The Disabled Jobless and the Receipt of Incapacity Benefit in Northern Ireland 1. Nicola Yeates

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1 The Disabled Jobless and the Receipt of Incapacity Benefit in Northern Ireland 1 Nicola The relationship between economic activity, inactivity and social security has been a central policy preoccupation throughout the 1980s and 1990s. Much of this discussion has focused on the extent to, and ways in, which the social security system supports economic inactivity amongst working-age people. The disabled working-age jobless have been a particular focus of this debate. Although the main concerns have been with the expenditure costs of economic inactivity and incapacity for work, relatively less attention has focused on the more general socio-economic disadvantages faced by the disabled population. Yet disabled people in Britain are amongst the poorest groups: they are disproportionately likely to be out of work, live in 'workless' households, and receive social security benefits. Furthermore, their likelihood of all of these has increased since the mid 1980s (Burchardt, 2000a; 2000b). To date, however, no such comprehensive research has been undertaken on disabled people's incomes in Northern Ireland. The aims of this paper are to examine trends in the receipt of Incapacity Benefit (IB) in Northern Ireland and to relate these to current policy concerns. Incapacity Benefit is one of the principal social security benefits available to working-age people. It is paid to over 1.6 million people in Britain and Northern Ireland (1999/2000) and there are a further million people who receive other benefits or National Insurance credits on the grounds of incapacity for work (DSS, 1998). About 4 per cent of recipients reside in Northern Ireland, while 7 per cent of the working-age population in Northern Ireland receive IB, compared with 4 per cent in Britain. This proportion rises to 9.5 per cent and 6 per cent, respectively, if credits-only cases are included. This differential is not specific to IB and is reflected in other disability benefits, such Disability Living Allowance. The higher 1 The author would like to acknowledge the research assistance of Grace Kelly and the Statistics and Research Branch of the Department for Social Development in the preparation of this paper. 80

2 rates of receipt of disability benefits mostly reflects the higher prevalence of disability in Northern Ireland (17 per cent of the population are disabled) (PPRU, 1992). It also reflects adverse economic conditions here, although the relationship between unemployment and incapacity for work is not an obviously straightforward one (Beatty and Fothergill, 1999a, 1999b). The paper draws some comparisons with trends in Britain, although a full exploration of the differences between Northern Ireland and Britain is outside the scope of this paper. Similarly, it is not possible to fully explore the utilisation of incapacity benefits generally or IB specifically, the relationship between the economy and IB caseloads, the operation and the impact of the benefit or of incapacity for work policies and programmes. The paper is organised into five sections. The first section reviews the structure of benefits for sick and disabled people and a number of policy issues arising. Section two maps caseload trends in sickness and disability benefits in Northern Ireland, while section three examines IB caseload trends (recipients and claimants). Section four examines how changes in IB caseloads have impacted on different social groups by gender, age, family type and religion since Section five examines flows off IB onto other benefits, notably Income Support (IS), Jobseekers Allowance (JSA). 1. Sickness and Disability Benefits: overview of provision and policy issues Sickness and disability benefits are one of the fastest-growing areas of social security. In 1999 they accounted for 48 per cent of all working-age claimants. Disabled people are the second largest group of social security recipients (after retirement pensioners): 2.88 million people of working-age claim benefits on the grounds of sickness or disability, while another 1.3 million people over retirement age receive Attendance Allowance. Sickness and disability benefits account for 25 per cent of social security expenditure. Expenditure on these benefits has increased by 9 per cent per year between 1987 and 1997, doubling in real terms over this period (DSS, 1998). Disability benefits are not only one of the fastest growing areas, but they are said to be one of the most complex and inequitable areas of the social 81

3 security system. Receipt of these benefits is based on the cause and the degree of impairment as well as individual work histories. This means that people with identical impairments and identical work records may qualify for different benefits and, consequently, greater or lesser amounts of income. This is further complicated by the fact that certain sickness and disability benefits can be combined. In Northern Ireland, 23 per cent of claimants classed as sick and disabled receive IB only, 11 per cent receive DLA only, and 1 per cent receive IS only. Of those who claim one or more benefit the most common combination is IB and DLA (17 per cent), and IB and IS (7 per cent) (SRB/DSD, 1999). Moreover, although provision for disabled people has generally improved, certain disabilities are not covered by the social security system (Barnes and Baldwin, 1999; Walker and Howard, 2000). Social security payments in respect of disability are conventionally categorised in the following way: Earnings-replacement benefits. Incapacity Benefit, Income Support and Severe Disablement Allowance 2 are paid on the basis of an assessment of incapacity for work and on the basis of additional tests, be they sufficient national insurance contributions (IB), means (IS) or degree of disablement (SDA). Additional costs benefits. Disability Living Allowance and Attendance Allowance are awarded on the basis of demonstrable need for care or supervision. DLA is paid to the under 65s, while AA is paid to those aged over 65. Wage supplements. Disability Working Allowance, now the Disabled Persons Tax Credit, is payable to disabled people working more than 16 hours a week. Compensation benefits. Industrial Injuries Disablement Benefit and War Pensions are paid on the basis of the degree of disability (loss of physical and mental faculty). The relative importance of demographic, labour market and institutional factors to the growth of sickness and disability benefits varies depending on the individual benefit. Thus, labour market and institutional factors have been more significant for IB, whereas demographic and institutional factors have been more 2 SDA was abolished for new claimants on People who become incapable of work before the age of 20 will be entitled to IB without having to satisfy national insurance contribution conditions. 82

4 significant in accounting for the growth of DLA and AA caseloads (Walker and Howard, 2000: 186). As regards Invalidity/Incapacity Benefit caseloads, Berthoud (1998) calculated that 29 per cent of the growth was due to people over pension age continuing to draw Invalidity Benefit in preference to Retirement Pension; 16 per cent of the growth was attributable to married women working and building up NICs before they became disabled; 13 per cent of the growth was due to the gradual increase in the proportion of the working-age population with impairments. The most important factor, accounting for 42 per cent of the growth, was higher take-up rates among a stable population of disabled people. There is no direct relationship between rising unemployment and increasing claims for IB, although higher unemployment is associated with more claims for disability benefits. Thus, in Britain, between 1973 and 1994 the increase in incapacity was less than the total increase in unemployment, while rapid increases in incapacity were evident in the late 1980s when unemployment was falling (Walker and Howard, 2000). Economic recession has hit disabled people harder, and they are spending more time on benefit because, once out of the labour market, they found it increasingly difficult to get back in to it. IB claimants disproportionately live in regions of high unemployment, where chances of getting a job are slight, and flexible labour market has made it harder for some with an impairment to work. In addition many are aged over 50 and have been out of work for a number of years and whose chances of returning to work are slight. Thus, Walker and Howard conclude that 'to the extent that fluctuations in the economy affect caseloads for incapacity benefits, the effect works primarily through reducing movements off benefit, which in turn causes people to spend an increasing amount of time off, or out of, work' (2000: 169; see also Burchardt, 2000). Thus the increase in caseload occurred because of a fall in the numbers leaving the benefit; indeed, between the average duration of claims increased substantially from 3 to 5 years and has since increased to 6 years. Institutional factors also explain the rise in caseloads. Many have pointed to how non-employed claimants may be categorised as disabled rather than unemployed, and the ways in which the social security system actively supports reporting of disability and claiming of incapacity benefits. Notably, sickness and 83

5 disability benefits are said to be more 'generous' than corresponding benefits for non-disabled people. Attention has particularly focused on the 'slackness' of the Invalidity/Incapacity Benefit regime compared with the JSA regime. First, the contributory element of IB is not time-limited, whereas the contributory element of JSA runs out after six months. Second, IB was paid at a higher rate than contributory JSA 3. Third, there are fewer requirements for IB claimants to search for work than for JSA claimants. Fourth, prior to April 2000, occupational pensions were not counted as income against IB, but they were against JSA. Fifth, prior to April 2000, one of the contribution conditions were that IB claimants must have paid class 1 or class 2 contributions on earnings equivalent to 25 times the LEL in any one tax year, while JSA claimants must have paid contributions in one of the last two tax years (Beatty and Fothergill, 1999a; McKay and Rowlingson, 1999; Thornton, 2000). There are said not only to be institutional incentives for unemployed people who are capable of work to claim IB rather than JSA, but also incentives to remain on IB. It is argued that IB claimants are discouraged from looking for employment because to do so might prejudice their status as incapable of work and their benefit entitlement. Furthermore, IB rates are increased the longer the duration of the claim (IB increases after 28 and 52 weeks) so that any movement off IB would require individuals to 'start again' on lower rates (Beatty and Fothergill, 1999a). The government has expressed concerns that IB is being used to subsidise early retirement, as older unemployed people (men in particular) were moving from a brief spell on JSA onto long-term IB and thence into retirement (Lilley, 1994; DSS, 1998). However, Burchardt (2000) argues that there is no evidence of an increase in the number of people without health problems or impairments claiming incapacity benefits, although there has been an increase in claims for such benefits among those already out of work who subsequently develop health problems or impairments. Notwithstanding this evidence about the relationship between unemployment and ill-health the government s concerns that many of those in receipt of IB are not 'genuinely' incapable of work and that IB constitutes a public subsidy for long- 3 Since 2000 IBST has been paid at a slightly lower rate than CBJSA for the over 25s. The IBST rate is 84

6 term economic inactivity informed reforms to the system in 1995 and These reforms aimed to restrict access to IB and make it less generous than JSA. In 1995 short-term sickness benefit and Invalidity Benefit were replaced by Incapacity Benefit for all subsequent new claims and a number of changes were made to eligibility for and payment of IB. An All Work Test was introduced to screen out those capable of work. The long-term rate of IB was made payable after 12 months of incapacity (rather than after six months in the case of invalidity benefit). Adult increases were only payable where the period of incapacity began before a certain age (35 years for the higher rate, or between 35 and 44 for the lower rate). The earnings-related additional pension was abolished and IB was made taxable (Berthoud, 1998; Ward, 1997; Wikeley, 2000). The measures introduced under the Welfare Reform and Pensions Act (WRPA) (1999) were designed to block moves from JSA onto IB, keep claimants in touch with the possibility of employment, and discourage early retirement (Bonner, 2000; Burchardt, 2000; Thornton, 2000). These measures entailed, firstly, tightening access to IB for new claimants of IB who had become sick or disabled in adulthood: required contributions must have been paid in one of the last three years instead of in any year, unless claimants have been in receipt of Invalid Care Allowance. Second, IB was means-tested against an occupational or personal pensions: IB is reduced by 50p for every 'pension pound' over 85, unless the claimant receives the higher-rate DLA care component. Finally, the All- Work Test (AWT) was replaced by the 'personal capability assessment' which screens out those capable of some work from IB and assists personal advisors in devising a back-to-work plan (the test for work capacity remains unchanged). While the intention of the government was to restrict access to IB overall the WRPA actually extends IB to a new group disabled people aged between 16 and 19, and for some in education up to the age of 25. These people would have claimed Severe Disablement Allowance (SDA). They need not have fulfilled the required contribution conditions. The WRPA has extended means-testing, restricted access to earningsreplacement benefits, with, in some cases, less benefit being paid overall while the CBJSA rate is (April 2001). 85

7 (Bruchardt, 2000a). The government estimates that the effect of the new contributions conditions will be to reduce the recipient caseload by about 10 per cent (DSS, 1998). Many of these people will henceforth sign for credits-only and claim income support (disability premium) or income-based JSA if they are capable of work. A number of unintended consequences are also predicted. First, the means testing of IB against occupational or personal pensions may actually discourage saving and investment in a private pension rather than discourage early retirement. Second, the introduction of a time threshold, after which unemployed claimants will be ineligible for IB, could bring forward the time at which those who have some health problems or impairments apply for the benefit (Burchardt, 2000a; Thornton, 2000; Wikeley, 2000). It is too early to know the impact of the WRPA reforms on disabled people's access to, or exit from, IB, their incomes or their relationship to paid employment. 2 Trends in sickness and disability benefits: expenditure and caseload In Britain social security benefits for people with a long-term illness or disability account for 25 per cent of social security expenditure in 1998/99 (DSS 1999). In Northern Ireland, 37 per cent of social security expenditure is spent on people in receipt of sickness and disability benefits (1998/9), and 18% on long-term sickness and disability benefits (DFP 1999). Caseload trends in Britain and Northern Ireland (figures 1 and 2) followed broadly the same pattern of increase during the 1990s: extra costs benefits overtook earnings-replacement benefits in 1993/94; means-tested benefits caseloads have increased; and compensatory benefits have remained broadly stable. In both Northern Ireland and Britain the fastest-growing area has been extra costs benefits, particularly DLA. In Britain about half of this growth has been due to a growing number of claims from people over state pension age, and 5 per cent was due to claims on behalf of children (Burchardt, 2000). In both Northern Ireland and Britain, earnings-replacement benefits caseloads increased during the early part of the decade, subsequently decreasing during the latter part. 86

8 thousands Figure 1 Sickness/Disability caseloads (Britain) EARNINGS REPLACEMENT EXTRA COSTS MEANS TESTED COMPENSATORY /91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 thousands 250 Figure 2 Sickness/Disability caseloads (N.Ireland) EARNINGS REPLACEMENT EXTRA COSTS 100 MEANS- TESTED COMPEN SATORY /1 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 Notes for figures 1 and 2: Earnings replacement does not include SSP as no caseload information is collected. IS with disability premium includes under 60 s only; caseload information is available from 1995 only. Claimants with Housing Benefit (disability premium) are not included due to incomplete data. Compensatory benefits do not include War Pensions as figures for Northern Ireland are not available. Source: The Government s Expenditure Plans 1996/97, 1999/2000, 2001/2002. Northern Ireland Expenditure Plans and Priorities 1994/95, 1996/97, 2999/2000. GB Income Support Quarterly Statistical Enquiry May NI Income Support Quarterly Statistical Enquiry May

9 There are a number of differences between caseload trends between Northern Ireland and Britain that are worth noting: (a) In both Northern Ireland and Britain most of the increase in extra costs benefits is accounted for by the introduction of DLA in This explains 70 per cent of the growth of these benefits in Northern Ireland and 74 per cent in Britain. The increase in DLA caseloads has been particularly sharp in Northern Ireland, having quadrupled since 1992/3; in Britain they doubled. In addition, there has been a sharper rise in Attendance Allowance caseloads in Northern Ireland than in Britain over the decade: AA caseloads have more than doubled since 1990 in Northern Ireland while in Britain they increased by 1.4 times. (b) Caseloads for earnings-replacement benefits increased both in Britain and Northern Ireland over the decade by one-fifth. Most (three-quarters) of this was attributable to the growth of IVB/IB caseloads. The replacement of IVB by IB in 1995 stemmed the growth of caseloads that had characterised the early 1990s, but in Northern Ireland IVB/IB caseloads have followed a steadier trend, rising and falling less sharply than in Britain. Thus, in Northern Ireland the IVB caseload increased by 33 per cent between 1990/1 and 1994/5, while in Britain the IVB caseload increased by 40 per cent. Since 1995/6 the IB caseload in Northern Ireland has declined by 5.6 per cent compared with 16 per cent in Britain. Notwithstanding the recent fall in the IB caseloads in Northern Ireland and Britain, IVB/IB caseloads increased during the 1990s as a whole, by 30 per cent in Northern Ireland and by 20 per cent in Britain. (c) The growth of means-tested benefits caseloads is accounted for by the sharp increase in the numbers receiving income support (with a disability premium) in both Northern Ireland and Britain. Disability Working Allowance comprised just 1 per cent of caseload. However, since 1994/5 the income support caseload has increased at a greater rate in Northern Ireland (42 per cent), than in Britain (34 per cent). (d) Separate figures for the War Pensions caseload in Northern Ireland are not available, so compensatory benefits in this analysis are restricted to industrial 88

10 injuries disablement benefit. In Northern Ireland the caseload for this benefit increased by 22 per cent while in Britain it declined by 6 per cent. 3. Trends in the receipt of Incapacity Benefit This section examines trends in IB caseloads since 1996 for both recipients 4 and claimants. 5 It focuses on aggregate caseload trends, flows onto IB, duration of receipt of IB and exit from IB (flows off IB onto other benefits are discussed in section 5). As noted in the previous section trends in IB receipt in Northern Ireland broadly follow the same pattern as in Britain, although the increase and subsequent decrease in caseloads have not been as steep in Northern Ireland. Figure 3 presents trends in IB recipient caseloads. Figure 3 Invalidity Benefit/Incapacity Benefit caseload (recipients) thousands thousands GB NI /91 91/92 92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/ Recipients refer to people who are in receipt of payment. 5 Claimants refer to people who are in receipt of payment as well as those who have applied for IB and who continue to submit medical evidence, but who either are not entitled because of failing the contribution conditions or have their benefit extinguished because of an overlap with another benefit or because of hospitalisation. 89

11 Incapacity benefit occupies a relatively more important place in Northern Ireland than it does in Britain, both in terms of expenditure and caseload. In Northern Ireland IB accounts for 11 per cent of social security expenditure, while in Britain it accounts for 7 per cent (DSS, 1999; DFP, 1999). This can be accounted for by the fact that IB recipients account for a greater proportion of the working-age population in Northern Ireland IB recipients accounted for 7 per cent of the working-age population in 1999 (down from 7.7 per cent in 1996), compared with 4 per cent in Britain. However, it should be noted that certain parts of Britain, notably the northeast of England, Wales and Scotland, have as high levels of receipt of IB as Northern Ireland. In addition, certain parts of Northern Ireland, for example Castlereagh, North Down and Fermanagh District Councils (DCs), IB receipt is akin to the British average. The DCs with above Northern Ireland average caseloads are Strabane, Omagh, Newry and Mourne, Magherafelt, Dungannon, Derry, Craigavon, Cookstown, Belfast, Banbridge and Armagh. In 1996, the five DCs with the highest number of IB recipients as a proportion of their relevant population were, Cookstown (10.6 per cent), Craigavon (9.8 per cent), Strabane (9.8 per cent), Magherafelt (9.0 per cent) and Newry & Mourne (8.8 per cent). In 1999, the same DCs remained in the top five, but were joined by Omagh: Cookstown (10.0 per cent), Strabane (9.0 per cent), Craigavon (8.8 per cent), Omagh (8.3 per cent) and Magherafelt (8.1 per cent). The DCs with the lowest number of IB recipients to the relevant population in 1996 were Fermanagh (4.5 per cent), North Down (5.1 per cent), Coleraine (5.3 per cent), Antrim (5.7 per cent) and Lisburn (5.7 per cent). By 1999 this had become Castlereagh (4.1 per cent), North Down (4.3 per cent), Fermanagh (4.6 per cent), Antrim (5.0 per cent) and Coleraine (5.1 per cent). Figure 4 shows the change in the proportion of IB recipients to the relevant population by DC between 1996 and The sharpest decrease over this period occurred in Castlereagh, Banbridge and Derry. In Fermanagh the proportion of IB recipients relative to the relevant population increased. DCs can give a more detailed picture of IB receipt across Northern Ireland but they mask differentials within these areas. However, population estimates at ward level, 90

12 being based on the 1991 Census, are judged to be too out-of-date for an accurate assessment of IB receipt at this level, so are not used. Figure 4 Change in IB caseload by District Council as a proportion of the relevant population,* Castlereagh Banbridge Derry Craigavon Newtownabbey Belfast Magherafelt Ballymena Newry & Mourne Carrickfergus North Down Strabane Northern Ireland Antrim Cookstown Down Armagh Larne Ards Dungannon Lisburn Moyle Ballymoney Coleraine Omagh Limavady 0.50 Fermanagh *Relevant population band (males 18-69, females 18-64) was chosen because, although there is no lower age limit to satisfy National Insurance conditions, two years contributions must have been paid or credited. It was also chosen to capture those receiving a transitional award under the old Invalidity Benefit rules. Population is based on mid-year estimates (NISRA 2000). It is difficult to assess how important the state of the economy has been in contributing to the falling caseloads. Unemployment (as measured by the claimant count) has fallen since the mid 1990s but, while there is a resemblance between the geography of sickness-related claimants and the geography of unemployment-related claimants (Beatty and Fothergill, 1999a: 15), there is no direct relationship between unemployment and the number of claims for IB (Burchardt, 2000; Walker and Howard, 2000). This research has not examined the impact of the economy on caseloads in Northern Ireland. However, the indirect relationship between IB caseloads and economic inactivity seems to be borne out by the fact that between August/ October 1997 and the corresponding period in 2000, economic activity rates amongst people of working age have actually decreased from 74.6 per cent to 71.3 per cent. Economic activity rates of men (all ages) have decreased the most (DETI/NISRA, 2000). Had greater economic inactivity translated directly into more IB claims then we should have 91

13 seen a much greater increase in the number of claimants than the 3 per cent that has actually occurred, while we should have seen a rise in the number of recipients. The overall decline in recipient caseloads in Northern Ireland is, like Britain, most easily attributable to reforms affecting eligibility for IB (see section 2). These reforms have aimed to both stem the flow onto IB and accelerate the outflow from it. There has been a steady decline in the number of claims for IB since 1996: in February 2000 there were nearly 2,000 fewer claims than in February Claims data does not distinguish between successful and unsuccessful claims, but data relating to monthly flows onto IB shows that the numbers of 'successful' claims have remained about the same overall (figure 5). Given the downward trend in claims, it appears that proportionately more people are entering IB compared with a few years ago. Figure 5 IB claims and flows (NI) 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 Claims Onto IB Off IB 2,000 1,500 1,000 Feb-97 Aug-97 Feb-98 Aug-98 Feb-99 Aug-99 Feb-00 The rise in the numbers of people exiting IB would also appear to suggest that people are less likely now to remain on the benefit than they were. Since spring 1999 the numbers of people exiting IB have clearly begun to exceed the 92

14 numbers flowing onto it. However, exits from IB relative to the stock has remained broadly constant at about two per cent since This is a much lower rate than Britain where six per cent of payments were terminated in the quarter ending February 2000 (DSS, 2000). Only about 800 more people left the benefit in the quarter ending February 2000 compared with February 1996 (8,317 compared with 7,585, respectively). The numbers exiting IB are simply not enough to make a large dent on the overall caseload. Furthermore, while the recent rise in the numbers leaving IB appears to be a potentially important development, a proportion of these will return to IB at a later date: 13 per cent of the total IB offflows from February 1996 had returned to IB at February The most important factor that explains the decline in the Northern Ireland recipient caseload (as in Britain) appears to be the removal of the possibility of opting to remain on IB for five years after pension age (Walker and Howard, 2000). In Northern Ireland, those of pension age in receipt of IB currently account for just 2 per cent of all recipients, compared with 12 per cent in February This is equivalent to about 5,500 cases leaving the caseload. Most of these people received the long-term rate of IB (IBLT), which also decreased by nearly 5,000 cases over the same period. The importance of this change in eligibility to the caseload is further borne out by the fact that there has been no corresponding decline in the number of recipients of working-age receiving IB. This group increased by about 1,600 over the same period. Trends in credits-only cases deserve special mention in any explanation of the decrease in IB recipient caseloads. People can sign for credits-only when they have satisfied the test of incapacity for work (i.e. they passed the AWT) but do not meet the contribution conditions necessary to receive IB (they sign for credits to safeguard their own pension entitlements but are not paid the benefit and cannot claim for any dependants). Credits-only cases do not appear in recipient caseloads, but in claimant caseloads. Credits-only cases have swelled the claimant caseload by approximately 10,000 since 1996 and comprise 26 per cent of all claimants (February 1999), up from 18 per cent in February This increase would suggest that a growing number of applicants are failing to meet 93

15 one or both of the contribution conditions 6. Indeed, the numbers failing to receive IB due to failing the contribution conditions are greater than those failing the AWT. The growth of credits-only cases has also occurred in Britain where, in the quarter ending November 1999, credits-only cases accounted for 45 per cent of all new claims, compared with 39 per cent in May 1995 (Walker and Howard, 2000). The growth of credits-only cases is not directly due to the introduction of IB as they were already increasing prior to the introduction of IB (ibid.). However, the restriction of the contribution conditions introduced under the WRPA will most likely result in a greater number of people who fail to receive IB and who then sign on for credits-only and receive another benefit instead, either IS with a disability premium or income-based JSA (if they are found capable of some work by the PCA). Failing the contributions test accounts for 75 per cent of cases where no benefit was paid (February 1999). This group is becoming older and more male. Those aged over 35 years old comprised a greater proportion of these cases in February 1999 than in February 1996, while those aged under 35 comprised a greater proportion in February 1996 than in February Men comprise a growing majority of people who fail the contributions test: 55 per cent in February 1996 and 58.5 per cent in February A greater proportion of women than men who fail the contributions test are aged between 40 and 59. Thus, in February per cent of men who failed the contributions test were aged between 40 and 59, while in February 1999 this had increased to 46 per cent; for women the corresponding figures are 54 per cent and 59 per cent. So, there has been a rise in the numbers of people of working age who have entered IB, but are they now less likely to remain on it? The All Work Test (AWT) has attracted a good deal of discussion, and various concerns have been expressed that fewer people would 'pass' the Test (i.e. be judged incapable of work). Administrative data does show that IB terminations due to failing the AWT have increased from 28 per cent of all IB terminations in February 1996 to 45 per cent in February (The number could actually be even higher given the 6 Prior to the reforms introduced by the WRPA (1999) to receive IB individuals must have actually paid Class 1 (employed) or Class 2 (self-employed) contributions on earnings equivalent to 25 times the LEL in 94

16 significant number of terminated cases recorded as 'other reasons'). 7 Moreover, this rise has taken place in a context where a growing number of recipients are exempt from the AWT. 8 The numbers of people exempt from the AWT have quadrupled since February 1996 and now comprise one-fifth of IB claimants (1999); the equivalent figure for Britain is 18 per cent (DSS, 1998). Two-thirds of these are exempt due to severe sickness, while the remaining third are exempt because they receive the high care component of DLA. The number of people exempt from the AWT because they are over 58 and have been in receipt of IVB since December 1993 are declining, from 10 per cent of total exemptions in February 1996 to 2 per cent in February Table 1: Claimant IB spells terminating by category of payment (%) Total IBST(L) IBST(H) IBLT IVB Credits-only Feb , Feb , Feb , Returning to the issue of exit from IB, the number of credits-only cases as a proportion of all those exiting IB is growing (Table 1). However, credits-only cases make up a greater proportion of all claimants anyway, and the 8 per cent increase in people exiting IB is proportionate to the increase in credits-only cases exiting IB. Similarly, people in receipt of IBLT account for a growing number of those exiting IB, but the numbers in receipt of IBLT have increased from 2 per any one tax year, and they must have Class 1 or Class 2 contributions or credits equivalent to 50 times the LEL in both of the last two tax years. 7 The principal reason (where one is given) for an IB award being terminated is failure of the AWT (accounting for 28 per cent of terminations in February 1996, 37 per cent in February 1998 and 45 per cent in February 2000), at the request of the claimant, failure to attend medical or provide information, death of claimant, and return to work (3 per cent in February 2000, two-thirds of whom were in receipt of short term IB). These figures must be interpreted with extreme caution and it is certainly not possible to definitively state that there has been a significant increase in the numbers of people failing the AWT since 1996 due to the significant (though declining) numbers of people exiting the caseload without any reason being recorded. In February 1996 nearly 60 per cent of terminations were entered under the categories of 'closed certificate' or 'any other reason given'. Although this has since declined to 35 per cent in February 2000 it is still a sizeable proportion and large enough not to be able to draw any firm conclusions. 8 Those with severe sickness, in receipt of DLA high care rate, aged over 58 and in receipt of IVB since December

17 cent of all claimants in February 1996 to 24 per cent in February Here, though, the rate of growth of IBLT caseloads exceeds the rate of exit from it. As noted earlier, one of the key explanations given for growth in IVB/IB caseloads is not that there have been any substantial increases in claims for IB but that people are remaining on the benefit for longer and fewer of them are leaving the register (Berthoud, 1993, 1998; Walker and Howard, 2000). It is not possible to calculate average duration of claims in Northern Ireland, although the proportion of claimants on IBLT (i.e. more than one year) is comparable to Britain (nearly 90 per cent). Half of IB claimants in Northern Ireland have been on the register for more than four years, while there were about 4,000 fewer claimants who had been on IB for less than one year in February 1999 compared with February 1996 (figure 6). 96

18 4. The social composition of IB: gender, age, family type and religion This section focuses on the social composition of IB recipients and claimants and examines whether and how the trends outlined in the previous section have impacted on the socio-demographic profile of the IB caseload. Starting with the gender profile, men comprise a greater proportion of both recipients and claimants than women do. In 1999, 62 per cent of the caseload were men, while 38 per cent were women. This gender difference reflects the fact that IB is a contributory benefit so entitlement depends on an individual's work history. As noted earlier, men make up the majority of people failing the contributions test, but the majority of recipients of SDA (the non-contributory equivalent) are women (56 per cent) (DSD, 1999). Figure 7 shows that IB receipt as a proportion of the relevant population is higher for men than for women, and Figure 7 IB receipt of men and women as a proportion of the relevant population female male that the decline in recipients has disproportionately impacted on men over 80 per cent of the fall in recipient caseload was due to men having left IB (3,300 men left IB between February 1998 and February 1999, compared with under 900 women). Between 1996 and 1999, the male caseload declined by nine per cent, 97

19 compared with three per cent for the female caseload. This has had the effect of narrowing the gender differential of IB recipients (Table 2). Table 2: Gender composition of IB recipients, 1996 and Change N % N % N % Men 49, , Women 28, , Total 77, , Over half (56 per cent) of the caseload comprise people aged 50 years and over. However, the age structure of IB recipients has become younger since In 1999 the single largest age band was 55-59; in 1996 it was The sharpest decline has been in the 65 and over age groups, whose numbers declined by 78 per cent between February 1996 and February In 1996, Figure 8 Change in age structure of recipients < per cent of the IB caseload was aged 60 and over, and has since declined to 19 per cent (1999). Most of this decrease is principally due to the combined effects of removing the option to stay on IB after retirement and of IVB (protected) 98

20 recipients gradually moving off IB onto retirement pension. There has also been a decline in younger (i.e. under 30) age groups receiving IB and an increase in the age groups, particularly in the group (figure 8). The age composition of women and men recipients differs markedly (figures 9 and 10). Female recipients are younger than male recipients are. The growing numbers of women in receipt of IB may account for the younger IB population noted earlier. The greatest increase in recipients between February 1996 and February 1999 has been amongst women in the and age groups (these groups also increased for men but by much less). There has been a decrease in female recipients aged under 35 (especially the age group), but the greatest decrease has been amongst women aged (whose numbers have declined by three-quarters) as well as amongst men aged over 65. Figure 9 Male recipients by age, 1996 and < Figure 10 Female recipients by age, 1996 and <

21 Religious composition, where this is known 9, is relatively evenly divided between Protestants and Catholics (figure 11). In February per cent of claimants were Protestant, and 44 per cent were Catholic; by February 1999 Protestants comprised 52.5 per cent of the caseload and Catholics had increased Figure 11 Share of claimants by religion and gender 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Feb-96 Feb-99 Catholic Women Protestant Women Catholic Men Protestant Men their share to 47.5 per cent. In February 1999 women comprised the majority about two-thirds of those claiming IB for less than one year; the majority of these were Protestant women (figure 12). On the other hand, men comprise the Figure 12 IB claimants by religion, gender and duration, February % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% < 1 year > 1 year Catholic women Protestant women Catholic men Protestant men 9 The religions given are Protestant and Catholic and are derived from the Price Waterhouse Coopers model discussed in more detail on page 41. The religion of between 7 and 11 per cent of persons is unknown; most of these receive IBLT. 100

22 majority of those claiming IB for more than one year (52 per cent of whom are Protestant). As regards the family composition of the IB caseload, social security administrative data can show 'benefit families' or 'benefit households' rather than 'actual' families and households, because it only records those who claim adult and/or child dependants' allowances 10. The most prevalent benefit family is single, no dependants (figure 13). In 1999, over four-fifths of recipients fall into this category, and its proportion has increased (from 80 per cent in February 1996 to 85 per cent in February 1999), largely because of the 50 per cent decline in the number of recipients who claim an adult increase (married/cohabiting couples) over the same period (these are most likely to be older male recipients (aged 65 and over) who had been claiming an adult increase for their wife or partner (aged 60 or over)). Households receiving child increases constitute declining proportion of all households - 9 per cent in February 1996 compared with 8.3 per cent in February The total number of children in respect of whom increases are paid decreased by 16 per cent, from about 13,700 children (February 1996) to about 11,500 children (February, 1999). Figure 13 IB recipients by family type, 1996 and % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Child dependant(s) Adult and child dependant(s) Adult dependant No Dependants 10 Adult increases are paid for an adult dependant who is caring for a child or where the spouse is aged 60 or over. Child increases are paid for a child dependant, and are paid with the short-term higher rate and with the long-term rate. Age additions are paid with the long-term rate at one of two rates depending on the age when incapacity began. 101

23 5. Flows off IB As noted earlier the outflow from IB has been lower in Northern Ireland than in Britain. It is difficult to estimate the destinations of IB leavers because of the way that data is recorded. Although the category of 'other reasons' (for termination of benefit) has shrunk from 60 per cent of all terminations (February 1996) to 35 per cent in February 1999, this is still a sizeable proportion and large enough to make any conclusions about destinations of IB leavers only tentative. While the numbers of people whose benefit was terminated because they had found work appears to have increased recently, it is possible that not all of these cases are recorded as such. Much of the recent policy debate has focused on flows from JSA onto IB. Indeed, one of the explicit aims of the WRPA (1999) was to stem this movement. Certainly, there is greater movement onto IB from JSA than onto JSA from IB. Figure 14 presents trends in the numbers of recipients who move off IB onto other key benefits 11. Most recipients leave to claim retirement pension. The second most important benefit destination is income support, followed by JSA. A small but growing minority (7 per cent in February 1996, and 11 per cent in February 2000) leaves to claim Family Credit Figure 14 Flows off IB onto other benefits IS JSA RP FC 0 Aug-96 Feb-97 Aug-97 Feb-98 Aug-98 Feb-99 Aug Individuals may flow off IB onto multiple benefits. 12 Family Credit was replaced by Working Families Tax Credit in October

24 Figure 15 Age of IB leavers to IS, by gender and marital status (Feb 1999) Women, M Women, S Men, M Men, S Figure 16 Age of IB leavers to JSA by gender and marital status (Feb 1999) Women, M Women, S Men, M Men, S Figure 17 Age of IB leavers to Family Credit by gender and marital status (Feb 1999) Women, M Women, S Men, M Men, S 103

25 Figures 15, 16 and 17 present the social composition of IB leavers (age, gender and marital status) moving to other working-age benefits - IS, JSA and FC. Two points are striking about this data. First, IB leavers moving to IS tend to be older than those moving onto JSA or FC (as we might expect). There were three times as many receiving IS with disability premium at the end of the 1990s compared with the start, and 1995 data shows that this increase has taken place mainly among the age group. Second, married women hardly feature among IB leavers at all. Single men and women comprise the majority of those leaving IB. The numbers of married men leaving IB is greatest amongst the year olds leaving for FC and the over 60s leaving IB for IS. 6. Conclusion This paper has examined aggregate trends in the IB caseload in the context of trends in sickness and disability benefit trends. It has also examined the changing social composition of the IB caseload since IB accounts for a greater proportion of the working-age population and social security expenditure in Northern Ireland than in Britain. In Northern Ireland this period has seen a slow but steady decline in the recipient caseload on the one hand and an increase in the IB claimant caseload on the other. There are fewer claims but a greater proportion of these are entering IB; of the latter, more are failing the AWT and contributions conditions. There appears to be a growing although still small number who are leaving to take up paid work. Most of the decrease can reasonably be accounted for by changes in eligibility criteria, which removed the possibility of remaining on IB for five years after pension age. Most (four fifths) of the decrease in recipient caseloads is accounted for by men leaving IB, particularly older men, who are single and/or who have been claiming an adult increase. (It is worth noting in this respect that an increasing proportion of credits-only cases is men aged over 35). The overall effect of these trends has been to alter the gender and age structure of the caseload, which has become slightly younger, more female and more Catholic. The caseload has also become more childless, and the decline in the numbers of children in respect of whom child increases are claimed has outpaced the decline 104

26 in recipients. In this respect, the numbers of younger (20-49) age groups (i.e. those most likely to claim child increases) moving onto IS is a worrying development. Only a small minority leave IB to move into work (e.g. claim Family Credit), and many of these will probably return to the IB caseload. In addition, the vast majority of recipients now receive the long-term rate of IB, and an increasing proportion of these have received it for four or more years. From the data two basic trajectories emerge: 1) About half of the caseload leaves IB, either for other benefits (retirement or working-age) or work. Some of these, if they are still of working-age, return to IB (at the lower rate) either as recipients or as credits-only cases if they do not have the required contributions. A proportion of the latter will receive Income Support. This dispersal of IB leavers to other benefits, either directly or indirectly, after a spell of employment, testifies to a significant degree of churning. However, we do not know what proportion of these leavers enter work and are paid enough not to have to claim WFTC. Nor do we know how many are simply leaving the register and relying on their own or their spouse's income instead. The WRPA reforms will mean that claimant caseloads will continue to increase, as a growing number of people who would have received IB will now receive disability IS (if they fail the contribution conditions) or JSA (if they are found capable of some work) instead. 2) The other half of the caseload is remaining on IB in the long-term; a growing proportion stay there for four or more years. Many of these people are exempt from the AWT. It is unlikely that they will leave IB before retirement, so their standard of living will be substantially if not wholly determined by policy decisions regarding rates of payment. The administrative data cannot tell us what other income they possess, but those that do have an occupational and/or personal pension worth over 85 per week will find that their incomes will be reduced as the WRPA measures come into force. 105

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