The local impacts of welfare reform

Tony Wilson, Policy DirectorCentre for Economic and Social Inclusion

tony.wilson@cesi.org.uk@tonywilsoncesi

Background

Commissioned by LGA to:

• Map cumulative impacts of reforms to Local Authority level

• Estimate the likely responses from residents – seeking work, moving home

• Model the ‘net’ impacts• Produce a tool that partners can access for more detail

and data

http://www.cesi.org.uk/publications/local-impacts-welfare-reform-assessment-cumulative-impacts-and-mitigations

Story so far

• Most fundamental changes to benefits system in a generation

• Social security spending at least £15 billion lower in final year of this Parliament• Equivalent to £1 in every £7 spent

• Will affect (nearly) all households claiming benefits...• ... But combined impacts on households and

areas not clearly understood

Where the savings are made...

Breakdown of savings in 2015/16 (GB, £m)

Tax cred-its; £5,275

1% uprating; £2,680

Restriction of ESA; £1,600

HB Local Housing Al-lowance; £1,640

Non-dependant deduc-tions, £215

Replacement of DLA; £1,350

Replacement of CTB; £355

HB size criteria; £465 Benefit cap; £185

Key findings (2015/16 financial year)

• Significant losses – average £1,615 per claimant household per year (£31/ week)

• Regional averages pretty similar – lower incomes in north but higher rents in south...

• Except for London: £1,965 average

• 60% of losses fall on working households

• Coastal towns hit hard – Thanet, Tendring, Yarmouth, Scarborough, Plymouth and Torbay

• Disabled people – particularly out of work – likely to be affected by multiple reforms

Average losses don’t vary much by area

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Estimated average loss per claimant by Local Authority, 2015/16

Average losses don’t vary much by area

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11 London authorities

Estimated average loss per claimant by Local Authority, 2015/16

Looking at this another way...

• Lower incomes (and therefore larger impacts) in North balanced by far greater private HB impacts in South

• Many reforms have broad base – tax credits, uprating

• Outside London, most areas see losses of £1,400-£1,700

• In London, £1,965 average

So need to look at caseloads...

Looking at where claimants are, we see much wider spread...

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Estimated share of households claiming benefit by Local Authority

And no surprises where these areas are

• Overall 45% of working age, non student households receive a DWP/ HMRC benefit (excl. Child Benefit)

• Concentrated in parts of North East and North West; South and West Yorkshire; Birmingham and Black Country; parts of London; coastal towns

• These are areas where overall impacts likely to be most strongly felt

We focused on key housing reforms: LHA, cap, size criteria

1.7 million households impacted – one in ten of all

• Average loss £1,215/ yr (£23/ week)• 1.2m (70%) non-working households• More likely in north, London and coastal towns• Larger impacts in south, London and coastal towns

More than twice as many hit by LHA reforms as size criteria, with losses nearly twice as great

Drawing all housing losses together...

Share of population impacted by a Housing Benefit reform

• London, North East, parts of North West and Yorkshire particularly hard hit

• Other inner cities and coastal towns lose out

• Most of South East and East relatively less impacted

• This is all as share of population...

Average loss per household tells different story...

Average loss per household impacted by a Housing Benefit reform

• Clear North/ South divide...• Losses far greater in South of England

across all measures, but particularly driven by private rents

• London is big loser on both

But people will find work or move, right..?

• Two key mitigations:• Increase income – through work• Reduce expenditure, by

- Moving home- Negotiating lower rent- Reducing outgoings

• But labour markets often weak• Many say they would move, few do...

Local Housing Allowance (DWP survey):• 32% would seek work• 35% would look to move

Second wave research suggests very few have moved, and even fewer found a job, no evidence of lower rents

Size criteria (Housing Futures Network):• 11% would seek work• 25% would look to move

Virtually no evidence of either so far

Benefit cap (DWP) – of those notified who found work:• 29% looked for work; 1% looked for new housing

Anecdotal evidence of housing and employment impacts, with a lot of support

Jobs and housing markets are tough

• Large gaps between average rents and maximum HB in the South

• Where rents are lower, jobs often falling• Relatively few areas with more affordable

rent and rising employment• Welsh Borders• Yorkshire and further north

So we developed three scenarios...

• Based on plausible (optimistic) assumptions• Adjusted for housing and employment markets

• At central scenario, about one in five households move or find work• Still £1 billion in housing losses per year

• Even at high mitigation, less than half move or find work

Results

Claimants finding

work

Claimants moving

home

Total claimants mitigating

impacts

Proportion impacted

who mitigate

Number not mitigating

impacts

Financial impact in 2015/16 after

mitigations Low 75,000 40,000 120,000 10% 1,065,000 £ 1,330,000,000 Central 155,000 115,000 270,000 23% 910,000 £ 1,160,000,000 High 305,000 200,000 510,000 43% 675,000 £ 880,000,000

DHPs help, but allocation is haphazard

Share of housing ‘losses’ met by Discretionary Housing Payments, after mitigation (central scenario)

• Only meet a very small fraction of housing losses - £1 in every £7 after mitigations

• And pretty random in how far they meet the challenge

• Reflects how formulas calculated

So what do we do about it?!

• We make ten recommendations...

For central government:

1. Publish estimates of impact of individual measures to LA level where possible

2. Publish best estimate of cumulative impact of welfare reforms on groups with protected characteristics

3. Ensure that Local Support Services framework recognises the need to work together

4. Explore how local areas can play a stronger role in commissioning and oversight of employment support

5. Review the level of Discretionary Housing Payments and the method by which this is apportioned

6. Build more affordable housing!

For everyone:

7. Understand local impacts and ensure that support is effectively targeted (with the right freedoms and funding)

8. Work together to share practice

9. Support Local Authorities to develop plans to support those impacted (including households in work)

10. Look at how support can be joined up locally across employment, skills, troubled families and other services – learning from Community Budgets

Three key areas that we need to link up

Income Jobs Employability

Welfare rightsBetter off in workMoney adviceDebt adviceFinancial products

Help find jobsApprenticeshipsTemp jobsSupply chain

TrainingAdult learningChildcareMobilityNetworks

Digital inclusion, social justice and disadvantaged groups

In practice this will mean...

... Different things in different places. But some common themes:

• Understanding the problem – the data, your residents, behaviours and responses

• Strong local leadership• Shared objectives – underpinned by

understanding of how services fit together• About jobs, housing and incomes

• Not (just) revenues and benefits• Looking across employment, skills, housing,

social services, financial inclusion, outreach

Four key ‘asks’ of government:

• A broader Support Services framework – ‘joint and equal’ partners on more than just UC

• Systematic approach to joining up – learn from Community Budgets, Transformation Network

• Fairer formula for DHPs

• Open up the data – numbers, characteristics, cumulative impacts

Want to know more?The local modelling tool...

Available at: http://tinyurl.com/impactmodel

The local impacts of welfare reform

Tony Wilson, Policy DirectorCentre for Economic and Social Inclusion

tony.wilson@cesi.org.uk@tonywilsoncesi