The Impact of Welfare Reform in Scotland - Tracking Study - Sweep 3 Report

1. Introduction

• The aim of the study is to explore the impact of ongoing welfare changes on a range of household in Scotland over a three year period, with two interviews per year. This report covers the third sweep of interviews.

• Chapter 1 outlines the objectives of the study and sets out the policy and economic context in which the third sweep of data collection took place.

• Changes in policy since the previous report, as well as scheduled and proposed future changes, are briefly outlined.

• The chapter also presents some key statistics around claimant numbers and economic conditions.

Background and research objectives

1.1. The aim of the study is to explore the impact of ongoing welfare changes on a range of households in Scotland over a three year period (2013-16). The study is being carried out for the Scottish Government by the Employment Research Institute at Edinburgh Napier University and the University of Stirling. This is the third report from the project, following on from the two reports published from the first year of the study (Graham et al. 2014; Lister et al., 2014).

1.2. The study aims to increase understanding of the impact of the welfare changes in Scotland as they occur over time, and will assist the Scottish Government in making decisions related to those areas within its devolved responsibility.

1.3. The research objectives of the study are:

• To obtain baseline information about a sample of 30 Scottish households with direct experience of welfare changes: The baseline stage of the study involved the selection and recruitment of an appropriate sample of households, and the collection of information from them. The sample selected was of households with common direct experience of welfare changes, but also reflecting some of their diversity with respect to characteristics such as family type, family circumstances, types of benefit received, and geographic location.

• To obtain follow up evidence on the sample of households about relevant changes to their lives since the first interview: This ongoing aspect of the study involves re-interviewing original participants about their family situation, with particular interest in any changes that have occurred, the impacts of these changes and their perception of the reasons for these changes. This information will be collected twice per year over three years.

• To analyse the differences between time points, and potential reasons for these differences, and the implications of the findings for understanding the impact of welfare reform and appropriate responses from the Scottish Government. Reports will be produced for the Scottish Government bi-annually. The study will be used to inform the Scottish Government about significant or emerging problems encountered by households, to assist in them framing their response to these.

1.4. This report covers Sweep 3 of the interviews. It reflects on the immediate and ongoing impact of welfare reform on participants, and also considers the role of support services in mitigating the impact of welfare reform.

Policy and economic context

1.5. The Welfare Reform Act 2012 introduced major reforms to the UK welfare system. The aim of the Act is to improve work incentives for families and simplify the current benefits system. The main elements of the Act that are of particular interest in this research are (Department for Work and Pensions, 2012a; UK Government, 2012; Scottish Government, 2014; Lister et al., 2014):

• Abolishing certain discretionary elements of the Social Fund at UK level^[1]
  The elements which were abolished included Crisis Loans for Living Expenses and Community Care Grants. These elements have been replaced in Scotland by the Scottish Welfare Fund.

• The introduction of a cap on the total amount of benefit that working-age people can receive
  Households on out of work benefits will no longer receive more in welfare payments than the average weekly wage for working households (DWP, 2012a). The cap applies to the combined income from benefits, although some claiming certain benefits are exempt, e.g. certain disability benefits.

• Introduction of the Personal Independence Payment (PIP) to replace Disability Living Allowance (DLA)
  The key differences with the new benefit are: the absence of an equivalent to the lowest care component of DLA; a stricter mobility test; and the introduction of a face-to-face medical assessment in some cases.

• Changes to the entitlement for the contributory element of ESA
  Under this change people can now only receive contributory ESA for up to one year if they are in the Work Related Activity Group (WRAG)^[2] or assessment phase. Provisions allowing young people to qualify for contributory ESA without meeting the standard National Insurance conditions have also been abolished.

• Abolishing Council Tax Benefit at UK level
  The nationally devised Council Tax Benefit has been replaced by locally administered Council Tax Reduction schemes, and subject to a 10 per cent cut in UK Government funding.^[3] The scheme provides help for people on low incomes or claiming benefits towards their Council Tax bill. In Scotland the Scottish Government fully mitigates the 10 per cent funding cut from the UK Government.

• The introduction of the 'bedroom tax'
  Through this element of the Act there has been a percentage reduction in Housing Benefit for working age households judged to be under-occupying their property in the social rented sector. This is fully mitigated in Scotland through Discretionary Housing Payments to affected tenants.

• Changes to Local Housing Allowance (LHA)
  Changes to LHA have included new caps on the amount of Housing Benefit that can be paid, and younger single claimants without dependents can only claim Housing Benefit for private sector accommodation based on the cost of living in shared accommodation.

• Changes to the uprating of working age benefits and tax credits
  Child Benefit and certain tax credit elements were initially frozen, and thereafter the uprating of working age benefits and tax credits was restricted to 1 per cent for three years.

• Changes to procedures in the event of a disputed benefit decision by the DWP
  In the event of a disputed decision, the claimant must request a 'mandatory reconsideration' before submitting an appeal. Those wishing to appeal after a mandatory reconsideration must submit their appeal directly to the tribunals service.

• A new sanctions regime for those on Jobseeker's Allowance (JSA) and ESA
  The new regime: introduced escalating fixed term penalties for repeated failures; extended the maximum duration of a sanction for JSA clients from 26 weeks to 156 weeks; and increased the benefit withdrawn from ESA claimants in the first four weeks of a sanction from 50 to 100 per cent.^[4]

• New conditionality for lone parents
  Lone parents whose youngest child has reached the age of five are no longer entitled to Income Support solely as a lone parent, but could be entitled to JSA, which would require them to look for work. Lone parents receiving Income Support who have a youngest child aged three or four may be required to undertake mandatory work-related activity.

• The introduction of a new Claimant Commitment related to jobseeker activities
  From October 2013 new claimants of JSA, ESA and Universal Credit sign a 'Claimant Commitment' that sets out the job readiness and job searching activities which they will undertake as condition of receiving their benefits. Claimants may be sanctioned if they are considered to not have fulfilled their commitment.

• The introduction of Universal Credit
  A number of key means tested benefits such as Income Support, Income Based Jobseekers Allowance (IB-JSA), Employment and Support Allowance (ESA), Housing Benefit and Tax Credits have been combined into one single entitlement called Universal Credit. Problems with the development of the IT system have meant that the roll out of Universal Credit has been delayed; it is currently projected that the majority of claimants will be transferred by December 2019, although this will not include those claiming ESA or tax credits only (National Audit Office, 2014).

1.6. The timetable by which the above changes have been implemented is shown in Figure A1.1 in Appendix 1, which also presents data on the number of claimants affected by the changes in Scotland.

1.7. The period pertaining to the Sweep 3 interviews occurred under improving labour market conditions. Over the course of 2014, employment increased by 63,000 and unemployment fell by 48,000, with the unemployment rate falling by 1.8 percentage points (Scottish Government Office of the Chief Economic Adviser, 2015). Of course it should be noted that the connection between growth in employment and falls in the benefit caseload is not straightforward, for example because of mismatches between the jobs created and the characteristics of those seeking work.

Structure of the Report

1.8. Chapter 2 outlines the study's methodology and presents key statistics on the sample size and characteristics. Chapter 3 presents the research findings with respect to the immediate, ongoing and perceived future impact of welfare reform. Chapter 4 presents the results of a questionnaire module on sources of support with benefits issues. Chapter 5 summarises the key findings, and outlines policy implications and plans for future sweeps of the study.

1.9. Appendices to the report are contained in a separate document. Appendix 1 provides further information about welfare reform and the number of claimants affected in Scotland. Appendix 2 provides an overview of eligibility for and rates of key working age benefits. Appendix 3 contains the interview schedule used in Sweep 3^[5], and Appendices 4 and 5 contain the consent form and information sheet presented to participants at Sweep 1.