THE IMPACT ON SCOTLAND OF THE NEW WELFARE REFORMS

1. THE IMPACT ON SCOTLAND OF THE NEW WELFARE REFORMS Christina Beatty and Steve Fothergill Centre for Regional Economic and Social Research Sheffield Hallam University

2. Previous reports • The impact of welfare reform on Scotland (2013) • The local impact of welfare reform (2014) • The cumulative impact of welfare reform on households in Scotland (2015) • The impact of welfare reform on the Scottish labour market (2015)

3. New GB report The Uneven Impact of Welfare Reform The financial losses to places and people Published March 2016

4. The new Scotland report • Financial loss to Scotland arising from the new (post-2015) round of welfare reform • Loss by local authority within Scotland • Comparison between Scotland and rest of GB • All the figures are brand-new!

5. Measuring the impacts • Treasury estimates of the overall financial saving arising from each element of the reforms • Benefit claimant numbers and expenditure, by local authority • Additional official data (e.g. from Impact Assessments)

6. The pre-2015 reforms • Housing Benefit: Local Housing Allowance • Non-dependant deductions • Benefit Cap • Personal Independence Payments • Employment and Support Allowance • Child Benefit • Tax Credits • 1 per cent uprating

7. Not included…… • Housing Benefit: under-occupation (‘Bedroom Tax’) • Arrangements to avert impact on claimants in Scotland • Council Tax Support • A hit for Scottish Government and local authorities, not claimants • Universal Credit • Essentially a re-packaging of existing benefits • Not originally expected to result in net reduction in benefit entitlement • Income Support for lone parents • Transfer to JSA at same rates • RPI to CPI uprating • Wider public sector accounting reform • Sanctions • Not new

8. Pre-2015 reforms: outturn financial loss to claimants in Scotland 2013 forecast Outturn (March 2016) £m p.a. £m p.a. Employment & Support Allowance 500 85 Tax Credits 300 340 1 per cent uprating 290 230 Child Benefit 225 240 Personal Independence Payments 165 130 Housing Benefit: LHA 80 80 Housing Benefit: ‘bedroom tax’ 50 0 Non-dependant deductions 30 20 Benefit Cap 15 3 ---------- --------- TOTAL 1,520 1,130 Source: Sheffield Hallam estimates based on official data

9. The new reforms (1) • Universal Credit work allowances • Reduction in level of earnings at which UC awards start to be withdrawn, from April 2016 • Tax Credits • Limiting child element to two children for new births, from April 2017 • Removal of family element & HB premium for new claims, from April 2017 • Reduction in income rise disregard, from April 2016 • Uprated income floor for self-employed, from 2016-17 • Revised UC delivery schedule • Mortgage interest support • Change from welfare payment to loan, from April 2016

10. The new reforms (2) • LHA cap in social rented sector • Housing Benefit limited to equivalent private sector rate, from April 2018 • Housing Benefit: 18-21 year olds • End of automatic entitlement for unemployed, from April 2017 • Employment and Support Allowance • Work-Related Activity Group reduced to JSA rate for new claims, from 2016-17 • Benefit Cap extension • New, lower ceiling set at £20k in Scotland, from 2016-17 • Benefit freeze • Freeze in value of most working-age benefits for four years from 2016-17

11. But don’t forget…… • Personal Independence Payments • Changeover from DLA to PIP not expected to be completed until 2018 • Existing claimants only reassessed from October 2015 And the reforms that don’t apply to Scotland…… • ‘Pay to stay’ • Social housing tenants to pay market rents if household income above £30k (£40k in London), from April 2017 • Mandatory for LA tenants, discretionary for Has • 1% p.a. reduction in social sector rents for four years • A hit for social sector landlords in England

12. Post-2015 reforms: financial loss to claimants in Scotland by 2020-21 Estimated loss Numbers Average loss £m p.a. adversely affected £ p.a. Benefit freeze 300 700,000 450 Universal Credit work allowances 250 240,000 1,050 Personal Independence Payments 190 70,000* 2,600 Tax Credits 140 150,000 950 Employment & Support Allowance 65 70,000* 900 LHA cap in social rented sector40 55,000 750 Benefit Cap extension 25 11,000 2,400 Mortgage interest support 25 17,000 1,450 Housing Benefit: 18-21 year olds 4 1,500* 2,600 ---------- --------- ---------- TOTAL 1,040 n.a. n.a. * individuals; households for all other benefits Source: Sheffield Hallam estimates based on official data

13. The way the losses impact Cut in real terms, not cash • Benefit freeze Cut for new / revised claims only • Reduced Universal Credit work allowance • Restrictions on ‘child’ and ‘family’ elements of Tax Credits • Lower ESA payment rates • LHA cap in social sector (new tenancies only) • End of automatic HB entitlement for out-of-work 18-21s Cash cut for existing claimants • DLA to PIP retesting • Lower Benefit Cap

14. Financial loss to claimants by 2020-21, by local authority Loss per working age adult from post-2015 reforms £ p.a. Glasgow 400Fife 320Perth & Kinross 260 W Dunbarton390Midlothian320Moray 240 N Ayrshire380S Ayrshire320 Stirling 230 Inverclyde 370S Lanarks 310Edinburgh230 Dundee 360 Falkirk 290E Renfrew 220 N Lanarks350E Lothian280 Orkney 210 E Ayrshire350Borders280 E Dunbarton200 Renfrewshire340Angus270 Aberdeen 180 Dumfries & G330Highland270 Aberdeenshire 170 W Lothian330Argyll & Bute 270 Shetland 160 Clackmannan330EileanSiar260 Source: Sheffield Hallam estimates based on official data

15. Relationship to deprivation

16. Post-2015 reforms: financial loss to claimants by 2020-21, by region and country Estimated loss Per working age adult £m p.a. £ p.a. North West 1,630360 North East 590360 Wales 680360 West Midlands1,250350 Yorkshire & the Humber 1,170350 East Midlands 920320 London1,770 300 Scotland1,040300 South West 930280 East of England 990270 South East 1,320240 ------------------------------ ------------------------ GB 12,295310 Source: Sheffield Hallam estimates based on official data

17. Will the loss be offset? • Planned increase in personal tax allowance • Worth up to £380 a year by 2020-21 • Only half that much after inflation? • Only proportion of benefit claimants pay tax – including some in work • National Living Wage • Good for low-paid workers • But benefits withdrawn as income rises • Discretionary Housing Payments • Scotland’s share only c.£15m a year • Financial support for childcare • Helpful for some

18. Will more people find work? • In vast majority of cases, claimants were already financially better off in work • Reductions in in-work benefits make employment less attractive • Big numbers are on ESA, not JSA • Highest claimant rates are in the places with the weakest local economies • No evidence so far of positive impact on Scottish labour market (see our 2015 report)

19. Conclusions • Pace of welfare reform is barely slowing • In Scotland, as in rest of Britain: • Losses to both in-work and out-of-work claimants • Multiple hits for some • Poorest places are hit hardest • Don’t be blinded by the devolution of welfare powers – Westminster still has a huge impact