The Impact of Welfare Reform

The Impact of Welfare Reform Bethany Eckley Research Manager, Church Urban Fund June 2013

Mission: to transform the lives of the poorest and the most marginalised in England.

Overview • It All Adds Up: cumulative, financial impact of welfare reforms. • The Human Cost of Welfare Reform: broader impact on people’s everyday lives.

1. Financial impact of reforms • Case studies simulate tax-benefit changes 2010 – 17 • Methodology: • Figures adjusted using RPI • Gross earnings rise with inflation • Rents rise by 4% pa • Hholds move to Universal Credit in 2016/17

Mark and Sarah • Mark is a full-time cook, earning £25,000 pa. • Sarah looks after their three children. • They live in a private property in east London.

Mark and Sarah: Gain £450 per year – increased tax allowances Gain £240 per year – freeze in Council Tax charges Lose £1,470 per year –reductions in tax credits Lose £1,760 per year – changes to Housing Benefit Lose £400 per year – changes to Child Benefit • = loss of £3,000 pa

Signifying a 13% reduction in five years. - 5% - 13% Mark and Sarah’s annual disposable income (after housing costs), 2010/11 to 2016/17.

Sam • Single man of working-age. • Disabled, but moves from incapacity benefit to JSA. • A local authority tenant in the north east.

Sam: Continues without earnings Loses £1,750 per year – the move to JSA Loses £470 per year – the ‘bedroom tax’ Loses £140 per year – a Council Tax charge • = loss of £2,300 pa

Signifying a 44% reduction in five years. - 44% - 45% Sam’s annual disposable income (after housing costs), 2010/11 to 2016/17

Representative? • Mark and Sarah: • 5-7% average reduction for families with children (IFS 2013). • Sam: • 1.5m reassessed by 2014, so far one in three judged fit for work. • 420,000 disabled people affected by ‘bedroom tax’.

2. The human cost of welfare reform • 19 interviews at ten church or faith-based community organisations. • To understand impact of reforms on people’s every day lives. • To reflect on how churches might best support those affected.

Impact of changes to disability benefits Jobseeker’s Allowance Incapacity Benefits Work Capability Assessment Employment and Support Allowance

“The biggest change is the move from ESA onto JSA. Now I would say personally that in many cases it is a good thing... But some of them that are being forced onto Jobseeker’s aren’t well and they can’t cope and those are the ones that we help.”

Those correctly found fit for work: • the difficulty of moving into employment.

Those incorrectly found fit for work: • appealing the decision.

Impact of changes to Housing Benefit • From April 2011, a cap on Local Housing Allowance: • £230 per week, one bedroom • £290 per week, two bedroom • £340 per week, three bedroom • £400 per week, four bedroom • From April 2013, the ‘bedroom tax’: • 14% less eligible rent for one spare bedroom • 25% less for two or more spare bedrooms

Families moving home, leaving support networks behind. “Some of our families from the school have been completely moved out of the area because of the housing benefit changes... They've gone all over the place, but miles away...And of course they’re still travelling into school because their whole network is here.”

Families struggling with the ‘bedroom tax’.

“For me, the biggest issue is the lack of compassion in the changes that are taking effect. Amongst the people making the decisions, there is either a refusal or an inability to understand that when you change something at the top, it is the people at the bottom of the food chain that it hits the hardest, and it hits quickest.”

Church-based responses Three groups affected by specific reforms: • Former incapacity benefit claimants who need to move into employment. • Former incapacity benefit claimants wrongly judged as fit for work. • Households affected by Housing Benefit changes.

Former incapacity benefit claimants who need to move into employment

Together: we can help to transform the lives of the poorest and most marginalised in England.

The Impact of Welfare Reform