8. Assessment of low income benefit measures
Sections 8 - 10 summarise each provision introduced by the Act, including the latest developments relating to these provisions and evidence of the impact of these provisions where available. In contrast to previous reports, these sections also include significant measures passed since the Act which will have a significant impact of UK government welfare spending in Scotland.
8.1 Universal Credit
Universal Credit ( UC) is a new, integrated, working-age benefit which will, when fully implemented, replace six existing means-tested benefits  .
UC is being gradually introduced across the whole of the UK, and is now available in all jobcentres for single jobseekers without children. In April 2017, around 51,200 people in Scotland claimed UC  - an increase of over 24,000 since April 2015. Between 650,000 and 700,000 households are expected to be receiving UC payments at full rollout in 2022. There is significant uncertainty around this date due to ongoing implementation issues.
There are now 7 Full Service sites in Scotland  with two more (Alloa and Stirling) due to launch in June 2017. The roll out for new claims is due to be completed in September 2018. Once this is complete, migration of existing benefit and tax credit claimants to Universal Credit will take place from 2019 to 2022.
8.1.2 Latest policy changes
At the Autumn Statement 2016, the Chancellor announced that the taper rate (the rate at which the UC award is reduced as claimants' earnings rise) would be reduced from 65% to 63% from April 2017. The policy is expected to increase spending by around £0.6 billion ( GB level) by 2020/21 and will have a positive impact on work incentives, as UC claimants can keep more of their additional earnings as they work more hours.
However, the Chancellor did not reverse the cuts to the 'Work Allowance' (announced at the Summer Budget 2015), which will save around £3.2 billion by 2020/21. The 'Work Allowance' is the amount of money a household can earn every month before their UC award begins to be gradually withdrawn.
In addition, the restriction of the child element in Universal Credit to the first 2 children for new claims also came into force in April 2017  ( see section 8.2). These two measures will reduce benefit income for in-work families and will only be partially mitigated by the change in the taper rate announced in the Autumn Statement.
The impacts of Universal Credit remain unclear, with less than 8% 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).  However, once fully rolled out UC is expected to have mixed financial impacts with 'winners' and 'losers' in terms of benefit entitlements.
Before the change in the taper rate was introduced, the Institute of Fiscal Studies estimated 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 loss)  . These impacts are based on the UC post-Summer Budget 2015 policy changes.
Feedback so far from areas where Full Service has rolled out indicates a significant rise in rent arrears ( see section 10.5) Th ere is also evidence of people struggling during the 6 week wait for first payments of UC, which is having a knock on effect on other services such as the Scottish Welfare Fund and on the use of food banks. The Trussell Trust has reported that full service UC areas have seen a 16.85% average increase in referrals for emergency food, more than double the national ( GB figure) average of 6.64%. The UK government Work and Pensions Committee have noted that 'some claimants have waited 12 weeks or more for their first payment due to administrative delay, doubling the expected waiting time for a claimants first payment, resulting in hardship and distress for people on UC.
8.2 Tax Credits/ UC - limit to 2 children and removal of the Family Element
From April 2017, child tax credit will be restricted to two children for new births after 6 April 2017. Also from April 2017, new child tax credits claims will also not receive the 'family element'. These changes will also apply to Universal Credit.
A household's child tax credit ( CTC) award depends on the number of children. The Child Element determines the maximum amount that a family can receive per each child and is currently set at £2,780 per year. Some families will receive less than this if their income is sufficiently high. The child element will not be awarded for third and subsequent new births after 6 April 2017 if the family is in receipt of tax credits. Families on tax credits will continue to receive a child element for more than 2 children if the children were born before 6 April 2017.
The UK government have also announced a number of exemptions to this policy:
- a second or subsequent child born in a multiple birth, but not the first child in a multiple birth
- children living long term with family or friends including informal caring arrangements where the child would otherwise likely be looked after by the local authority
- children adopted from local authority care
- children likely to have been conceived as a result of rape or coercion
The 'family element' is a standard CTC element which is paid to all households with children, worth a maximum amount of £545 per year (some families will receive less if their income is sufficiently high). New families who make a CTC claim from April 2017 will not be entitled to the family element.
Whilst these reforms were not introduced by the Act, both reforms will apply to Universal Credit. Under UC, the child element for the first child is higher than the element for second and subsequent children. From April 2017, new UC claims will receive the lower child element for all children, which is equivalent to the removal of the family element in CTCs. The restriction of child element to the first 2 children (with exemptions) will also apply. However, later in 2017, families with 3 or more children who make a new claim to Universal Credit ( UC) will also not receive the child element, regardless of the date of birth of the child.
8.2.2 Latest Development
The Scottish Government have not introduced a two child cap in assessments for the Council Tax Reduction Scheme. Rape Crisis Scotland and Scottish Women's Aid (along with many of their local organisations) have confirmed that they will not support implementation of the policy as third party assessors. In April 2017, The Equality and Human Rights Commission wrote to Damian Hinds, Minister of State for Employment, to express its concerns about the policy and the quality of equality impact assessment. The letter notes:
"The impact assessment published by the Department for Work and Pension for these changes was not sufficiently detailed to support proper scrutiny of the legislation. […] There was no evidence provided to support DWP's assumption that the measures will incentivize families to only have two children if they cannot afford to have more." 
By 2020/21 around 50,000 households in Scotland will be affected by the two child cap, reducing spending in Scotland by around £120m. Similarly, by 2020/21 the removal of the family element from new claims will reduce social security spending in Scotland by around £50 million affecting around 90,000 households. The Institute of Financial Studies estimate that a 3 child family will lose on average £2,500 per year while families with 4 children or more will lose £7,000 per year and 4 million families across the UK will see entitlements fall.
At this stage, it is not possible to say how many households will be affected by both reforms. For example, a household in receipt of CTCs that has a third child after April 2016 will be affected by the two child cap but not the removal of the family element. However, a household with three children making a new claim to UC from later this year will be affected by both policies.
8.3 Conditionality and sanctions
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, Income Support and Universal Credit  .
As introduced by the Act, since October 2013, JSA, IS, ESA and UC 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'.
As part of the Act a new model of sanction regime was introduced, with three levels of sanction (high, medium and low). As part of the Act, JSA claimants subject to higher, medium or lower level sanctions will lose 100% of their JSA entitlement for the duration of the sanction. ESA WRAG claimants subject to a lower level sanctions will lose an amount equivalent to their personal allowance for the duration of the sanction, currently around £67.50 per week. Lone parents with a child under 5 on Income Support will lose either 20% or 40% of their entitlement depending on the severity of sanction applied. The Act also introduced the sanctions regime for Universal Credit.
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.
8.3.2 Latest Developments
A new 'Early Warning' system, which will work alongside the JSA sanctions regime, was trialled in Scotland  from March 2016 to September 2016. The Early Warning system involved issuing a warning to a claimant before a sanction was 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 'Early Warning' system was used in 6,500 potential sanctions and a preliminary analysis was published by DWP in December 2016.
Following the Smith Agreement to devolve further powers to Scotland in 2014, the UK government has devolved some contracted employment provision. This has been in place since April 2017. The Scottish Government has introduced a change in policy that all devolved employment support will be voluntary. In the first transitional year, Work First Scotland and Work Able Scotland will provide up to 4,800 individuals with a disability or health condition with employment support. A new programme, Fair Start Scotland, will operate from April 2018 and aims to support at least 38,000 people over the three years of referrals.
Sanctions are now applied under four UK benefits - Employment and Support Allowance, Jobseeker's Allowance, Income Support and Universal Credit. The number of adverse JSA sanctions has declined over the past 3 years. For example, in February 2014 there were 5,369 individuals sanctioned under JSA in Scotland, compared to just 612 in December 2016 (latest data). This is partly due to the rollout of Universal Credit which has reduced the number of people claiming JSA, particularly younger people who are more likely to be sanctioned.
In Scotland, over the whole of 2016, around 7,150 people were sanctioned under JSA, 10,430 people were sanctioned under Universal Credit, 560 people were sanctioned under ESA and 310 people were sanctioned under IS. At most, this means that 18,500 people were sanctioned in Scotland in 2016  . Table 13 shows the number of sanctions applied each month to individuals across each benefit as a proportion of the relevant benefit caseload  .
Table 13: Sanctions on individuals in each month as a proportion of caseload (%) for JSA, ESA, IS and UC
The proportion of individuals subject to a sanction under JSA has been steadily falling from 2.3% of the caseload in August 2015 to 1.4% in November 2016. The proportion of individuals sanctioned under ESA has been relatively flat, with approximately 1 in 1,000 people on the benefit subject to a sanction each month. DWP data for IS sanctions only go back as far as October 2016, so there is only one data point available, the proportion for Nov-16 was 0.2%. The proportion of the UC caseload subject to a sanction is more erratic, with the rate varying from 7% of the caseload in August 2015 to 3% of the caseload in May and August 2016. The latest data shows that 6.2% of people on UC are sanctioned  .
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  . Since this analysis has been published, data on UC sanctions has been published which shows that young people are continuing to be disproportionally affected by sanctions. As of December 2016, people under the age of 25 made up 39% of the UC 'sanctionable' caseload, however 53% of all sanctions in the same month were imposed on people under the age of 25.
Some sanctions are applied and later reversed by an appeal. 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.
The initial findings from the 'Early Warning' system trial in Scotland showed that 13% of those that received an early warning of a sanction responded with additional evidence to support the reversal of a sanction decision, with around half of those being successful in overturning the sanction decision (7% of all those that received an early warning notification)  . DWP concluded that, given that the vast majority of claimants in the trial did not provide evidence within the extra 14 days, "there is clearly further work to do beyond this interim finding to inform any potential change to the current system". A final report is expected to be published in 2017 and was not available at the time of writing.
8.4 The Benefit Cap
As part of the October 2010 Spending Review, the UK government announced an intention to cap total household benefits at £500 per week for a family and £350 per week for a single person from 2013. It was expected that the cap would apply nationally from April 2013, but it was later announced a phased roll-out would be applied. National implementation was managed over a 10 week period split into two tranches. By September 2013 the DWP reported that the cap had been successfully rolled-out across the UK  .
In the Summer Budget 2015 the UK government's announced its intention to reduce the Benefit Cap.
8.4.2 Latest Developments
From 7 November 2016 the lowered Benefit Cap was introduced. The lower cap (outside London) is set at £20,000 per year for couples and single parent households and to £13,400 for single adult households. DWP estimated this would affect 5,000 households in Scotland. Those in receipt of Working Tax Credit, Disability Living Allowance, Personal Independence Payment, Carers Allowance and Guardians Allowance are exempt from the cap.
The most recent statistics (February 2017) show that a total of 7,323 Scottish households have been affected by the old and new Benefit Cap at some point since its introduction on 15 April 2013  . Before the new lower cap was introduced, there were around 800 households being capped per month in Scotland. As a result of the new cap this number rose to around 3,640 households in February 2017. Around two-thirds of these were lone parent households and around a quarter were couples with children. Overall, over 11,000 children were in households affected by the new cap.
The number of households affected by the new cap (3,640) represents around a fourfold increase on the number of households affected by the old cap (around 800 cases per month). The average reduction in housing benefit under the new cap is around £59 per week. Most households (52%) lose less than £50 per week, but some households lose considerably more, with 90 households losing over £200 per week. Those households with the biggest weekly loses are likely to be households who were affected by the previous cap  .
In terms of impact at a local authority level, the number of cases in Glasgow (682) and Edinburgh (517) represent over 37% of all households affected in Scotland. A full breakdown of the number of households affected by the Benefit Cap can be seen in table 14.
Table 14: Number of Households capped under the new cap by Local Authority
|Local Authority||Number of capped households|
|Argyll & Bute||31|
|Dumfries & Galloway||65|
|Edinburgh, City of||517|
|Na h-Eileanan Siar||<5|
|Perth & Kinross||41|
Note: Based on latest Stat-Xplore data (February 2017)
8.5 Benefit freezes and changes to uprating
With the exception of a change to uprating of the Local Housing Allowance ( see section 10.2, most uprating changes and benefit freezes were not introduced through provisions in the Act. However, some of the most significant welfare spending cuts implemented by UK governments since 2010 were the result of cutting awards across all recipients via uprating policies and benefit freezes.
8.5.2 Latest Developments
The latest change to uprating policy was the introduction of the 4 year freeze to most working-age benefits. The main working-age rates of Income Support, Jobseeker's Allowance, Employment and Support Allowance (excluding the support component) and Housing Benefit will be frozen as well as most elements of working tax credit and child tax credit (and the corresponding element of UC) and Child Benefit.
The impact of uprating policies in the 2010-15 are outlined in section 2.2. The benefit freeze passed in the 2015-17 parliament was estimated to have reduced spending by £3.5 billion by 2020/21. However, based on the latest CPI inflation forecasts, the Resolution Foundation have estimated that this could increase to around £4.5 billion by 2020/21  . The benefit freeze is expected to affect 30% of all households in the UK (around 5.5 million), which would mean around 750,000 households in Scotland could be affected.
8.6 Social Fund
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 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.
The Scottish Government has replaced Community Care Grants and Crisis Loans with the 'Scottish Welfare Fund' ( see section 7.4), which is a national scheme administered by local authorities.
8.6.2 Latest Developments
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:
- Sure Start Maternity Grant (now Best Start Grant)
- Funeral Payments (now Funeral Expense Assistance)
- Winter Fuel Payments
- Cold Weather Payments
In May 2017 the Scottish Government outlined that the next milestone in building Scotland's new social security system will be the delivery of the first benefits. These new benefits include Best Start Grant ( BSG) and Funeral Expense Assistance ( FEA), as well as increased Carer's Allowance.
The aim of the BSG is to provide support to families on low incomes at key transitions throughout a child's early years to help tackle material deprivation. The BSG will see the birth payment to the first child increase from £500 to £600, recognising that the SSMG has remained unchanged for a number of years. The BSG will provide support to families, not just for the birth of a first child, but for every child, by re-introducing a payment of £300 for second and subsequent children. The BSG will also provide two additional payments of £250 at key transitions during a child's early years, at around the time that they start nursery and before starting school.
The intention of the FEA is to provide critical support to bereaved people at a difficult time by improving the predictability, process, and awareness of the benefit. We recognise the stress caused by the complexity of the current benefit and the time taken to process it. As a result our aim for the FEA is to create a benefit that is easier for people to understand if they are eligible for assistance and process applications within 10 working days of receipt of a completed application. The increased awareness of the FEA is also expected to increase the take up of the benefit to reach more of those in need with this support.
Email: Philip Duffy, Philip.Duffy@gov.scot
Phone: 0300 244 4000 – Central Enquiry Unit
The Scottish Government
St Andrew's House