Welfare reform: annual report 2018

5. Conclusion

Since 2010, the UK Government has enacted a range of welfare reforms that have significantly reduced the generosity of the UK welfare system. Major spending reductions have already been felt from reforms such as capping benefit uprating at 1% from 2013. This was immediately followed by a four-year benefit freeze which will last until April 2020. Whilst the benefit freeze began in April 2016, when inflation was 0.3%, the value of benefits has eroded over the past 2 years due to inflation reaching 3% in 2017 and with 2 further years of forecast inflation at 2% benefit value is likely to reduce further. ^[153]

The impacts of other cuts will continue to grow over the next few years, as more people move onto UC. The reduction in work allowances and complex rules such as the Minimum Income Floor and Surplus Earnings will affect working claimants and the self-employed. Claimants migrating from legacy benefits such as Tax Credits and Housing Benefit could also experience the conditionality and sanctions regime for the first time, especially if they are in work. According to the most recent data, claimants of UC were more than six times as likely as claimants of either Jobseeker’s Allowance, Employment and Support Allowance ( ESA) or Income Support to be sanctioned.

At the point of full transition to UC, the Resolution Foundation has estimated that the average working family will have £625 less benefit income compared to what they would have got under the legacy system. ^[154] Transitional protection will protect some families from experiencing a sudden income drop, but will erode over time. Policies like the Two Child Limit and removal of the family element will continue to affect an ever greater number of families across the country as more children are born who do not qualify for additional support and as more families make new claims to UC.

We estimate that the welfare reform policies of successive UK governments since 2010 mean that social security spending in Scotland in 2020/21 will be £3.7 billion lower than had they not been introduced. The Equalities and Human Rights Commission estimated that the combined effect of UK tax and welfare reforms since 2010 will bring an additional 80,000 Scottish children into relative poverty after housing costs by 2021/22. ^[155]

The introduction of Personal Independence Payment brought in more stringent eligibility criteria to disability benefits. This year, DWP’s policy to restrict the PIP enhanced mobility rate unless claimant’s immobility was caused by “reasons other than psychological distress” was ruled unlawful by the UK High Court. ^[156] The DWP have now committed to reviewing affected claims at an estimated cost of £3.7 billion. ^[157]

Since 2011, 70,000 ESA claimants across Great Britain eligible for disability premiums have been underpaid due to DWP’s errors and lost an estimated average of £5,000 by 2018/19, the year in which the DWP intend to repay affected claimants. ^[158] Following pressure and legal action, DWP recently reversed their decision to pay back underpayments dating back to 2014 only and will now repay underpayments incurred as far back as 2011. ^{[159, 160]} The department expects to pay out up to £500 million of underpayments by April 2019, but do not plan to pay any compensation to reflect the value of lost passported benefits, like NHS prescriptions, dentistry treatment and free school meals.

In 2018/19, the Scottish Government will spend over £125 million on policies to mitigate the impacts of welfare reform and support people on low incomes. Over £350 million has been allocated to Council Tax Reduction for 2018/19, which reduced Council Tax liabilities for around 485,000 people with lower incomes. It has put an ambitious range of targets in place to reduce child poverty.

Of the legacy benefits, households affected by the benefit cap, 89% included children in May 2018. ^[161] Most are lone parent households. 25% of lone parent households will move into poverty due to UK tax and welfare reforms according to EHRC estimates. ^[162] Other policies, like the Two Child Limit and removal of the family element, specifically reduce social security spending on families with children. UC conditionality has demonstrably negative impacts on the risk of destitution, food insecurity and poor mental health. Within its limited powers, the Scottish Government has taken action to reduce the impact of UK Government welfare reforms. However the enduring effects of reductions in benefit generosity make Scotland’s child poverty targets more challenging than they would otherwise be.