the uneven impact of welfare reform on people and places...welfare reform and austerity •...

Professor Christina Beatty and Professor Steve Fothergill

Centre for Regional Economic and Social Research

Sheffield Hallam University

National Association of Welfare Rights Advisers

11th March 2016

The uneven impact of welfare reform

on people and places

• Welfare reform and austerity

• Financial losses

– pre-2015 reforms

– post-2015 reforms

– cumulative impact over entire period

• Impact

– by place

– by household type

– by tenure

• How much will be offset by other changes?

• An assessment

Overview

• Financial crisis and world recession 2008/09

• Overhaul of the welfare system was central to deficit

reduction plan for new Coalition Government in 2010

– Emergency Budget June 2010; Spending Review October 2010

– 21st Century Welfare, DWP, November 2010

– Universal Credit: Welfare that works, DWP, November 2010

– Welfare Reform Act 2012; Welfare Benefits Uprating Bill 2013

• Conservative Government have continued the cut back of

the welfare system

– 2015 Emergency Budget and Spending Review

• Welfare reform not new - already underway by previous

Labour government

– Need a modern welfare state: Welfare to Work, New Deals, 'rights and

responsibilities', increased conditionality, making work pay

– Welfare Reform Act 2007, Welfare Reform Act 2009

National context for welfare reform and austerity

• What's the impact of the pre-2015 reforms when fully

implemented?

• Evidence gaps on the impact of reforms

– impact of the reforms as a whole

– highlight the uneven geography of the impacts

– highlight the uneven impact across households

• Research on the pre-2015 welfare reforms

– Hitting the Poorest Places Hardest 2013

• FT, Scottish Parliament, SHU

– Scottish Parliament Welfare Reform Committee - 4 reports

– Local studies - Northern Ireland, Welsh Valleys, Sheffield,

Hampshire

Adding to the evidence base

• Outturn of pre-2015 welfare reforms to March 2016

• Anticipated impact of post-2015 welfare reforms by 2020/21

– individual reforms

– overall

– by household type

– by tenure

• Anticipated impact of all pre and post-2015 welfare reforms

by 2020/21

• Current research funded by

– Sheffield Hallam University

– Oxfam

– Joseph Rowntree Foundation

New evidence

• Our estimates are firmly grounded in:

– HMRC budget announcements

– DWP Impact Assessments and Equality Impact Assessments

– For pre-2015 reforms updates since original announcements in

subsequent budgets and out-turn figures

• Government administrative statistics

− NOMIS, DWP STAT-XPLORE, HMRC, ONS

• See statistical appendix of report for all details of reforms,

data sources and methods

• Document the impacts, not comment on merits

Methods

• Housing Benefit: Local Housing Allowance

• Housing Benefit: Under-occupation SRS (‘bedroom tax’)

• Housing Benefit: Non-dependant deductions

• Household benefit cap

• Council Tax Support

• Personal Independence Payment

• Employment and Support Allowance

• Child Benefit

• Tax Credits

• 1 per cent up-rating

Pre-2015 reforms

Estimated annual financial loss by March 2016

from pre-2015 reformsLoss

(£m pa)

Tax Credits 4,210

Child Benefit 3,030

1 per cent uprating 2,700

Housing Benefit: LHA 1,670

Personal Independence Payments 1,190

Employment and Support Allowance 650

Council Tax Support 370

Housing Benefit: ‘bedroom tax’ 360

Non-dependant deductions 210

Household benefit cap 100

TOTAL 14,490

Source: Sheffield Hallam estimates based on official data

• Universal Credit tapers and thresholds

• Tax Credits

• Mortgage interest support

• 'Pay to stay'

• LHA cap in social rented sector

• Housing Benefit: 18-21 year olds

• Employment and Support Allowance (new reforms)

• Benefit cap (new reforms)

• Benefit freeze

Post-2015 reforms

Estimated annual financial loss by March 2016

from pre-2015 reforms

Estimated loss

£m p.a.

Benefit freeze 4,010

Universal Credit tapers & thresholds 3,220

Tax Credits 2,115

Personal Independence Payments(1) 1,680

Employment and Support Allowance 640

Benefit cap 495

Mortgage interest support 255

‘Pay to stay’ 240

LHA cap in social rented sector 225

HB: 18-21 year olds 40

TOTAL 12,920

(1) Additional post-2015-16 impact of pre-2015 reform

Sources: HM Treasury, Impact Assessments and Sheffield Hallam estimates based on official data

Anticipated financial loss by 2020/21 from post-

2015 reformsAverage loss per

affected

h'hold/individual

£ p.a.

Personal Independence Payments(1) 2,600

HB: 18-21 year olds 2,600

Benefit cap 2,350

‘Pay to stay’ 1,850

Mortgage interest support 1,500

Employment and Support Allowance 1,300

Universal Credit tapers & thresholds 1,050

Tax Credits 1,050

LHA cap in social rented sector 750

Benefit freeze 500

(1) Additional post-2015-16 impact of pre-2015 reform

Sources: HM Treasury, Impact Assessments and Sheffield Hallam estimates based on official data

£mpercentage of

2020/21 total

2016-17 2,225 17

2017-18 5,580 43

2018-19 8,885 69

2019-20 11,845 92

2020-21 12,920 100

Timing of additional financial losses arising from

welfare reform


Average financial loss £ p.a.

Pensioner couple 40

Single pensioner 40

Couple – no children 200

Couple – one dependent child 900

Couple – two or more dependent children 1,450

Couple- all children non-dependent 200

Lone parent – one dependent child 1,400

Lone parent – two or more dependent children 1,750

Lone parent – all children non-dependent 250

Single person household 250

Other – with one dependent child 1,130

Other – with two or more dependent children 1,360

Other – all full-time students 0

Other – all aged 65+ 50

Other 300


Anticipated loss in 2020-21 from post-2015 welfare

reforms, by household type

Number of

working age

households, GB,

millions, 2011

Average loss per

working age

household

£ p.a.

Social rented sector 3.6 1,690

Private rented sector 4.1 730

Owner occupied 12.2 290

Anticipated loss in 2020-21 arising from post-2015

welfare reforms, by tenure


Estimated

loss

£m p.a.

Loss per

working age adult

£ p.a.

North West 3,600 790

North East 1,300 790

Wales 1,450 770

West Midlands 2,650 750

Yorkshire and the Humber 2,550 750

London 4,250 730

East Midlands 2,000 680

Scotland 2,200 640

South West 2,100 630

East 2,200 600

South East 3,100 560

Great Britain 27,400 690

Anticipated loss by 2020-21 arising from all pre and

post-2015 welfare reforms, by region

Estimated loss arising from pre-2015 welfare reforms

by March 2016, by district

Loss per

working age adult

£ p.a.

TOP 10 DISTRICTS

Blackpool 720

Westminster 680

Knowsley 560

Brent 550

Middlesbrough 550

Hastings 540

Barking and Dagenham 540

Torbay 530

Enfield 530

Hartlepool 520

REGIONS

North East 410

North West 410

London 410

Wales 400

Yorkshire and the Humber 380

West Midlands 380

East Midlands 350

South West 330

Scotland 330

East 320

South East 310

Great Britain 360


Anticipated loss by 2020-21 arising from post-2015

welfare reforms, by district


Loss per

working age adult

£ p.a.

TOP 10 DISTRICTS

Blackburn with Darwen 560

Blackpool 560

Barking and Dagenham 530

Bradford 510

Knowsley 500

Sandwell 500

Oldham 490

Birmingham 490

Leicester 490

Middlesbrough 490

REGIONS

North West 380

North East 380

Wales 370

West Midlands 370


East Midlands 330

London 320

Scotland 320

South West 290

East 280

South East 250

Great Britain 320


post-2015 welfare reforms, by district


Loss per

working age adult

£ p.a.

TOP 10 DISTRICTS

Blackpool 1,270

Knowsley 1,070

Blackburn with Darwen 1,070

Barking and Dagenham 1,060

Middlesbrough 1,040

Hastings 1,010

Thanet 1,000

Burnley 1,000

Torbay 990

Hyndburn 980

REGIONS

North West 790

North East 790

Wales 770

West Midlands 750


London 730

East Midlands 680

Scotland 640

South West 630

East 600

South East 560

Great Britain 690


post-2015 welfare reforms, by district


Loss per

working age

household

£ p.a.

TOP 10 DISTRICTS

Newham 2,740

Barking and Dagenham 2,670

Enfield 2,610

Leicester 2,600

Blackpool 2,570

Luton 2,570

Birmingham 2,530

Sandwell 2,500

Blackburn with Darwen 2,500

Bradford 2,440

REGIONS

West Midlands 1,960

North West 1,860

Yorkshire and the Humber 1,860

East Midlands 1,860

Wales 1,840

North East 1,810

London 1,780

South West 1,540

East 1,500

Scotland 1,430

South East 1,380

Great Britain 1,690

Relationship between deprivation and anticipated financial loss

in 2020-21 from post-2016 welfare reforms, by local authority

Sources: Sheffield Hallam estimates and University of Cambridge adjusted IMD for GB

Universal Credit tapers and thresholds – anticipated

impact to 2020-21


Tax Credits (new reforms) – anticipated impact to 2020-21


Employment and Support Allowance (new reforms) –

anticipated impact to 2020-21


‘Pay to stay’ – anticipated impact to 2020-21


LHA cap in social rented sector – anticipated impact to

2020-21


Benefit cap (extension) – anticipated impact to 2020-21


How much will be offset?

• Personal tax allowances

– increase from £10,600 in 2015/16 to £12,500 by 2020/21

– worth £380 a year

BUT

– many in low paid part time work (especially women) will already be below these tax thresholds

– will not benefit those on out-of-work benefits

– half of this amount might be expected anyway if increases in line with inflation

• National Living Wage

– from April 2016 £7.20 per hour for 25yrs+ an increase of 70p on minimum wage - will benefit 2.7m low paid workers in short run (£25 per week, £1,275 per year if FT)

– aspiration to increase to £9 per hour by 2020

BUT

– UC revised tapers and thresholds will increase withdrawal rate of support


• Reduction in social sector rents

– 1 per cent a year reduction for four years (England only)

– affects landlords income rather than HB tenants

– about 1/3 tenants not on HB will benefit from lower rent

– government estimates £12 a week or £600 a year gain (£900m a year)

BUT

– widening gap between social sector and market rents means that higher-

income tenants may face even bigger payments under the new ‘pay to stay’

• Discretionary Housing Payments

– £800m over 5 year period - on average £160m p.a.

BUT

– £495m from the lower Benefit Cap alone by 2020/21

– DHP temporary, but welfare reforms permanent


• Extension of free childcare. – from September 2017, increase from 15 to 30 hours a week for working parents

of 3 and 4 year olds

– worth up to £2,500 a year per child

– tax-free childcare up to £2,000 per child from early 2017

– net cost to the Exchequer is estimated to be £585m a year in 2020-21

BUT

– households with dependent children estimated to lose £10.7bn p.a by 2020-21

– won't benefit those out of work

• Overall– Goes some way to offset financial loss

– But the winners and the losers are unlikely to be the same people

– Unlikely full loss will be offset in this way

An assessment

• Financial losses of £13bn a year to claimants by 2020-21

• Cumulative loss since 2010 to £27bn a year

• Over 80 per cent of the loss from the post-2015 reforms will fall on

families with dependent children

• Just under half of the financial loss from post-2015 reforms is

estimated to fall on working-age social sector households

• Older industrial areas, less prosperous seaside towns, some

London boroughs are hit hardest

• More deprived local authorities face greater financial losses

• Tax thresholds, the minimum wage, social sector rents, DHPs and

childcare entitlement will help offset some, but unlikely all of the loss

• Winners and the losers are only sometimes the same people

• Welfare reform will widen the gap in prosperity between the best

and worst local economies across the country

http://www.shu.ac.uk/research/cresr/sites/shu.ac

.uk/files/welfare-reform-2016.pdf

Dataset:

http://www.shu.ac.uk/research/cresr/sites/shu.ac

.uk/files/welfare-reform-2016.xlsx

Report:

https://public.tableau.com/profile/welfare.re

form.2016#!/vizhome/Impact_1/Maps

Interactive maps:

Contact details:

Professor Christina Beatty

[email protected]

http://www.shu.ac.uk/research/cresr/

http://www.shu.ac.uk/research/cresr/sites/shu.ac.uk/files/welfare-reform-2016.pdf

http://www.shu.ac.uk/research/cresr/sites/shu.ac.uk/files/welfare-reform-2016.xlsx

https://public.tableau.com/profile/welfare.reform.2016#!/vizhome/Impact_1/Maps

mailto:[email protected]

http://www.shu.ac.uk/research/cresr/

the uneven impact of welfare reform on people and places...welfare reform and austerity •...

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