available to local authorities and devolved administrations.

Responsibility for assisting those who would otherwise struggle to meet Council Tax liabilities in Scotland now sits with the Scottish Government and Scottish local authorities via the Council Tax Reduction scheme (see section 3.3). The UK Government transferred funding equivalent to forecasted CTB expenditure in Scotland, less 10%, to the Scottish budget. The Scottish scheme protects vulnerable groups by reducing their Council Tax liabilities, rather than providing benefit payments to meet them as existed under CTB.

The Scottish Government also replaced Community Care Grants and Crisis Loans with the new 'Scottish Welfare Fund' (see section 3.4), which is a national scheme administered by local authorities.

Latest policy changes

Separate from the Act, following the passage of the Scotland Act 2016, all elements of the Regulated Social Fund will now be devolved to Scotland. The elements are:

− Funeral Payments
− Sure Start Maternity Grant
− Winter Fuel Payments
− Cold Weather Payments

More detail on these is included in section 4.2.

2.4 Personal Independence Payment

Background

Personal Independence Payment ( PIP) is replacing Disability Living Allowance ( DLA) - the benefit for disabled people and people with a long-term health condition - for working-age adults. Central to the PIP system is a change to eligibility for the benefit with tighter criteria backed by 'descriptors' and a points-based approach to entitlement. An assessment for the benefit by an independent healthcare provider is a critical aspect of the system [16] .

The roll-out of PIP across the UK was initiated on 1 October 2015 and is due to conclude by 2019. As of April 2016, 85,400 people in Scotland were receiving PIP [17] .

Latest policy changes

The expected date for the full roll-out of PIP was extended to 2019 in the Summer Budget 2015 [18] . The budget also proposed changes to the eligibility criteria related to aids and appliances but widespread opposition resulted in this proposal being withdrawn and a commitment by the UK government to no further cuts to disability benefit expenditure for the remainder the UK parliamentary term. Improvements to communication and the assessment process as a result of the independent review of PIP continue to be developed and implemented [19] .

Impact

The ability to measure the impact of PIP so far is limited by a lack of information on the outcomes of the PIP assessments. The change in criteria and emphasis on the most severely disabled has meant people losing out in some areas and gaining in others. Where people have lost access to their Motability vehicle this has caused particularly negative impacts on independent living.

- 2014/15 spending on DLA in Scotland was £1,465 million, with an estimated £164 million being spent of PIP [20] .

- HM Treasury's 2013 Budget document estimates reduced spend due to DLA reform of nearly £3 billion a year by 2017/18. These figures do not reflect the reality of the PIP roll-out as a number of revisions have been made since then that revised spend upwards.

- In March 2016, the Office of Budget Responsibility ( OBR) increased their estimate of the percentage of DLA cases which would be successfully re-assessed to PIP (at any level of award) from 74% to 83% of cases [21] . Based on the number of working-age people in Scotland claiming DLA prior to reassessments starting (171,200 in August 2015), 29,100 can expect to lose their award [22] after being re-assessed.

- The OBR report also suggests that the composition of PIP caseload across different levels of award for the initial reassessment is different to what was expected previously. However, to date, DWP have not published new analysis of how many re-assessed cases can expect a higher/lower/unchanged PIP award compared to their previous DLA award.

Devolution of DLA and PIP

The introduction of the Scotland Act 2016 will transfer powers to the Scottish Parliament over a range of ill health and disability benefits, including DLA and PIP [23] (see section 4.2). These benefits currently help people towards the additional costs of their disabilities and impairments.

While exact timescales have yet to be formalised, it is anticipated that the majority of, if not all, DLA claims by people of working age will be migrated to PIP by the time the Scottish Government will be able to deliver social security benefits. The Scottish Government will have the power to change all aspects of the system and a number of commitments have already been made (see section 4.5).

2.5 'Bedroom Tax'

Under-occupancy in the social rented sector

From April 2013, DWP introduced a percentage reduction in Housing Benefit for working-age households judged to be under-occupying their property in the social rented sector (a similar reduction was introduced to the housing element of Universal Credit). The UK Government refers to this change as the 'removal of the spare room subsidy', but it is more commonly known as the 'bedroom tax'.

The Scottish Government has been mitigating the bedroom tax since 2013 through funding Discretionary Housing Payments (see section 3.2) for those affected and has announced it intends to use its powers under the Scotland Act 2016 to effectively abolish the bedroom tax for those on Universal Credit .

Impact

The introduction of the bedroom tax in Scotland raised widespread concerns about the impact on both households and social landlords.

Around 72,000 households are affected by the bedroom tax in Scotland. Housing benefit recipients have an average weekly reduction of £12.12. [24] Around 60,900 (85%) have one spare bedroom and around 10,500 (15%) have two or more bedrooms. [25]

Of those affected, around 53,000 are single person households, 11,000 are households with children and around 8,000 are couples without children. Analysis using the Family Resources Survey suggests that around 80% of households affected in Scotland contain an adult with a 'Disability Discrimination Act' recognised disability. [26]

DWP intended that the bedroom tax would lead to behavioural change, with households downsizing to smaller accommodation to avoid the cut in housing benefit. However, limited availability of accommodation in the social rented sector meant it was not possible to meet the needs of those wishing to downsize in the short-term, especially as this accommodation remains in demand from homeless households. DWP's own review suggests no more than 8% of those affected have downsized. [27]

In the absence of behavioural change, the impact of the bedroom tax on household incomes raised concerns. DWP's own review suggested that 78% of people affected said they ran out of money by the end of the week or month very/fairly often. [28] This raised the prospect of an increase in arrears and risk to tenancies as well as a knock on impact on local authority and Registered Social Landlord ( RSL) finances.

2.6 The Benefit Cap

Background

From April 2013, the UK Government introduced a cap on the total amount of benefit that working-age people can receive. The cap was set to £26,000 for couple and lone parent households and £18,200 for single households. Those in receipt of Working Tax Credit, Disability Living Allowance and Personal Independence Payment are exempt from the cap.

Latest Developments

The UK government announced in its 2015 Summer Budget that the level at which benefits were capped would be reduced to £20,000 per year for couples and single parent households (£23,000 in London) and to £13,400 per year for single adult households (see table 1).

Table 1 - Maximum Benefit Cap for different households

Household Type Benefit Cap introduced in April 2013 Benefit Cap introduced in Autumn 2016
Per year Per week Per year Per week
Couples and Lone Parent Households £26,000 £500 £20,000 £385
Single Adult Households £18,200 £350 £13,400 £257

The cap will be lowered sometime in Autumn 2016 but no firm date has yet been published. The UK Government has also announced plans to exempt households in receipt of Carer's Allowance and Guardian's Allowance from the cap.

Impact

The most recent statistics as of February 2016 show that a total of 3,587 Scottish households were affected by the current Benefit Cap since its introduction on
15 April 2013 [29] . The number of people affected by the Benefit Cap in each month has been slowly decreasing, from a high of 980 households in March 2014 to
730 households in February 2016 [30] .

Amongst these 730 households, around 100 are single adult households with no children. In the absence of behavioural changes or changes in circumstances, these single adult households could lose £4,800 per year under the new cap (in addition to any losses under the current cap). Couple and lone parent households could lose £6,000 per year. Households who were not subject to the old benefit cap but are subject to the new cap will all lose between £0 and £6,000 per year.

A UK Government impact assessment estimated that an additional 90,000 households (across the UK) could be affected in the first year, although behavioural changes (e.g. moving into work or moving home) could reduce this number. If Scotland's current share of UK households affected by the new benefit cap was the same as those affected by the current cap (3.5%), this would mean 4,000 could be affected. However, a higher benefit cap in London and exemptions for Carer's and Guardian's Allowance claimants may mean that the impacts would be different in Scotland.

DWP have now published local authority level estimates of the total number of households they expect to be affected (those already affected plus additional households affected by the changes to the cap) [31] . These estimates do not provide a single estimate for each local authority but instead provide a range of numbers that could be affected.

2.7 Jobseekers Allowance - Conditionality and Sanctions

Background

Claimants must meet certain conditions in order to remain entitled to Jobseeker's Allowance ( JSA) and some other means tested benefits such as Employment and Support Allowance and Universal Credit [32] . Since October 2013, JSA claimants are required to sign a personalised 'Claimant Commitment', which sets out the particular job readiness and job searching activities that must be undertaken in order to receive payments. If claimants do not meet the requirements, payments are stopped for a certain period. This is known as a 'sanction'.

Claimants who face sanctions are often unable to comply with the conditions for a range of complex reasons, including: lack of awareness, knowledge and understanding of the process, practical and personal barriers.

Latest Developments

A new 'Early Warning' system, which will work alongside the sanctions regime, is currently being trialled in Scotland. The Early Warning system involves issuing a warning to a claimant before a sanction is applied. This differs from the current regime, where a sanction is applied immediately after notification from DWP. During the trial a sanctioned claimant will be given a 14 day period after the 'warning' to provide evidence of a good reason before the decision to sanction is made.

The trial should reduce the number of sanctions experienced by JSA claimants in Scotland, particularly the number of sanctions which are later overturned.

Impact

Scottish Government analysis published in 2014 highlighted that sanctions tend to affect the most vulnerable in society, including lone parents, young people and disabled people [33] . In the year to December 2015 [34] , a total of 26,400adverse sanctions were applied, affecting 23,800 individuals. The absolute number of sanctions has decreased compared to the same period in 2014, when 49,400 individuals were sanctioned. However, JSA sanction statistics need to be understood in the context of falling numbers of claims to JSA as UC is rolled out across Scotland. The JSA claimant count has fallen from 113,700 in January 2014 to 59,500 in December 2015 [35] part of which can be attributed to the roll-out of Universal Credit.

The percentage of JSA claimants being sanctioned has also fallen to 2.1% in the December 2015, compared to 4.8% in January 2014. It should be noted however, that the age profile of JSA claimants has changed, with the percentage of young people aged 16-24 dropping from 25% of the caseload in January 2014 to 17% in December 2015. This change is key because young people aged 16-24 in Scotland are disproportionately affected by sanctions. DWP figures for the period from January 2014 and December 2015 indicate that 16-24 year olds accounted for somewhere between 35% and 42% of all adverse sanction decisions [36] .

There is concern that claimants who are sanctioned but subsequently successfully appeal this sanction, will still experience an interruption in payment whilst the appeal is pending an outcome.

2.8 Employment and Support Allowance

Background

Employment and Support Allowance ( ESA) was introduced in 2008 and aims at providing financial support and personalised assistance to help claimants who are ill or disabled back into work. The Work Capability Assessment allocates claimants into one of two groups:

- Support group - the claimant is assessed as having limited capability for work-related activity.

- Work-related activity group ( WRAG) - the claimant is assessed as being able to participate in work-related activity.

Only individuals in the WRAG are required to take part in interviews or training and thus only they can be sanctioned (similar to JSA [37] ) as a result of not fulfilling particular job searching activities. As of November 2015, 64,110 individuals in Scotland belonged to the ESA WRAG, accounting for 25% of all ESA claimants.

From April 2013, contributory based ESA [38] for WRAG claimants was limited to one year. In addition, provisions allowing young people to qualify for contributory ESA without meeting the normal National Insurance conditions were abolished. Eligibility for income related ESA was unaffected.

Latest Developments

ESA is one of the benefits that will be replaced by Universal Credit. According to the current timetable for UC roll-out, there should be no more new claims for ESA from June/July 2018 and the current caseload should be migrated over to UC by 2021.

The rate for new claimants in the WRAG is set to be reduced from £103 to £73 per week in 2017 to bring the rate into line with Jobseekers Allowance. The UK Government believe too few people are moving from the WRAG into work and that although £55 million is expected to be saved (total savings across the UK) [39] in the first year of the lower rate, £60 million would be spent to support people to get back to work.

Impact

The new ESA sanction regime was introduced in December 2012 and entails open-ended sanctions followed by fixed period sanctions after re-compliance.

In the year to 2015, 1,417 ESA sanctions were applied to 1,233 people in Scotland [40] . The number of sanctions have fallen from the equivalent period in 2014 where 2,419 sanctions were applied to 1707 people in Scotland [41] . Similar to the case with JSA sanctions, the WRAG caseload for ESA has fallen in this period from 66,980 to 64,100 [42]

2.9 Local Housing Allowance

Background

Private rented sector ( PRS) Housing Benefit has been a source of increased costs for DWP, especially due to increases in rental prices in London and the South East. LHA sets the maximum Housing Benefit that can be paid in each 'Broad Rental Market Area' for five property types. Prior to April 2011, it was set at the 50 th percentile and then reduced to the 30 th percentile of rents in each Broad Rental Market Area ( BRMA).

Latest Developments

In April 2014 and 2015, the annual LHA rates were set at either the greater of the 30 th percentile, or the previous LHA rate uprated by 1% or 4% as directed by the UK Government. In the 2015 Autumn Budget it was announced that the April 2016 rates would be either frozen or reduce to the 30 th percentile if lower than the 2015 rates.

The local authority uses the appropriate rate, based on the area where the person lives and the size of their household, to work out the maximum rent to be included in the Housing Benefit calculation.

Impact

Research commissioned by the DWP highlighted that, as of May 2013, the impacts of the changes to LHA had been concentrated in the South East of England, with the expected displacement of existing claimants due to the reduction in LHA not occurring0 [43] . Analysis also concluded that the gap in rent payments left by the reduction in LHA rates was mostly being met by tenants (94% of incidences) with only 6% of incidences being met by landlords [44] .

The most recent DWP data show that in November 2015 just over 77,000 PRS households in Scotland (around 3% of all households in Scotland [45] ) were in receipt of LHA.

In addition, the 2012 reforms mean that single people under 35 without dependants, with some exceptions, are only eligible for Housing Benefit in the private rented sector based on the cost of living in shared accommodation, rather than in a self-contained property. This 'Shared Accommodation Rate' is set at the one bedroom shared rate.

Recent research by the Chartered Institute of Housing [46] shows people have faced a growing gap between the LHA they receive and the rent they pay since April 2012. In a number of parts of the UK, the rate of LHA paid means that people can only afford to rent in the bottom 10% of the PRS market - this is before the effect of the LHA freeze from April 2016. Aberdeen and Shire BRMA is the worst in the UK, with less than 20% of the market available at the LHA rate for every category of dwelling.

2.10 Welfare Reform Tracking Study

Background

The Employment Research Institute at Edinburgh Napier University and the University of Stirling conducted a qualitative longitudinal study for the Scottish Government, following circa 30 individuals in receipt of working-age benefits or tax credits over the period 2013-2016. The aim was to assess both short and long-term impacts of welfare changes on Scottish households, to inform the development and implementation of the Scottish Government's welfare reform mitigation strategy.

Main findings

The main findings of the study focused on both participants' experiences of welfare reform and on policy implications for mitigating actions [47] and issues to consider in the design and implementation of new devolved benefits. The findings noted here focus on participants' experiences:

− Those affected by welfare reform are not always aware of how changes to benefits will affect them, and there are a range of situations in which people might seek information, advice and support. This needs to come from a range of services, including frontline health and social care services and dedicated information and advice agencies, with referral mechanisms between them.

− The UK Government and media rhetoric around welfare reform, and participants' interactions with some of the officials involved in administering benefits, have contributed to participants feeling stigmatised, stressed, and distrustful of the benefits system.

− Participants viewed addressing barriers to work (in the areas of education, skills, employability services, childcare, and health) as more likely to get people into work than stronger conditionality.

− Some participants found the process of applying for benefits burdensome (due to the length and repetitiveness of forms, and the amount of information required), and many experienced a range of life stressors that constrained their ability to tackle it.

− Many participants had few resources to fall back on, which meant that even temporary delay or loss of benefit (i.e. due to a sanction) could have a substantial negative impact.

− Participants who considered themselves to have fluctuating conditions found it difficult to quantify or predict the impact on their lives in the straightforward way required by the polar questions in the assessment process for disability benefits.

− Participants often found official communication (by local authorities as well as DWP) about benefits and benefit changes to be confusing and poorly worded.

− A number of participants had been caused problems not (or not solely) by the welfare changes themselves, but due to errors and delays on the part of the agencies responsible for their claims.

2.11 Emergency Food Aid

The Scottish Government funded a report - published in 2015 by The Poverty Alliance - which identified 167 groups and organisations in Scotland offering some form of emergency food provision. [48] In April 2016, The Trussell Trust reported that the main drivers of foodbank use across the UK continue to be benefit problems (e.g. administrative delays and sanctions) and low income. [49]

In 2015-16, 133,726 people in Scotland were given a three-day supply of emergency food by Trussell Trust foodbanks. [50] This is an increase of 13.6% or 16,037 people compared to 2014-15. [51] Across the UK, over one million people received three-day emergency food supplies from the Trust in 2015-16; a rise of 2% on 2014-15. [52]

The Trussell Trust has been working in partnership with the University of Hull to map foodbank data against UK census data. Early findings indicate a significant emergent link between foodbank use and areas with high numbers of people in skilled manual work or unable to work due to long-term illness or disability. [53]


Contact

Email: Philip Duffy