The Impact Of Welfare Reform In Highland

10th February 2013

This report was produced by Citizens Advice Bureaux in Highland

Introduction
In 2011/12 Highland bureaux advised clients on 24166 new benefit issues, on-going clients returning for further advice were further advised on 21303 repeat benefit issues. The bureau therefore dealt with 45469 benefit issues, 125 issues for every day of the year.
As welfare changes begin to affect clients, citizens advice bureaux are well placed to see the human impact of these changes and to help mitigate the impact of them. This briefing outlines the experience of clients in the Highland area affected by the changes so far, and predicts the impact of the changes still to come.

Highland
In 2011/12 benefits advice alone accounted for 46% of all new issues the bureaux advised on, repeat benefit advice accounted for 51% of all repeated advice. Bureaux in Highland undertake a significant amount of benefit form filling and representation work in addition to giving advice.

This benefits related work by the bureau has resulted in an average financial gain of £4638 for each client with associated impacts on the local community.

Impact so far
A series of welfare reforms have already impacted on a range of people in Highland. This includes working families, sickness benefit claimants, jobseekers and Housing Benefit claimants. While some changes will benefit local people, others will significantly reduce income; narrow housing options; and ultimately make it difficult for many to stay in their home.

Employment and Support Allowance (ESA)
Bureaux in Highland advised on 6360 ESA issues in 2011/12.
From April 2011, existing Incapacity Benefit claimants began to be reassessed for ESA. Over 9590 claimants in Highland will undergo a reassessment for sickness benefits by 2014 at a rate of nearly 61 per week.i
By 2014, around 4000 current Incapacity Benefit claimants in Highland will lose entitlement to sickness benefits.
2300 will be moved out of the benefits system altogether, 1300 eligible for Jobseekers Allowance (JSA)ii with the remaining existing Incapacity Benefit claimants moved to other benefits depending on the individual’s circumstances.
This will result in a loss of £13.8 million in income replacement benefits to claimants which will have an impact on the local economy.iii

Tax credits
In April 2012, the eligibility rules for Working Tax Credit and Child Tax Credit changed and impacted on 85,000 Scottish families. Up to April, families were eligible for Child Tax Credits if their income was below £41,300. This changed to £32,000 for families with two children and £26,000 for lone parents. Families were also able to claim Working Tax Credit if they were responsible for at least one child and worked at least 16 hours a week but this was increased to 24 hours per week (with one parent having to work at least 16 hours).

These changes mean that 73,300 families in Scotland will have lost Child Tax Credits worth around £545 per year and a further 11,370 families may have lost Working Tax Credits worth up to £3,870 per year.iv

Housing Benefit
The combined effect of the changes will serve to reduce Housing Benefit payments by around £38 million in Scotland.v This will affect a wide range of people, including disabled people, large families, and those under the age of 35. It is estimated that around 60,000 tenants in Scotland lost an average of £40 per month due to the changes introduced in 2011.vi
From January 2012 changes came in which specifically affect single people up to 35 years old; they now only receive enough LHA to cover sharing a property, not to rent their own home. This will reduce the amount of support they are entitled to by up to £2,800 per year. This is likely to have affected approximately 120 people in the Highland area who face a potential loss of £36 per week.vii This may force many to find shared accommodation or face arrears and possible homelessness.

In October 2011, Local Housing Allowance (LHA) payments were restricted to the 30th percentile of local rents rather than the midpoint for claimants. This change reduced the housing support received by 55,000 households across Scotland by an average of £10 per week.

In 2011, 29% of private rented accommodation in Highland was occupied by LHA claimants.viii Scottish Government estimates show that availability of private rented accommodation for claimants in Highland will decrease from around 52% of stock to 31%.

JSA sanctions
Jobseekers Allowance (JSA) claimants are required to meet a number of conditions in order to show that they are actively seeking employment. A failure to meet these conditions may result in the claimant’s JSA payments being sanctioned for a fixed period. There has been a significant increase in the number of sanctions that have been applied to jobseekers in the past two years. This rise reflects a ramping up of the conditions jobseekers must meet to continue to receive JSA and a widening of the circumstances in which jobseekers can receive a sanction.

Reforms in 2013

The preceding paragraphs show the significant impact that welfare reform has had on the people of Highland. However, the majority of the proposed welfare reforms will not take place until 2013. The following paragraphs summarize the impact that these changes may have:

Child Benefit
The freeze in Child Benefit for 3 years from 2011-12 is estimated to reduce the real-terms income of approximately 621,000 families in Scotland. Child benefit is also going to be withdrawn from families with a higher rate tax payer from January 2013. The Scottish Government estimate that approximately 110,000 families in Scotland will have their child benefit withdrawn and that, on average, these families will be £1,600 a year worse-off.ix

Housing Benefit
The introduction, from April 2013, of benefit penalties for those of working age under occupying local authority or housing association housing will affect over 94,000 social housing tenants of working age in Scotland who will, on average, lose about £11 per week.x These claimants will face the choice of either making up the difference from other income or trying to find smaller accommodation. As incomes are being squeezed and affordable accommodation is limited, many could face arrears and possible eviction.

DLA/PIP
From April 2013, Disability Living Allowance (DLA) will be replaced with the new Personal Independence Payment (PiP). All current DLA claimants will be reassessed for the new benefit. In Scotland, this means that up to 225,000 working age DLA claimants will be required to attend the new assessment with Inclusion Scotland estimating that 75,000 (one in three working age claimants) will lose their entitlement. There are 7580 working age DLA claimants in Highland who are likely to face reassessment.xi

Universal Credit
Universal Credit will be introduced nationally from October 2013 and will gradually replace all other income-replacement benefits, such as Jobseekers Allowance, Housing Benefit, sickness benefits and Working Tax Credit. DWP modelling suggests that 200,000 households in Scotland will have higher entitlements, while around 170,000 households will receive less.xii Analysis from the Institute of Fiscal Studies suggests that couples with children will benefit more than couples without children, who in turn benefit more than single adults. Lone parents will be worse off in the long run. Analysis from Citizens Advice England and Wales found that disabled people who are able to work may be worse off.xiii

Universal Credit represents one of the biggest sets of changes to the welfare system since its creation. Its implementation will be a huge challenge not only for the Department for Work and Pensions, but also for the frontline advice services that will support claimants to navigate the new system. All applications for Universal Credit, with a few exceptions, will be made online. The ‘digital by default’ approach to making a claim for Universal Credit will not be suitable for a significant minority of claimants who may therefore struggle to make an application.

Conclusion
Welfare reform has already had a significant impact on the lives of many people in the Highland area. The bureaux on the frontline of welfare advice see clients every day who have personally experienced these changes. As the major reforms approach in 2013, all the services that help and assist those who stand to be adversely affected must work together to best mitigate the impact of reform and to support clients through challenging times.