UK welfare policy: impact on disabled people

5. Impact of Employment and Support Allowance

5.1 Background to ESA

Employment and Support Allowance ( ESA) was introduced in 2008 with the aim to provide financial support and personalised assistance to help claimants who are ill or disabled back into work. People who apply for Employment and Support Allowance ( ESA) are required to undergo a work capability assessment ( WCA).The work capability assessment allocates claimants into one of two groups:

• Support group – the claimant is assessed as having limited capability for work-related activity. The claimaint does not have to take part in work-focussed interviews or associated activity as a condition of receiving their benefit.
• Work-related activity group ( WRAG) – the claimant is assessed as being able to participate in work-related activity. People in this group are too ill to work but are expected to be able to return to work eventually. Claimants are usually required to take part regular in work focused interviews with a DWP personal advisor, however this can be done via the telephone and does not require the claimant to travel to a Job Centre.

Because individuals in the work-related activity group are required to take part in interviews or training, they can be sanctioned as a result of not complying with DWP conditions. As of February 2017, 53,699 individuals in Scotland received the ESA WRAG, accounting for 21% of all ESA claimants. 165,540 individuals were in the Support group. ^[33]

Single people in the ESA support group are entitled to £109.65 per week (£5,720 per year), whilst those in the ESA work-related activity group are entitled to £102.15 per week (£5,330 per year) if an existing claim, or £73.10 per week (£3,810 per year) if a new claim from April 2017.

5.2 ESA sanctions

It is important to note that ESA sanctions were not part of the welfare reforms introduced since 2010, as they had always been part of ESA since its introduction as a benefit in 2008 for those in the WRAG group. However, from 3rd December 2012 a revised sanctions regime for ESA WRAG claimants was introduced.

Under the new rules ESA WRAG claimants who fail to comply with the conditions for receiving the benefit receive an open ended sanction meaning that the claimant will not be paid until they comply with DWP conditions. Once they have complied with DWP conditions, this open ended sanction will be followed by a fixed period sanction of between one to four weeks.

The fixed period sanction will be one week for a first failure, two weeks for a second failure and four weeks for a third and subsequent failures in a 52 week period.

Claimants who are sanctioned will lose all of their personal allowance, but their WRAG component (if they are entitled to this component) will not be affected. This means that claimants will lose £73.10 per week ^[34] for each week that they are subject to a benefit sanction. Those affected by a sanction will only receive a maximum of £29.05 per week for each week they are sanctioned. However, those who have made a new claim to ESA since April 2017, and are therefore not entitled to the work related activity component, will lose all of their ESA award.

Since the new sanction regime was introduced, 4,258 people have been subject to an adverse ESA sanction in Scotland. Sanctions are recorded on a monthly basis. The number of people sanctioned peaked in early 2014, at over 200 per month. More recently, around 50 people per month are being sanctioned, with 428 people affected by a sanction in the 12 months to March 2017.

Figure 8 - Number of ESA adverse sanctions each month (Scotland) between January 2013 and March 2017

Nearly half of those sanctioned under ESA in the 12 months to March 2017 (257 people in total) were recorded as having mental and behavioural disorders. Around 73% (356) of sanctions were applied because someone failed to participate in work related activity, 27% (133) of sanctions were applied because someone did not take part in a mandatory interview.

Data on the length of time an ESA sanction is applied for is shown at a GB-level in Figure 9. Over half of ESA sanctions are in place for 4 weeks or less, whilst 8% of sanctions are applied for 27 weeks or more (over 6 months). Although these figures are GB-level, applying a Scotland share to these figures suggest that around 470 people have been sanctioned for more than 6 months in Scotland. ^[35]

Figure 9 - Number of sanctions by length of time sanction is applied ( GB – level)

Case Study D

An East of Scotland CAB reports of a vulnerable client suffering from anxiety and depression whose ESA payments have been sanctioned, leaving the client in severe hardship with approximately £10 per week to live on (after other deductions). The client telephoned the DWP to explain she would not be able to attend her weekly triage as she had no money for bus fare to the Jobcentre, yet she was still sanctioned. The client is now in receipt of food parcels and requires a grant from the Scottish Welfare Fund and a gas grant to survive.

Source - CAS

5.3 Removal of the ESA work-related activity component

A key reform to ESA came into force in April 2017, when the work-related activity component (£29.05 per week) was abolished for new claimants. The policy was motivated by the aim to align ESA WRAG with JSA (Jobseekers Allowance). From April 2017, people who started an ESA claim and were then placed in the WRAG group after the work capability assessment, will not be entitlement to the work-related activity component.

This policy is estimated to reduce welfare spending by £0.21 billion at a GB level by 2020/21. At a Scotland level, it is estimated that this policy will save around £26 million by 2020/21. ^[36] Once fully rolled out this policy will affect all claimants currently in the WRAG group of ESA in Scotland or around 64,000 people in total. However, the policy only affects new claims, so to get a sense of the impact of this policy change in Scotland, an estimate of the number of new ESA cases in the WRAG group is needed.

According to the latest DWP statistics between April 2014 and September 2015, an average of 7,100 people per month applied for ESA in Scotland (with a maximum of 8,300 and minimum of 6,300 per month). ^[37]

Figure 10 - Initial outcomes of WCA assessments in Scotland (April 2014 to September 2015)

Figure 10 shows that in each month around 38% of cases are withdrawn or cancelled prior to WCA. Around 30% of WCA cases end in people being placed in the Support Group, whilst around 20% of cases are assessed as 'fit for work'. Only around 8%, less than 600 cases per month are initially assigned to the WRAG group. A number of cases (around 4% over this period) were recorded as awaiting an assessment. ^[38]

Based on these figures, the average annual on-flow to the WRAG group would be between 6,000 and 8,000 per year in Scotland. However, this could to be an underestimate because it does not take into account the increase in the number of people in the WRAG group after Mandatory Reconsiderations and Appeals.

DWP GB level estimates of the outcome of WCAs after mandatory reconsiderations and appeals are considered and then applied to the Scotland-level figures in Figure 10. This analysis suggests that the actual number of people who start an ESA WRAG claim is some 17% higher than the number that are initially assigned to the WRAG group after the WCA.

This suggests that between 7,000 and 10,000 people per year starting a claim to ESA in Scotland will not be entitled to the work related activity component.

It should be acknowledged that the introduction of Universal Credit and behavioural change will potentially have an impact on the number of people being assessed at a WCA and the number of people moving into the WRAG group or appealing the decision may be less than was historically the case because there is no additional component as part of the award.

Case Study E

A West of Scotland CAB reports of a vulnerable veteran with a number of chronic health conditions. Job Centre Plus declined to process client's ESA application and insisted that client continue on JSA, despite submitting an 8-week fit note for these conditions. This resulted in client's ESA assessment taking place five weeks later than it should have, which will impact on his income (a reduction of at least £29 per week) if he is placed in the Work Related Activity Group ( WRAG).

Source - CAS

5.4 Other changes to ESA

Two additional significant changes to Employment and Support Allowance have been made since 2010.

The first change was that from April 2012, new claimants of contributory ESA and assessed as eligible for the Work Related Activity Group, would only be entitled to the contributory form of the benefit for up to one year. Those still claiming ESA after one year may then claim income-based ESA, but they may not be entitled to any benefit if they or their partner have other income or capital above a certain level.

As set out by the OBR, the limit of contribution based ESA ( WRAG) to 1 year was expected to be a significant saving (£2 billion by 2015/16), but is now only thought to have saved around £0.2 billion. ^[39] The original saving estimate was based on assumptions about the behavioural response of those affected by the change, for example, whether people would move onto the income-based version of the benefit once their contribution-based entitlement expired. The assumption at Budget 2012 was that 36% of the WRAG caseload would be made up of those entitled to the contributory-based benefit. In practice, the percentage is much lower (less than 5% in Scotland), which implies that far more people moved from contribution-based to income-based ESA after 1 year than originally expected.

The second change was the abolition of the ESA 'youth' provision, which allowed those aged 16 to 19 (or 25 if in education) to qualify for contributory ESA without meeting the normal National Insurance conditions. Ahead of introducing the policy, the DWP estimated that 15,000 young people (across GB) would lose their entitlement in the first three years of the policy. In Scotland, over 400 people aged 16-25 claimed contribution-based ESA before this policy was introduced.