THE IMPACT ON SCOTLAND OF THE NEW WELFARE REFORMS Christina Beatty and Steve Fothergill Centre for Regional Economic and Social Research Sheffield Hallam University

Previous reports The impact of welfare reform on Scotland (2013) The local impact of welfare reform (2014) The cumulative impact of welfare reform on households in Scotland (2015) The impact of welfare reform on the Scottish labour market (2015)

New GB report The Uneven Impact of Welfare Reform The financial losses to places and people Published March 2016

The new Scotland report Financial loss to Scotland arising from the new (post-2015) round of welfare reform Loss by local authority within Scotland Comparison between Scotland and rest of GB All the figures are brand-new!

Measuring the impacts Treasury estimates of the overall financial saving arising from each element of the reforms Benefit claimant numbers and expenditure, by local authority Additional official data (e.g. from Impact Assessments)

The pre-2015 reforms Housing Benefit: Local Housing Allowance Non-dependant deductions Benefit Cap Personal Independence Payments Employment and Support Allowance Child Benefit Tax Credits 1 per cent uprating

Not included…… Housing Benefit: under-occupation (‘Bedroom Tax’) Arrangements to avert impact on claimants in Scotland Council Tax Support A hit for Scottish Government and local authorities, not claimants Universal Credit Essentially a re-packaging of existing benefits Not originally expected to result in net reduction in benefit entitlement Income Support for lone parents Transfer to JSA at same rates RPI to CPI uprating Wider public sector accounting reform Sanctions Not new

Pre-2015 reforms: outturn financial loss to claimants in Scotland 2013 forecast Outturn (March 2016) £m p.a. £m p.a. Employment & Support Allowance 500 85 Tax Credits 300 340 1 per cent uprating 290 230 Child Benefit 225 240 Personal Independence Payments 165 130 Housing Benefit: LHA 80 80 Housing Benefit: ‘bedroom tax’ 50 0 Non-dependant deductions 30 20 Benefit Cap 15 3 ---------- --------- TOTAL 1,520 1,130 Source: Sheffield Hallam estimates based on official data

The new reforms (1) Universal Credit work allowances Tax Credits Reduction in level of earnings at which UC awards start to be withdrawn, from April 2016 Tax Credits Limiting child element to two children for new births, from April 2017 Removal of family element & HB premium for new claims, from April 2017 Reduction in income rise disregard, from April 2016 Uprated income floor for self-employed, from 2016-17 Revised UC delivery schedule Mortgage interest support Change from welfare payment to loan, from April 2016

The new reforms (2) LHA cap in social rented sector Housing Benefit limited to equivalent private sector rate, from April 2018 Housing Benefit: 18-21 year olds End of automatic entitlement for unemployed, from April 2017 Employment and Support Allowance Work-Related Activity Group reduced to JSA rate for new claims, from 2016-17 Benefit Cap extension New, lower ceiling set at £20k in Scotland, from 2016-17 Benefit freeze Freeze in value of most working-age benefits for four years from 2016-17

But don’t forget…… Personal Independence Payments Changeover from DLA to PIP not expected to be completed until 2018 Existing claimants only reassessed from October 2015 And the reforms that don’t apply to Scotland…… ‘Pay to stay’ Social housing tenants to pay market rents if household income above £30k (£40k in London), from April 2017 Mandatory for LA tenants, discretionary for Has 1% p.a. reduction in social sector rents for four years A hit for social sector landlords in England

Post-2015 reforms: financial loss to claimants in Scotland by 2020-21 Estimated loss Numbers Average loss £m p.a. adversely affected £ p.a. Benefit freeze 300 700,000 450 Universal Credit work allowances 250 240,000 1,050 Personal Independence Payments 190 70,000* 2,600 Tax Credits 140 150,000 950 Employment & Support Allowance 65 70,000* 900 LHA cap in social rented sector 40 55,000 750 Benefit Cap extension 25 11,000 2,400 Mortgage interest support 25 17,000 1,450 Housing Benefit: 18-21 year olds 4 1,500* 2,600 ---------- --------- ---------- TOTAL 1,040 n.a. n.a. * individuals; households for all other benefits Source: Sheffield Hallam estimates based on official data

The way the losses impact Cut in real terms, not cash Benefit freeze Cut for new / revised claims only Reduced Universal Credit work allowance Restrictions on ‘child’ and ‘family’ elements of Tax Credits Lower ESA payment rates LHA cap in social sector (new tenancies only) End of automatic HB entitlement for out-of-work 18-21s Cash cut for existing claimants DLA to PIP retesting Lower Benefit Cap

Financial loss to claimants by 2020-21, by local authority Loss per working age adult from post-2015 reforms £ p.a. Glasgow 400 Fife 320 Perth & Kinross 260 W Dunbarton 390 Midlothian 320 Moray 240 N Ayrshire 380 S Ayrshire 320 Stirling 230 Inverclyde 370 S Lanarks 310 Edinburgh 230 Dundee 360 Falkirk 290 E Renfrew 220 N Lanarks 350 E Lothian 280 Orkney 210 E Ayrshire 350 Borders 280 E Dunbarton 200 Renfrewshire 340 Angus 270 Aberdeen 180 Dumfries & G 330 Highland 270 Aberdeenshire 170 W Lothian 330 Argyll & Bute 270 Shetland 160 Clackmannan 330 Eilean Siar 260 Source: Sheffield Hallam estimates based on official data

Relationship to deprivation

Post-2015 reforms: financial loss to claimants by 2020-21, by region and country Estimated loss Per working age adult £m p.a. £ p.a. North West 1,630 360 North East 590 360 Wales 680 360 West Midlands 1,250 350 Yorkshire & the Humber 1,170 350 East Midlands 920 320 London 1,770 300 Scotland 1,040 300 South West 930 280 East of England 990 270 South East 1,320 240 ------------------------------ ------------------------ GB 12,295 310 Source: Sheffield Hallam estimates based on official data

Will the loss be offset? Planned increase in personal tax allowance Worth up to £380 a year by 2020-21 Only half that much after inflation? Only proportion of benefit claimants pay tax – including some in work National Living Wage Good for low-paid workers But benefits withdrawn as income rises Discretionary Housing Payments Scotland’s share only c.£15m a year Financial support for childcare Helpful for some

Will more people find work? In vast majority of cases, claimants were already financially better off in work Reductions in in-work benefits make employment less attractive Big numbers are on ESA, not JSA Highest claimant rates are in the places with the weakest local economies No evidence so far of positive impact on Scottish labour market (see our 2015 report)

Conclusions Pace of welfare reform is barely slowing In Scotland, as in rest of Britain: Losses to both in-work and out-of-work claimants Multiple hits for some Poorest places are hit hardest Don’t be blinded by the devolution of welfare powers – Westminster still has a huge impact