This paper tracks the evolving impact of the coronavirus outbreak on the labour market.
The 2010 Government’s welfare reform programme
There have been major changes to the benefits system as a result of the 2010 Government’s welfare reform programme and changes initiated by the previous Labour Government. In particular, the Welfare Reform Act 2012 provided for a new benefit – Universal Credit – to replace means-tested benefits and tax credits for working-age families; and for Personal Independence Payment (PIP), to replace Disability Living Allowance for people of working age. The 2010 Government also continued the roll-out of Employment and Support Allowance (ESA) – first introduced in 2008 – and made further changes to the ESA rules.
Employment and Support Allowance
Employment and Support Allowance (ESA) replaced Incapacity Benefit, Severe Disablement Allowance and Income Support (for claims solely on grounds of illness or incapacity). ESA provides financial support for people with a health condition or illness that prevents them from working. ESA was first introduced for new claims in October 2010, and the reassessment of the remaining incapacity benefits claimants for ESA started in 2010.
As a result of measures in the Welfare Reform Act 2012, contributory ESA for claimants in the “Work-Related Activity Group” is now limited it 12 months. Those still on benefit at that point may then claim income-based (ie means-tested) ESA, but they may not be entitled to any benefit if they have a working partner, or if they or their partner has other income or capital above a certain level.
The Government’s intention is that ESA places greater emphasis on a claimant’s functional capabilities and what they are able to do, and the importance of moving towards work wherever possible.
The Work Capability Assessment (WCA) assesses people’s entitlement to ESA, and looks at the functional effects of an individual’s condition, rather than the condition itself. There have been concerns about the suitability of the WCA and the assessment process for people with a range of disabilities, in particular mental health conditions and autism. Recommendations were made in the Independent Reviews of the Work Capability Assessment to improve the process for disabled people. In July 2014 the Work and Pensions Committee called for a “fundamental redesign of the ESA end-to-end process.” This was rejected by the Government, although it accepted there was scope for improvements to the WCA and to accompanying processes.
Following concerns about the performance of the Medical Services contractor Atos Healthcare, in March 2014 DWP announced the “early exit” of Atos from the DWP contract. A new Medical Services contractor – Maximus – took over from Atos on 1 March 2015 and is pledged to undertake one million WCAs this year, to help clear the backlog.
ESA claimants with less severe functional limitations may be required to attend Work Focused Interviews, and to undertake “work-related activity” by a DWP adviser or as part of the Work Programme. A more stringent “conditionality and sanctions” regime for ESA claimants was introduced in December 2012. Between then and December 2014, 60,472 ESA claimants received an “adverse” sanctions decision.
From April 2013, Universal Credit (UC) began to replace a range of means-tested benefits and tax credits for working age families, including income-related ESA. A detailed timetable for full roll-out of UC is still to be announced.
UC will introduce a new conditionality regime, and claimants will be required to undertake activities tailored to their personal circumstances. All claimants will have to accept a personal Claimant Commitment that explains what conditions they must meet to get UC. This will include conditions ranging from preparing for applications and interviews or getting ready to move into work, to not taking any action if someone has significant limits on their ability to prepare for work due to a disability or health condition. The Work Capability Assessment will be used to assess applicants’ ability for work.
With the introduction of Universal Credit, the current system of multiple, overlapping disability additions for benefit and tax credit claimants is to be replaced by a simpler system, where means-tested additions for disabled people are payable at two rates only. Further information on the changes and how they will affect disabled people is give in part 6 of Library briefing on the Draft Universal Credit Regulations 2013.
Personal Independence Payment
Personal Independence Payment (PIP) is replacing Disability Living Allowance for people of working age. Like DLA, PIP is non-means-tested and is intended to help with the extra costs arising from ill health or disability. When fully introduced, it is expected that around 600,000 fewer people will receive PIP than would have got DLA, and expenditure will be £2.5 billion a year lower than it would otherwise have been.
In 2014 both the Work and Pensions Committee and the Public Accounts Committee described the level of service to PIP claimants and the length of time people were having to wait for decisions on PIP claims as unacceptable. The Government acknowledged that the situation was not satisfactory and said it was “working collaboratively” with the assessment providers to improve performance and reduce the backlog of claims.
On 5 June the High Court ruled that the length of time two claimants had had to wait for a decision on their PIP claims was unacceptable and unlawful, but did not breach their human rights. The Government is considering the terms of the judgment. New PIP claims are currently taking an average of 11 weeks from registration to decision.
Library briefing: Introduction of Personal Independence Payment
Other Library briefings on welfare changes affecting disabled people
Cumulative impact of welfare reforms on disabled people
Concerns have been voiced about the overall impact of welfare reforms on disabled people and their families. A 2013 report by the Centre for Regional Economic and Social Research at Sheffield Hallam University, Hitting the Poorest Places Hardest, commented:
Sickness and disability claimants can also expect to be hit hard. The individuals adversely affected by the incapacity benefit reforms can expect to lose an average of £3,500 a year, and those losing out as a result of the changeover from Disability Living Allowance to Personal Independence Payments by an average of £3,000 a year. Often these will be the same individuals: most DLA claimants of working age are out-of-work on incapacity benefits and in both cases the groups most exposed to benefit reductions are those with less severe disabilities or health problems.
The same individuals may also find that they encounter reductions in Housing Benefit entitlement. The overall reductions in Housing Benefit are estimated to be more than £1.6bn for those in the private rented sector (affected by LHA reforms), £490m for those in the social rented sector (affected by the ‘bedroom tax’) and £340m by higher deductions for non-dependants (which mostly impact on Housing Benefit). The losses for the households affected – often £1,000 a year – are large.
In April 2014 the Social Security Advisory Committee (SSAC) published The cumulative impact of welfare reform: a commentary, which recommended that, among other things, the Government produce an analysis of cumulative impact of changes on vulnerable groups such as disabled people and consider the need for measures to mitigate the impacts. Responding in July 2014, the Government said that while cumulative impact analysis could be useful in some cases, it was not possible to break down the results to smaller sub-groups in the population accurately, and that it did not consider that results could be reliably disaggregated for disabled people.
On 6 July 2014 the “Just Fair” consortium – comprising 78 national charities – published a report, Dignity and Opportunity for All: Securing the rights of disabled people in the austerity era. The report highlighted a number of “major backward steps” which had impacted on disabled people, including changes to the rules on benefit sanctions, disability benefit reform and the introduction of “underoccupation” provisions in Housing Benefit. It concluded that the UK is breaching international law on the human rights of disabled people.
Welfare reform under the 2015 Government
The Queen’s Speech on 27 May 2015 announced that the Government will continue to reform welfare. The Government will bring forward the Full Employment and Welfare Benefits Bill which will include measures to reduce the level of the household benefit cap from £26,000 to £23,000 and freeze the main rates of most working-age benefits, tax credits and Child Benefit. However, pensions and benefits relating to the additional costs of disability will be exempt from the rate freeze. Households who are in receipt of benefits relating to the additional costs of disability will also be exempt from the lowering of the benefit cap.
On 22 June 2015, the Secretary of State for Work and Pensions said that it is the Government’s intention to support disabled people within the welfare reform programme:
“It is our intention to protect the most vulnerable, including the disabled. I believe our reforms demonstrate our strong record of supporting disabled people. We introduced the personal independence payment to ensure more support is going to those who need it. More than 700,000 of those who were, once upon a time, stuck on incapacity benefits under Labour are now preparing or looking for work. Spending on disability benefits increased in real terms, and, as my hon. Friend has said, disability employment increased by 238,000 in the previous Parliament.
‘Our purpose is to protect the most vulnerable. It has been from the beginning, and it will continue to be. There is, therefore, no reason for people to be fearful….
We must review welfare spending, but we want to do so in a way that actually changes lives. We felt that much of the huge increase in welfare spending under the Labour Government – an increase of some 60 per cent – went to the wrong people who were not doing the right thing. That is the key point. Our purpose is to reform welfare in order to get people back to work, and to ensure that those who cannot manage and have disabilities are treated with the utmost kindness and given the utmost support.”
The Government has pledged to make additional cuts in welfare spending totalling £12 billion a year. The measures announced so far account for just over £1 billion. There has been speculation that, in order to meet the £12 billion target, the Government might introduce measures that could impact on disabled people and their families. Announcements are expected in the Budget on 8 July.
Institute for Fiscal Studies, Benefit cuts: where might they come from?, IFS Observations, 26 May 2015
Asked by: Mrs Madeleine Moon (Bridgend) (Lab) | Party: Labour Party
What his policy is on maintaining the level of (a) employment and support allowance, (b) personal independence payment and (c) attendance allowance for disabled claimants.
22 Jun 2015 | Oral questions – Lead | Answered | House of Commons | House of Commons chamber | 900447 | 597 cc602-4
Asked by: Alan Brown (Kilmarnock and Loudoun) (SNP)
What assessment he has made of the implications for his Department of the High Court ruling in June 2015 on delays in personal independence payments.
22 Jun 2015 | Oral questions – Lead | Answered | House of Commons | 900444 | 597 cc598-600
<p>To ask the Secretary of State for Work and Pensions, what steps his Department has taken to take into account the particular effects of different health conditions in implementation of its welfare reform policies.
16 Dec 2014 | Written questions | Answered | House of Commons | 218040
To ask the Secretary of State for Work and Pensions, how many people with disabilities have moved home since becoming subject to the under-occupancy penalty; and what proportion such people are of all those who have moved house since becoming subject to that penalty.
To ask the Secretary of State for Work and Pensions, what his Department’s projected expenditure on (a) disablity living allowance and (b) personal independence payment is in each year up to 2017-18.
04 Nov 2014 | Written questions | Answered | House of Commons | 212399
To ask the Secretary of State for Work and Pensions, what assessment he has made of the effect of changes in employment and support allowance and personal independence payments on people with progressive conditions such as multiple sclerosis and Parkinson’s.
04 Nov 2014 | Written questions | Answered | House of Commons | 212345
27 Feb 2015 | Written statements | House of Commons | HCWS321
27 Feb 2015 | Written statements | House of Commons | HCWS320
17 Dec 2014 | Written statements | House of Commons | HCWS120
03 Dec 2014 | Written statements | House of Commons | 589 cc15-6WS
Motion that this House has considered processing of personal independence payment applications. Agreed to on question.
17 Jun 2015 | Debates | House of Commons | Westminster Hall | 597 cc146-164WH
25 Nov 2014 | Adjournment debates | House of Commons | Westminster Hall | 588 cc228-250WH
28 Oct 2014 | Opposition days | House of Commons | House of Commons chamber | 587
28 Oct 2014 | Adjournment debates | House of Commons | Westminster Hall | 587 cc12-21WH
One-off evidence session with the Minister for Disabled People. The session follows up issues raised in the Committee’s July 2014 Report on Employment and Support Allowance and Work Capability Allowance. It also looks at progress with implementing Personal Independence Payments since the Committee last questioned the Minister on this in September 2014.
28 Jan 2015 | Parliamentary committees – House of Commons papers – Select Committee oral evidence | House of Commons | HC 967 2014-15
27 Nov 2014 | Command papers – Select Committee reports (Government responses) | House of Lords, House of Commons | Cm. 8967
16 Jul 2014 | Parliamentary committees – Select Committee reports – House of Commons papers | House of Commons | HC 302 2014-15
09 Jun 2014 | Parliamentary committees – Select Committee reports – House of Commons papers | House of Commons | HC 280 2014-15
26 Mar 2014 | Parliamentary committees – Select Committee reports – House of Commons papers | House of Commons | HC 720 2013-14
2010 to 2015 government policy: welfare reform, DWP Policy paper. Updated 8 May 2015.
Welfare reform DWP policy
What the government’s doing about welfare reform.
First published:28 March 2013Last updated:16 February 2015
Joseph Rowntree Foundation, June 2014
Commons Library Briefing paper SN06896
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