Welfare Reform (Further Provision) (Scotland) Act 2012: annual report 2016

Executive Summary

The Welfare Reform (Further Provision) (Scotland) Act 2012 tasks the Scottish

Government with producing an Annual Report on the impacts of the UK Welfare Reform Act 2012 (the Act) on the people of Scotland. Changes in UK welfare policy since the Act was passed have been detailed in previous annual reports. This is the third annual report (an initial report was also published in 2013), and the first to be published since the passing of the Scotland Act 2016, which will devolve a range of disability benefits, carer benefits and components of the Regulated Social Fund to Scotland, as well as powers to create new devolved benefits and top-up existing reserved benefits.

Impacts of the Welfare Reform Act

In June 2016, Universal Credit ( UC) was available in all jobcentres in Scotland for single jobseekers without children. The most recent data for May 2016 show that there are around 28,100 households in Scotland claiming UC. Measures announced in the Summer Budget 2015 have reduced the relative generosity of UC for in-work claimants by reducing the Work Allowances. Once fully rolled out, UC is expected to have mixed financial impacts, with 'winners' and 'losers' in terms of benefit entitlement. The Scottish Government will have the power to make certain administrative changes to UC.

The Personal Independence Payment ( PIP) caseload continues to be low, with 85,400 people in April 2016. The latest data for working age Disability Living Allowance ( DLA) from November 2015 showed a caseload of 165,000 (November 2015 caseload for PIP was 67,500). PIP and DLA will both be devolved following passage of the Scotland Act 2016, although timescales for delivering these (and other benefits) in Scotland have yet to be formalised.

The UK Government announced in the Summer Budget 2015 a lower Benefit Cap of £20,000 per year for couples and lone parent households, and £13,400 per year for single adult households (a higher cap has been set for claimants in London).

The new Jobseeker's Allowance ( JSA) sanction regime was introduced in October 2012. In the year to December 2015, a total of 26,400 adverse sanctions were applied, affecting 23,800 individuals. A new 'Early Warning' system, which will work alongside the sanctions regime, is being trialled in Scotland during 2016, and is expected by DWP to reduce the number of sanctions.

The rate for new Employment and Support Allowance ( ESA) claimants in the 'Work Related Activity Group' is set to be reduced from £103 to £73 per week in 2017 to bring the rate into line with Jobseekers Allowance.

The UK government announced that Local Housing Allowance ( LHA) rates (used to calculate housing benefit in the private rented sector) will be either frozen or be reduced to the 30th percentile of average rental prices, if lower than the frozen rate from April 2016. This is expected to reduce the number of properties in the private rented sector with rents that could be met by the LHA alone.

Scottish Government Mitigation

The Scottish Government has introduced a number of measures using existing powers, to mitigate some of the impacts of Welfare Reform.

In the period 2013 to 2017, the Scottish Government is providing £125 million of additional funding to mitigate the 'bedroom tax' through Discretionary Housing Payments. The Council Tax Reduction Scheme has continued to help people on low incomes with their council tax liabilities, following the abolition of Council Tax Benefit ( CTB) in 2013. In 2016-17, a further £23m of funding provided by the Scottish Government to protect previous entitlement under CTB. The Scottish Government also provides £38 million to local authorities through the Scottish Welfare Fund, which continues to provide crisis grants and community care grants.

The Scottish Government is continuing to meet the challenges of Welfare Reform in other areas. The Scottish Government continues to fund universal free school meals to children in primary one to three, providing £54m in funding in 2016/17. Entitlement to early learning and childcare to vulnerable two-year-olds is being extended to 600 hours a year, with over 4,300 two-year-olds (50% of those eligible) receiving the support. Finally, eligibility criteria to Blue Badges have been extended following the introduction of PIP and the Scottish Government's Emergency Food Action Plan provided £1 million over 2014-15 and 2015-16 to help combat food poverty in Scotland.

New Social Security Powers

The Scotland Act 2016 will transfer responsibility for 11 benefits to the Scottish Parliament covering benefits related to disability, ill health and caring, and components of the Regulated Social Fund. This will represent around £2.7 billion (15%) of total social security spending in Scotland.

In addition, the Scottish Parliament will be given powers to create new benefits in areas of devolved responsibility and to top-up reserved benefits, as well as having limited powers to make administrative changes to Universal Credit. Thus, new powers will give future Scottish Governments the opportunity to create distinct social security policies in the area of devolved responsibility.

In March 2016, the Scottish Government announced that a new agency will be created to oversee the delivery of these benefits. Timescales for delivery of Scottish social security benefits have yet to be formalised and will be led by the commitment to a safe and secure transition.