Download Improvement Service The Impact of Welfare Reform in Scotland

Improvement Service
The Impact of Welfare Reform in Scotland:
Literature Review
Improvement Service
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January 2014
Contents
Executive Summary........................................................................................................... 3
1. Introduction.................................................................................................................... 7
2. Scope of ‘Welfare Reform’ ............................................................................................. 8
3. Summary Matrix ............................................................................................................ 9
4. The Impact of Welfare Reform on Scotland, Sheffield Hallam University (2013) .......... 11
5. UK Government Cuts to Welfare Expenditure in Scotland, Scottish Government (2013)
........................................................................................................................................ 14
6. People, Councils, the Economy 2nd Edition, Scottish Local Government Forum Against
Poverty (2013) ................................................................................................................. 16
7. The Local Impacts of Welfare Reform, Local Government Association (2013) ............. 18
8. Government Spending on Benefits and State Pensions in Scotland, Institute for Fiscal
Studies (2013) ................................................................................................................. 21
9. Fife Council Economic and Social Impact of Welfare Reform, Rocket Science UK (2013)
........................................................................................................................................ 23
10. The Economic Impact of Welfare Policy in Glasgow, Fraser of Allander Institute (2012)
........................................................................................................................................ 26
11. Findings and Points to Consider for Future Research ................................................ 29
12. Conclusions ............................................................................................................... 32
13. Appendices................................................................................................................ 34
14. References ................................................................................................................ 42
Executive Summary
This paper summarises and compares a number of reports that have been produced
concerning the estimated impact within Scotland of the Welfare Reform changes that are
being implemented by the UK Government. The reports covered within this review focus
either on the impact within Scotland as a whole or within particular areas of Scotland 1. The
majority of the reports reviewed focus on the direct financial reductions that are likely to take
place as a result of Welfare Reform.
The purpose of this paper is to:•
Produce a relatively easily digestible summary of published impact estimates arising
from Welfare Reform implementation within Scotland;
•
Review the various methodological approaches taken to estimating the impact of Welfare
Reform within Scotland;
•
Help draw attention to the likely extent of the impact of Welfare Reform within Scotland in
order to help inform discussion on potential responses; and
•
Identify any gaps in analysis that may benefit from further research.
It is anticipated that this paper will be of interest to all of Scotland’s Local Authorities and
Community Planning Partnerships, as well as a wider range of stakeholders
Consideration is required in terms of defining what exactly falls within the term ‘Welfare
Reform’. In this respect, this paper has simply reviewed what has been set out in the
various published reports that are covered within the scope of this review.
The literature review provides an overview of the work already undertaken by way of
estimating the impacts of Welfare Reform. The seven papers covered in the review are:
•
•
•
•
•
•
1
Beatty, C., and Fothergill, S., (2013). The Impact of Welfare Reform on Scotland.
Edinburgh: The Scottish Parliament. Sheffield Hallam University.
Local Government Forum Against Poverty and Rights Advice Scotland, (2013).
People, Councils, the Economy: 2nd Edition.
Phillips, D., (2013). Government Spending on Benefits and State Pensions in
Scotland: Current Patterns and Future Issues. London: Institute for Fiscal Studies.
Scottish Government Welfare Analysis, (2013). UK Government Cuts to Welfare
Expenditure in Scotland.
Wilson, T., Morgan, G., Rahman, A., and Vaid, L., (2013). The local impacts of
welfare reform: An assessment of cumulative impacts and mitigations, London: Local
Government Association.
Rocket Science, (2013). Fife Council: Economic and Social Impact of Welfare
Reform. Edinburgh: Rocket Science.
The LGA paper is also included in the literature review as, whilst it does not provide estimates of impact in
Scotland, the approach taken by this study is of interest. If the relevant data for Scotland was sourced, there may
be scope to apply the LGA methodology for Scottish Local Authorities. This would be contingent on further
analysis of the methodology and appropriate resourcing.
•
Fraser of Allander Institute, The, (2012) The Economic Impact of Welfare Policy
Changes in Glasgow. Glasgow: University of Strathclyde.
The review has set out the key findings of each report and highlighted a range of
methodological and other issues arising. Each report has adopted a slightly different
approach and direct comparison has not always been straightforward.
This paper highlights the fact that each report includes differences in terms of which Welfare
Reforms are included and the timescales covered in estimating impact. Likewise, the review
highlights the various methodological approaches taken across the seven reports reviewed.
Taking each report in turn, this review seeks to provide a summary of their respective aims,
methodologies and headline findings both at a national and local level (where evident), in
order to develop a picture of existing knowledge on the likely impact of the Welfare Reform
measures. Where apparent, the paper also draws attention to strengths and weaknesses of
the respective reports. This helps inform the paper’s closing discussion, which raises points
for consideration and suggests gaps that may be addressed by further research.
From the literature review, it is apparent that there are considerable disparities between
reports in the estimates of the impact of welfare reform, regardless of whether the estimate
concerns annual financial impacts (impacts for a given yearly period) or cumulative financial
impacts (the combined impact over a number of successive years). For instance the
estimated impact on Scotland as a whole varies:
•
•
•
£2bn per year by 2014/15 (Scottish Government Welfare Analysis)
£1.6bn per year by 2014/15 (Beatty, C., and Fothergill, S.)
£780m per annum by 2015/16 (Local Government Forum Against Poverty and
Rights Advice Scotland).
Variation also exists between estimates of the cumulative financial impact:
•
•
The Scottish Government estimates that the reforms could result in a loss of £4.5bn
by 2014-15
Whilst the Local Government Forum Against Poverty sets the estimated figure for
2010-15 at £2.1bn.
These differences can largely be attributed to variations in methodologies and which Welfare
changes are factored into the analyses. These issues are discussed further throughout the
review.
In terms of non-geographic breakdowns, the LGA report noted that it was not possible to
model the distribution of impacts across different groups or on groups with certain
characteristics. This was attributed to a lack of appropriate data and knowledge on issues
such as benefit combinations, characteristics of claimants, household composition, income
levels, etc.
It is also noted that the studies tended to focus on direct impacts, expressed in terms of
direct financial reductions, relative to the situation that would have existed in the absence of
Welfare Reform. The various estimates do not always relate to a direct cash reduction, but
also include elements of the level of Benefits that would otherwise have pertained, in the
absence of reform 2.
Information relating to the new DWP conditionality and sanctioning regime is also largely
absent from any of the studies reviewed – perhaps understandably, given that data relating
to this has only recently begun to emerge. Nevertheless, initial analysis of the
consequences of sanctioning in Scotland indicate that this is having a significant detrimental
impact – initial estimates are of the order of around £1 million per month in Scotland of lost
Benefit income.
Likewise, subsequent to publication of the various reports reviewed in this paper, additional
planned UK Government cuts have been announced which will have further significant
detrimental impact on the Welfare budget. Whilst the specific details of where these
additional cuts will fall have not yet been made, the likely consequence will be to worsen the
estimated impacts set out in each of the studies reviewed.
Generally, the reports reviewed tended to avoid explicit reference to any potential positive
impacts that may arise from Welfare Reform. For example, DWP publications 3 outline
modelling of potential ‘winners and losers’ as a result of Universal Credit, summarise
transitional arrangements and suggest that the changes will help reduce complexity and
thereby encourage take-up of currently unclaimed benefits.
A number of transitional arrangements are being implemented, which are intended to
mitigate the immediate impact of some of the Welfare Reform changes. However, the
studies included in the review tended not to factor in these kinds of measures when
developing estimates of impact.
Because they are primarily focused on the direct financial consequences of Welfare Reform,
the papers reviewed – either explicitly or implicitly - do not attempt to factor in wider
economic forecasts relating to employment, growth in the economy, inflation, etc. A couple
of the studies do make more general references to these issues, however. For example, the
Sheffield Hallam report questions the UK Government assertions in relation to the impact of
Welfare Reform incentivising work. This includes querying the likelihood of supply side
measures significantly impacting on demand and the creation of new job opportunities.
Consequently, that report indicates that it does not make any assumptions concerning
reduced benefits being replaced by employment income.
On the whole, the studies reviewed tended not to factor in wider multiplier effects, which may
be expected to arise. Only the Fraser of Allander Institute study for Glasgow alluded to the
view that Welfare Reform is likely to have a ripple effect, with impacts felt in the wider
economy beyond those directly claiming benefits.
Regardless of the methodology used in any of the reports, it is not currently possible to
generate exact figures on the impact of Welfare Reform. This is inevitable given the range
of unknowns at this stage, including an absence of detailed information regarding timetabling
of the introduction of a number of the changes.
2
For example, changes to Benefit up-rating may result in annual Benefit increases being less than they would
otherwise have been. In this instance, quantifying the net financial impact of this will be contingent upon
prevailing inflation rates.
3
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/220177/universal
-credit-wr2011-ia.pdf
http://www.scotland.gov.uk/Resource/0040/00404939.pdf
A consistent conclusion, however, from each report reviewed is that Welfare Reform will
have a major impact on Scotland. It is likely that significant spending power will be taken out
of the economy and this will have an adverse impact at a number of levels – on individuals,
households and the economy as a whole.
As yet, there is no detailed analysis available of the direct and indirect economic impacts
arising from Welfare Reform across Scotland 4. The majority of studies to date have
focused on forecasting the likely direct financial reductions as a result of the various
changes. With the exception of the FAI report - which covers Glasgow - none of the studies
considered the impact that Welfare Reform with have on jobs and the economy of Scotland.
It is suggested that this is a gap that requires urgent further research. Furthermore, if it is to
be the basis of detailed planning, such further analysis ought to be capable of producing a
balanced assessment of likely economic impact. This means that it ought to take proper
account of both likely negative and positive consequences likely to arise from Welfare
Reform. Similarly, and with reference to its usefulness in planning, any such further analysis
ought also to be capable of producing robust estimates of impact at a range of levels,
including various geographic breakdowns and also in terms of likely impact on particular
client groups.
A final point is that the Welfare Reform changes are likely to act as a driver for increased
demand for a wide range of public services. Local Authorities and other key partners require
to understand the likely changes to service demands and the corresponding resource
implications. This information will be essential to effective planning for these significant
changes, many of which are already underway. Accordingly, further consideration needs to
be given to the effect of Welfare Reform on a range of public services and in how it will
potentially drive increased service demand. In this respect, there are concerns about ‘cost
shunting’, whereby savings to the UK Government arising from Welfare Reform ultimately
results in increased costs for other parts of the public sector, such as Local Authorities. With
the exception of the Fife Council paper, none of the reports factor in additional costs or lost
income to the public services as a result of Welfare Reform. Some of these issues are likely
to emerge in discussions concerning the development of Local Support Services
Frameworks, linked to the introduction of Universal Credit. Whilst all Local Authorities – and
some Community Planning Partnerships - have established corporate working groups to
respond to Welfare Reform issues, it is likely that they would benefit from more detailed
research on the likely consequences of Welfare Reform in relation to service demand,
service design and consequent resource implications.
Having completed this literature review, the Improvement Service will now seek to take
forward discussions with the Scottish Government and CoSLA in order to explore ways of
addressing the identified research gaps.
4
This statement is not intended as a criticism of the reports reviewed; rather simply a reflection of what they have
focused upon.
1. Introduction
This paper summarises and compares a number of reports that have been produced
concerning the estimated impact of the Welfare Reform changes that are being implemented
by the UK Government. The reports covered within this review focus either on the impact
within Scotland as a whole or within particular areas of Scotland.
The purpose of this paper is to:•
Produce a relatively easily digestible summary of published impact estimates arising
from Welfare Reform implementation within Scotland;
•
Review the various methodological approaches taken to estimating the impact of Welfare
Reform within Scotland;
•
Help draw attention to the likely extent of the impact of Welfare Reform within Scotland in
order to help inform discussion on potential responses; and
•
Identify any gaps in analysis that may benefit from further research.
It is anticipated that this paper will be of interest to all of Scotland’s Local Authorities and
Community Planning Partnerships, as well as a wider range of stakeholders.
The paper is also likely to be of interest to others seeking to commission or undertake work
on estimating the impact of Welfare Reform.
7
2. Scope of ‘Welfare Reform’
Consideration is required in terms of defining what exactly falls within the term ‘Welfare
Reform’. In that respect, this paper has simply reviewed what has been set out in the
various published reports that are covered within the scope of this review.
Whilst much press attention has been given to the Government’s Universal Credit ‘flagship’
policy, and changes to Housing Benefit, for most of the reports covered in this review,
Welfare Reform is also be deemed to encompass changes to several other benefits and the
way in which some benefits are calculated. Consequently, ‘Welfare Reform’ is typically seen
to constitute a wide range of changes, including changes to benefits, changes to entitlement,
changes to the rate at which benefits increase and capping of overall benefit entitlement and
future increases. This wide definition includes changes that were set in motion several years
ago, as well as changes that are yet to be (fully) implemented.
It is also noted that the wider definition of Welfare Reform means that the various changes
do not only impact on those claiming out-of-work Benefits. A key point emerging from the
analysis is the impact that Welfare Reform will have on many people that are already active
in the labour market, but in low paid jobs and/or in jobs that do not provide sufficient hours.
Indeed, the LGA paper highlighted that the adverse economic / financial consequences of
Welfare Reform will impact far more extensively on working households than non-working
households. (This is largely as a consequence of changes to Tax Credits and changes to
up-rating 5).
It is noted that, since publication of the various reports covered in this review, a number of
changes and delays in implementation of various aspects of Welfare Reform have been
announced by the UK Government. For example, this includes less rapid progress than
initially forecast for changes relating to UC and also DLA to PIP re-assessment. No account
is taken of these delays in the analysis.
5
The changes to up-rating include applying the Consumer Prices Index rate rather than the Retail Price Index;
and removing the link between annual Benefit rises and inflation by applying a fixed percentage rate, capped at
1% for the next three years.
8
3. Summary Matrix
Table 1 below provides an overview of which aspects of ‘Welfare Reform’ are included in
each of the six reports included within the review.
More detailed summaries of the main points of each of the six studies are set out in the
subsequent sections of this report.
9
3.1 Matrix Summarising which WR Changes are Included in each Report
WR Change / Report
The Impact of Welfare
Reform on Scotland
1% Up-rating
Abolition of Council Tax Benefit
Attendance Allowance
Benefit Cap
Bereavement Allowance
Carer’s Allowance
Child Benefits
CPI Up-rating
√
Disability Living Allowance (DLA) to Personal
Independence Payment (PIP)
Employment Support Allowance (treated
separately)
Housing Benefit (collectively)
√
Housing Benefit social size criteria
Housing Benefit: Local Housing Allowance
Incapacity Benefit /Severe Disablement
Allowance (treated separately)
Incapacity Benefits (including ESA)
Income Support
Industrial Injuries Benefits
Jobseeker’s Allowance (JSA)
Maternity Allowance
Non-dependent reductions
Over 75 TV Licences
Pension Credit
State Pension
Statutory Maternity Pay
Tax Credits
√
√
UK Government Cuts
to Welfare Expenditure
in Scotland
√
√
√
√
√
√
People,
Councils, the
Economy
√
√
Local Impacts of
Welfare Reform
Government Spending on
Benefits and State
Pensions in Scotland
√
√
√
√
√
√
√
√
√
√
N/A
N/A
√
N/A
N/A
√
√
√
√
√
√
The Impact of
Welfare Policy
Changes on Glasgow
√
√
√
√
√
Fife Council
Economic and Social
Impacts of Welfare
Reform
√
√
√
√
Deemed not a useful
comparator
√
√
√
√
√
√
√
√
√
√
√
N/A
N/A
N/A
N/A
√
√ includes not
dependent
reductions
N/A
N/A
√
√
√
√
√
√
√
√
√
√
√
√
√
√
√
Time limiting of ESA (treated separately)
√
Universal Credit
Winter Fuel Payments
√
√
Doesn’t include aspects of
tax credit reforms but no
further details given
√
10
4. The Impact of Welfare Reform on Scotland, Sheffield Hallam University
(2013)
4.1 Methodological Notes
This report, published in April 2013, was commissioned by the Scottish Parliament to look
specifically at the impact of Welfare Reform on Scotland, both as a whole and within each of
the 32 local authorities.
The report looks specifically at the financial loss per working age adult (16-64), as Welfare
Reform will impact almost exclusively on this group. The UK Government has, in most
cases, not produced estimates of the local impact of the reforms. However, it does publish a
range of statistics that allow the local impact to be estimated.
The estimates in this report reflect the impact when the reforms have come into full
effect. The Welfare Reforms covered in this report, when fully implemented, are
expected to save the UK Treasury almost £19billion per year.
However, it is important to note that the impact of Universal Credit is omitted from
this study, as this is not expected to result in a net reduction in benefit entitlement
and is unlikely to fully impact before 2018.
This report forms part of a wider Sheffield Hallam study, Hitting the Poorest Places Hardest:
The Local and Regional Impact of Welfare Reform. This paper provided estimates of the
economic impact of welfare reform for all 379 Local Authority areas in addition to providing
regional comparisons (Northern Ireland is not included in this analysis).
4.2 Key Findings
In terms of individual benefits, this report estimates that Scotland is likely to be more
adversely affected by changes to DLA and Incapacity Benefits on a per capita basis than
Great Britain. The financial loss per working age adult per annum for DLA is estimated at
£50 for Scotland compared to £40 for Great Britain 6. Similarly, for Incapacity Benefit
changes, the loss is estimated as being greater for Scotland at £145 per working age adult
per annum, whilst it was significantly less at an estimated £110 for Great Britain.
In overall terms, per working age adult, financial losses arising from Welfare Reform in
Scotland are estimated to be broadly the same as the Great Britain average. The report
noted that the loss of benefit income will have knock-on consequences for local spending
and employment (although it did not quantify these kind of impacts). When Welfare Reform
comes into full effect, it is estimated that it will take over £1.6billion out of the Scottish
economy (around £480 per year for every working age adult).
Overall, Welfare Reforms will hit Scotland less than northern England and Wales, but more
than much of Southern England. In Scotland, generally the more deprived the Local
6
Given that many adults and families will be untouched by the Welfare Reform changes, the average loss per
working age adult clearly masks the extent of impact for those that will be affected.
11
Authority area, the greater the financial impact, and a key consequence of Welfare Reform
will be to widen gaps in prosperity between the most and least well-off local areas in
Scotland.
The biggest financial impact in Scotland will come from the reform of Incapacity Benefits (an
estimated £500million per year), and Child Benefit changes will affect the largest number of
households (more than 600,000). In contrast, the Household Benefit Cap will impact on
relatively few Scottish households (2,600).
Incapacity Benefit and DLA reforms will have a greater than average impact on Scotland
than the rest of the UK, due to the comparatively high claimant rate for these benefits in
Scotland. Individuals adversely affected by Incapacity Benefit reforms will lose on
average £3,500 per year, and those impacted as a result of the changeover from
Disability Living Allowance to Personal Independence Payments will lose an average
of £3,000 per year. A more detailed breakdown of estimated losses per Benefit can be
accessed in Appendix A.
A fuller comparison of Scotland with other UK regions can be accessed in Appendix C.
Glasgow faces the biggest loss from Welfare Reform, both overall and on a per capita basis,
with residents set to lose around £270million per year (£650 per working age adult).
Glasgow ranks 23rd in terms of financial loss per working age adult out of 379 local authority
areas across Great Britain, 8th in the UK for impact of DLA and 14th for impact of the
‘Bedroom Tax’. Other Scottish Local Authority areas that will also be hard hit include:
Local Authority
Glasgow
Inverclyde
Dundee
West Dunbartonshire
North Ayrshire
North Lanarkshire
Clackmannanshire
East Ayrshire
Estimated Loss (p.a.)
£270m
£33m
£58m
£36m
£51m
£123m
£18m
£43m
Loss per Working Age Adult (p.a)
£650
£630
£600
£600
£580
£560
£550
£540
Financial losses in Edinburgh will be significantly smaller at £135million per year (£400 per
working age adult), and Edinburgh ranks 238th out of the 379 local authority areas. Dundee
ranks 51st and Aberdeen City 299th. The least impacted areas in Scotland include (ordered
in table according to the loss per working age adult):
Local Authority
Shetland Islands
Aberdeenshire
Aberdeen City
East Dunbartonshire
Orkney Islands
East Renfrewshire
Moray
Estimated Loss (p.a.)
£4m
£49m
£52m
£22m
£5m
£20m
£21m
Loss per Working Age Adult (p.a.)
£290
£300
£330
£340
£350
£350
£360
The full breakdown of the impact of welfare reform on individual Council areas can be
accessed in Appendix B.
12
It is expected that Welfare Reforms will hit hardest in areas where welfare claimants are
concentrated, which tend to be the poorest areas with the highest rates of worklessness.
However, although some Local Authorities will be impacted less severely than others, overall
losses to all Scottish Local Authority areas will still be significant. Likewise, the impact on
individuals and households will also be considerable.
4.3 Points to Note / Gaps / Areas of Uncertainty
In estimating the impact of Welfare Reform, this report holds all other factors constant and
makes no assumptions in terms of growth of the UK and Scottish economies or future levels
of employment; therefore it is difficult to measure future impact with a high level of accuracy.
The report also questions the Westminster Government’s assumption that more people will
look for and find employment due to the financial incentive resulting from Welfare Reform.
While some individuals will find work to compensate for loss of income through Benefits, it is
unlikely that extra supply will lead to a substantial increase in demand. Therefore, this report
does not assume that losses of income from Benefits will necessarily be replaced by income
from employment.
The Scottish Government has chosen not to pass on the Westminster Government’s 10%
cut in the value of Council Tax Benefit payments to Local Authorities for the first two years.
This element of Welfare Reform, therefore, will still have an impact on the Scottish economy,
but is absorbed elsewhere rather than falling directly on Councils / claimants. In addition,
this decision is a temporary measure and, although agreed for two financial years, no
permanent arrangement has been put in place to continue this in the longer term.
The estimated financial impact of Welfare Reform on Scotland is significantly higher in this
report (£1.6billion) than the £780m per year estimated in the Scottish Local Government
Forum against Poverty report, and slightly lower than the £2billion quoted in the analysis
conducted by the Scottish Government. The main reasons for this are:
•
This report takes fuller account of the impact of reforms on Incapacity Benefit, Tax
Credits and Child Benefit than the Scottish Local Government Forum against Poverty
report; and
•
The Scottish Government analysis includes the impact of the switch from Retail Price
Index to Consumer Price Index for indexation, which is a wider reform and will also
affect certain public sector pensions.
13
5. UK Government Cuts to Welfare Expenditure in Scotland, Scottish
Government (2013)
5.1 Methodological Notes
This report examines where the UK Government has cut the Welfare Budget since June
2010 in the period to 2014/15, as part of their wider fiscal consolidation plans. It also
assesses the extent to which these cuts are likely to come from welfare payments made in
Scotland.
The Scottish Government does not currently have responsibility for welfare; therefore it
indicates that it does not have the modelling and analytical tools needed to fully assess the
impact of Welfare Reform. Instead, the analysis in this report is guided by information
published in the UK Government Budget, the Autumn Statement and Spending Review
policy costing data.
The report takes two different approaches to estimating the potential impact of Welfare
Reform cuts at the Scottish level. These are:
1. Assume that Scotland takes a share of benefit expenditure based on Scotland’s
proportion of expenditure by DWP on benefits at the GB level (8.9%).
2. Examine each change individually and apply Scotland’s proportion of GB benefit
expenditure to that benefit. This approach is more sensitive in that it considers the
impact of changes to individual benefits in Scotland.
5.2 Key Findings
Based on the above methodology, as a result of the welfare reforms since 2010, the 201415 Welfare bill is expected to be reduced by around £2billion in Scotland and by
£21billion in the UK.
However, as a result of the cumulative impact of welfare reform over the five years from
2010 to 2014-15, the UK Government will have reduced the Scottish Welfare bill by
over £4.5billion and around £47billion in the UK.
Within these cuts, it is estimated that around £1billion of losses relate directly to children in
Scotland through changes to Tax Credits, abolition of the Health in Pregnancy Grant and
Child Trust Fund, and changes to Income Support and Child Benefit. Indirectly, this figure is
likely to be much higher when reforms to Housing Benefit, etc are taken into account.
5.3 Points to Note / Gaps / Areas of Uncertainty
As above, Welfare is currently a reserved issue; therefore the Scottish Government states
that it does not have the ability to assess fully the impact of the reforms to the same extent
as the Westminster Government. The report cautions that there are limitations in relying on
14
the data published from multiple UK Government sources because, as demonstrated in the
report, each makes different estimations. Data from different UK Government sources also
makes different assumptions around economic growth and inflation, which feed into policy
assumptions and costings.
This report also cautioned that announcements in the 2012 Autumn Statement are expected
to reduce spending on welfare by £15.2billion over the period 2013-14 to 2017-18. This is
largely as a result of the introduction of the uprating of discretionary working age benefits
and tax credits by 1% for three years from 2013-14. This means that the annual increase in
these benefits will be capped at 1%, rather than increasing in line with the Consumer Price
Index and benefits will increase by less than inflation. In practice, this will put further
pressure on claimants’ standard of living.
15
6. People, Councils, the Economy 2nd Edition, Scottish Local Government
Forum Against Poverty (2013)
People, Councils, the Economy 2nd Edition, was published in March 2013 by the Scottish
Local Government Forum Against Poverty and Rights Advice Scotland. (The initial edition of
the report was published in September 2010). The report aims to provide an estimate of the
impact of the welfare changes by calculating the monetary losses to Scotland 2010-2015,
broken down to Local Authority level.
6.1 Methodological Notes
This report uses an approach based on the official number of actual claimants in each Local
Authority area at February 2012 and the annual amount paid at February 2012. All figures
are based on statistics from HM Treasury, HMRC, DWP and the Scottish Government. As
shown in the summary matrix, the report covers the following benefit types:
•
•
•
•
•
•
•
•
•
•
•
Disability Living Allowance (DLA)
Income Support
Employment Support Allowance (ESA)
Incapacity Benefit
Jobseeker’s Allowance (JSA)
Carer’s Allowance
Attendance Allowance
Housing Benefit
Child Benefit
Tax Credits
Benefit Cap
(The paper makes no mention of Universal Credit).
Importantly, the paper considers the impact of the reduction in these benefits resulting from
the change in up-rating from the Retail Price Index to the Consumer Price Index, which the
Sheffield Hallam paper does not take account of. Taking each benefit in turn, the report
estimates the yearly losses directly resulting from the welfare reform policies covering 20102015, in order to derive a total loss estimate. In addition, the report also provides benefit
profiles: showing the estimated economic losses for each respective benefit by Local
Authority area.
6.2 Key Findings
The report estimates that the UK Government welfare reform policies are going to directly
result in a cumulative total loss of £2,116,615,000 for Scotland from 2010-2015, with the
majority of the losses coming from April 2013 onwards. This figure is considerably less than
the Scottish Government (£4.5bn 2010-2015) cumulative estimate. Analysing the impact by
annual losses, the paper estimates that in 2015/16 the financial impact of the welfare
16
changes in Scotland will be £780,588,783, this is considerably lower than both the Sheffield
Hallam estimate of £1.6bn (2014/15) and the £2bn (2014/15) calculated by the Scottish
Government. The national findings are summarised in Appendix D.
In terms of individual benefit types, the Forum estimates that Disability Living Allowance will
witness the biggest cut amongst all benefits, with a total loss from 2010-2015 of
£683,234,707. This was attributable to the UK Government’s stated 20% reduction in
forecast working age DLA expenditure in 2015/16. Housing Benefit was seen to be the
second worst affected, with an estimated total loss of £521,551,839 and third was Child
Benefit, with a loss of £484,862,429.
In terms of impacts at Local Authority level, Glasgow was estimated to have the biggest
total loss from 2010-2015 at £313,107,859. Edinburgh was second with £233,274,603
and North Lanarkshire the third worst affected with total losses of £144,827,350. A
summary of total losses by Local Authority is provided in Appendix F. As with the national
figure, the local losses estimated by the report are significantly smaller than the Sheffield
Hallam paper. For example Sheffield Hallam estimates the loss to Glasgow in 2014/15
alone to be £269m. Across Scottish Local Authorities, the trends identified at a national level
largely held, with DLA, Housing Benefit and Child Benefit on the whole seeing the
largest total losses of all benefit types.
6.3 Points to Note / Gaps / Areas of Uncertainty
The analysis is limited to the period covering 2010-2015 thus the paper fails to account for
changes that will not have fully come into force by 2015. Citizen’s Advice Scotland also
criticised the report for failing to fully address the extent of changes to Incapacity Benefits.
As the analysis is based on the number of claimants and the annual amount claimed, the
figures simply confirm that, the higher the number of claimants and annual amount claimed
in a Local Authority area, the higher the estimated total loss. A greater degree of context
could have been given by providing some form of denominator (e.g. total
population/households); this would also have allowed for greater per capita comparisons
between Local Authorities. In contrast, this level of analysis and context is provided by the
Sheffield Hallam paper.
In terms of the figures, all estimates in the paper are given to the nearest £1, implying a
degree of accuracy and precision that is unlikely to be correct. The estimates perhaps would
have benefited from the use bandings and/or rounding.
17
7. The Local Impacts of Welfare Reform, Local Government Association (2013)
The Local Impacts of Welfare Reform: An Assessment of Cumulative Impacts and
Mitigations was published in August 2013 by the Local Government Association (LGA),
which commissioned the Centre for Economic and Social Inclusion to undertake the
research. The report stated that it aimed to contribute towards the gaps in the evidence
base on Welfare Reform by considering the individual and cumulative impact of key reforms.
Unlike People, Councils, the Economy, this report looks at the economic impact on
households as opposed to Local Authority areas as a whole and takes the step of providing
a breakdown by working and non-working households. The report deals with ten welfare
reforms including the introduction of Universal Credit, As follows:•
•
•
•
•
•
•
•
•
•
Changes to tax credits
Changes to Local Housing Allowance
Non-dependent reductions
Restriction of contributory ESA to one year
Replacement of DLA with Personal Independence Payment (PIP)
Abolition of Council Tax Benefit
Introduction of Size Criteria in Social Housing
Benefit Cap
Changes to uprating of benefits and tax credits
Introduction of Universal Credit
Although the analysis in the report is only applicable to England and English Local
Authorities, there are lessons and approaches which could be taken forward to develop a
Scottish equivalent, if so desired.
7.1 Methodological Notes
For each welfare reform, the report apportioned to local authority level the Government’s
most recent or final estimate of the fiscal impact of that measure, which is published by HM
Treasury. Impacts for financial year 2015/16 were chosen as the comparison point as it is
beyond the point at which all impacts were due to have taken effect and it represents the
final year of the current Parliament. The authors note that Universal Credit signifies an
exception to this approach and they used the estimate of its steady state financial impact
published in the Government’s most recent Impact Assessment (December 2012).
The authors used a variety of methods to apportion financial impacts between local
authorities. This was usually calculated on the basis of a Local Authority’s share of
expenditure on a certain benefit or on the basis of published estimates of impacts in
Government Impact Assessments, or a combination of the two. The authors provide a more
detailed methodology in their appendices, explaining how they derived their estimates for
each of the ten welfare reform areas listed above. After closer examination of their
methodology and the data used, it may be possible to conduct similar analysis for Scotland.
18
7.2 Key Findings
The analysis in the report is limited to England and English Local Authorities, however it is
worth noting their summary findings as a means to provide context to any future Scottish
studies. The report found that, excluding the impact of UC, it is estimated that the income of
households claiming benefit will be on average £1,615 p/a or £31 p/w lower in 2015/16.
This does not equate to a cash loss of £1,615 p/a, but instead signifies the loss in income
compared with what benefits would have been in the absence of reform.
At a Local Authority level, the report found that all English regions with the exception
of London will see losses between £1,500 and £1,650 p/a per claimant household; thus
they concluded that the average impact is fairly evenly spread. This was attributed to the
impact of the various individual reforms largely balancing out across England.
When looking at the cumulative impact according to the working status of households, the
report estimated that 59% of all Welfare Reform reductions impact households where
someone works. They found that the reductions for working households are greater than
non-working households in 314/325 local authorities in the analysis. This was explained by
the changes to tax credits and the changes to uprating of benefits.
7.3 Points to Note / Gaps / Areas of Uncertainty
As with all studies, the LGA analysis does have its limitations. Firstly, the authors
acknowledge that, although they have apportioned impacts to Local Authority areas, it is not
possible to model the distribution of impacts across different groups or on groups with
certain characteristics. The report attributes this to a lack of appropriate data and knowledge
on benefit combinations and the characteristics of claimants. This point is a recurring issue
across the whole welfare reform agenda, in terms of lack of detailed data relating to
household composition, income levels, etc.
7.4 LGA Impact Tool
Accompanying the paper, the authors also provided an Excel based tool which can be used
by councils and their partners to model the impacts of welfare reform in their local area. A
screenshot of the tool is provided in Appendix F. It covers nine benefit areas:
•
•
•
•
•
•
•
•
•
HB Local Housing Allowance
HB Social Size Criteria
Non-dependent Reductions
CTB localisation
Tax Credits
DLA replacement
1% up-rating
ESA Time Limiting
Benefit Cap
19
The ‘dashboard style’ tool allows users to select their desired (English) region and Local
Authority. It shows the estimated cash impacts in 2015/16 of welfare reforms and the
estimated number of claimant households affected for each reform. This allows an estimate
to be made of the impact in 2015/16 per affected household. For each reform area, the tool
provides the total numbers affected, overall impact (£m reduction), average loss (£/year) and
average loss rank. Importantly, the model also provides this same breakdown according to
employment status. If the relevant data for Scotland was sourced and the LGA methodology
was studied further, there may be scope to replicate an equivalent tool for Scottish Local
Authorities. This would need to be explored further and resourced.
20
8. Government Spending on Benefits and State Pensions in Scotland, Institute
for Fiscal Studies (2013)
Government Spending on Benefits and State Pensions in Scotland: Current Patterns and
Future Issues, was published by the Institute for Fiscal Studies (IFS) in July 2013. This
comprehensive IFS briefing note aims to describe the patterns of benefit expenditure in
Scotland and set out a number of issues for consideration. Of particular relevance to this
review is the IFS’ quantitative analysis of the impact of changes made to benefits in Scotland
since 2010 and their comparison of the results relative to the rest of the UK.
8.1 Methodological Notes
The IFS paper examines how the tax and benefit reforms from 2010-2015 are likely to
impact households in Scotland and how this compares to the rest of the UK. The IFS report
differs from other studies as it examines the distributional impacts of reforms at an income
level. This is achieved using the IFS tax microsimulation model, ‘TAXBEN’. It should be
noted that there are certain reforms excluded from the analysis. This includes UC, aspects
of tax credit reforms and the move from Incapacity Benefit to Employment and Support
Allowance. These omissions are explained by issues relating to benefit timescales and data
availability. The authors based their estimates on individual household data using the
Family Resources Survey 2010-11. The analysis is limited to Scotland as a whole and no
breakdown is provided at a local level.
8.2 Key Findings
Looking at the percentage change in net household income, the IFS analysis estimated that
the benefit reforms implemented from 2010-2015 were likely to reduce average Scottish
household incomes by less than the UK as a whole. In Scotland, the reforms were
calculated to reduce household incomes by £480 p/a (in 2013/14 prices) or 1.6% of net
income, compared to £560 p/a or 1.7% for the UK as a whole (IFS 2013: 36). The Beatty
and Fothergill report also suggested the benefit reforms they modelled would result in a
£480 loss per working age adult in Scotland by 2014/15. However, they saw this as
slightly higher than the loss for Great Britain (£470 per working age adult).
Analysing the distributional impact by income decile group, the IFS estimated that the
reforms are regressive, with poorer households losing more as a percentage of their income.
This is true for the UK and Scotland, although the findings suggest that Scottish households
on low-middle incomes appear to be suffering less than the average for such households in
the UK. For instance, average losses for a household in the second and third deciles of the
income distribution are 4.4% and 3.9% of income for the UK but 3.5% and 3.4% respectively
for Scotland (IFS 2013: 36). This was attributed to the fact that Scotland is less affected by
changes to Housing Benefit and by cuts to Tax Credit and Child Benefit. However, the IFS
estimates revealed that Scotland is likely to be hit harder by changes to disability benefits.
This estimate was also identified in Hitting the Poorest Places Hardest.
21
8.3 Points to Note / Gaps / Areas of Uncertainty
The analysis is limited to Scotland and the UK as a whole with no estimates provided for
other UK regions nor at Local Authority level. This approach limits the ability to provide
further context to the Scottish estimates and to capture the local variation in impact which
will exist within Scotland. Consequently, this inhibits the practical application of the research.
22
9. Fife Council Economic and Social Impact of Welfare Reform, Rocket Science
UK (2013)
Rocket Science consultants conducted this study for Fife Council in order to advise on the
local impacts of Welfare Reform on individuals, families, communities and the economy, and
to recommend appropriate responses that Fife Council might make.
9.1 Methodological Notes
This report modelled 10,000 low income families to examine the impact that Welfare Reform
will have on income. Calculations included Tax Credit, Child Benefit, Housing Benefit,
Council Tax Benefit and Job Seeker’s Allowance. However, this study does not take the
following into account:
•
•
•
Disability in the household (or carer/attendance etc)
The impact of the proposed 50-30%ile change in housing costs
Factors such as lone parents becoming jobseekers after the youngest child reaches
5 years old
In order to identify those areas which are likely to be particularly adversely affected by
Welfare Reforms and subsequent spending reductions, the combination of the impact of Job
Seekers Allowance and Housing Benefit was used as a proxy measure. Details of the
impact of these two benefit types across Fife can be accessed in Appendix G.
9.2 Categories
This report found that everyone who is not working, and the majority of households earning
less than £10,000 pa, will be worse off on Universal Credit. The most affected households,
which are most likely to experience a large reduction in income as a result of the reforms
are:
•
•
•
•
Disabled people
People living in the ‘wrong home’ (Principally, those deemed by the new DWP criteria
as having ‘too many’ bedrooms)
Large families
Households with no earners
Current projections suggest that the most significant reduction in benefit spend will be on
those of working age who are actively seeking work. They estimate that this reduction will
take total spending on social security back to where it was in 2007, but the money will be
spread across significantly more people.
As a result of changes to Universal Credit, everyone who is not working and households
earning under £10,000 will be worse off, although the report does not state by how much.
23
9.3 Key Findings
In 2010, the Gross Value Added of Fife (excluding Public Sector) was £3.1bn. Social
Security spending is £1.13bn pa; therefore this is a highly significant part of the Fife
economy and equivalent to around one third of the area’s total GVA. This means that, in
individual areas of high unemployment in Fife, Welfare Reforms are likely to lead to a
significant reduction in local spending, which will be likely to have a major adverse impact on
the local economy. The report suggests that the impact of this will be more apparent in Fife
than in many other local authority areas, due to the area having proportionately higher levels
of unemployment and greater incidences of disability.
According to this report, there are several significant risks facing Fife Council as a result of
the implementation of Welfare Reform, including:
•
•
•
•
Risk of missing the ‘tipping point’ for some of the most vulnerable individuals /
households, with whom the Council has no active contact
Increase in demand for support from the Council cannot be met in conventional ways
Recent improvements in areas such as homelessness are reversed
Local private sector services, such as shops, cafes and pubs, are already under
pressure and may be forced to close.
Although the individuals affected will be distributed across Fife, households that are likely to
suffer a loss of income as a result of welfare reforms are concentrated in areas of multiple
deprivation and these are the areas in which the local effects will be most significant.
However, although the local impact will be less obvious in other areas of Fife, the impact on
individual households within these areas will be no less significant.
Details of the local variations in different areas across Fife can be accessed in Appendix H.
9.4 Issues and Implications
The report noted that there are several practical implications of the welfare reform changes
that will have an impact in Fife. These include issues that are wider than just the economic
impact, including:
Limited housing stock with which to respond to households that are in the ‘wrong house’ and
need to downscale in order to make ends meet
•
•
•
•
•
Greater numbers (including children) living in poverty/severe poverty
Greater numbers at risk of homelessness
Greater levels of social housing rental arrears
Changes in family living patterns
Greater numbers of low-income households entering work
24
This increase in pressure is likely to lead to increased demand on public sector services,
including:
•
•
•
•
•
Support in work assessment appeals
Money Advice and/or household budgeting support
Help with digital access
Support for households in crisis
Employability support
9.5 Points to Note / Gaps / Areas of Uncertainty
This report cautions that due to the complexity of the changes associated with welfare
reform, it is not currently possible to identify all of those who are most at risk and who will be
worst affected. This is partly because the starting point, in terms of existing debt, for many
households is unknown. This also makes it impossible to estimate the expected loss to the
Fife economy with any degree of accuracy. In this respect, the report for Fife was more
descriptive of anticipated economic and social changes that may be brought about by
Welfare Reform, rather than quantifying breakdowns of likely economic impact.
25
10. The Economic Impact of Welfare Policy in Glasgow, Fraser of Allander
Institute (2012)
The Economic Impact of Welfare Policy in Glasgow was published in September 2012 by the
Fraser of Allander Institute for Glasgow City Council. The report aimed to assess how
benefit reforms would impact on Glasgow. This was to be achieved by considering the
extent to which reduced spending resulting from the reforms would affect both the local
economy in Glasgow and the rest of Scotland. This is the only paper of the six reviewed
which is concerned with the impact on the local economy and which quantifies the impact in
terms of jobs and wages.
10.1 Methodological Notes
The report concerned itself with two primary measures:
•
•
Estimated reduction in benefit spending
Estimated employment impact (job losses) and wage impact (loss of wages)
On both counts, estimates are calculated for both Glasgow and the rest of Scotland, with the
later focused on impact arising directly as a consequence of benefit reductions for Glasgow
residents 7. As shown in this review’s matrix the benefit changes included in the Fraser of
Allander review were:
•
•
•
•
•
•
•
•
•
•
Disability Living Allowance
Child Benefit
Incapacity Benefit/Severe Disablement Allowance
Employment and Support Allowance
Income Support
Housing Benefit
Attendance Allowance
Bereavement Allowance Carer’s Allowance
Jobseeker’s Allowance
In addition, CPI uprating is applied to each benefit where applicable.
A reduction in benefit spending was calculated by applying policy changes to existing DWP
claimant count and average weekly payment data. Having derived an estimate of reduced
payments, the authors used the Scottish Input-Output tables, looking at the distribution of
spending by industry in the lowest 10% of the income distribution in addition to
Employment/Output and Wage/Output ratios in order to derive estimates for the impact on
jobs and wage income. The figures given are based on the assumption that the initial
impacts and subsequent effects on Glasgow will be a function of Glasgow’s share of
employment in the relevant industrial sector affected.
In the paper, no dates are assigned to the estimates. Therefore, it is assumed that the
figures given apply to the fully implemented policies.
7
Because a proportion of Glasgow residents spending will be on goods and services from outwith the local area.
26
10.2 Key Findings
Table 2 shows the summary reductions in spending in Glasgow for the individual changes
included in the report and the total estimated reduction for Glasgow. Based on the benefits
included in their analysis, Fraser of Allander estimated that changes to these benefits will
result in £114.8m reduction in benefit spending. As can be seen in the table below, the
largest proportion of this reduction is attributable to the Disability Living Allowance to PIP
changes (£41.5m) and Incapacity Benefit/Severe Disablement Allowance (£31.6m).
Combined, these account for 64% or £73.1m of the total spending reduction in Glasgow.
Table 2
Benefit
Disability Living Allowance
Incapacity Benefit/Severe Disablement Allowance
Housing Benefit
Income Support
Employment Support Allowance
Child Benefit
Jobseeker’s Allowance
Attendance Allowance
Carer’s Allowance
Bereavement Allowance
Total
Reduction in benefit spending (£m)
41.5
31.6
18.0
12.3
5.96
3.1
1.15
0.89
0.34
0.04
114.8
Regarding the employment and wage impact, Fraser of Allander estimated that the various
benefit changes will result in a loss of 1,293 jobs and £33.7m worth of wage income in the
city. In addition, they estimate that this reduction for Glasgow residents would also result in
the loss of 646 jobs and £16.8m in wage income across the rest of Scotland. (i.e. The latter
due to the proportion of the reduction in Benefits of Glasgow residents that would otherwise
be spent on supporting jobs out with the city). These figures are displayed in Table 3 below.
Table 3
Employment Impact
Wage Impact (£m)
Glasgow
1,293
33.7
Rest of Scotland
646
16.8
Total
1,939
50.5
A more detailed breakdown of the employment and wage impact by benefit type is provided
in Table 4. As with the summary figures, the table contains the employment and wage
impacts for both within and outwith Glasgow, again with the later caused by reductions in
benefit spending by Glasgow residents. The table shows that the trends identified in relation
to the estimated impact of DLA and IB/SDA hold, with the two benefit types respectively
estimated to have the largest and second largest employment and wage impact within
Glasgow and the rest of Scotland. The analysis reinforces the view that welfare reform is
likely to have a ripple effect, with impacts felt in the wider economy beyond those directly
claiming benefits.
27
Table 4
Benefit Type
Area
Disability Living
Allowance
Incapacity Benefit/Severe
Disablement Allowance
Glasgow
Rest of Scotland
Glasgow
Rest of Scotland
Glasgow
Rest of Scotland
Glasgow
Rest of Scotland
Glasgow
Rest of Scotland
Glasgow
Rest of Scotland
Glasgow
Rest of Scotland
Housing Benefit
Income Support
Employment Support
Allowance
Child Benefit
Other changes
(Attendance Allowance,
Bereavement Allowance,
Carer’s Allowance,
Jobseeker’s Allowance
Employment Impact
(Jobs lost)
467
233
356
178
202
101
138
69
67
34
35
17
27.1
13.5
Wage Impact (£m)
12.2
6.1
9.3
4.6
5.3
2.6
3.6
1.8
1.75
0.87
0.91
0.45
0.7
N/A
10.3 Points to Note / Gaps / Areas of Uncertainty
In terms of methodology, the omission of changes to Tax Credits is noticeable. This is
perhaps surprising given the paper’s focus on employment. The authors assume that any
impact from Tax Credits on households, especially those on low incomes, would be
compensated with increases in Housing Benefit and Council Tax Benefit.
Unlike the Fife paper, Glasgow is treated as a whole and no attempt is made to provide sub
local authority analysis. This does mean that the paper does not capture potential variation
in impacts within the City. This is potentially an important point given the spectrum of
deprivation and benefit dependency that exists in Glasgow.
28
11. Findings and Points to Consider for Future Research
The literature review identifies a number of issues that should be considered in any further
research or modelling of the impact of Welfare Reform:a) There are variations / inconsistencies in the methodologies used in each report
including which reforms are included and omitted, the timescales of impacts, etc.
Any further research should seek to learn lessons from the various approaches taken
in the studies that have already been completed.
b) It is noted that, across the studies reviewed, the various estimates do not always
relate to direct cash reductions. This is because a number of the estimated impacts
relate to what benefits would have been in the absence of reform 8.
c) Generally, the reports reviewed tended to avoid explicit reference to any potential
positive impacts that may arise from Welfare Reform. For example, DWP
publications 9 outline modelling of potential ‘winners and losers’ as a result of UC,
summarise transitional arrangements and suggest that the changes will help reduce
complexity and thereby encourage take-up of currently unclaimed benefits.
d) Similarly, because they are mostly concerned with the direct financial consequences
of Welfare Reform, the papers reviewed – either explicitly or implicitly – generally did
not attempt to factor in wider economic forecasts relating to employment, growth in
the economy, inflation, etc. A couple of the studies did make more general
references to these issues, however. For example, the Sheffield Hallam report
questioned the UK Government assertions in relation to the impact of Welfare
Reform incentivising work. This includes querying the ability of supply side measures
to significantly impact on demand. Consequently, that report indicates that it does
not make any assumptions concerning reduced benefits being replaced by
employment income
e) Generally, however, the reports covered by this review are assumed to base all
estimates on the current economic situation remaining constant. Further research
could model scenarios relating to various economic growth forecasts
f)
Further consideration needs to be given to the wider ‘knock on’ economic impacts,
including multiplier effects, in assessing what the Welfare Reform changes mean for
local economies. The FAI paper for Glasgow was alone in beginning to factor in
such considerations. The FAI analysis highlighted that the majority of benefit
recipients tended to spend the bulk of their income locally. Therefore, reductions in
their income are likely to have knock-on effects for local businesses which, in turn,
could have a detrimental impact on local employment. In developing economic
impact estimates, there are also limitations in relation to assumptions concerning
economic growth and labour market performance. The fact that much of Welfare
Reform is premised on incentivising work and jobs being available, does not
necessarily mean that demand will match this. In short, Welfare Reform is likely to
8
For example, changes to Benefit up-rating may result in annual Benefit increases being less than they would
otherwise have been. In this instance, quantifying the net financial impact of this will be contingent upon
prevailing inflation rates.
9
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/220177/universal
-credit-wr2011-ia.pdf
http://www.scotland.gov.uk/Resource/0040/00404939.pdf
29
have a ripple effect, with impacts felt in the wider economy beyond those directly
claiming benefits and this ought to be accounted for within any further studies.
g) With the exception of the LGA paper, the estimated impact of Universal Credit is
omitted from analysis in all of the reports reviewed. Where explained, this has been
attributed to timescales and data issues. Whilst its omission on these grounds is
understandable, it is noted that UC is generally regarded as the most radical element
within the broad WR changes. Once more definitive information about the UC rollout is available, this could be explored further, potentially with updates and revisions
to the various estimates.
h) The reports - with the exception of that conducted by Rocket Science for Fife Council - are
focused more on a UK/Scotland level although a number do provide summary Local
Authority level figures. Further analysis would be useful which modelled the varying
distribution of impacts across different groups (e.g. comparing benefit combinations,
characteristics of claimants, household composition, income levels, etc). As well as
client-based analysis, this could also include more localised analysis aimed at
assessing differences in the spatial distribution of impact, which may be masked
when looking at overall Scottish or Local Authority level impact.
i)
Generally, however, with the exception of the Fife paper, no attempt has yet been
made to look at distributional effects within Local Authority areas. There are
neighbourhoods within every Local Authority area where benefit dependency is more
heavily concentrated; therefore the impact of reforms will be greater in these areas.
Conducting research only from an overall Local Authority perspective could mask this
variation. Whilst undoubtedly challenging, having a more ‘localised breakdown’
analysis will be particularly important in informing the targeting of service planning
and provision.
j)
Further research is also required into the distributional effect across different groups
of individuals and households, which is likely to reveal variations behind the summary
and average figures, and highlight the people / groups that are likely to be most
affected. The majority of research conducted at a household level looks at the
impact per household or working age adult. However, it is important to note that the
impact on those actually affected could be greater than these estimates, and is likely
to vary significantly depending on individual circumstances.
k) Information relating to the new DWP conditionality and sanctioning regime is also
largely absent from any of the studies reviewed – perhaps understandably so, given
that this information has only recently become available. Nevertheless, initial
analysis of the consequences of sanctioning in Scotland indicate that this is having a
significant detrimental impact – estimated to be of the order of around £1m per
month.
l)
Likewise, subsequent to publication of the various reports reviewed in this paper,
additional planned UK Government cuts have been announced which will have
further significant impact on the Welfare budget. Whilst the specific details of where
these additional cuts will fall have not yet been made, the likely consequence will be
to exacerbate the estimated impacts set out in each of the studies reviewed.
m) Further consideration also needs to be given to the effect of Welfare Reform on other
public services and in potentially driving increased demand. In this respect, there are
concerns about ‘cost shunting’, whereby savings to the UK Government arising from
Welfare Reform ultimately result in increased costs for other parts of the public
sector, such as Local Authorities. With the exception of the Fife Council paper, none
30
of the reports factor in additional costs or lost income to the public services as a
result of Welfare Reform. The CoSLA commissioned report on LSSF is beginning to
scope some of these issues.
n) A number of transitional arrangements are being implemented, which are intended to
mitigate the immediate impact of some of the Welfare Reform changes. The studies
reviewed tended not to factor in these kind of measures. The funding gap resulting
from the Council Tax Replacement scheme has been absorbed by the Scottish
Government and CoSLA for 2013/14, which together provided £40m in additional
funding for this transitional year. In its 2014/15 draft budget, the Scottish
Government pledged to roll forward its £23m contribution with a proposal that local
government will again contribute £17m. However, this reform will still have a
significant impact on the economy because, although less apparent in terms of
benefit reduction, this reduction in funding will have to be absorbed elsewhere.
Furthermore, as yet no long term plans have been put in place for the scheme
beyond these initial years.
o) The LGA report included a model for estimating impact. Any model or tool developed
for Local Authorities should primarily be aimed at informing and assisting at a
practical level. One option is for a ‘self-service’ model for Local Authorities to be
developed, but this would require consideration to be given to the inconsistencies
which may emerge in relation to how the model might be applied and the results
interpreted.
p) Welfare is largely a reserved matter and an absence of access to detailed data can
limit the ability of the Scottish Government and Local Authorities to fully model and
research the economic impacts. They do not have direct control or influence over the
data required and are reliant on data from central government departments such as
the DWP and HMRC. Their ability to conduct further research is also constrained by
data gaps and time lags in publishing - for example, the most recent published Tax
Credits data relates to 2011/12.
q) Regardless of the methodology adopted in future research or modelling, it is
important to bear in mind that any figures generated will necessarily involve a degree
of estimation, as full data concerning future impacts is not possible. Nevertheless,
the scale and nature of the WR changes is such that best possible estimates will be
important for understanding likely impact, planning services and identifying potential
means of mitigating worst adverse impacts.
31
12. Conclusions
This paper has summarised and compared a number of reports that have been produced
concerning the estimated economic impact of the Welfare Reform changes that are being
implemented by the UK Government. The review has set out the key findings of each report
and highlighted a range of methodological and other issues arising. Each report has
adopted a slightly different approach and direct comparison has not always been
straightforward.
Regardless of the methodology applied in the reports, it is not currently possible to generate
exact figures for the impact of Welfare Reform. This is inevitable given the range of
unknowns at this stage, including exact details regarding timetabling of the introduction of a
number of the changes.
A consistent conclusion, however, from each report reviewed is that Welfare Reform will
have a major impact on Scotland. It is likely that significant spending power will be taken out
of the economy and this will have an adverse impact at a number of levels – on individuals,
households and the economy as a whole.
As yet, there is no detailed analysis available of the direct and indirect economic impacts
arising from Welfare Reform across Scotland 10. The majority of studies to date have
focused on forecasting financial reductions as a result of the various changes. With the
exception of the FAI report - which covers Glasgow - none of the studies considered the
impact that Welfare Reform with have on jobs and the economy of Scotland. It is suggested
that this is gap that requires urgent further research. Furthermore, if it is to be the basis of
detailed planning, such further analysis ought to be capable of producing a balanced
assessment of likely economic impact. This means that it ought to take proper account of
both likely negative and positive consequences likely to arise from Welfare Reform.
Similarly, and with reference to its usefulness in planning, any such further analysis ought
also to be capable of producing robust estimates of impact at a range of levels, including
various geographic breakdowns and in terms of likely impact on particular client groups.
A final point is that the Welfare Reform changes are likely to act as a driver for increased
demand for a wide range of public services. Local Authorities and other key partners require
to understand the likely changes to service demands and the corresponding resource
implications - and to plan for these significant changes, a number of which are already
underway. Accordingly, further consideration needs to be given to the effect of Welfare
Reform on other public services and in potentially driving increased service demand. In this
respect, there are concerns about ‘cost shunting’, whereby savings to the UK Government
arising from Welfare Reform ultimately result in increased costs for other parts of the public
sector, such as Local Authorities. Some of these issues are likely to emerge in discussions
concerning the development of Local Support Services Frameworks, linked to the
introduction of UC. Whilst all Local Authorities – and some Community Planning
Partnerships - have established corporate working groups to respond to Welfare Reform
issues, it is likely that they would benefit from more detailed research on the likely
10
This is not intended as a criticism of the reports reviewed; rather simply a reflection of what they have
focused upon.
32
consequences of Welfare Reform in relation to service demand, service design and
consequent resource implications.
The Improvement Service will now seek to take forward discussions with the Scottish
Government and CoSLA in order to explore ways of addressing the identified research gaps.
33
13. Appendices
The following appendices provide more detailed findings from the reports included in this review.
Appendix A
Impact of Welfare Reform on Scotland by 2014/15
Source: Source: Beatty, C., and Fothergill, S., (2013). The Impact of Welfare Reform on Scotland. Edinburgh: The Scottish Parliament, pp.9.
Incapacity Benefits
Tax Credits
1% Uprating
Child Benefit
Disability Living Allowance
Housing Benefit: LHA
Housing Benefit: Bedroom
Tax
Non-dependent deductions
Household Benefit Cap
Total
Number Of
Households/Individu
als Affected
Estimated Loss
£m p.a.
Number of
Households/Indivi
duals Affected
per 10,000
410
1,600
n.a.
2,660
160
340
340
Loss per
Working Age
Adult £ p.a.
500
300
290
225
165
80
50
Average Loss per
Affected
Household/Individua
l £p.a.
3,480
810
n.a.
360
3,000
1,010
620
144,000
372,000
N/A
621,000
55,000
80,000
80,000
28,000
2,600
30
15
1,130
4,810
120
10
10
<5
N/A
1,660
N/A
N/A
480
145
85
85
65
50
25
15
34
Appendix B
Overall impact of welfare reform on Scotland by 2014/15(1), by local authority
Source: Beatty, C., and Fothergill, S., (2013). The Impact of Welfare Reform on Scotland.
Edinburgh: The Scottish Parliament, pp.11.
Estimated loss £m p.a.
Glasgow
Inverclyde
Dundee
West Dunbartonshire
North Ayrshire
North Lanarkshire
Clackmannanshire
East Ayrshire
Renfrewshire
South Lanarkshire
South Ayrshire
West Lothian
Dumfries and Galloway
Fife
Midlothian
Falkirk
Argyll and Bute
East Lothian
Angus
Highland
Edinburgh
Scottish Borders
Eilean Siar
Perth and Kinross
Stirling
Moray
East Renfrewshire
Orkney Islands
East Dunbartonshire
Aberdeen
Aberdeenshire
Shetland Islands
Scotland
(1) Except
269
33
58
36
51
123
18
43
60
104
35
57
44
113
25
48
24
27
30
60
135
29
6
36
22
21
20
5
22
52
49
4
Loss per working age
adult £ p.a.
650
630
600
600
580
560
550
540
530
510
500
490
480
480
480
470
430
430
410
410
400
400
380
380
380
360
350
350
340
330
300
290
1660
480
DLA by 2017/18, incapacity benefits and 1% up-rating by 2015/16
35
Appendix C
Overall Impacts of Welfare Reforms by 2014/15 by region
Source: Beatty, C., and Fothergill, S., (2013). Hitting the Poorest Places Hardest: The Local
Regional Impact of Welfare Reform. Sheffield: Centre for Regional Economic Social
Research, Sheffield Hallam University, pp.16.
Estimated loss £m p.a.
North West
North East
Wales
London
Yorkshire and the Humber
West Midlands
2,560
940
1,070
2,910
1,690
1,740
Loss per working age adult
£p.a.
560
560
550
520
500
490
Scotland
1,660
480
East Midlands
South West
East
South East
1,310
1,440
1,490
2,060
450
430
400
370
Great Britain
18,870
470
Except DLA by 2017/18, incapacity benefits and 1% up-rating by 2015/16
36
Appendix D
Benefit changes and their impact: Summary Losses per year directly resulting from
Welfare Reforms 2010-2015
Source: Scottish Local Government Forum Against Poverty and Rights Advice Scotland,
(2013). People, Councils, the Economy 2nd Edition, pp. 5.
DLA
Income
Support
ESA
Incapacity
Benefit
JSA
Carers
Allowance
Attendance
Allowance
Housing
Benefit
Child
Benefit
Tax Credits
Benefit
Cap
Total
Claimants
at Feb
2012
Annual total
at Feb 2012
(£)
Losses so
far (£)
Annual
losses
from April
2014 (£)
181,091,220
15,870,681
Annual
losses
from April
2015 (£)
314,288,271
24,187,198
Total losses
2010-15 (£)
5,455,427
2,465,396
Annual
losses
from April
2013 (£)
182,399,789
7,810,374
346,940
146,890
1,360,310
616,348,985
104,820
177,460
464,826,768
604,683,435
1,859,307
2,418,734
5,867,973
7,633,524
11,923,721
15,511,320
18,171,963
23,639,527
37,822,964
49,203,105
149,510
52,500
492,652,919
151,414,848
1,970,612
605,659
6,219,250
1,258,560
12,637,517
1,942,454
19,259,800
2,658,454
40,087,179
6,465,127
161,540
538,009,753
2,152,039
4,471,937
6,901,959
9,446,065
22,972,000
483,900
1,710,218,791
61,527,232
130,894,106
153,105,689
176,024,813
521,551,839
621,615
858,373,521
125,659,017
106,953,876
119,607,344
132,642,193
484,862,429
468,800
1,954,808,600
46,270,500
0
46,270,500
7,000,000
46,207,500
14,000,000
46,270,500
14,000,000
185,082,000
35,000,000,
6,796,839,696
250,383,922
506,779,890
578,862,405
780,588,783
2,116,615,000
683,234,707
50,333,649
37
Appendix E
A summary of losses per year in each local authority area directly resulting from
welfare reforms 2010-2015.
Source: Scottish Local Government Forum Against Poverty and Rights Advice Scotland,
(2013). People, Councils, the Economy 2nd Edition, pp. 18-33.
Local Authority
Aberdeen City
Aberdeenshire
Angus
Argyll and Bute
Clackmannanshire
Dumfries and Galloway
Dundee City
East Ayrshire
East Dunbartonshire
East Lothian
East Renfrewshire
Edinburgh, City of
Eilean Siar
Falkirk
Fife
Glasgow City
Highland
Inverclyde
Midlothian
Moray
North Ayrshire
North Lanarkshire
Orkney
Perth and Kinross
Renfrewshire
Scottish Borders
Shetland
South Ayrshire
South Lanarkshire
Stirling
West Dunbartonshire
West Lothian
Total losses 2010-2015 (£)
62,592,184
70,405,795
39,998,441
36,140,133
22,064,472
55,986,748
71,354,700
54,423,118
31,842,875
37,425,754
26,709,329
223,274,603
8,550,733
58,128,402
131,812,159
313,107,859
76,893,757
37,606,387
34,023,790
31,550,095
62,048,155
144,827,350
6,731,809
47,901,973
73,061,862
38,148,326
6,261,945
44,771,014
126,085,716
27,838,097
43,967,289
67,550,696
38
Appendix F
Local Impacts of Welfare Reform: Impact Tool
Source: Wilson, T., Morgan, G., Rahman, A., and Vaid, L., (2013). The local impacts of
welfare reform: An assessment of cumulative impacts and mitigations, London: Local
Government Association.
39
Appendix G
Variations in Benefit Status Across Fife
Source: Rocket Science, (2013). Fife Council: Economic and Social Impact of Welfare
Reform. Edinburgh: Rocket Science, pp. 15.
40
Appendix H
Jobseekers Allowance and Housing Benefit Impact Across Fife
Source: Rocket Science, (2013). Fife Council: Economic and Social Impact of Welfare
Reform. Edinburgh: Rocket Science, pp. 16.
•
•
•
•
•
•
•
•
•
•
•
This is a reasonable proxy for other losses – but households in other situations (i.e. earning)
may win OR
•
Worst affected areas: Red areas are worst 10% by absolute loss of income to 2016 for JSA+ HB
households.
41
14. References
Beatty, C., and Fothergill, S., (2013). Hitting the Poorest Places Hardest: The Local Regional
Impact of Welfare Reform. Sheffield: Centre for Regional Economic Social Research,
Sheffield Hallam University. Available at:
http://www.shu.ac.uk/research/cresr/sites/shu.ac.uk/files/hitting-poorest-placeshardest_0.pdf
Beatty, C., and Fothergill, S., (2013). The Impact of Welfare Reform on Scotland. Edinburgh:
The Scottish Parliament. Available at:
http://www.scottish.parliament.uk/S4_Welfare_Reform_Committee/Reports/wrR-13-02w.pdf
Citizens Advice Scotland, (2013). Making Sense of Research on Welfare Cuts in Scotland.
Available at:
http://www.cas.org.uk/system/files/Making%20sense%20of%20research%20on%20welfare
%20cuts%20in%20Scotland.pdf
Fraser of Allander Institute, The., (2012) The Economic Impact of Welfare Policy Changes in
Glasgow. Glasgow: University of Strathclyde.
Local Government Forum Against Poverty and Rights Advice Scotland, (2013). People,
Councils, the Economy: 2nd Edition. Available at:
http://www.scottishpovertyforum.org.uk/PCE2v3.pdf
Phillips, D., (2013). Government Spending on Benefits and State Pensions in Scotland:
Current Patterns and Future Issues. London: Institute for Fiscal Studies. Available at:
http://www.ifs.org.uk/publications/6818
Rocket Science, (2013). Fife Council: Economic and Social Impact of Welfare Reform.
Edinburgh: Rocket Science.
Scottish Government Welfare Analysis, (2013). UK Government Cuts to Welfare Expenditure
in Scotland. Available at:
http://www.scotland.gov.uk/Topics/People/welfarereform/analysis/welfareexpenditurecuts
Wilson, T., Morgan, G., Rahman, A., and Vaid, L., (2013). The local impacts of welfare
reform: An assessment of cumulative impacts and mitigations, London: Local Government
Association. Available at: http://www.local.gov.uk/publications//journal_content/56/10180/4098780/PUBLICATION
42