Abolition of the ESA Work-Related Activity Component

The Welfare Reform and Act 2016 legislated for the abolition of the Work-Related Activity Component (WRAC) of ESA for new claimants from 3 April 2017. This equates to a reduction of £29.05 a week for claimants in the Work-Related Activity Group (WRAG). Alongside this, the Government announced “new funding for additional support to help claimants return to work”

Employment and Support Allowance

ESA is an “income replacement” benefit for people who have a health condition or disability which limits their ability to work. As of May 2016 there were just under 2.4 million ESA claimants in Great Britain, including 429,000 in the Work-Related Activity Group.

There are two forms of ESA:

• contributory ESA, for those with a sufficient National Insurance contribution record; and
• income-related ESA, which is means-tested.

Income-related ESA will eventually be replaced by Universal Credit; contributory ESA will remain as a separate benefit. The Government currently expects the introduction of Universal Credit to be fully complete by 2022.

A person must undergo a Work Capability Assessment to be eligible for ESA. There are three possible outcomes of a Work Capability Assessment:

• the claimant is found “Fit for Work” and may instead apply for JSA or Universal Credit;
• the claimant is placed in the “Work-Related Activity Group” (WRAG) and must undertake “work-related activity”;
• the claimant is placed in the “Support group” and is not required to take part in any work-related activity.

Following the assessment, successful ESA claimants receive a standard rate plus an additional amount.

The standard rate of ESA is currently £73.10 a week, plus either:

• £36.20 for claimants in the Support Group, or;
• £29.05 for claimants in the Work-Related Activity Group.

These additions are known as the Support Component and the Work-Related Activity Component, respectively.

What is happening to the Work-Related Activity Component?

In Summer Budget 2015, it was announced that the Work-Related Activity Component paid to those in the WRAG would be abolished for new claims from April 2017. The equivalent element in Universal Credit will also be abolished. This will involve a reduction of £29.05 a week (2017-18 rates) and aligns the rate of payment with those claiming Jobseeker’s Allowance (£73.10 a week). Existing claimants will not be affected, while there will be protections for those who may move into the WRAG or Universal Credit equivalent from the Support Group.

The changes were introduced to “remove the financial incentives that could otherwise discourage claimants from taking steps back to work”. £640 million a year of savings were initially forecast by 2020-21; this was later revised to £450 million a year.

Reaction to the changes

The changes were widely criticised by disability charities. The idea that the WRAC incentivises claimants to not look for work has been particularly disputed.

The proposals were opposed by opposition parties. Amendments to retain the component (and equivalent in Universal Credit) were tabled and agreed at the Lords Report Stage of the Welfare Reform and Work Act 2016. The Lords vote followed the publication of a review initiated by Members of the House of Lords and supported by disability charities; the “Halving the Gap?” review. The review recommended that the Government should not proceed with the removal of the Work-Related Activity Component.

These amendments were overturned by the Commons. A further amendment requiring the Government to provide analysis of the impact of the changes before introducing them was also proposed by the Lords, and subsequently overturned by the Commons.

Mitigating Support

Alongside the changes to the WRAC was an announcement to provide “new funding for additional support to help claimants return to work”. The Government has since announced a series of measures and funding to deliver this, including £60 million per year rising to £100 million per year for practical employment support, including an additional £15 million in 2017-18 directed at the local Jobcentre Plus Flexible Support Fund, to be set aside specifically for those with limited capability to work.

Further detail of the additional employment support has been set out in the Government’s October 2016 Green Paper, Improving Lives. This was published instead of a previously announced White Paper.

Work and Pensions Committee report

In its report on the Disability employment gap published on 31 January, the House of Commons Work and Pensions Committee said that if the DWP is to press ahead with the ESA cut, it must first set out a clear plan for identifying where claimants have additional, unavoidable living costs relating to their conditions, and how it will ensure that these costs are covered.  The Committee expects the Government to respond to its report before the lower rate of ESA is due to take effect in April and, if it intends to proceed with the reduction, to explain how this will not be detrimental to its target of halving the disability employment gap.