Welfare and benefits commentary - analysis of the trends

A further round of welfare reforms have been announced in recent months, many building on other changes that have been introduced in the last few years.

Introduction

The majority of the changes outlined below aim to make cuts to social security expenditure. It has also been argued that they will improve work incentives, make the system fairer and more affordable, and simplify the complexities of the benefit system.

These principles of reform are attractive to many. The problem, as this chapter highlights, is that they are being applied in the context of a complex system, which means that they do not always translate. While few people will experience all the components of this benefit system and so will have little need to understand its intricacies and interactions with other systems of support, the interactions between different elements of support require further attention. Many people will call on the social security system at some point, whether due to a sudden change in circumstances or when moving into retirement. The indicators presented in the following pages outline some of the difficulties people find themselves in when they try to access the welfare system.

The table below provides an overview of recent and proposed key reforms. Basic impact estimates are included where possible.

Key welfare reforms and estimates of their impact
Date Change Number affected Impact
Oct 2012 New JSA and ESA sanction schemes Potentially all JSA claimants and those on ESA in the work-related activity group Full amount of benefit up to 4 weeks (ESA), 13 weeks, 26 weeks or 3 years (JSA)
April 2013 Under-occupancy penalty ('bedroom tax') 460,000 £15 per week
April 2013 Council tax benefit replaced with local council tax benefit support schemes 2.26 million £3 per week
April 2013 Overall benefit cap (£350 for single, £500 for others) 22,000 £63 per week
April 2016/17 Reduced overall benefit cap to £385 outside London and £442 in Greater London 92,000 households in addition to the 22,000 currently already affected

A further £64 per week for households already capped

£39 per week for households not previously capped

April 2016 4 year freeze in working-age benefits (at 2015/16 levels) 30 per cent of all households £6 per week in 2019/20
April 2016 Change in conditionality for responsible carers under UC 220,000 carers Additional conditionality applied to group
April 2016 Lowering of tax credit income threshold and increase in rate at which credits are withdrawn At least 2.4 million families (up to 3 million) Not published by DWP
April 2017 Realigning ESA WRAG payments with JSA levels up to 500,000 families in the long term £28 per week
April 2017 Restricting benefit entitlement to level for 2 children for new tax credit and UC claims - i.e. changes to child and family element 3.7 million households Not published by DWP

Source: DWP impact assessments, DWP Stat Xplore and NPI modelling of Council Tax Support schemes

Choice of indicators

There has been much discussion of the affordability of the benefit system in recent years. This chapter begins by analysing trends in social security spending over the long term, comparing these to the value of benefits for different households.

Next we consider the coverage of the benefits system in terms of numbers of claimants and the take-up of some key out-of-work benefits.

Turning to individual benefits, we review data on the claimant count, which now includes a small number of Universal Credit claimants alongside those claiming Jobseeker’s Allowance. People who claim these benefits are subject to conditionality and may be sanctioned if they fail to comply or engage in particular activities. We also discuss the extent to which sanctions are being applied to Jobseeker’s Allowance claimants.

The next set of indicators provides an overview of the Employment and Support Allowance (ESA), a key income replacement benefit for working-age adults who are unable to work. While the assessment process does not seem to be working effectively, a growing number of people are claiming ESA. We look at the different categories of ESA claimants, focusing in particular on those in the work-related activity group.

The next indicator covers the localisation of Council Tax Support for low-income households and how the impact varies across England. With calls for further devolution of components of the social security system, the indicator highlights the potential for varying levels of support to be offered to low-income households in different local areas.

The final two indicators focus on recent welfare reforms that have sought to reduce benefit payments, whether for claimants in the social rented sector or among those households making higher value benefit claims. The first indicator looks at the impact of reducing benefit entitlement for social renters who are deemed to have a spare room, and the final indicator considers the kinds of household which are now subject to the benefit cap.

The chapter closes with a map showing the proportion of young people who will be affected by cuts to tax credits in each local authority in Great Britain.

Commentary

A debate about welfare reform that originates from a concern with the size of social security spending, and which becomes focused on reducing the amount spent on working-age claimants, will leave a number of important policy questions unanswered. At £228 billion, spending on social security represents a significant share of government expenditure. Resources are not limitless and difficult questions have to be answered about who should get support and when. However, given that spending on social security as a share of GDP has been coming down since 2012/13 (Hood, A. and Oakley, L. (2014) A survey of the GB benefit system, Institute for Fiscal Studies; Office for Budget Responsibility (2015) Welfare trends report, OBR), it seems fair to prioritise other questions relating to the design of the benefit system.

Many of the indicators in this chapter raise questions around the issue of access to benefits. A question that appears particularly incompatible with the tenor of recent debates is why such a large proportion of people do not claim benefits that they appear to be eligible for. The level of take-up can offer important insights into the state of the benefit system and the extent to which targeted support is reaching intended groups. This should form a key performance indicator for the DWP.

Another issue relating to access is the length of time it takes for people to receive support. For those who start a claim for benefits, the assessment process can be challenging and some claimants experience long delays. Some of these delays are now built in to the system – for example, everyone making a claim for JSA, ESA or Universal Credit is now required to wait for seven days before they are entitled to the benefit. Other delays are the result of more fundamental design problems: better monitoring of delays in the assessment process for ESA is needed to ensure that a particularly vulnerable group of claimants is not being affected by service failures.

Access to benefits is not just a matter of meeting the criteria for individual benefits. In addition to the means-testing associated with the majority of working-age benefits, recent reforms have introduced additional layers of conditionality and assessment for some households. The benefit cap aims to prevent certain households (such as those who are working-age, workless, not in receipt of DLA) from making high value benefit claims that outstrip median earnings. In practice 11,000 lone parents with a young child aged under 5 are having their benefit capped. If the expectation is that these claimants will respond to the cap by moving into work, the cap is effectively extending conditionality to a group of claimants that would not normally be expected to actively seek work.

Benefit levels have never been based on a systematic estimate of basic needs. Each reform, whether a freeze in benefit rates, an adjustment to entitlement or benefit levels, or the addition of a new condition that people have to meet in order to claim, changes how the system functions. Many introduce new inconsistencies. These deserve greater attention.

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