The impact of welfare reform tracking study: sweep four report

INTRODUCTION

• The aim of the study was to explore the impact of ongoing welfare changes on a range of working age households in Scotland over a three year period (2013-2016), with four interviews held during this time. This report covers the fourth and final sweep of interviews.
• Chapter 1 outlines the objectives of the study and sets out the policy and economic context in which sweep 4 of data collection took place.
• Changes in policy since the previous report published in May 2015 are briefly outlined.

Background and research objectives

The study was carried out for the Scottish Government by the Employment Research Institute at Edinburgh Napier University and the University of Stirling. This is the fourth and final report from the project, following on from the three previous reports (Graham et al., 2015; Graham et al., 2014; Lister et al., 2014).

The aim of the study was to explore the impact of ongoing welfare changes on a range of working age households in Scotland over a three year period (2013-16). It was intended to increase understanding of the impact of the welfare changes in Scotland as they occurred over time, and assist the Scottish Government in making decisions related to those areas within its devolved responsibility.

The research objectives of the study were:

• To obtain baseline information about a sample of 30 Scottish working age 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, the 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 involved re-interviewing original participants about their household situation, with particular interest in any changes that had occurred and the impacts of these.
• 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. The study has contemporaneously informed the Scottish Government about significant or emerging problems encountered by households, to assist the Scottish Government in framing their response to these.

This report covers the fourth and final sweep of interviews, and provides an overview of the research findings from the study as a whole.

Policy and economic context

The Welfare Reform Act 2012 introduced major reforms to the UK welfare system. The aim of the Act was to improve work incentives and simplify the benefits system. The main elements of the Act that were of particular interest in this research were (Department for Work and Pensions, 2012a; Graham et al., 2015; Lister et al., 2014; Scottish Government, 2014 UK Government, 2012):

• Abolishment of certain discretionary elements of the Social Fund at the UK level
  The elements which were abolished included Crisis Loans for Living Expenses and Community Care Grants. These elements were replaced in Scotland by the Scottish Welfare Fund ( SWF). The Welfare Funds (Scotland) Act 2015, which places the SWF into law, was passed and received Royal Assent in spring 2015. Permanent regulations and statutory guidance will be in place from April 2016. ^[1]
• The introduction of a cap on the total amount of benefit that working-age people can receive
  Households on out of work benefits no longer receive more in welfare payments than the average weekly wage for working households (Department for Work and Pensions, 2012a). The cap applies to the combined income from benefits, although some benefits are exempt from the cap, 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 Employment and Support Allowance ( 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 ( CTB) at UK level
  The nationally devised CTB has been replaced by locally administered Council Tax Reduction ( CTR) 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 ( HB) 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 ( DHP) to affected tenants.
• Changes to Local Housing Allowance ( LHA)
  Changes to LHA have included new caps in the amount of HB that can be paid, and younger single claimants without dependents can only claim HB 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 ( IS) solely as a lone parent, but could be entitled to JSA, which would require them to look for work. Lone parents receiving IS 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 have had to 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 ( UC)
  A number of key means tested benefits such as IS, Income Based Jobseekers Allowance ( IB-JSA), ESA, HB 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 UC has been delayed. It has been 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).

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.

The roll out and direction of current reforms to the welfare system are likely to change in future as more powers are devolved to the Scottish Parliament. Following the 'No Vote' in the September 2014 Scottish Independence referendum Prime Minister David Cameron announced that Lord Smith of Kelvin would oversee a process to take forward devolution commitments on further powers for the Scottish Parliament. The Smith Commission published its report in November 2014. The report detailed Heads of Agreement on further devolution of powers to the Scottish Parliament (Smith Commission, 2014).

The Commission outlined the following in relation to working age welfare benefits (Smith Commission 2014; Sandford 2015):

• UC would remain a reserved benefit administered and delivered by the Department for Work and Pensions ( DWP), although the Scottish Government will have the administrative power to change the frequency of UC payments, vary plans for single household payments, pay landlords directly for housing costs, and vary the housing cost elements of UC.
• Powers would be devolved to the Scottish Parliament for: Attendance Allowance, Carer's Allowance, DLA, PIP, Industrial Injuries Disablement Allowance and Severe Disablement Allowance, Cold Weather Payment, Funeral Payment, Sure Start Maternity Grant, Winter Fuel Payment, DHPs.
• Responsibility for the following benefits would remain reserved: Bereavement Allowance, Bereavement Payment, Child Benefit, Guardian's Allowance, Maternity Allowance, Statutory Maternity Pay, Statutory Sick Pay and Widowed Parent's Allowance.
• The Scottish Parliament will have powers to create new benefits in devolved policy areas; and make discretionary payments in any area of welfare without prior permission from DWP.
• The Scottish Parliament would have (on expiry of the current commercial arrangements) all powers over support for unemployed people through currently DWP contracted employment programmes e.g. the Work Programme and Work Choice.

The Scotland Bill 2015-2016 has been proposed to put into effect the recommendations made by the Smith Commission. As of February 2016 the Bill was undergoing the Committee stage and Report stage in the House of Lords.

Structure of the report

The remainder of this report:

• outlines the study's methodology and presents key statistics on the sample size and characteristics
• presents changes since the previous sweep
• looks at participants' trajectories over the course of the study
• and finally, summarises the key findings, from this sweep and the study as a whole, and their implications for policy.

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 ^[5] , and Appendix 4 summarises all the policy implications across all the reports from this study.