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

1. Introduction

1.1 Purpose of report

The Welfare Reform Act 2012 ^[1] (the Act), which received Royal Assent on 8 March 2012, introduced some of the biggest reforms to the UK welfare system in the last 60 years ^[2] . According to the Department for Work and Pensions ( DWP), the Act aims to "make the benefit system fairer and more affordable[,…to help] reduce poverty, worklessness and welfare dependency [and to] reduce levels of fraud and error" ^[3] .

Scottish Ministers were required to introduce regulations to enable devolved legislation to take account of these changes. Amongst other provisions, the Welfare Reform (Further Provision) (Scotland) Act 2012 placed a requirement on Scottish Ministers to report annually until 2017 to the Scottish Parliament on the impact of the Act on the people of Scotland. This is the fourth such report to be published.

The following requirements were set out in the Act:

3. The Scottish Ministers must prepare an annual report giving such information as they consider appropriate about the impact that the UK Act is having on people in Scotland .

4. An annual report is -

a) starting with 2014, required each year until 2017 ^[4] .

b) to be laid before the Scottish Parliament on or before
30 June in the year concerned.[…]

6. The references in subsections (1) and (3) to the impact of the UK Act include that arising directly or indirectly from the effect of-

(a) a relevant portion of that Act, or

(b) a relevant instrument made under that Act. ^[5]

This report provides a summary of the impacts of the UK Act on people in Scotland, primarily focusing on updates to the information on the impacts of provisions in the Act and particular changes in UK policy in relation to provisions in the Act since the publication of last year's report ^[6] . As with previous reports, it will outline the details of Scottish Government's mitigation activities. This year's report contains an additional chapter describing the new welfare powers in the Scotland Act 2016 which provide opportunities for the Scottish Government to set its own social security polices in the areas of devolved responsibility.

1.2 Key provisions in the Welfare Reform Act 2012

The Welfare Reform Act includes the following key provisions, discussed in detail in section 2.

− The phased introduction of Universal Credit.
− The abolition of Council Tax Benefit at UK level.
− The abolition of certain discretionary elements of the Social Fund at UK level.
− The phased replacement of Disability Living Allowance ( DLA) with the Personal Independence Payment ( PIP) for working-age adults.
− Changes to Housing Benefit in relation to under-occupancy in the social housing sector (the 'bedroom tax' ^[7] ).
− The introduction of a cap on the total amount of benefit that working-age people can receive (the benefit cap).
− Changes to entitlement for the contributory element of Employment and Support Allowance.
− Changes to Local Housing Allowance.
− A new requirement on lone parents, whose youngest child has reached the age of five to look for work, meaning they must instead claim Jobseeker's Allowance instead of Income Support.
− The introduction of a new Claimant Commitment that sets out the particular jobseeker activities that any claimant must undertake in order to receive benefits.

1.3 Points to note about this report

This report seeks to present a comprehensive summary of the impacts of the Act, but a number of issues limit what is able to be presented.

Delays to roll-out continue. The provisions of the Act began to be introduced from March 2012. However, key provisions - including Universal Credit ( UC) and Personal Independence Payment ( PIP) - have not been rolled out to their original timetables. Only limited numbers are in receipt of UC or PIP in Scotland to date.

The available data only cover short periods of time. Many reform impacts will not yet be detectable, because of time lags in the collection, analysis and publication of large-scale survey data.

Welfare reform pre-dates and post-dates the Act. Although many of the provisions of the Act are significant in terms of impacts, other changes to welfare, introduced before and after the Act also have significant impacts. This Annual Report is specifically focused on the Act, however, where impacts are arising from policies directly or indirectly related to the provisions in the Act these are also included. Key welfare policy announcements since June 2015 are listed in section 1.4.

Some welfare powers are being devolved to Scotland. New powers in relation to social security will be devolved to Scotland in the Scotland Act 2016, based on the recommendations of the Smith Commission ^[8] . Chapter 4 of this report provides more detail on this. Although the devolution of these powers will have significant implications for the people of Scotland in the future, reporting on the potential impacts of these is beyond the scope of this report.

Isolating Act changes from other UK changes to welfare is challenging. The welfare system is inter-connected in a highly complex way. The introduction of a variety of reforms since 2010 has been differently phased and managed. Hence, separating out the direct impacts of the Act is not necessarily straightforward.

1.4 Key changes in UK policy since June 2015

There are seven key policy changes introduced since June 2015 (the publication date of last year's report) which concern the main provisions of the Welfare Reform Act but were not specifically set out in the original Act :

1. Universal Credit: the 'Work Allowances' (the amount of income a household can earn before benefits begins to be taken away) have been reduced, reducing the generosity of Universal Credit (see section 2.2).

2. Personal Independence Payments ( PIP): In the Summer Budget 2015 the UK Government announced that PIP roll-out would be extended to 2019. In March 2016, the UK Government announced and then reversed its decision to change the eligibility criteria related to aids and appliances in PIP. It then made a commitment to no further cuts to disability benefit expenditure for the remainder of the parliamentary term (see section 2.4).

3. Benefit Cap: The Benefit Cap, introduced in April 2013, has been reduced from £26,000 to £20,000 per year for couples and lone parents, and from £18,200 to £13,400 per year for single people (see section 2.6) from November 2016.

4. Sanctions: A new 'Early Warning' system is to be trialled in Scotland for Job Seekers Allowance claimants subject to a benefit sanction (see section 2.7).

5. Employment and Support Allowance: The rate for new claimants in the 'Working 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.

6. Local Housing Allowance ( LHA): The UK Government announced that from April 2016, LHA rates would be either frozen or be reduced to the 30 ^th percentile of average rental prices, if lower than the frozen rate (see section 2.9).

7. Benefits Freeze: In the Summer Budget 2015, the UK Government announced that the cash value of most working-age benefits will be frozen for four years from 2016-17.