The Impact of Welfare Reform on Hastings

The Impact of Welfare Reform on Hastings Nick Hopkins Consulting December 2012 1

Content Section Page Executive Summary 3 1. Introduction 16 2. The Local Background to Welfare Reform. 19 3. The Impact of Welfare Reform on Hastings 24 3.1 The Introduction of Universal Credit 29 3.2 The Transition From Incapacity Benefit to 40 Employment and Support Allowance 3.3 Transition From Disability Living Allowance to 45 Personal Independence Payment 3.4 Support with Housing Costs/ Tax Credits 49 3.5 Localising Responsibility for Benefit: 63 DESSS/ Local Council Tax Support Schemes 3.6 Uprating of Benefits 4. Understanding the Experiences of Benefit 65 Claimants 5. Conclusions and Recommendations 89 Contact Details: Nick Hopkins, Director, Nick Hopkins Consulting, 41 Carolside Avenue, Clarkston, Glasgow, G76 7AD www.nhhrconsulting.co.uk Tel: 07891 600078 E mail: nick@nhhrconsulting.co.uk 2

Executive Summary Introduction The benefit system has been subject to constant change since its earliest days. The Coalition Government s welfare reforms, contained largely within the Welfare Reform Act 2012, have increased the pace of change hugely, and are set to bring about the most substantial changes within the system since the post war period. The Government s reforms are aimed at creating a simpler welfare system, which increases the incentive to work and is more responsive to changes in individuals circumstances. At the same time, the reforms are designed to achieve a cut in the overall cost of the welfare system of 18bn over four years. There is considerable debate about the impact the reforms will have, their fairness and the way that they have been, and will be, implemented. This report does not take a position on those questions, but presents an analysis of the likely impact on Hastings in a neutral fashion. The report tries to move the understanding of the reader beyond media debates focused on: o The benefit cap, which only affects a small number of people (around 70) in the town. o Simple distinctions between benefit claimants and hard working families; the reforms will impact substantially on those in work as well as those out of work. The final version of this report reflects additional analysis done as part of the East Sussex County Council Welfare Reform Project. Section 2: The Local Background to Welfare Reform. Welfare reform is impacting, and will impact, on Hastings residents in a context in which the town is already facing major challenges in the labour market, and in terms of household poverty and income, and financial inclusion. The Labour Market Unemployment in Hastings has fluctuated since the start of the recession. The most recent figures suggest that over 3,100 people in the town are claiming Job Seeker s Allowance (JSA). Over twice as many men than women claim JSA. The labour market in Hastings is subject to substantial flux, with over 550 people moving onto JSA every month. The critical role of the benefit system, not only in supporting people who are out of work for a long time, but also to assist people to cope with shorter periods of being out of work, should not be forgotten. The numbers of people relying on Universal Credit for a large part of their income will be higher because of higher unemployment in the recession. A substantial number of people per month will be submitting new claims for Universal Credit, for some of them engaging with an unfamiliar system for the first time. Universal Credit is being introduced over a period of time (see section 3.1). Claimants of legacy benefits whose circumstances change are being moved to Universal Credit earlier in the process. Areas with high turnover in the labour market will therefore see more people move to Universal Credit earlier in the process. 3

Wages Hastings is a low wage economy. Full time wages for Hastings residents are over 80.00 per week lower than the average for the United Kingdom. Part time workers in Hastings work longer part time hours for less reward than the UK average. More than 50% of part time workers in Hastings are being paid at below the rate that has been identified as necessary to meet the standard of a living wage in the UK, 7.20 per hour. At 37.9% of the workforce, a substantially higher proportion of the workforce in Hastings work part time than the Great Britain average. Comparatively high numbers of Hastings residents are likely to be impacted as a consequence of the introduction of Universal Credit, which is designed to support people in low paid employment as well as those who are out of work. Universal Credit contains a number of changes specifically designed to support, incentivise and influence people in part time employment. These will impact on a very substantial number of Hastings residents. Already introduced changes to tax credits which impact on people in part time work (see section 3.5) are likely to have had a particularly significant impact on Hastings residents. Poverty and Household Income. Hastings has high levels of poverty, particularly child poverty. 50% of Hastings residents have a household income 4,500 or more below the average in Great Britain. Welfare reform may: o Increase the number of people living in poverty. o Deepen the poverty of some of those already living in that situation. A substantial number of Hastings residents may be pushed into poverty by the changes, or if already in poverty, may be at risk of their situation worsening further. Given the focus of welfare reforms on people of working age, there may be particular concerns about the prospect of an increase in the already high levels of child poverty in Hastings. Financial Exclusion Hastings contains large numbers of households who may be affected by financial exclusion, which is both a cause and a symptom of low incomes and poverty. The impact of welfare reform may: o Push people into debt, through reduction of the generosity of the safety net for people falling out of work, or of the support for people who are long term unemployed or unable to work for health or other reasons. o Increase the difficulty they face accessing mainstream financial products/ thereby making them rely on more expensive sub prime products. o Challenge their ability to manage their household budgets. Personal savings are unlikely to offer much protection against the negative impacts of welfare reform, and the ability of low income households to save may be further compromised by reduced incomes. 4

Section 3: Predicting the Impact of Welfare Reform on Hastings A clear policy decision has been taken by the Government to focus the vast majority of the benefit changes discussed in this document on working age benefit claimants. Older people are generally explicitly protected from the changes, although they may experience the impact of the changes on the rest of their family. Section 3.1 The Introduction of Universal Credit. Key Changes Universal Credit is the flagship of the Government s welfare reform process. It replaces all the main income related benefits (apart from Council Tax Benefit and the Social Fund) and tax credits. These are known as the legacy benefits. It is intended to be a simpler system, improve work incentives and smooth the transition into work, reduce in work poverty, reduce fraud and error, and encourage more effective management of money. The process of introduction will take four years, from October 2013 onwards. Universal Credit will involve a reduced rate of withdrawal of benefit from claimants for every pound they earn in work above a certain amount. A number of changes will reduce entitlement for disabled people and some families with disabled children. Claimants will have to sign a claimant commitment, setting out their responsibilities, and will be subject to a stricter, less flexible sanctions regime. Universal Credit will be paid monthly in a single payment to a nominated single member of the household, by BACS into a transactional bank account. The direct payment of benefit to social landlords will cease for most claimants, apart from those deemed vulnerable. There is a shift towards encouraging the making and managing of claims online. Predicted Financial Impact An estimated 14,850 of the 41,200 households in Hastings will claim Universal Credit, this constitutes 36.1% of the total households in the town. The table below sets out the number of people who will gain, lose, or see their entitlement unaltered under Universal Credit. It must be remembered that the figures below do not account for any negative impacts on income from the other reforms discussed in this report. Numbers Affected in Hastings Households Claiming Universal Credit 14,850 Households with Increased Income 5,550 Households with Income Unaffected 4,290 Households with Reduced Income 5,010 Children Affected by Changes to 180 Disability Related Element of Child tax Credit. Severely Disabled People Affected by 500 Loss of Severe Disablement Premium Severely Disabled Lone Parents 50 Affected by Loss of Severe Disablement Premium Children Affected by Loss of Their Lone 90 Parent's Severe Disablement Premium Households Affected by Reduced 180 Entitlement to Disability Related Element of Working Tax Credit. 5

Human Impact There may be particular difficulties for those affected by some of the changes; disabled people/ families with disabled children; who may not be able to meet extra household costs as previously. Vulnerable people may be at risk of falling foul of the stricter and less flexible sanctions regime. Organisations working with vulnerable people may need to be more proactive in trying to ensure that this does not happen. Universal Credit will leave people having to plan their household budget over a longer period, sometimes having responsibility for more of their household expenditure and sometimes leaving them with a lower income. Organisations receiving payments from lower income customers may be at risk of seeing their arrears levels rise. There may be increases in tenancy failures, tenancy terminations and evictions, and mortgage repossessions. Local organisations are likely to have to be under pressure to respond to crises where their service users cannot financially meet their basic humanitarian needs. As the new system beds in, there will inevitably be mistakes in the administration of Universal Credit. Given the bringing together of all the legacy benefits under Universal Credit, the impact of such mistakes in terms of temporary loss of household income will be severe. The move to online handling of claims will create difficulties for people with literacy and numeracy problems, people whose first language is not English, and people without access to the internet at home. Section 3.2: The Transition From Incapacity Benefit to Employment Support Allowance Key Changes Since October 2008 people who cannot work as a result of illness or disability have claimed Employment and Support Allowance rather than Incapacity Benefit. From April 2011 existing Incapacity Benefit claimants have been reassessed for their fitness to work, before being placed on either Jobseeker s Allowance or Employment and Support Allowance. This reassessment process is intended to be concluded by March 2014, and is designed to move people into a job or closer to the labour market where their condition allows. Claimants being assessed or reassessed will go through the Work Capability Assessment. This will result in them being placed in one of three groups: o The fit for work group. At this point they will be paid Jobseeker s Allowance rather than Employment and Support Allowance, and be required to look for work. o The Work Related Activity Group, denoting that they are considered to have limited ability to work at present, but that they are capable of preparing for a return to work. They will be required to undertake a variety of activities which may include training and work experience. People in this group will claim ESA. o The Support Group denoting that they have limited capability for work related activity and for work. People in this group will also claim Employment and Support Allowance and will not face any work related requirements. People Affected Incapacity Benefit is a benefit more commonly claimed by men than by women, and by people of middle to late working age, but it is clearly not, as is sometimes suggested, a benefit solely for older male manual workers parked to massage the unemployment figures. 6

Significant numbers of vulnerable people, in particular with mental health problems will be going through the WCA process. Research suggests that the WCA process is poor at taking account of the sort of health conditions affecting many of those going through the assessment, in particular in relation to the challenges facing people with mental health problems or with conditions associated with pain, fatigue, and regular fluctuation of impairment. This is discussed in more detail in section 4. Predicted Financial Impact In Hastings it is predicted that of the 3,540 current claimants of Incapacity Benefit: 3,430 will complete the WCA process, 1,270 will be found fit for work and placed on JSA, 2,160 will get ESA, of whom 1,165 will be placed in the Work Related Activity Group and 995 will be placed in the Support Group. On a conservative estimate, the financial losses to current IB claimants in Hastings may be as high as 1.58m. The WCA process may produce 520 appeals, of which 200 will be successful. The time limiting of contribution based ESA may affect around 790 people in Hastings may lose this entitlement, at a total loss to local claimants of 4.09m. Section 3.3 Transition From Disability Living Allowance to Personal Independence Payment Key Changes In the Welfare Reform Act 2012, the Government set out details of the creation of a new benefit, called Personal Independence Payment (PiP), for eligible working age people aged 16 to 64 to replace Disability Living Allowance (DLA). The aim is to target support on those individuals who need it most. Access to the new benefit will be through a functional test which will require applicants to score a certain number of points on a test relating to everyday activities such as food preparation, managing continence, social interaction and planning and undertaking a journey. Claimants will receive a combination of standard and enhanced payments relating to daily living and mobility. (DLA claimants currently receive a combination of care component at lowest, middle or highest rate, and mobility component at lower or higher rate) There will be no lifetime awards, with the average period before reassessment expected to be 2 years. Personal Independence Payment (PIP) will be introduced from April 2013, with the transition of existing DLA claimants beginning in October 2013. The main period of transition will start in October 2015. People Affected Disability Living Allowance is a benefit that is particularly important for people of older working age, but not solely for that age group. It is claimed almost equally by men and women. A substantial number of people claiming DLA in East Sussex will be affected by conditions which may: o Fluctuate. o Involve pain and/or fatigue. Should problems experienced with the Work Capability Assessment be replicated in the assessment process for PIP, this may leave those people particularly vulnerable to incorrect decisions. Similarly, significant numbers of people will be affected by conditions that may impact upon their cognitive capacity, which may have implications for their 7

experience of submitting applications, of the assessment process, and for their ability to effectively challenge decisions in relation to their benefits. Predicted Financial Impact As a result of the transition to PIP from DLA, an estimated 1,080 current claimants in Hastings will see their award increase, 570 will see their award stay the same, 1,080 will see their award decrease, 950 will receive no award. Over 3m less will be received by Hastings residents in PIP than would have been received through an unreformed DLA. Between June 2013 and the end of September 2018, the introduction of PIP may generate 1,350 appeals of which 510 will prove successful. Section 3.4 Changes to Support with Housing Costs and Tax Credits In its emergency budget of June 2010, in a further announcement in March and December 2011, and in the Welfare Reform Act of 2012, the coalition Government has introduced a series of changes to Local Housing Allowance and Housing Benefit, the support available to people to enable them to meet the housing costs. These changes are aimed at controlling costs, reducing what are seen as excessively high payments to some tenants, encourage more efficient usage of the social housing stock, and increase work incentives for renters. Changes to Housing Benefit will affect those in the social rented sector: o Non-dependant deductions, the amounts taken off Housing Benefit claims where non dependant adults, typically children of the householders, share the claimant s house have been increased. Further increases are being phased over four years. o The bedroom tax will be introduced in April 2013. People identified as underoccupying their property i.e. who have one or more spare bedrooms will have to meet some of their rental costs themselves. o The change will affect couples/ single people without children living in properties with more than one bedroom, and some families with one or more children living in properties with three or more bedrooms, dependent on rules relating to the children s ages and their gender. Section 3.4 a Local Housing Allowance Changes to Local Housing Allowance will affect tenants in the private rented sector: o Local Housing Allowance is now capped at set amounts based on the number of bedrooms in the property. o The amount of Local Housing Allowance a claimant can receive is now set based on the level of the 30 th percentile local rent, rather than the median (50 th percentile) local rent. o Single people under 35 now receive Local Housing Allowance set at the rate of renting a bedroom in shared accommodation, as was previously the case with single people under 25. o From April 2013 Local Housing Allowance rates will be up-rated in line with the Consumer Price Index measure of inflation rather than actual rises in local market rents. LHA will be reduced due to the 30 th percentile change for 813 recipients between January 2012 and 31 st December 2012. The extension of the single room rate to tenants aged up to 35 is expected to impact on 230 tenancies in the period between April 2012 and March 2013. 8

Section 3.4 b Housing Benefit Changes to Housing Benefit will affect those in the social rented sector: o Non-dependant deductions, the amounts taken off Housing Benefit claims where non dependant adults, typically children of the householders, share the claimant s house, have been increased. Further increases are being phased over four years. o The bedroom tax will be introduced in April 2013. People identified as underoccupying their property i.e. who have one or more spare bedrooms will have to meet some of their rental costs themselves. o The change will affect couples/ single people without children living in properties with more than one bedroom, and some families with one or more children living in properties with three or more bedrooms, dependent on rules relating to the children s ages and their gender. 386 households have been affected by the changes to non dependent deductions, with 282 of these households (73%) of working age. Between 629 and 1,229 out of the 2,858 working age Housing Benefit claiming social rented tenants will be affected by the under-occupation penalty. Losses for those affected will vary for tenants of the two biggest social landlords: o Between 10.12 and 11.21 a week if occupying a 2-bedroom property instead of a 1-bedroom property o Between 11.91 and 13.11 a week if occupying a 3-bedroom property instead of a 2-bedroom property o Between 21.26 and 23.41 a week if occupying a 3-bedroom property instead of a 1-bedroom property Section 3.4 c Tax Credit Changes The Emergency Budget in 2011 introduced a number of changes to Tax Credits that came into effect on 6 th April 2012. The most significant change increased the number of hours that couples had to work in order to claim tax credits. Although this change is being superseded by the introduction of Universal Credit, it will have a short to medium term negative financial impact on over 1,600 households in East Sussex if they cannot increase their hours in work, potentially a challenge in a time of underemployment. The impact may be as much as 4,000 per year in some cases, increasing the risk of debt and financial crisis for those households. 320 households in Hastings are at risk of being affected in this way. Section 3.5 Localising Responsibility Section 3.5a Localising Responsibility: The Social Fund The Social Fund is being abolished in its current form from April 2013. East Sussex County Council is responsible for the design and administration of a new fund, the Discretionary East Sussex Support Scheme (DESSS). This effectively replaces the Crisis Loan Living Expenses and Community Care Grant elements of the previous system. The scheme aims to support people in financial crisis who cannot meet basic needs and to help people establish independent living in the community. The scheme will be cashless. The budget for the scheme is limited to the amount provided by central government for the purpose. The scheme is likely to be particularly important for single person households, and for lone parents. 9

Given the pressures on low income families outlined elsewhere in the report which may increase the number of people experiencing financial crisis, there may be extreme pressure on the DESSS budget. This could cause additional problems if the resources are not available to support people with grants towards independent living. Section 3.5b Localising Responsibility: Local Council Tax Support Scheme The 2012 Welfare Reform Act devolved to local authorities the responsibility for designing and delivering replacements for Council Tax Benefit. In doing so, Hastings Borough Council will have to deal with a 10% cut in the budget provided, worth around 1.1m and a requirement to maintain current levels of support for older people. Consultation has just finished on the common schemes proposed by the five boroughs/ districts in East Sussex. The new schemes aim to limit the impact on the most vulnerable households, and avoid penalising those moving into work. Just under 8,000 households in Hastings will be affected by the changes. There may be particular impacts on those on low incomes living in mid to higher value properties, and those living with non dependent adults. Section 3.6 Inflation Uprating of Benefits. From April 2011 benefits are being uprated in line with a measure of inflation, the Consumer Price Index, that is usually lower than the alternative Retail Price Index and Rossi measures. This will erode the value of benefits year on year. This will push increasing number of claimants into poverty and financial crisis. Families with children appear to be particularly vulnerable to the change, both in terms of facing higher than average rises in their household costs, and in terms of greater reductions in their income. Changes announced on December 5 th in the Chancellor s Autumn Statement, which limit the rise in a range of benefits and tax credits to 1% per annum for the three years from April 2013, will increase this level of erosion. Section 4: Understanding the Experience of Benefit Claimants. This section is based on 18 interviews carried out with Hastings residents over the period of July to October 2012. Interviewees were selected from the following groups: o Those had appealed/ were appealling against a Work Capability Assessment they had undergone as part their transition from claiming Incapacity Benefit to claiming Employment Support Allowance. o Those claiming Disability Living Allowance. o Those affected by the changes to Local Housing Allowance outlined in section 3.4a. o Families who had used the Social Fund within the last year. Management on a Low Income. Where people see their income reduced as a consequence of welfare reform, household budgets that are already very constrained will become tighter still, with consequences for the quality of life of those affected. Interviewees who are currently coping financially are still living lives with no or little access to luxuries and with little slack to cope with anything that goes wrong. A reduction in income may push people from coping towards being unable to manage properly. 10

Living on a constrained income has a negative psychological impact. The loss of income has a similarly negative impact, with people very conscious of the better times left behind. There are clear risks to health and well being, where welfare reform negatively impacts on the income of people who already have mental health problems, and for other vulnerable people who may experience mental health problems as a consequence of reduced household income. Budgeting The payment of benefits on a monthly rather than fortnightly basis under Universal Credit may cause considerable difficulties for people used to budgeting on a weekly or fortnightly basis. Some claimants may run out of money towards the end of the payment period, and face a number of days without cash as a consequence. Financial capability support to build the capacity of people claiming benefits to budget may have a role to play in responding to the challenges of welfare reform. However: o The majority of interviewees believe that they have competent budgeting skills. o Even if these claims are not taken as typical or at face value, there may be little enthusiasm from most benefit claimants for financial capability aimed at increasing their budgeting skills. o Some claimants may not be able to save money through traditional methods such as trading down in terms of the cost of their purchases. Interventions may be required which focus on building skills/ knowledge required to purchase different good and services or to use purchases more efficiently (for example cookery classes). Ultimately people may find the challenge of living on such low incomes to be insurmountable. Use of Banking Products and Use of the Internet. Suggested responses to some of the budgeting challenges created by welfare reform may involve encouraging people to use financial products to assist them to budget. In developing such responses it should be understood that: o Their success will require large numbers people to think differently, i.e. more formally, about the way in they manage their money. o Banks may not be the preferred providers of such services. The majority of interviewees did not have access to the internet at home. Of those who did, a significant number did not use the internet for managing their financial affairs in anything but the most limited way. The push under Universal Credit to deal with claims on line may confront many benefit claimants with a channel for making claims with which they are very unfamiliar and uncomfortable, or which in many cases they cannot easily access. Giving people the advice, support and information to deal with consumer issues may be an intervention with a broader pay off. Attitudes towards Borrowing and Debt. There was a clear sense that a large majority of interviewees did not engage in borrowing that could in any way be described as reckless. Benefit claimants already have limited borrowing options. The impact of welfare reform may narrow those options further. Those who use debt to manage their income across the longer term, or whose short to medium term debts are currently manageable, may struggle to cope if their incomes reduce as a consequence of welfare reform. 11

Arrears on household bills, including on utilities, are a critical source of debt, and of stress on a household. Reduced incomes under welfare reform may make it more difficult for households to clear these debts, leading to financial stress over the longer term. Savings and Other Financial Products. Few interviewees had savings. Of those who did have savings, few had sufficient cash set aside to enable them to cope with any income loss from welfare reform or from other sources for any length of time. Where people do have savings, any substantial losses of income will cause those savings to run dry within a short time. Even fewer interviewees would be in a position to start developing a savings pot at this stage to enable them to protect themselves from future loss of income. Given the limited benefit and high cost of putting aside savings to cope with income loss, it is clear that interventions should not focus on encouraging savings for this purpose. Experience of the Benefit System Many interviewees experience the benefit system as being complex. To the extent that Universal Credit simplifies the system, it may offer claimants the benefit of being clearer about entitlements and how to negotiate the system. However, to the extent that the ease experienced by some interviewees in negotiating the system is the result of their familiarity with the system rather than the result of their personal capability, the sheer extent of change within the welfare reform process will create its own problems. The loss of benefit, through both mistake and sanction, is a very common experience amongst interviewees, often with serious and long lasting consequences. The numbers of people experiencing such problems may rise as a result of the bedding in of new systems and the stiffening of sanctions. Without support to deal with/ avoid these problems, some claimants may be left very financially vulnerable, others will be more capable of resolving issues themselves. The smooth delivery of the system to claimants requires positive and appropriate interactions between staff working in the system and claimants. The trust, and possibly the appropriate attitudes, on either side may not be in place to enable such interactions. Some claimants used to a situation of benign neglect in their relationship with the benefits system will face engagement with the benefit system in the future which may be more intensive and may be experienced as more intrusive. Incapacity Benefit to Employment Support Allowance The attitude of the ATOS staff delivering the assessment was generally felt by interviewees to be poor. Interviewees described ATOS staff behaviour variously as disrespectful and uncaring, insulting and disrespectful. These experiences compounded the natural reluctance of vulnerable claimants to open up to people that they did not know in relation to personal details relating to their condition. Interviewees were also very aware that they were not being seen by doctors, and felt that those delivering the tests were not sufficiently skilled to do so competently. 12

Interviewees felt that the process itself: o Was designed to trick them to ensure that they were found fit for work, o Was delivered by assessors who were always ready to put a ready for work spin on the situation, to the extent that interviewees sometimes felt that a false record of the Work Capability Assessment had been taken. o Could be described as Orwellian in that it involved being constantly observed. o Did not deal effectively with fluctuating conditions or people with mental health problems. o Was a conveyor belt approach, governed by tick boxes and driven by targets to get people onto JSA. o Did not give adequate opportunity to raise complaint. In terms of the emotional impact of the assessments, interviewees found the experiences of waiting for, undergoing, and awaiting the results of, the test extremely stressful, and experienced considerable emotional fall out once they had received a negative decision. For some vulnerable people, particularly those with mental health problems, there may be a risk that the experience has a significant negative impact on their health and well being. Interviewees appeared to have experienced highly inaccurate assessments, evidenced by their initial awards of no points being completely overturned, and implied by the failure of ATOS to challenge their appeal. It is difficult to argue with the suggestion that if replicated consistently, the experience of interviewees suggests a process which is not fit for purpose. In the light of the coming transition from DLA to PIP, in which the functional assessment will be delivered by ATOS, there may be concerns about the replication of this experience in the future. Disability Living Allowance Claimants Failing to access Disability Living Allowance may lead to a loss of independence for claimants where it hits either or both their access to suitable transport, and/ or their ability to cover the costs of care. The impacts will be particularly serious where people are also affected by the tightening of access to local authority care budgets. Media coverage of the changes is both causing concern to existing claimants, and for some is leading to a feeling that they are being negatively targeted and labelled by government policy. The stress engendered by such worries may become a factor impacting on people s health, as seen in the discussion of the transition from Incapacity Benefit to Employment Support Allowance above. LHA Claimants: Response to the Changes People affected by the changes to Local Housing Allowance may face a number of unpalatable housing choices as a consequence of the changes if they are not able to increase their income from employment or from other sources. These will include: o Finding the extra money from within budgets that are already highly constrained. o Seeking new accommodation, which may still require a contribution from within their own constrained budget, and which may not be suitable for their needs. o Attempting to access social housing provision for which the waiting lists are currently long, often with little priority attached to their case. Disabled people may be left particularly vulnerable in these circumstances. 13

If feelings about direct payment in the social rented sector reflect those amongst those interviewees who were renting their homes privately, the ending of most direct payment for social renters under Universal Credit could prove very challenging. Use of Social Fund. Community Care Grants continue to be an essential way of supporting people to set up a new home/ live independently. The new support scheme, DESSS, is designed to support people in immediate crisis as well as to sustain independent living. Should the burden on this part of the scheme grow considerably due to the impact of changes, particularly those under Universal Credit, levels of support to people who previously may have claimed Community Care Grants may be under severe pressure. Views on Local Advice Providers. Interviewees regarded support from advice, and other support, agencies as essential to the effective resolution of the financial issues that they faced. On several occasions it was clear that interviewees who may have benefited from advice had not accessed assistance, either at all, or at a sufficiently early stage in the process. Some interviewees had experienced problems accessing support because of the current heavy demand on advice services. There was also an indication that joint working between the advice agencies in Hastings might not always have been as effective as it should have been, a situation that the Renaissance House Hub is designed to tackle. Supporting an effective response to welfare reform from the advice sector may require; support for more efficient working to reduce the burden on agencies; increased or maintained capacity within the sector; and stronger referral links with the range of organisations working directly with service users. Section 5: Recommendations Overarching Recommendation Hastings Borough Council should consider the business case for investment in the projects set out below, even in the current difficult climate for public spending. This case can be seen in terms of the: Additional income and hence economic activity brought into the town through higher levels of benefit payments to local residents. The opportunity to reduce business risks and burdens faced by public sector organisations that is offered by the preventative aspects of the project ideas targeting the negative consequences of welfare reform discussed below. Theme 1: Ensuring the Benefit System Works as it Should for Hastings Residents. Recommendation 1.1 Hastings Borough Council should maintain existing levels of investment in Hastings CAB core activities and HARC, as a complement to initiatives being taken forward by the East Sussex Welfare Reform Project. 14

Recommendation 1.2 Hastings Borough Council should take cognisance of the fact that any resource that may be available to support action across the county under this theme will only be available for the short term, and will not cover the whole of the period over which welfare reform will be a challenge for Hastings resident. Once the format of any additional services created under the aegis of the East Sussex Welfare Reform Project is clear, Hastings Borough Council should be involved in discussions with the County and other partners about how such services might be supported in the longer term. Theme 2: Dealing with the Consequences of Welfare Reform for Hastings Residents. Recommendation 2.1 Hastings Borough Council should work alongside ESCC, other boroughs and districts councils, and local RSLs to consider investment in enhanced debt advice provision within the county. This would act in part to replace provision being lost as a result of the cutbacks to Legal Services Commission funding. Any additional investment should be targeted at service users identified and referred through a number of defined routes, including services working with people threatened by homelessness/ in rent arrears, people in need of housing support, vulnerable families, or people with mental health problems. This service would fit alongside that funded by the Lottery, should the current bid prove successful. Recommendation 2.2 Hastings Borough Council should explore the possibility of making an investment in Hastings and Rother Credit Union to ensure that it can deliver a budgeting account to an increased number of members. This exploration should be carried out alongside ESCC, and local RSLs, who have held preliminary discussions with Hastings and Rother Credit Union about the impact of Universal Credit and budgeting accounts. Recommendation 2.3 Hastings Borough Council should keep a watching brief in relation to the developing relationship between ESCC and local foodbanks. It should continue to encourage the development of joint working and referral between its own frontline staff and Hastings Foodbank. Recommendation 2.4 Hastings Borough Council should considers how it can support the development of the financial capability of local residents. Its focus should be on exploring with other partners how financial capability can be built into/ provide an added push to local initiatives focused on life skills, or health related activities such as smoking cessation, and how frontline staff can reinforce clear messages around money management and financial resilience. Recommendation 2.5 Hastings Borough Council should maintain as far as possible its current activities to tackle fuel poverty. It should explore the potential for a local initiative around energy clubbing. This involves people coming together to offer their collective custom to a range of energy companies in return for negotiation of a lower tariff. Recommendation 2.6 Hastings Borough Council should convene a consultation with the local voluntary sector through Hastings Voluntary Action to explore further creative, low cost initiatives to reduce household outgoings. Recommendation 2.7 Hastings Borough Council should continue its current support for employability initiatives locally. For many people, the only way to deal with the negative income consequences of welfare reform will be to find employment. This report was produced with the support of Mandy Littlewood Consulting, Clair Malpas and Lisa Glass. Thanks are also due to Chantal Lass for commissioning the work, to all those who recruited interviewees for the research, and to the interviewees for their honesty and openness. 15

Section 1: Introduction Change has been a constant in the benefit system since its earliest days. The pace of that change has intensified since the election of the Coalition Government in May 2010. Changes set out within the Welfare Reform Act 2012, in the emergency budget of June 2010 and through a number of other statutory instruments, collectively are creating the biggest changes in the UK social security system since the National Insurance Act of 1946. Continuity and Change in the Themes of Reform In pursuit of twin and intertwined goals of tackling poverty and making work pay, the 1997 to 2010 Labour Government focused considerable attention on welfare reform. Tax credits were introduced to support those with children and wages of low paid workers, Pension Credit was created to tackle poverty amongst older people by supplementing the basic state pension, and Employment Support Allowance was brought in with the intention of increasing levels of employment amongst people with health problems. Some of the key themes of the coalition Government s reforms, there is considerable continuity from previous governments. The reforms are intended to tackle a welfare system which is seen as: Acting as a disincentive to work. Insufficiently responsive to changes in circumstances. Not reflective of changes in society. There are, however a number of significant changes in emphasis from reform programmes carried out by previous administrations: The reforms have the specific intent of achieving a cut in the overall social security bill of 18bn by their conclusion, with the money saved being used to reduce the level of cuts required in other departmental budgets under the Government s austerity programme. One of the stated aims of the introduction of Universal Credit, the main plank of the Government s reform strategy, is to simplify the way in which the welfare system operates. This is seen as contrasting with the perceived complexity of reforms under the previous administration, and that which has grown up within the social security system since its earliest days. The focus of the reforms is almost entirely on people of working age and their families. Far fewer of the changes will impact on older people, who have been insulated from the reforms as an explicit policy decision. 16

Aspects of the Reform Agenda. Three broad areas of reform can be discerned: Three transitions from existing benefits to new benefits: o The gathering together of work related and means tested benefits within Universal Credit. o The ongoing migration of existing Incapacity Benefit and Severe Disablement Allowance Claimants to Employment Support Allowance or Job Seekers Allowance and the repeated re-assessments via the Work Capability Assessment. o The transition of current Disability Living Allowance claimants to the new Personal Independence Payment. The localisation of control over the Social Fund, and Council Tax Benefit. A series of smaller changes to various benefits, including changes to uprating, child benefit, tax credits and Housing Benefit coming into force before the introduction of Universal Credit. Structure of the Report Section 2 describes key aspects of the Hastings socio-economic context in which the reforms will be delivered. This allows for an understanding of: The extent to which Hastings might experience particularly high levels of impact as a result of welfare reform. The extent to which the town is experiencing difficulties relating to poverty, low incomes and financial inclusion, prior to the introduction of major elements within the welfare reform process. Ways in which Hastings residents may lack or possess resilience in dealing with the consequences of key aspects of welfare reform. The broader anti poverty and financial inclusion context within which any response aiming to mitigate the impact of the welfare reforms on Hastings will be delivered. Section 3 focuses in turn on the three areas of welfare reform identified above, estimating the impact of reforms on Hastings residents in terms of the numbers of people likely to be affected, and where possible, the extent of potential financial losses. Section 4 presents findings from a series of interviews with people who have been affected by welfare reform, or may be affected by welfare reform in the future. Section 5 draws key conclusions from the report, focusing on highlighting the areas in which local authorities and other local organisations may need to respond. The Neutrality of the Report The authors of the report are keenly aware that the issue of welfare reform is politically controversial. They are not, and cannot be, immune from having personal views about the consequences of the reforms. However, they are clear that this report is as neutral a reporting of research findings as is possible. However, it is clear that at first sight the report may appear to have a particular slant, in that it may appear to emphasise the potential negative impacts of welfare reform. Two critical points need to be made in this respect. 17

There is huge debate about the ultimate consequences of the welfare reforms for those affected. Critics focus on the income that households may lose as a consequence, and broader negative impacts that they fear will follow. In response, the Government stresses its belief that the changes will incentivise work, and that, as a key part of its broader economic strategy, they will make a major contribution to the creation of a stronger economy. This report has to focus on the impacts of reform that are more certain. It will therefore inevitably concentrate on the potential negative and positive direct income consequences of the reforms, rather than on less predictable potential positive outcomes relating to work incentives. Even if such outcomes were more predictable, and could be assessed with greater accuracy, questions would remain as to they were distributed so as to balance income losses. Moving beyond the Current Media Debate Much of the debate in the media has focused on the issue of the benefit cap, the restriction of the maximum amount of benefit that can be paid to a household to reflect median household income. The limited attention paid to this within the report does not reflect any view of the authors about the justice or otherwise of the cap, nor of the reasons for the debate focusing in that direction, rather their view that the benefit cap has far less significance for people in Hastings than any of the other changes discussed in this report. Much of the rhetoric used in the media when debating welfare reform also assumes a simple and lasting distinction between benefit claimants and hard working families. This ignores the fact that the majority of the reforms discussed in this report impact on people who are in low paid work as well as people who are out of work. It also ignores the fact that people s interactions with the benefit system are complex and change over time; people go in and out of work, form and leave relationships, fall ill and see their health improve. This leads to a final point, within the terms of the information available, it is only possible to provide a series of snapshots of particular moments in time. The statistical part of the report cannot hope to capture the complexity of individuals interaction with the benefit system over time, but where possible it will present evidence that indicates that complexity, and readers should at all times bear in mind that the circumstances of many of those affected by welfare reform will change to an even greater extent than the social security system itself. Relationship between this Report and East Sussex County Council Report on the Impact of Welfare Reform After completion of the initial draft of sections 2 and 3 of this report in September, the consultant was commissioned to carry out a similar piece of work for East Sussex County Council s Welfare Reform Project. Based on the further research that he was able to carry out for that county wide project, much of it based on the large number of reports released since the first draft of this report was completed, the consultant has been able to carry out a substantial rewrite of this report ensuring that it reflects the most up to date information available. This note both acknowledges the debt to that county wide work, and explains the similarities in structure and content between the reports, both of which stand as independently valid pieces of work. 18

Section 2: The Local Background to Welfare Reform. Introduction Welfare reform is impacting, and will impact on Hastings residents in a context in which the town is already facing major challenges. This section sets out an overview of key poverty and financial inclusion related issues facing Hastings residents. Exploring these issues gives a sense of the risks posed by welfare reform, and particular financial problems to which people may be vulnerable as the process rolls out. The section updates much of the work presented in the ESAP Report Financial Inclusion in East Sussex produced back in 2010. It covers: Developments in the labour market relating to unemployment, employment and wage levels. Poverty and household income. Financial inclusion issues: o Debt. o Financial capability. o Access to mainstream financial issues. Labour Market This section explores: The unemployment impact of the recession on Hastings. The extent to which Hastings residents move in and out of employment. The extent of the reliance on part time employment in Hastings. The low wages earned by Hastings residents. Unemployment in the Recession The ongoing recession has had a major impact on unemployment in Hastings, as elsewhere in the UK. In October 2008, at the start of the recession, Hastings had a total of 2,002 people claiming Job Seeker s Allowance 1. This rose to a peak of 3,549 in February 2010, falling back to 2,976 in November 2010. It rose to a further peak of 3,553 in February 2012, before falling back to 3,155 in July 2012, the most recent month for which figures are available 2. The number of men claiming Job Seeker s Allowance in Hastings in October 2008 stood at 1,488. This rose to 2,648 in February 2010, falling back to 2,160 in November 2010. It rose to another peak of 2,545 in February 2012, before falling back to 2,242 in July 2012, the most recent month for which figures are available. The number of women claiming Job Seeker s Allowance in Hastings in October 2008 stood at 517. This rose to 901 in February 2010, falling back to 803 in October 2010. It rose to another peak of 1008 in February 2012, before falling back to 913 in July 2012, the most recent month for which figures are available. 1 Measuring the number of people claiming JSA does not capture the full extent of unemployment in an area. However, it is often one of the headline unemployment figures used, and it is sufficient for the purposes of illustrating the trends discussed in this section. 2 All figures in this section from www.nomisweb.net. 19