The local and regional impact of welfare reform The Impacts of Welfare Reform Steve Fothergill Centre for Regional Economic and Social Research Sheffield Hallam University
Publications Hitting the Poorest Places Hardest: the local and regional impact of welfare reform by Christina Beatty and Steve Fothergill available at www.shu.ac.uk/cresr On-line dataset for every authority Scotland and Northern Ireland reports Interactive map on Financial Times website
Which reforms? Housing Benefit: Local Housing Allowance Housing Benefit: Under-occupation ( bedroom tax ) Non-dependant deductions Household benefit cap Council Tax Benefit Disability Living Allowance Incapacity benefits Child Benefit Tax Credits 1 per cent up-rating
The reforms (1) Housing Benefit: Local Housing Allowance 50 th to 30 th percentile for setting rents in private sector Cap on rents based on property size Abolition of 15 excess payments Age limit for shared accommodation up from 25 to 35 CPI indexation Housing Benefit: under-occupation ( bedroom tax ) Payments to working age claimants in social rented sector set at level that reflects size and age composition of household Non-dependant deductions Higher deductions from HB to reflect contribution that non-dependant household members are expected to make to housing costs
The reforms (2) Household benefit cap Cap on total payments to working-age claimants Council Tax Benefit 10% reduction in grant from central government Can be passed on only to working age households Disability Living Allowance Replacement of DLA by Personal Independence Payments More stringent and regular medical test Reduction in number of payment categories
The reforms (3) Incapacity benefits Employment and Support Allowance (ESA) replacing previous benefits Tougher medical test Work Capability Assessment Re-testing of existing claimants New conditionality in Work-Related Activity Group Time limiting of non-means tested benefit for ESA claimants in Work-Related Activity Group Child Benefit Three year freeze Withdrawal from households with higher earner
The reforms (4) Tax credits Adjustments to thresholds, withdrawal rates, supplements, income disregards and backdating Changes to indexation and up-rating Reduction in childcare element of WFTC Increase in working hours requirement for WFTC 1 per cent up-rating Up-rating by 1 per cent rather than CPI for three years for main working age benefits and LHA element of Housing Benefit
Not included Universal Credit Essentially a re-packaging of existing benefits Not expected to result in net reduction in benefit entitlement Most of impact will be felt well beyond 2015 Income Support for lone parents Transfer to JSA at same rates RPI to CPI up-rating Wider public sector accounting reform
Measuring the impacts Treasury estimates of the overall financial saving arising from each element of the reforms Government Impact Assessments Benefit claimant numbers and expenditure, by local authority Additional official statistics DWP evidence from pilot schemes
Statistical issues to bear in mind. Some reforms target households, others individuals Some people are hit by more than one element of the reforms Almost exclusively the impact is on working age benefit claimants Impact when reform is fully implemented All other factors held constant in particular, no assumption that lower benefits lead to higher employment
Overall impact on GB (1) Loss ( m pa) Per working age adult ( pa) Incapacity benefits 4,350 110 Tax Credits 3,660 90 1 per cent uprating 3,430 85 Child Benefit 2,845 70 Housing Benefit: LHA 1,645 40 Disability Living Allowance 1,500 40 Housing Benefit: bedroom tax 400 10 Non-dependant deductions 340 10 Council Tax Benefit 340 10 Household benefit cap 185 5 TOTAL 18,700 465 Sources: HM Treasury and Sheffield Hallam estimates
Overall impact on GB (2) No of households/ individuals affected Average loss per affected h hold/individual ( pa) Child Benefit 7,600,000 370 Tax Credits 4,500,000 810 Council Tax Benefit 2,450,000 140 Housing Benefit: LHA 1,350,000 1,220 Incapacity benefits 1,250,000 3,480 Disability Living Allowance 960,000 1,560 Housing Benefit: bedroom tax 540.000 740 Non-dependant deductions 300,000 1,130 Household benefit cap 40,000 4,820 1 per cent uprating?? Source: Sheffield Hallam estimates based on official data
The groups typically most affected (1) Housing Benefit: LHA Low-income households in the private rented sector Housing Benefit: bedroom tax Older, low-income working age tenants in social rented sector whose children have moved away Non-dependant deductions Low-income households with grown-up children living at home Household benefit cap Large out-of-work families in high rent areas Council Tax Benefit Low-income working age households
The groups typically most affected (2) Disability Living Allowance Less severely disabled of working age, mostly older, mostly out-of-work Incapacity benefits Out-of-work, mainly older adults with ill health or disability, except the most ill/disabled Child Benefit All households with children (a little) Households with higher earners (a lot) Tax Credits Low-to-middle income families with children, including working households 1 per cent up-rating Everyone on the main working age benefits
Impact by region Overall loss Per working age adult m p.a. p.a. North West 2,560 560 North East 940 560 Wales 1,070 550 London 2,910 520 Yorkshire & the Humber 1,690 500 West Midlands 1,740 490 Scotland 1,660 480 East Midlands 1,310 450 South West 1,440 430 East of England 1,490 400 South East 2,060 370 GB 18,870 470 Source: Sheffield Hallam estimates based on official data
Overall financial loss, by local authority Greater London per working age adult p.a. 550 + 450 to 550 350 to 450 0 to 350
Worst-hit 30 local authority districts Loss per working age adult p.a. Blackpool 910 Hastings 690 Hackney 670 Westminster 820 Burnley 690 Enfield 670 Knowsley 800 Rochdale 680 Glasgow 650 Merthyr Tydfil 720 Barking & Dag 680 Salford 640 Middlesbrough 720 Brent 680 Caerphilly 640 Hartlepool 710 Hyndburn 680 Oldham 640 Torbay 700 Blackburn 670 Wirral 640 Liverpool 700 Thanet 670 Haringey 640 Blaenau Gwent 700 Stoke on Trent 670 St Helens 630 Neath Port Talbot 700 Rhondda C T 670 Inverclyde 630 Source: Sheffield Hallam estimates based on official data
Least-hit 20 local authority districts Loss per working age adult p.a. Mid Sussex 280 Chiltern 270 East Hampshire 280 South Buckinghamshire 260 Waverley 280 Guildford 260 Cotswold 270 South Northamptonshire 260 Harborough 270 South Oxfordshire 260 Horsham 270 Rutland 260 Surrey Heath 270 Wokingham 250 Mole Valley 270 Cambridge 250 South Cambridgeshire 270 Hart 240 Winchester 270 City of London 180 Source: Sheffield Hallam estimates based on official data
Districts with largest absolute losses Loss arising from welfare reform m p.a. Birmingham 490 Bristol 141 Glasgow 269 Kirklees 140 Leeds 232 Enfield 136 Liverpool 227 Edinburgh 135 Manchester 217 Westminster 133 Bradford 194 Croydon 129 County Durham 188 Wirral 127 Sheffield 173 Newham 127 Cornwall 171 Leicester 126 Brent 146 Ealing 125 Source: Sheffield Hallam estimates based on official data
Relationship to deprivation Sources: Sheffield Hallam estimates and Payne and Abel (2012) based on Indices of Deprivation for England, Wales and Scotland
Housing Benefit: LHA Greater London per working age adult p.a. 55 + 40 to 55 25 to 40 0 to 25
Housing Benefit: bedroom tax Greater London per working age adult p.a. 20 + 15 to 20 10 to 15 0 to 10
Non-dependant deductions Greater London per working age adult p.a. 12 + 9 to 12 6 to 9 0 to 6
Household benefit cap Greater London per working age adult p.a. 20 + 10 to 20 5 to 10 0 to 5
Council Tax Benefit Greater London per working age adult p.a. 20 + 10 to 20 0 to 10 0
Disability Living Allowance Greater London per working age adult p.a. 50 + 40 to 50 30 to 40 0 to 30
Incapacity benefits Greater London per working age adult p.a. 150 + 100 to 150 75 to 100 0 to 75
Child Benefit 85 + 75 to 85 65 to 75 0 to 65
Tax Credits Greater London per working age adult p.a. 110 + 90 to 110 70 to 90 0 to 70
1 per cent uprating Greater London per working age adult p.a. 120 + 90 to 120 60 to 90 0 to 60
Some conclusions The impacts of welfare reform are substantial Many of the biggest impacts are still working their way through Many deprived parts of Britain are hit hardest Key effect of reforms is to widen the gaps in prosperity between the best and worst local economies