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:

http://www.local.gov.uk/publications

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.

Zero hours contracts and jobseeking

There's a lot of discussion at the moment about 'zero hour contracts' -  employment contracts where there is no obligation on the employer to provide a guaranteed amount of work, or indeed any work at all, or sick pay or holiday pay. On the other hand, employees are often required to be available for work whenever the employer requires it, either explicitly (for instance at Buckingham Palace, Cineworld, and Sports Direct, according to a recent article in the Independent[1]), or implicitly, by favouring more flexible employees.

This isn't an employment blog, so isn't the place to examine the issues involved from an employment rights point of view.

However, the rise of zero contracts may have consequences for benefits claimants. There are two main areas where problems may arise?

(A) Will claimants be sanctioned if they fail to apply for zero hours jobs? 

Will Jobseeker's Allowance claimants be penalised if they refuse to apply for work, or turn down offers for work, from employers who are offering zero hour contracts only?

According to Hansard, the answer is a reassuring 'no'. In answer to a question put by Lord Greaves on 25th April this year, Lord Freud (Parliamentary Under-Secretary of State, Department for Work and Pensions) said:

'I can confirm that Jobseeker's Allowance claimants are not required to apply for zero hour contract vacancies.' [HL6759]

Well, that is encouraging. And, in general, answers given by DWP ministers normally both reflect, and inform, practice on the ground. 

However, the legal framework is a bit messy.

Until late 2012 it was very clear that there was not a problem. Regulation 72(5)(a) of the Jobseeker's Allowance Regulations 1996 made it explicit that a claimant would not be sanctioned if the position applied for provided less than 24 hours per week (or 16 hours per week in some circumstances). A zero hour contract cannot assure an employee of this, so claimants were clearly protected against having to apply for this kind of work . Unfortunately, from late 2012 onwards, new sanction rules have applied: regulation 72 of the Jobseeker's Allowance Regulations has been through some major surgery, and any reference to a minimum amount of work per week has now disappeared. There is, therefore, no explicit protection in law from being required to take on a zero hours contract. 

Fortunately the lack of clarity works both ways: there is nothing in the rules to say that zero hours contracts are not a good reason for refusing a job. I also note the guidance for DWP decision makers states that they may take into account any restrictions a claimant has been allowed to place on their work search[2]. This means it is very important that claimants try to get a minimum hours restriction included in their job search criteria, as this will make it harder for the Jobcentre Plus to argue with a refusal to work a zero hour contract.

(B) What if an employee is in a zero hours contract and it is unsustainable?

This is a bit more tricky. Again, a claimant has to show 'good reason' for leaving a job to avoid being sanctioned when they try to claim Jobseeker's Allowance. And, again, what counts as a good reason is not made clear.

Guidance to decision makers for the DWP [3] indicates that if a claimant knew about the conditions when they took a job but took it anyway, being unhappy with those conditions will not be a good reason for leaving. However I think it would be worth arguing against this, even if a person knew it was a zero hours contract at the outset, if they had an expectation of a certain amount of work, and this expectation was not satisfied.



At the moment we don't really know how this will develop, as zero hour contracts are a relatively new problem for most areas of the workforce, and also the new sanction rules have been in place for less than a year. If Lord Freud's statement turns out not to reflect how things are on the ground the situation will be deeply worrying: failure to apply for a job, or leaving a job voluntarily, attracts the highest level of sanction, which can be anything from 13 to 156 weeks depending on previous history.

If you have been sanctioned because of these issues, or know someone who has, please let me know.


If you want to know more general advice about Jobseeker's Allowance sanctions, have a look at my main website:

http://www.benefitsowl.info/JSA Sanctions.html




[1] http://www.independent.co.uk/news/uk/home-news/buckingham-palace-employs-summer-staff-on-zerohours-contracts-8739830.html  (31st July 2013)
[2] http://www.dwp.gov.uk/docs/admk2.pdf (paragraph K2151)
[3]http://www.dwp.gov.uk/docs/admk2.pdf (paragraph K2233)