Tuesday, 20 August 2013

Impact of welfare reforms: a new report

The Local Government Association (LGA) has just published a report, commissioned from the Centre for Economic and Social Inclusion, titled 'The local impacts of welfare reform': it makes interesting reading.

You can download the full report here:


The LGA is a cross-party organisation: it describes its aim as to 'work with councils to support, promote, and improve local government'. The report's main purpose is therefore presumably to help councils deal with the effects of welfare reform, but it also deserves a wider audience.

The report calls into question the rhetoric that sets benefits claimants against 'hard-working families'. It estimates that nearly 60% of the reductions fall on households where someone works, and notes that in fact 'the reductions for working households are greater than the reductions for households where no one works in 314 of the 325 local authorities in this analysis'.

It is also the only report I've seen that makes a serious effort to compare the effects of all the different changes that form part of the current government's welfare reforms. Which changes do you imagine are going to bring in the biggest reductions in government spending? The 'bedroom tax'? The replacement of Disability Living Allowance with Personal Independence Payment? The Benefit Cap? The removal of Council Tax benefit in favour of local Council Tax Support?

In fact all the changes in the paragraph above combined contribute only about 17% to the overall projected savings of  about £14 billion for the year 2015/16 (the famous, and massively disruptive, bedroom tax only contributes about 3%).

The four largest contributors to savings (which together total about 80%) are the following:

  1. A collection of largely unnoticed tweaks to tax credits, such as adjustments of the working hours requirements and real-terms reductions in various payments rates and thresholds, for example. These changes contribute about 38% to overall savings.
  2. The decision to only uprate benefits by 1% instead of by inflation: this saves about 19% of the total.
  3. Restricting contribution based Employment and Support Allowance to one year only: this saves about 12% of the total.
  4. Changes to Housing Benefit in the private rented sector - for example, restricting Housing Benefit to the 'shared room rate' for claimants under 35 - save about 12%. 

Of course the changes to Housing Benefit are going to be of particular concern to local authorities, as they are responsible for assessing and paying this, and also have to deal with requests for Discretionary Housing Payments (DHPs). The report acknowledges that an extra £155 million has been given to local authorities but predicts that even with this extra help, DHPs will only cover about £1 in every £7 needed overall. This prediction is based in a fairly complex analysis, but in the most likely scenario, only about 23% of claimants will be able to either resolve their rent problems by finding work or by moving home.

Although Universal Credit is not included in the report's analysis for 2015/16, as any effect at this stage will be too small to be worth considering, it does consider how Universal Credit will impact on claimants in the longer term. The report confirms the fear in other quarters that disabled people are likely to see lower awards than under the current system. It also notes that 'most estimates suggest that Universal Credit is unlikely to lead to any significant impact on employment'.

For hard-pressed local authorities the report will make grim reading, as it will for claimants, and those who work with them. Nobody is, I think, likely to be very surprised by the conclusions, but the analysis is clear and well argued, and may provide useful data to anyone intending to campaign against the direction the government is taking.

No comments:

Post a Comment