The Impact of Welfare Reform on

Hastings

Presentation to

HVA Meeting

23rd April 2013

Overview of the Reforms

• Reform has been constant since earliest days of post war welfare state.

• Previous Government very active- • Tax Credits.• Pension Credit.• Employment and Support Allowance.

• Welfare Reform Act 2012, perhaps biggest change since National Insurance Act 1946.

Continuity and Disjunction

• Continuation of some themes driving change in system:– Tackling disincentives to work.– Making system more responsive to claimants’

changes in circumstances.– Creating a system more reflective of changes to

society.

• New themes:– Designed to achieve £18bn cut.– Reducing complexity.– Avoidance of impact on older people.

Hastings Context

• Impact will be greater on Hastings than elsewhere in East Sussex and the South-East.

• A town and its people that were already facing pressures both long and short term.

• At best, many Hastings residents just about coping but have little buffer against further income loss.

• Many Hastings residents may not have the resilience to cope with the changes.

Hastings Context• Labour market:

– High unemployment for men and women.– High dependence on part time work, and ‘undermployment’.– Lots of people in and out of work.

• Wages and Incomes– Those in work in Hastings have lower incomes than UK and

East Sussex averages. – Higher levels of poverty in the town.

• Amongst working age population there will be a high number of people in and out of work who will be reliant to some extent on tax credits and benefits,

• These people will be impacted by welfare reform.

Three Areas of Reform

• Three transitions:– Creation of Universal Credit.– Incapacity Benefit and Severe Disablement

Allowance to Employment and Support Allowance.– Disability Living Allowance to Personal

Independence Payment.

• Smaller changes to key benefits, and reduced uprating- ‘salami slicing’.

• Localisation of control over Social Fund and Council Tax Benefit.

Transition 1: Universal Credit- Detail and Timescale• Being introduced 2013 to 2017. • Parcelling up of all income related and means tested benefits

that aren’t being localised, plus tax credits.• Some changes to benefits for disabled people- ‘transitional

protection’ for existing claimants. • April 2013 benefit cap introduced.• October 2013 onwards in some areas• April 2014 onwards- roll out, including existing claimants

where judged that they could benefit.• End of 2015 to end of 2017 the remainder of people will

move over.

Transition 1: Universal Credit- Numbers Affected• 14,450 households predicted to be claiming Universal

Credit in Hastings by end of transition. – 5,550 will gain.– 4,290 will see no change.– 5,010 will see their income fall.

• Disabled people impacted (NB transitional protection): – 500 disabled people ‘lose’ severe disablement premium-

affecting 50 lone parents and 90 children. – 180 children by ‘loss’ of disability related element of CTC.– 180 households by cuts to disability related element of WTC.

Transition 1: Universal Credit- Potential Impacts• Positive impacts:

– Greater simplicity may reduce high levels of non take up, dealing with some of the substantial underclaiming that is endemic in system.

– Meant to make mini jobs pay more.

• Negative Impacts– Challenges to financial capability resulting from:

• Monthly payment.• End of direct payment to landlords.

• More emphasis on digital channel to make claims. – Mistakes in new system, and eggs in one basket. – Summarisable as: responsible for more expenditures,

over a longer period, often with less money.

Transition 2: Incapacity Benefit to Employment and Support Allowance• Began for new claimants in October 2008. • Migration of existing claimants began in April

2011, March 2014 to conclude.• Work Capability Assessment carried out by ATOS.• People categorised as fit for work, able to

undertake work related activity, or placed in support group.

• From April 2012, contribution based ESA ends after a year, after that onto income based ESA.

• ESA critical for large numbers of people with musculo skeletal and mental health problems.

Transition 2: IB to ESA: Numbers Affected• In August 2012, 2,470 people were waiting

to make the transition.

• Of those people:– 890 are predicted to be found fit for work.– 360 of those will appeal, 140 successfully.

Transition 3: Disability Living Allowance to Personal Independence Payment• Two components, daily living and mobility, paid at

standard and enhanced rates (removal of lowest rate of care).

• Points based system. • June 2013 all new claims to be for PIP.• October 2013: reassessments begin, step up pace in

October 2015, and October 2017 to conclude.• Increased qualifying times.• Time limited awards.• 20% cut in working age budget.

Transition 3: DLA to PIP- Numbers Affected• 3,680 current working age claimants in Hastings.• Reasons for claiming; musculo-skeletal problems,

mental health problems, learning disabilities, neurological conditions.

• 14% of claimants nationally in work.• Impact:

– 1,080 will see an increase in their entitlement.

– 570 will see their entitlement stay the same.

– 1,080 will see their entitlement reduce.

– 950 will see their entitlement disappear.

• 4,720 new claimants to end of 2017, 2,690 will be rejected.

Impact of Assessments under Transitions 2 and 3.

• Stressful even if fair, and new experience for many.

• Potential negative impact on health, both of process and of decision.

• Real doubts about fairness.

• Likely to generate high volume of appeals, upwards of 1,500 by 2017.

Salami Slicing: Housing Support• Changes to Local Housing Allowance:

– Rates set at 30th percentile not at median.

– Under 35s restricted to single room rate.

– Uprating changed.

• Bedroom Tax:– Contribution demanded if ‘under-occupy’ social rented house.

– Exemptions are limited.

• Non dependent deductions increasing.• Risks of arrears and homelessness growing, particular

impact on vulnerable groups. • People may be trapped in homes that they can’t afford.

Salami Slicing: Tax Credits and Uprating• April 2012, substantial changes to Tax Credits brought in:

– Qualifying income thresholds reduced for child tax credit.– Income falls can be greater before being compensated, income rises

less before payments are reduced. – Over 50s element abolished. – Backdating reduced.

• Move from RPI to CPI in 2011.• Dec 2012- cut to 1% rise in income and employment related

benefits and tax credits.• Pressure on families; even before latest changes Resolution

Foundation found that:– Families in lower paid jobs, shift from rising to falling incomes over

next 5 years.– Benefit reliant households lose nearly 5% of income.

Localisation- Social Fund and Council Tax

• D-Day for both 1st April. • New DESSS scheme

– Details at: http://www.eastsussex.gov.uk/community/benefits/desss/default.htm

– Pilot aspect to the scheme, some continuity from aspects Social Fund, some critical differences.

– 4,690 applications and 3,070 awards in 2011/12 in Hastings for parts being replaced.

• New Council tax support scheme.– Devolved to LAs in context of initial 10% cut to be born by people of

working age.

– Details available at: http://www.hastings.gov.uk/housing_tax_benefits/benefits/counciltax/

Reflections on Human Impact from Interviews• People’s budgets will become tighter, and their

lives less bright, and sometimes much more difficult.

• Debt is stressful for many, what will increases in debt levels mean?

• People with bad previous experiences of the system may struggle to exercise their rights.

• Concerns from disabled people about maintaining their independence, their mobility and ability to pay for care.

Impact on Hastings- Financial Inclusion and Capability

• High levels of debt in the town, vulnerable to being worsened by welfare reform, pushed from manageable to unmanageable:– Reductions in generosity of benefits and simple loss of income

will put people at risk.– Significance of illness as a trigger for debt in the context of

disability focused welfare reforms.

• Existing low levels of savings and insurance, even less likely to be able to put money aside, reduced resilience.

• Trade down within credit market. • Financial capability and resilience tested to destruction?

Impact on Agencies• Pressures on homelessness and housing services,

RSLs.• General pressure on anyone collecting money from

low income residents.• Demand for advice; debt, appeals and support deal

with teething troubles.• Will be faced with service users in crisis due to

running out of cash; chronic shortage, system failure or sanctions.

• Health impact implications for NHS/ care providers.• Stickability for education providers.

Current Response

• East Sussex Welfare Reform Project taking forward an advice and information based response from County, Districts and Boroughs.

• Project has a website at East Sussex website.

• Ongoing support for advice sector from Hastings Borough Council.

• Community based initiatives such as foodbanks.

Concluding Thoughts

• Overall funding context is dire, solutions need to be cheap, create reinvestible savings, and/ or be fundable from external sources.

• Key questions for today:– How can the rest of the voluntary sector support the advice

sector?– What financial products might help people? – How can people be supported to cope with having less money? – How can people’s purchasing power be increased/ their ability to

get more for less be increased?– How can we provide humanitarian assistance to people in crisis? – How can we support people to prevent homelessness?– How can people be helped back to work?

Contact Details

• More information on East Sussex Welfare Reform Project at: http://www.eastsussex.gov.uk/community/benefits/default.htm

• More information and support on welfare reform from: nick@nhhrconsulting.co.uk /

07891 600078.