1st Report, 2015 (Session 4): The Cumulative Impact of Welfare Reform on Households in Scotland

SP Paper 657 (web only)

WR/S4/15/R1

1st Report, 2015 (Session 4)

The Cumulative Impact of Welfare Reform on Households in Scotland

Remit and membership

Remit:

To keep under review the passage of the UK Welfare Reform Bill and monitor its implementation as it affects welfare provision in Scotland and to consider relevant Scottish legislation and other consequential arrangements.

Membership:

Clare Adamson (Deputy Convener)
Annabel Goldie
Joan McAlpine
Margaret McDougall
Christina McKelvie
Michael McMahon (Convener)
Kevin Stewart

Committee Clerking Team:

Clerk to the Committee
Simon Watkins

Assistant Clerk
Heather Lyall

Committee Assistant
Suzanne Lyden

The Cumulative Impact of Welfare Reform on Households in Scotland

 

The Committee reports to the Parliament as follows—

1. In December 2014, the Committee commissioned research on the cumulative impact of welfare reform on households in Scotland from the Centre for Regional Economic and Social Research at Sheffield Hallam University

2. The research is attached as Annexe A to this report.

ANNEXE A – THE CUMULATIVE IMPACT OF WELFARE REFORM ON HOUSEHOLDS IN SCOTLAND

THE CUMULATIVE IMPACT OF WELFARE REFORM

ON HOUSEHOLDS IN SCOTLAND

A report for the Scottish Parliament

Christina Beatty and Steve Fothergill

Centre for Regional Economic and Social Research

Sheffield Hallam University

February 2015

Key points

  • This report documents for the first time the cumulative impact of the welfare reforms on different types of households across Scotland. All the estimates are rooted in official statistics and have been comprehensively updated to reflect the Treasury’s most recent figures on the expected financial savings.

  • When the current welfare reforms come to full fruition, which is now unlikely before 2018, they can be expected to reduce incomes in Scotland by £1.5bn a year, or £440 for every adult of working age. The impact falls very unevenly on different places, and on different households.

  • Families with dependent children are one of the biggest losers – in Scotland, couples with children lose an average of more than £1,400 a year, and lone parents around £1,800 a year. Because this is the cumulative impact of several individual benefit changes the overall impact has previously been hidden.

  • In all, families with children lose an estimated £960m a year – approaching two-thirds of the overall financial loss in Scotland.

  • Claimants with health problems or disabilities also lose out badly. Reductions in incapacity benefits are estimated to average £2,000 a year, and some of the same people also face big losses in Disability Living Allowance as well as reductions in other benefits.

  • Nearly half the reduction in benefits might be expected to fall on in-work households.

  • For some groups – notably families with children – the average losses in Scotland are nevertheless below the GB average. The decisions in Scotland not to pass on reductions in Council Tax Benefit and to offset the impact of the ‘Bedroom Tax’ are important factors.

  • In Glasgow, where the financial losses are greatest, a wide range of household types face above-average reductions in income.

  • There is little prospect in Scotland that the loss of benefit income will be offset by growth in income from employment, and increases in Income Tax allowances only go a small part of the way for some households.

THE CUMULATIVE IMPACT OF WELFARE REFORM ON HOUSEHOLDS IN SCOTLAND

Scope and purpose of the report

The Westminster Government is implementing welfare reforms that apply to all parts of the UK, including Scotland. The reforms impact very unevenly, however, on different places and different people.

This report looks at the cumulative impact of the welfare reforms on different types of households in Scotland. While the Westminster Government’s Impact Assessments offer a guide to the impacts of each element of the reform package, this is the first time that evidence has been available for Scotland on the cumulative impact on different sorts of households – on pensioners, couples, lone parents, households with and without dependent children, and so on.

The report builds on the foundations of two previous studies for the Scottish Parliament. The first, published in April 2013, looked at the financial losses arising from the reforms across Scotland as a whole and in each of its 32 constituent local authorities1. The second, published in June 2014, extended the estimates down to the level of electoral wards2. In exploring the impact on different types of households, the present report also draws heavily on methods that were first developed in a study for Sheffield City Council3.

All the figures presented in the report are estimates but in every case they are firmly rooted in official statistics – for example in the Treasury’s own estimates of the financial savings, the Westminster Government’s Impact Assessments, and benefit claimant data. The figures here have also been comprehensively revised to take account of the Treasury’s most recent estimates of the financial savings and, in some cases, of outturn data.

Welfare reform is a deeply contentious issue and in documenting the impacts the present report, like its predecessors, does not attempt to comment on the merits of the reforms. However, it is important that the impacts on different types of household are fully understood.

The welfare reforms

The figures in the present report once again cover all the major welfare reforms that have been underway in Scotland since 2010. Some of these reforms are now fully in place. Others are still being implemented and a small number still have a long way to run before coming to full fruition.

The reforms covered by the report are:

Housing Benefit – Local Housing Allowance

Changes to the rules governing assistance with the cost of housing for low-income households in the private rented sector. The new rules apply to rent levels, ‘excess’ payments, property size, age limits for sole occupancy, and indexation for inflation.

Non-dependant deductions

Increases in the deductions from Housing Benefit, Council Tax Benefit and other income-based benefits to reflect the contribution that non-dependant household members are expected to make towards the household’s housing costs

Household benefit cap

New ceiling on total payments per household, applying to the sum of a wide range of benefits for working age claimants

Disability Living Allowance

Replacement of DLA by Personal Independence Payments (PIP), including more stringent and frequent medical tests, as the basis for financial support to help offset the additional costs faced by individuals with disabilities

Incapacity benefits

Replacement of Incapacity Benefit and related benefits by Employment and Support Allowance (ESA), with more stringent medical tests, greater conditionality and time-limiting of non-means tested entitlement for all but the most severely ill or disabled

Child Benefit

Three-year freeze, and withdrawal of benefit from households including a higher earner

Tax Credits

Reductions in payment rates and eligibility for Child Tax Credit and Working Tax Credit, paid to lower and middle income households

1 per cent up-rating

Reduction in annual up-rating of value of most working-age benefits, which would normally have been increased with inflation

A fuller description of each of these reforms, including the timing of implementation, is contained in the appendices of the two previous reports for the Scottish Parliament4.

The vast majority of these welfare reforms have been initiated by the present Coalition government in Westminster, notably but not exclusively through the Welfare Reform Act 2012. Some of the incapacity benefit reforms, however, are Labour measures that pre-date the 2010 general election but have only recently taken full effect. They have been included here, alongside the Coalition’s reforms, to provide a comprehensive view of the impact of the reforms that have been underway.

In the Scottish context, two important omissions from the list are worth noting:

  • Council Tax Benefit. In collaboration with Scottish local authorities, the Scottish Government has chosen not to pass on to claimants the Westminster Government’s 10 per cent cut in the value of Council Tax Benefit payments.

  • Housing Benefit: under-occupation in the social rented sector. This reform, better known as the ‘Bedroom Tax’, is effectively not being implemented in Scotland from 2014-15 as a result of the Scottish Government’s decision to make available sufficient funding for Discretionary Housing Payments to fully offset the reduction in Housing Benefit.

Three further omissions are worth noting:

  • Universal Credit. This is scheduled to replace just about all means-tested working age benefits and is arguably the most ambitious reform of all. The introduction of Universal Credit is however distinctly different from the other reforms. Unlike the others, it is not expected to lead directly to a reduction in welfare spending and is better understood as a repackaging of existing benefits that for the first time introduces a consistent benefit withdrawal rate, but the rules governing eligibility are essentially carried over from the existing benefits it replaces. There are also major delays in the implementation of Universal Credit.

  • Income Support for lone parents. The qualifying age of the youngest child has been reduced from under 7 to under 5. The effect is to transfer the lone parent from Income Support to Jobseeker’s Allowance at the same payment rate.

  • RPI to CPI for benefits up-rating. This was introduced from 2011-12 but is really part of a much wider accounting reform, including for example all public service pensions.

When fully implemented, the welfare reforms covered in this report, including those that no longer apply to Scotland, are expected to save the UK Treasury around £18bn a year.

The figures the report presents show the financial losses to claimants when the reforms have come into full effect. Some of the reforms, particularly those affecting incapacity and disability benefits, are being implemented in stages over a number of years. The incapacity benefit reforms have also fallen well behind schedule because of the backlog in undertaking Work Capability Assessments (in part because of the loss of the prime contractor) and in processing appeals, which in turn is delaying the implementation of means-testing for those placed in the Work-Related Activity Group.

For some of the reforms (to Housing Benefit for example) the figures are therefore the expected losses in the 2014-15 financial year, but the full impact of the package as a whole cannot now be expected before 2018.

In estimating the impact of the welfare reforms the report holds all other factors constant. What this means in practice is that it makes no assumptions about the growth of the UK and Scottish economies, or about future levels of employment and unemployment.

The overall impact on Scotland

To provide a context for the household data presented later in the report, Table 1 shows the estimated impact of the welfare reforms on Scotland as a whole.

Table 1: Overall financial loss arising from welfare reform in Scotland (updated)

 

Estimated
loss
£m p.a.
Loss per
working age
adult £ p.a.
Tax Credits 350 100
Disability Living Allowance 320 90
Incapacity benefits 280 80
Child Benefit 240 70
1 per cent uprating 230 65
Housing Benefit: LHA 80 25
Non-dependant deductions 20 5
Household benefit cap 4 <5
     
Total 1,520 440
     

Source: Sheffield Hallam estimates based on official data

These are new and comprehensively updated estimates and, as such, replace the figures in the two previous reports for the Scottish Parliament.

The data sources and methods are set out in full in the appendices to the previous reports and therefore not repeated here. In brief, they involve taking the Treasury’s estimates of the financial savings arising from each reform and allocating the financial losses to Scotland and its constituent local authorities on the basis of local claimant data from DWP and HMRC. Data from the Westminster Government’s Impact Assessments and in some cases from pilot schemes also plays a part.

In the April 2013 report, the estimated impacts were all rooted in the Treasury’s estimates of the financial savings, published when each of the reforms were first announced in the Budget, Autumn Statement or Spending Review. Subsequently, the Treasury has revised a number of the estimated financial savings, for example to take account of better information, and published these in subsequent Budgets and Autumn Statements. Outturn figures are also now available for a number of welfare reforms – for example, the numbers affected by the overall cap on household benefits. It is also now clear that because of falling inflation the 1 per cent uprating of most working age benefits will not now deliver the savings that were originally expected5.

All the figures in the present report have been comprehensively updated to take these revised estimates of the financial savings into account.

Some of the changes are substantial. For example, the Treasury has revised down the anticipated savings from the time-limiting of non-means tested ESA by more than 40 per cent6. Conversely, the Treasury has increased the anticipated savings arising from the changeover from DLA to PIP by more than £1bn a year, to £2,870m a year by 2017-187. DWP has also increased, from 450,000 to 600,000, its estimate of the number of claimants likely to lose entitlement as part of the changeover8.

Table 1 shows that when the reforms have come into full effect they can be expected to take around £1.5bn a year out of the Scottish economy, or an average of £440 a year for every adult of working age – that is, an average of £440 for every person in Scotland aged between 16 and 64, whether or not they claim welfare benefits9. These new figures are a little down on those in the June 2014 report10 – from £1.6bn a year and £460 per adult of working age. The reduction in Scotland is in line with revised GB figures.

The individual welfare reforms vary greatly in the scale of their impact. The relative importance of each of the reforms, in terms of financial loss, is also different on these new, updated estimates.

In Scotland and indeed in the rest of the UK, the biggest financial impact is now estimated to come from the changes to Tax Credits – an estimated loss in Scotland of £350m a year. The changeover from DLA to PIP and the reforms to incapacity benefits also account for substantial sums - £320m and £280m a year respectively – though the losses arising from incapacity benefit reform are well down on the original estimates, in line with the Treasury’s new figures11. Changes to Child Benefit (£240m a year) and the below-inflation uprating of most working-age benefits from April 2013 (£230m a year) also account for substantial sums.

The overall scale of the financial loss in Scotland (£440 a year per adult of working age) is just below the GB average (£450). Scotland is hit substantially harder than South East England (£370) but less than Wales (£520), London (£490), North West England (£530) or North East England (£530)12.

It should not escape note, however, that the impact in Scotland would have been around £35 a year higher (i.e. around £475 per adult of working age) if the Scottish Government had not struck a deal with local authorities to avoid passing on the cut in Council Tax Benefit or put in place arrangements to defray the impact of the ‘Bedroom Tax’. The financial burden of these welfare reforms is being borne by public sector budgets in Scotland rather than by benefit claimants.

In the spring of 2015, at least three-quarters of the financial impact of the changeover from DLA to PIP remains in the future. There have also been delays in implementing the re-testing for incapacity benefits, arising in particular from the withdrawal of the original prime contractor. This in turn is delaying the full impact of the time-limiting of ESA. Taking the welfare reform package as a whole, in the spring of 2015 around 30 per cent of the overall financial loss to claimants in Scotland (and in the rest of Britain) still lies ahead.

Table 2 shows the estimated financial loss arising from the reforms in each of Scotland’s 32 local authority districts. Again, all these figures have been revised and updated and therefore replace those previously published.

Table 2: Overall financial loss arising from welfare reform in Scotland, by local authority (updated)

 

Estimated
loss
£m p.a.

Loss per
working age adult
£ p.a.

Glasgow

239

580

Inverclyde

30

570

West Dunbartonshire

33

550

Dundee

52

540

North Ayrshire

47

540

North Lanarkshire

113

510

East Ayrshire

40

500

Clackmannanshire

17

500

Renfrewshire

55

480

South Lanarkshire

96

470

South Ayrshire

32

470

West Lothian

53

460

Dumfries and Galloway

42

450

Midlothian

24

450

Fife

103

440

Falkirk

44

430

Argyll and Bute

22

410

East Lothian

25

400

Angus

28

390

Highland

56

380

Scottish Borders

27

380

Edinburgh

124

370

Perth and Kinross

34

360

Eilean Siar

6

350

Stirling

21

350

East Renfrewshire

19

340

Moray

20

340

Orkney Islands

5

340

East Dunbartonshire

21

320

Aberdeen

46

300

Aberdeenshire

47

290

Shetland Islands

4

270

 

   

Scotland

1,520

440

 

   

Source: Sheffield Hallam estimates based on official data

The biggest impact, in absolute terms and on a per capita basis, falls on Glasgow where the welfare reforms are now estimated to result in a loss of £239m a year, equivalent to £580 a year for every adult of working age in the city. On per capita basis a number of other older industrial areas are also hit hard. These include Inverclyde, Dundee, West Dunbartonshire, North Lanarkshire, Clackmannanshire and North and East Ayrshire.

By contrast, the financial loss in Edinburgh – an estimated £124m a year, or £370 per adult of working age – is significantly smaller. The places least affected by the reforms are in North East Scotland, Orkney and Shetland, and two relatively affluent districts (East Renfrewshire and East Dunbartonshire) in the central belt. However, it is worth noting that even in some of these local authorities the absolute losses remain large. Aberdeen, for example, can still expect to lose £46m a year.

As the earlier reports explained, there are no surprises in this geography. It is to be expected that welfare reforms will hit hardest in the places where welfare claimants are concentrated, which tend to be in the poorest areas with the highest rates of worklessness. There is a strong correlation between the financial loss per adult of working age arising from welfare reform and the Scottish Indices of Deprivation. The correlation applies at the level of local authority districts and at the level of electoral wards.

The impact on households and individuals

The welfare reforms impact on a wide range of households and individuals, and not just on those on out-of-work benefits.

As a guide, Table 3 identifies the types of households and individuals most affected by each of the reforms. This list draws on information in the Westminster Government’s Impact Assessments but also on a wider understanding of which groups claim which benefits.

A key point about the welfare reforms is that they often impact simultaneously on the same individuals and households. This point is best illustrated by considering incapacity benefit claimants. This large group of out-of-work men and women – they account for 7.7 per cent of all adults of working age in Scotland13 – tends to be older (IB/ESA claimant rates increase with age) and most have previously worked in low-grade manual jobs. Among incapacity claimants, the group most exposed to loss of benefit are those with less severe health problems or disabilities. They may now be found ‘fit for work’ at the point they undergo the new medical assessment or, if they remain on ESA in the Work-Related Activity Group, they lose entitlement to non-means tested benefit after a year.

This group of incapacity claimants is also exposed to the loss of DLA as the changeover to PIP takes place. At present, around half of all incapacity claimants also claim DLA. In theory, the most severely disabled should retain entitlement to PIP, meaning that the reductions in eligibility that the Westminster Government anticipates will hit those with less severe health problems or disabilities. Many of these will be the same people who are having their entitlement to incapacity benefits removed or reduced.

Table 3: Groups typically most affected by individual welfare reforms

 

HOUSING BENEFIT: LOCAL HOUSING ALLOWANCE

  • Low income households, mostly of working age, in the private rented sector
  • Under-35s, often single men, in the private rented sector
  • Families with large numbers of children in the private rented sector 

NON-DEPENDENT DEDUCTIONS

  • Low-income households claiming Housing Benefit with.grown-up children living at home 

HOUSEHOLD BENEFIT CAP

  • Large out-of-work families in high rent areas

DISABILITY LIVING ALLOWANCE

  • Less severely disabled of working age, mostly older, mostly out-of-work
  • New claimants initially, but existing claimants from 2015 onwards

INCAPACITY BENEFITS

  • Out-of-work, mainly older adults with less severe health problems or disabilities who are found ‘fit for work’ and denied access to Employment and Support Allowance (ESA)
  • ESA claimants in the Work-Related Activity Group- mainly older, mainly ex-manual workers, all out-of-work- who lose because of means-testing after 12 months (owing to partner’s income, other household income or savings)

CHILD BENEFIT

  • All households with children (a little)
  • Households with higher earners (a lot) 

TAX CREDITS

  • Low-to-middle income families with children, including workless households
  • Part-time workers on less than 24hrs a week

1 PER CENT UP-RATING

  • Everyone on the main working age benefits (JSA, IB/ESA, IS, HB(LHA), Tax Credits)

Source: Impact Assessments

Added to this, incapacity claimants living in the private rented sector are exposed to reductions in Housing Benefit under the Local Housing Allowance system. If they have grown-up children still living at home – which will often be the case given the age of many claimants – the new, larger non-dependant deductions also come into play. The failure to uprate the value of benefits with inflation adds a further twist to their financial loss. The financial loss to incapacity claimants would often have been even greater if the Scottish Government had not found ways to offset the ‘Bedroom Tax’ and avoid reductions in Council Tax Benefit.

Measuring the impact on households

Estimates of the total number of households in Scotland adversely affected (i.e. losing money) as a result of welfare reform were included in the two earlier reports. Table 4 comprehensively updates the figures to take account of more recent data and also disaggregates the impact of the changes to Child Benefit into its two components.

Table 4: Estimated numbers in Scotland adversely affected by each welfare reform (updated)

 

Estimated number of
households/individuals adversely affected

Average loss
per affected household/individual
£ p.a.

1 per cent uprating

835,000

270

Child Benefit- freeze

620,000

170

Tax Credits

370,000

930

Incapacity benefits(1)

145,000

2,000

Disability Living Allowance(1)

120,000

2,600

Child Benefit- higher earners

90,000

1,500

Housing Benefit: LHA

84,000

970

Non-dependant deductions

28,000

700

Household benefit cap

900

4,600

(1) Individuals affected; all other data refers to households

Source: Sheffield Hallam estimates based on official data

The important point in Table 4 is that a number of reductions in welfare benefits, notably the 1 per cent uprating of most working-age benefits and the three-year freeze in Child Benefit, impact on very large numbers but the average financial loss is relatively modest. A number of other welfare reforms, however, impact to a far greater extent on smaller numbers. The latest figures on the household benefit cap, for example, indicate that fewer than 1,000 households are affected but the financial loss to each may be large14. The incapacity benefit and DLA reforms both impact adversely on relatively large numbers of people and the average financial loss from each is substantial, which is why these reforms account for some of the largest financial losses to Scotland.

It is nevertheless worth bearing in mind that the figures here on the number of households or individuals affected are a ‘snapshot’ at a single point in time. Over time, as people move on or off benefit – there is always turnover – the numbers who will at some point feel the financial impact of the reforms will be substantially larger.

Additionally, it is worth remembering that in Scotland and elsewhere the numbers of incapacity benefit and DLA claimants undergoing reassessment are much larger than the numbers that eventually lose out financially. Only a proportion are ‘adversely affected’ in the sense that they lose money but for the remainder the reassessment process is still likely to be major source of stress and anxiety.

The figures on the impact of the reforms on different types of households in Scotland, presented below for the first time, are wholly new. In essence, they take the numbers adversely affected and the financial losses in Scotland – all deeply rooted in official statistics – and allocate them to different types of household on the basis of further official statistics on the extent to which different household draw on benefits:

  • The numbers of households in each of 15 categories (pensioners, working age couples, lone parents, etc.) in Scotland as a whole and in each local authority are taken from the 2011 Census of Population

  • The proportions of each household type receiving each welfare benefit are GB figures taken from DWP data on Housing Benefit claimants and from the Westminster Government’s Family Resources Survey

  • Combining population data and claimant rates generates intermediate estimates of the number of households of each type impacted by each welfare reform

  • The intermediate estimates are then revised to be consistent with the overall numbers affected by each element of the reforms (in Table 4 for Scotland as a whole) derived from the benefit-by-benefit calculations15.

These methods were successfully piloted in a November 2014 report on Sheffield16.

The resulting figures on the impact of the reforms on different types of households in Scotland are estimates and all subject to a margin of error. Nevertheless, the figures provide a substantially more reliable assessment of the numbers affected and the financial losses than has hitherto been available from any source.

For Scotland as a whole, Table 5 shows the estimated number of households of each type adversely affected as a result of each element of the welfare reforms. The 15-fold classification used here includes all Scotland’s 2.4m households17.

Two groups of households are relatively unaffected by welfare reform. One is student households – the 2011 Census identified 21,000 of these in Scotland – reflecting the fact that hardly any students are entitled to benefits.

The other much more substantial group that escapes lightly are pensioner households – around half a million in Scotland. The Westminster Government has deliberately crafted the reforms to try to avoid impacting on pensioners. In practice, to lose financially as a result of the reforms a pensioner household must be living in private rented accommodation and claiming Housing Benefit, or have a child for whom they can still claim Child Benefit, or be still in-work and eligible for Tax Credits. Few pensioner households fall into any of these categories.

Beyond students and pensioners, the uprating of benefits by 1 per cent rather than by inflation impacts on large numbers of households of all types. These include households drawing on not only incapacity benefits and Housing Benefit, themselves subject to reform, but also on Jobseeker’s Allowance and Income Support.

The other reforms impact more on specific groups:

  • The reforms to Housing Benefit in the private rented sector (‘Local Housing Allowance’) impact particularly on single person households (an estimated 27,500 in Scotland) and on lone parents with dependent children (24,500 households)

  • The increases in non-dependant deductions are a serious issue for lone parents whose grown-up children are still living at home (10,000 households in Scotland are in this category)

  • The household benefit cap affects larger families with children

  • The reforms to Disability Living Allowance impact on especially large numbers of working-age couples without dependent children (41,500 in all) and single person households (another 32,500)

  • The impact of incapacity benefit reform is similar to that of DLA reform, with working-age couples without dependent children (38,500) and single person households (50,000) most affected

Table 5: Estimated number of households adversely affected by welfare reform, Scotland

 

Housing Benefit: LHA

Non-dependant deductions

H’hold benefit cap

DLA*

IB/ESA*

Child Benefit: freeze

Child Benefit:higher earners

Tax Credits

1% uprating

Pensioner couple

1,200

1,900

-

-

-

1,900

-

1,800

1,900

Single pensioner

6,000

5,000

-

-

-

-

-

-

6,000

Couple no children

2,800

-

-

30,500

28,000

-

-

8,200

50,000

Couple- one child

5,000

1,000

-

8,000

10,500

176,000

47,000

68,000

176,000

Couple- two or more children

8,000

1,200

300

14,500

11,000

235,000

40,000

113,000

235,000

Couple- all children non-dependent

1,000

3,200

-

11,000

10,500

-

-

3,000

18,000

Lone parent- one dependent child

14,000

3,200

-

7,500

10,000

101,000

2,000

82,000

101,000

Lone parent- two or more dep. children

10,500

1,900

600

5,500

4,500

71,000

2,000

60,000

71,000

Lone parent- all child non-dependent

1,900

10,000

-

6,000

9,000

-

-

1,900

19,000

Single person household

27,500

-

-

32,500

50,000

-

-

10,000

107,000

Other- with one dependent child

1,100

400

-

1,500

2,000

21,000

-

12,500

21,000

Other - with two or more dep. children

800

300

-

1,000

1,500

16,000

-

10,500

16,000

Other- all full-time students

-

-

-

-

-

-

-

-

-

Other- all aged 65+

100

100

-

-

-

-

-

-

100

Other

3,500

-

-

4,500

6,500

-

-

1,500

14,000

 

                 

Total

83,000

28,000

900

120,000

145,000

620,000

90,000

370,000

835,000

 

 

 

 

 

 

       

Table 6: Overall impact of welfare reform on Scotland, by household type

 

Total number of households of each type in 2011

Average financial loss
£ p.a.

Pensioner couple

179,000

30

Single pensioner

312,000

40

Couple- no children

415,000

380

Couple- one dependent child

181,000

1,430

Couple- two or more dependent children

229,000

1,480

Couple- all children non-dependent

151,000

400

Lone parent- one dependent child

100,000

1,770

Lone parent- two or more dependent children

70,000

1,850

Lone parent- all children non-dependent

93,000

530

Single person household

511,000

490

Other- with one dependent child

21,000

1,410

Other- with two or more dependent children

16,000

1,500

Other- all full-time students

21,000

0

Other- all aged 65+

6,000

30

Other

68,000

490

 

 

 

 

 

All impacts by 2014-15 except DLA by 2017/18, incapacity benefits and 1% up-rating by 2015/16

Sources: Census of Population and Sheffield Hallam estimates based on official data

  • Child Benefit changes impact on virtually all households with dependent children18 (620,000 in all in Scotland) but the numbers experiencing full or partial withdrawal are smaller (90,000) and the vast majority of these are couples rather than single parents

  • Tax Credit changes also impact principally on households with dependent children, including large numbers (more than 140,000 in Scotland) of lone parents

Table 6 shows the average financial loss to each type of household in Scotland19. It is important to underline that these are averages across the whole stock of households of each type, not just those hit by the welfare reforms. Thus the modest average loss for couples with no children, for example, averages substantial losses to some households together with large numbers of other couples who are entirely unaffected by the welfare reforms.

The significant observation from this table is that households with dependent children are hit particularly hard. This is especially true of lone parent households with dependent children who on average can expect to lose around £1,800 a year when all the reforms have come to fruition. Couples with dependent children on average lose nearly £1,500 a year. By contrast, households without dependent children, including single-person households as well as couples, escape more lightly – the average loss is between £380 and £530 a year.

Table 7 offers a guide as to why different types of households are losing money. This table excludes pensioner and student households, for whom the losses are very small, and for the remaining household types shows the share of the average financial loss attributable to each element of the welfare reforms.

Taking for example the large average loss to lone parents with two or more children, 44 per cent is estimated to be attributable to reductions in Tax Credits, 15 per cent to below-inflation uprating, 11 per cent to changeover from DLA to PIP, 9 per cent to the three-year freeze in the value of Child Benefit, 8 per cent to reductions in the LHA element of Housing Benefit, and 7 per cent to the incapacity benefit reforms. These are of course averages which few specific households will mirror, but they provide an indication of the sources of financial loss to this particular group.

In contrast, the more modest average loss to working age couples with no children is made up principally of reductions to Disability Living Allowance (49 per cent) and incapacity benefits (35 per cent).

Around all these averages there will be a large spread both in terms of the sums lost and the make-up of the loss. As noted earlier, some couples face reductions in incapacity benefits, DLA, Housing Benefit and the failure to uprate with inflation. In these circumstances the cumulative financial loss when all the reforms have come to full fruition could be as large as £6-7,000 a year.

Table 8 shows the share of households of each type losing financially as a result of each of the welfare reforms. The figures here reflect not only the changes introduced by Westminster but also Scotland’s population structure and benefit claimant rates.

Unsurprisingly, the figures show that nearly all households with dependent children are impacted by the freeze and subsequent 1 per cent uprating in the value of Child Benefit. The withdrawal of Child Benefit from households with higher earners mainly affects couples with children; lone parents with dependent children are much less likely to lose out as a result of this change.

On other fronts, however, lone parents lose out badly. More than four out of five lone parents with dependent children are affected by reductions in Tax Credits, and around one-in-seven by reforms to Housing Benefit in the private rented sector. A further 7-10 per cent of this group of lone parents can be expected to lose money as a result of the reforms to incapacity benefits, and 7-8 per cent as a result of the changeover from DLA to PIP.

Table 7: Share of estimated financial loss attributable to each welfare reform, by type of household, Scotland, percentages

 

HB: LHA

Non-dep.
ded.

H’hold benefit cap

DLA

IB/ESA

Child Benefit: freeze

Child Benefit:higher earners

Tax Credits

1% uprating

TOTAL

Couple- no children

2

-0

-0

49

35

-0

-0

5

9

100

Couple- one child

2

0

-0

8

8

11

27

25

19

100

Couple- two or more children

2

0

0

11

6

12

18

31

19

100

Couple- all children non-dep.

2

4

-0

48

34

-0

-0

5

8

100

Lone parent- one child

8

1

0

11

11

10

2

43

15

100

Lone parent- two or more children

8

1

2

11

7

9

2

44

15

100

Lone parent- all child non-dep

4

14

-0

31

37

-0

-0

4

10

100

Single person household

11

-0

-0

34

40

-0

-0

4

12

100

Other- with one dep. Child

4

1

-0

12

14

12

-0

39

19

100

Other- with two or more dep. Child

3

1

-0

11

13

11

-0

42

19

100

Other

11

-0

-0

34

40

-0

-0

4

12

100

Source: Sheffield Hallam estimates based on official data

Table 8: Estimated proportion of households adversely affected by each welfare reform, Scotland, percentages

 

Housing Benefit: LHA

Non-dependant
deductions

H’hold
benefit cap

DLA

IB/ESA

Child Benefit: freeze

Child Benefit:higher earners

Tax Credits

1% uprating

Pensioner couple

1

1

0

0

0

1

0

1

1

Single pensioner

2

2

0

0

0

0

0

0

2

Couple- no children

1

0

0

7

7

0

0

2

12

Couple- one child

3

1

0

5

6

97

26

38

97

Couple- two or more children

3

1

0

6

5

100

18

50

100

Couple- all children non-dependent

1

2

0

7

7

0

0

2

12

Lone parent- one child

14

3

0

7

10

100

2

81

100

Lone parent- two or more children

15

3

1

8

7

100

3

86

100

Lone parent- all child non-dependent

2

11

0

6

10

0

0

2

20

Single person household

5

0

0

6

10

0

0

2

21

Other- with one dependent child

5

2

0

6

10

98

0

59

98

Other- with two or more dep. children

5

2

0

6

10

100

0

67

100

Other- all full-time students

0

0

0

0

0

0

0

0

0

Other- all aged 65+

1

1

0

0

0

0

0

0

1

Other

5

0

0

6

10

0

0

2

21

 

 

 

 

 

 

 

 

 

All households

4

1

0

5

6

26

4

16

34

 

 

 

 

 

Source: Sheffield Hallam estimates based on official data

The final line of Table 8, which shows the proportion of all Scottish households losing financially as a result of each of the welfare reform, nevertheless underlines the point that the burden falls on only a minority of all households. Only the freeze in the value of Child Benefit, the reductions in Tax Credits, and the failure to uprate with inflation hit a significant proportion of all Scottish households, and even then only a third at most. By contrast the very large financial losses associated with the DLA and incapacity benefit reforms – a combined total of £600m a year when both reforms have come to full fruition – are estimated to fall on just 5-6 per cent of all households.

The impact on specific sub-groups

Households with dependent children

Adding together couples, lone parents and others with dependent children, Scotland has a total of over 600,000 households with dependent children. These households account for around 26 per cent of all households in Scotland. The estimates of the impact of welfare reform by type of household provide a clear view of the financial losses to this particular group:

  • On average in Scotland, households with dependent children are estimated to lose £1,550 a year as a result of welfare reform

  • By contrast, households without dependent children are estimated to lose an average of just £320 a year

  • And even if pensioner and student households are excluded from the figures, the average loss to households without dependent children is only £435 a year

Of the total of £1.5bn a year that Scotland is expected to lose when the reforms have come to full fruition, some £960m – approaching two-thirds – is a financial loss faced by households with dependent children.

That households with dependent children are on average hit so hard by welfare reform is not something that has been widely recognised. As the figures show, the financial losses are rooted in a whole raft of changes rather than a single reform to the benefits system. Reductions in Tax Credits, drawn on heavily by low and middle income households with children, are a key part of the explanation but reforms to Housing Benefit, disability and incapacity benefits, Child Benefit and the 1 per cent uprating all compound the losses. Conversely, substantial numbers of in-work households without children draw little if at all on the benefits system.

Individuals with ill health or disability

Long-term ill health or disability is widespread in the population, in Scotland and elsewhere. Bearing in mind that the incidence of ill health or disability tends to increase with age it is perhaps fortunate that the reforms exempt those of state pension age: Incapacity Benefit and its successor Employment and Support Allowance are paid almost exclusively to working-age claimants20, and the changeover from Disability Living Allowance to Personal Independence Payments does not apply to the over-65s.

In Scotland, incapacity benefits are claimed by 268,000 men and women of working age. Disability Living Allowance is claimed by 209,000 men and women of working age21. These are often the same people – DLA is a benefit frequently claimed alongside incapacity benefits. The figures in the report show that, collectively, this group of claimants with health problems or disabilities is hit hard by welfare reform:

  • The financial loss in Scotland arising from DLA and incapacity benefit reform is estimated to be £600m a year – 40 per cent of the total financial loss arising from welfare reform

  • Scotland’s incapacity claimants can on average expect to lose £1,050 a year from this element of the reforms alone, and working-age DLA claimants can expect to lose an average of £1,530 a year

  • But within both groups the financial losses fall just on some claimants rather than everyone. As Table 4 earlier showed, those losing out – generally the less severely ill or disabled if procedures are working properly – can expect to lose an average of £2,000 a year as a result of incapacity benefit reform and £2,600 a year as DLA is replaced by Personal Independence Payments

  • Furthermore, some of the same claimants can in addition often expect to lose financially as a result of other elements of the welfare reform package, such as changes to Housing Benefit.

As noted earlier, even in 2015 much of the impact of the incapacity and DLA reforms remains in the pipeline. The full impact will not be felt until 2018.

In-work households

It is a popular misconception that the reforms to welfare benefits impact only on those who are out-of-work. The changes are extensive, and some impact more on in-work households. Working out the precise split between, on the one hand, households where someone is in work and, on the other, households where no-one is employment is not straightforward because some benefits are claimed by both groups – Housing Benefit is a good example. A further complication is that some out-of-work benefits – incapacity benefits for example – can be claimed by individuals who live in households where others are in work.

Official statistics offer some guidance. DWP benefits data22, for example, shows that in Scotland:

  • 25 per cent of Housing Benefit claimants in the private-rented sector are in employment

On the other hand virtually none of the households affected by the benefit cap will be in work. National data from HMRC23 also tells us that:

  • 73 per cent of all Tax Credit recipients are in work

  • And that 51 per cent of all the lone parents who are Tax Credit recipients are in work

Bearing in mind these figures it is possible to make an informed estimate of the overall impact of welfare reform on those in work. Let us assume that: 80 per cent of the reductions in Tax Credits and Child Benefit fall on in-work households; that one-third of the reduction in DLA and of the impact of the 1 per cent uprating falls on in-work households; that a quarter of the reduction in Housing Benefit in the private rented sector hits this group; and that 20 per cent of the reduction in incapacity benefits also impacts on in-work households. The resulting figure for Scotland is that:

  • Around £730m a year of the financial loss arising from welfare reform might be expected to fall on in-work households

  • The financial loss to in-work households would therefore account for just less than half (48 per cent) of the total financial loss to Scotland arising from welfare reform

Comparison with GB averages

It was noted earlier that the overall financial loss arising from welfare reform is estimated to be marginally less in Scotland than across Great Britain as a whole – £440 per adult of working age per year, compared to a GB average of £450. Table 9 compares the financial losses to different types of households.

These figures present a complex picture. Benefit rules and payment rates are the same in Scotland as in the rest of Britain, so differences in claimant rates between Scotland and GB are an important influence on the financial loss to different household types. The divergences from GB averages do however also reflect the decisions in Scotland not to implement reductions in Council Tax Benefit and to offset the losses arising from the ‘Bedroom Tax’.

Table 9: Average financial loss arising from welfare reform, by household type

 

Scotland
£ per year.

GB average
£ per year.

Pensioner couple

30

30

Single pensioner

40

60

Couple- no children

380

340

Couple- one dependent child

1,430

1,480

Couple- two or more dependent children

1,480

1,540

Couple- all children non-dependent

400

360

Lone parent- one dependent child

1,770

1,950

Lone parent- two or more dependent children

1,850

2,120

Lone parent- all children non-dependent

530

530

Single person household

490

520

Other- with one dependent child

1,410

1,440

Other- with two or more dependent children

1,500

1,530

Other- all full-time students

0

0

Other- all aged 65+

30

40

Other

490

490

Sources: Census of Population and Sheffield Hallam estimates based on official data

The Scottish decisions on Council Tax Benefit and the ‘Bedroom Tax’ appear to have reduced the average financial loss to lone parents in particular – estimated to be £180 a year below the GB average for a lone parent with one dependent child and £270 a year for those with two or more dependent children. Council Tax Benefit is claimed widely by lone parents. Many lone parents also live in the social rented sector and, depending on the number and age of their children, would have exposed to reductions in Housing Benefit attributable to the ‘Bedroom Tax’.

Couples without children, or with grown-up children still living at home, are groups for whom the average financial losses in Scotland are estimated to be above the GB average by around £40 a year. This probably owes a great deal to the high incapacity and DLA claimant rates in Scotland, particularly among older men and women of working age. The wider application of means-testing to incapacity benefits is also likely to impact more on couples – where one partner’s income from employment will usually disqualify the other – than on single-person households.

Variation between Scottish local authorities

The appendix presents figures on the average financial loss for each type of household in each of Scotland’s 32 local authorities. Once again it is important to stress that these are estimates that are all subject to a margin of error, and too much weight should not be placed on small differences between places or household types. Additionally, it again needs emphasis that the figures are averages for each household type and therefore hide what will often be large variation between individual households.

The differences between local authorities primarily reflect differences in benefit claimant rates: where claimant rates are high, the average loss among the households claiming those benefits is high.

In Glasgow, where the overall financial loss per adult of working age is estimated to be the highest in Scotland (see Table 2 earlier), the average loss to specific household types is often highest as well:

  • Couples with two or more dependent children lose on average £1,900 a year when the reforms have come to full fruition

  • Lone parents with dependent children lose on average around £2,300 a year

  • Couples without children at home lose on average £520 a year

  • Single person households of working age lose on average £660 a year.

In Glasgow and a number of other places, the above average losses to couples without children and to single person households owes a great deal to a high incapacity and DLA claimant rates and the large reductions in spending on these benefits.

Will the loss of income be offset?

Westminster ministers take the view that the welfare reforms increase the financial incentives to take up employment and because more people will look for work more people will find work. In this view, employment will be higher and the loss of benefit income will be offset in whole or in part by an increase in earnings.

There is no question that the welfare reforms do increase the financial incentive to work. On the other hand, even before the reforms began most out-of-work claimants would have been financially better off in employment. Financial disincentives only came into play for relatively small numbers at specific cut-off points in the system. It is these cut-offs that Universal Credit is intended to address by ensuring that claimants are financially better off in work in all circumstances.

Additionally, it is worth remembering that several of the welfare reforms – the changes to Tax Credits, to Child Benefit and Housing Benefit for example – impact extensively on those who are already in employment. Many of those in employment may find it difficult to increase their working hours to offset the loss of income. Relatively few employers can offer this flexibility.

Central to the view that employment will rise in the wake of the welfare reforms is the assumption that extra labour supply leads to extra labour demand from employers. However, whether labour markets really do work in this way is deeply questionable. Taking the very long view, the forces of demand and supply do certainly lead to adjustments in wage levels, and when wages fall in response to extra labour supply it adds to firms’ competitiveness and encourages extra employment. Paradoxically, some welfare benefits (such as Tax Credits) actually add to the downward pressure on wages because they partially compensate for low wages. But even so, this process of adjustment of wages in response to demand and supply generally takes many years or even decades. The national minimum wage also constrains the extent to which wages can fall.

There are specific times and places where a shortage of labour can bottle-up economic growth – parts of southern England before the 2008 recession are perhaps an example. But at times of low growth or in places where the local economy is relatively weak and already has a substantial pool of unemployed labour, the likelihood of an increase in labour supply triggering an increase in employment is low. Some individuals will undoubtedly find work to compensate for the loss of benefit income but whether the overall level of employment will be any higher as a result is questionable. More often than not, the claimants finding work will simply fill vacancies that would have gone to other jobseekers, thereby transferring unemployment from one person to another.

Scotland’s economy is a long way off the level of prosperity in parts of London and South East England. There remains a significant pool of unemployed labour in many areas and it is not obvious that, outside a few specific occupations, there is a general labour shortage. A further complication is that in Scotland and elsewhere, worklessness on benefit has mostly come to rest with those least able to secure and maintain a foothold in the labour market – men and women with health problems or disabilities, for example, and those with few formal qualifications and only low-grade manual work experience. In a competitive labour market these men and women are rarely employers’ first choice. The welfare reforms are not set to deliver an expanded workforce of computer programmers, doctors, trained engineers or electricians.

A prudent assumption would therefore be that, in Scotland, welfare reform is unlikely to result in significant expansion of employment to offset the loss of income.

The other way in which the loss of income might in theory be offset is by a reduction in personal taxation. The welfare reforms that are the focus of this report are of course only one of several things that are happening simultaneously and, as Westminster ministers have correctly pointed out, increases in personal allowances have the effect of reducing (or in some cases eliminating) liability for Income Tax.

Two points are worth bearing in mind about the impact of changes in personal allowances. The first is that only a proportion of benefit claimants actually pay Income Tax. Those in full-time employment will typically do so but there are many others – especially women – in low-paid part-time employment who have an income below tax thresholds. Those on means-tested benefits will generally be in this position too. For some in-work households with children, income tax reductions may offset some or all of the erosion in the value of Child Benefit, but for lone parents out-of-work on benefit this is much less likely.

The other point is the scale of the tax changes. If the personal allowance is for example £1,500 a year higher than would otherwise have been the case, the financial benefit to the taxpayer (at a 20 per cent tax rate) is £300 a year, or £600 a year for a double-income household where both are liable for Income Tax. By way of contrast, in Scotland the average financial loss arising from welfare reform for a household with dependent children is estimated to be £1,550 a year.

Concluding remarks

What the figures in the report demonstrate is that the welfare reforms impact very unevenly. Just as certain parts of Scotland lose much more than others, some households are far more exposed to the changes than the rest.

In Scotland, as in the rest of Britain, pensioner and student households escape virtually unscathed. But on average, families with dependent children face substantial financial losses. This is particularly true of lone parents. That families with dependent children lose so much is not something that has usually been noted, perhaps because the financial losses do not arise from a single element of the reforms. The cumulative impact of the reforms – adding together all the changes underway over the last four or five years – nevertheless exposes the full impact.

Average losses can of course still hide a great deal. Even within a group that is hit hard (lone parents for example) some households will escape lightly if they draw little on benefits. Others face above-average losses. The withdrawal of Child Benefit from higher earners is unusual because it hits the better-off, but in general it is likely to be the less well-off, both in and out of work, that lose the most.

APPENDIX: Estimated average financial loss arising from welfare reform, by type of household by local authority

 

Pensioner couple

£ per year
Single pensioner

Couple - no children

Couple - one child

Aberdeen

20

20

270

1,170

Aberdeenshire

20

20

240

1,040

Angus

30

30

320

1,260

Argyll and Bute

30

50

330

1,360

Clackmannanshire

30

30

430

1,510

Dumfries and Galloway

30

40

390

1,420

Dundee

40

50

470

1,670

East Ayrshire

30

40

440

1,520

East Dunbartonshire

20

20

290

1,150

East Lothian

30

30

320

1,320

East Renfrewshire

20

20

280

1,180

Edinburgh

30

60

300

1,380

Eilean Siar

20

20

310

1,170

Falkirk

20

30

380

1,370

Fife

30

30

370

1,440

Glasgow

30

50

520

1,830

Highland

20

20

330

1,270

Inverclyde

30

40

500

1,650

Midlothian

30

30

390

1,410

Moray

20

20

280

1,130

North Ayrshire

30

50

440

1,610

North Lanarkshire

30

30

450

1,530

Orkney Islands

30

20

260

1,180

Perth and Kinross

30

30

300

1,280

Renfrewshire

30

30

400

1,510

Scottish Borders

30

30

300

1,260

Shetland Islands

20

10

220

1,000

South Ayrshire

30

40

400

1,480

South Lanarkshire

30

30

410

1,480

Stirling

20

20

330

1,270

West Dunbartonshire

30

30

490

1,610

West Lothian

30

30

390

1,420

 

 

 

 

 

 

 

 

 

 

Scotland

30

40

380

1,430

 

       

Source: Sheffield Hallam estimates based on official data

Estimated average financial loss arising from welfare reform, by type of household by local authority (cont.)

 

Couple -
two or more children

£ per year

Couple -
all children non-dependent

Lone parent -
one child

Lone parent-
two or more children

Aberdeen

1,190

290

1,320

1,420

Aberdeenshire

1,040

250

1,150

1,200

Angus

1,310

330

1,590

1,650

Argyll and Bute

1,410

340

1,780

1,830

Clackmannanshire

1,610

440

1,920

2,080

Dumfries and Galloway

1,510

410

1,880

1,950

Dundee

1,750

480

2,170

2,270

East Ayrshire

1,600

450

1,980

2,080

East Dunbartonshire

1,140

300

1,240

1,260

East Lothian

1,350

340

1,610

1,680

East Renfrewshire

1,150

290

1,250

1,280

Edinburgh

1,420

320

1,720

1,880

Eilean Siar

1,210

320

1,380

1,430

Falkirk

1,410

400

1,650

1,700

Fife

1,500

380

1,790

1,870

Glasgow

1,900

540

2,280

2,360

Highland

1,320

340

1,570

1,630

Inverclyde

1,710

520

2,100

2,150

Midlothian

1,470

410

1,750

1,870

Moray

1,180

300

1,400

1,460

North Ayrshire

1,680

450

2,050

2,140

North Lanarkshire

1,580

470

1,890

1,950

Orkney Islands

1,240

270

1,510

1,570

Perth and Kinross

1,330

310

1,590

1,660

Renfrewshire

1,550

420

1,830

1,890

Scottish Borders

1,330

310

1,600

1,670

Shetland Islands

1,000

240

1,030

1,070

South Ayrshire

1,540

420

1,880

1,970

South Lanarkshire

1,520

420

1,780

1,840

Stirling

1,290

340

1,480

1,520

West Dunbartonshire

1,680

500

1,980

2,080

West Lothian

1,470

410

1,730

1,800

 

 

 

 

 

 

 

 

 

 

Scotland

1,480

400

1,770

1,850

 

       

Source: Sheffield Hallam estimates based on official data

Estimated average financial loss arising from welfare reform, by type of household by local authority (cont.)

 

Lone parent -all children non-dependent

£ per year
Single person household

Other - with one dependent child

Other - with two or more dependent children

Aberdeen

390

330

1,070

1,140

Aberdeenshire

320

300

920

960

Angus

440

410

1,270

1,310

Argyll and Bute

470

460

1,360

1,420

Clackmannanshire

580

550

1,550

1,590

Dumfries and Galloway

540

490

1,510

1,660

Dundee

650

610

1,730

1,780

East Ayrshire

610

560

1,620

1,730

East Dunbartonshire

380

350

1,010

1,070

East Lothian

440

420

1,260

1,360

East Renfrewshire

370

350

1,010

1,060

Edinburgh

450

440

1,300

1,380

Eilean Siar

420

370

1,150

1,320

Falkirk

510

460

1,360

1,420

Fife

510

470

1,440

1,530

Glasgow

720

660

1,840

1,950

Highland

450

400

1,260

1,360

Inverclyde

680

640

1,670

1,810

Midlothian

520

490

1,380

1,480

Moray

400

350

1,170

1,220

North Ayrshire

610

570

1,620

1,720

North Lanarkshire

600

560

1,530

1,640

Orkney Islands

400

330

990

930

Perth and Kinross

400

380

1,270

1,320

Renfrewshire

550

510

1,510

1,580

Scottish Borders

420

390

1,270

1,420

Shetland Islands

280

260

770

750

South Ayrshire

550

520

1,490

1,580

South Lanarkshire

550

510

1,440

1,540

Stirling

440

410

1,180

1,300

West Dunbartonshire

650

590

1,620

1,700

West Lothian

530

490

1,380

1,450

 

 

 

 

 

 

 

 

 

 

Scotland

530

490

1,410

1,500

 

       

Source: Sheffield Hallam estimates based on official data

Estimated average financial loss arising from welfare reform, by type of household by local authority (cont.)

 

Other - all full-time students

£ per year 
Other -
all aged 65+

Other households

Aberdeen

-0

-30

330

Aberdeenshire

-0

-30

300

Angus

-0

-30

420

Argyll and Bute

-0

30

440

Clackmannanshire

-0

30

600

Dumfries and Galloway

-0

30

500

Dundee

-0

30

600

East Ayrshire

-0

30

540

East Dunbartonshire

-0

30

350

East Lothian

-0

30

400

East Renfrewshire

-0

30

350

Edinburgh

-0

30

440

Eilean Siar

-0

30-

400

Falkirk

-0

30

460

Fife

-0

30

470

Glasgow

-0

30

660

Highland

-0

30

400

Inverclyde

-0

30

610

Midlothian

-0

30

500

Moray

-0

30-

360

North Ayrshire

-0

30

550

North Lanarkshire

-0

30

550

Orkney Islands

-0

30-

380

Perth and Kinross

-0

-30

380

Renfrewshire

-0

30

500

Scottish Borders

-0

30-

400

Shetland Islands

-0

-30

260

South Ayrshire

-0

30

500

South Lanarkshire

-0

30

510

Stirling

-0

30-

400

West Dunbartonshire

-0

30

580

West Lothian

-0

30

490

 

 

 

 

 

 

 

 

Scotland

-0

30

490

Source: Sheffield Hallam estimates based on official data


Footnotes:

Any links to external websites in this report were working correctly at the time of publication.  However, the Scottish Parliament cannot accept responsibility for content on external websites.

1 C Beatty and S Fothergill (2013a) The Impact of Welfare Reform on Scotland, Scottish Parliament, Edinburgh. The research on which the report was based was co-funded by the Scottish Parliament, the Financial Times and Sheffield Hallam University. Figures for the rest of Britain were published simultaneously in C Beatty and S Fothergill (2013b) Hitting the Poorest Places Hardest; the local and regional impact of welfare reform, CRESR, Sheffield Hallam University.

2 C Beatty and S Fothergill (2014a) The Local Impact of Welfare Reform, Scottish Parliament, Edinburgh.

3 C Beatty and S Fothergill (2014b) The Impact of Welfare Reform on Communities and Households in Sheffield, CRESR, Sheffield Hallam University.

4 C Beatty and S Fothergill (2013a) and (2014a) op.cit.

5 The Treasury has not yet published a revised estimate of the financial savings arising from the 1 per cent uprating. The inflation data for September each year (normally used as the basis for uprating from the following April) and the Office for Budget Responsibility’s inflation forecast at the time the 1 per cent uprating was announced, allow the estimation of a revised figure, used in the present report.

6 This appears to be because the Treasury has now taken better account of offsetting increases in other means-tested benefits, such as Housing Benefit, paid to the ESA claimants who are affected. This also lowers the estimates included here of the savings arising from other elements of the incapacity benefit reforms, which use the net savings arising from time-limiting as a guide.

7 HM Treasury(2013) Budget 2013, Table 2.2, HMT, London.

8 See National Audit Office (2014) Personal Independence Payment: early progress, NAO, London.

9 The financial loss per adult of working age is a good yardstick because (as data presented later shows) nearly all the impact of the reforms falls on working-age claimants.

10 C Beatty and S Fothergill (2014a) op. cit.

11 The Treasury appears to have based the expected savings arising from the changeover from DLA to PIP on the numbers expected to lose entitlement and the average DLA payment per claimant. In practice, the reduction in numbers might be expected to be mainly among those with less severe disabilities, who mainly receive lower payments, in which case the full savings anticipated by the Treasury may not arise.

12 All these figures for other parts of GB have been fully revised and updated and are therefore comparable with the new figures for Scotland. The figures therefore differ from those published in previous reports.

13 May 2014; Source: DWP.

14 The average financial losses arising from the household benefit cap are GB estimates from the Department for Work and Pensions. Separate figures are not available for Scotland.

15 C Beatty and S Fothergill (2013a) and (2014a) op.cit. The appendices to these reports set out in detail the methods underpinning the benefit-by-benefit calculations.

16 C Beatty and S Fothergill (2014b) op.cit.

17 The ‘other’ households types include households with complex structures (e.g. parent and child living with grandparents, or unrelated adults sharing). In total, ‘other’ households account for modest numbers – excluding student and pensioner households, only around 100,000 in Scotland.

18 There are limited circumstances in which a child is defined as ‘dependent’ by the Census of Population but no longer qualifies for Child Benefit.

19 The average financial loss is calculated by multiplying the number of households of each type affected by each reform by the average financial loss arising from each reform, summing the total, and then dividing by the total number of households of each type in Scotland (Source: Census of Population)

20 The exception is a very small number who continue in employment beyond state pension age and remain eligible to claim incapacity benefits for a short period.

21 These incapacity benefit and DLA claimant numbers are for May 2014 (Source: DWP)

22 DWP Stat-Xplore, May 2014

23 August 2012

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