Welfare Reform (Further Provision) (Scotland) Act 2012: annual report 2017

1. Introduction

1.1 Purpose of the report

The Welfare Reform Act 2012 ^[7] (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 ^[8] . 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" ^[9] .

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 final such statutory 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 ^[10] .

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. ^[11]

As the final report, the content will go beyond the statutory duty and will place the impact of provisions in the Act in the wider context of all welfare reforms passed by UK governments since 2010.

1.2 Key features of the report

This report brings together a range of evidence of the impact of UK government welfare reforms in Scotland. This includes:

• A comprehensive overview of the impact of all welfare measures contained within the Welfare Reform Act and measures introduced by the Conservative government in the 2015-17 parliament.
• An analysis of the reduction in welfare spending in Scotland resulting from policies announced by both Coalition and Conservative UK governments in the 2010-15 parliament and the 2015-17 parliament based on OBR 'Welfare Trends' (2016) and HMT Policy Costings since 2015.
• An analysis of the financial impact of reductions in welfare spending at a local authority level in Scotland and the estimated number of households which will be impacted by welfare measures at a Scotland level.
• A summary of the combined impact of welfare reforms on equality groups, in particular women and people with disabilities.
• The impact of welfare reform on income inequality, the number of households in poverty and children in poverty.
• The details of the Scottish Government's policies to mitigate the worse effects of Welfare Reform and mitigation activities..

1.3 Key provisions in the Welfare Reform Act 2012

The Welfare Reform Act includes the following key provisions:

• 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).
• 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 job-seeker activities that any claimant must undertake in order to receive benefits.

1.4 Limitations of the 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 in Scotland to date, representing less than 8% of the final UC caseload at full rollout.

Uncertainty in forecasting welfare spending: The analysis of the financial impact of UK welfare reforms on spending in Scotland to 2020/21 shows what would happen to welfare spending based on forecasts and costings produced by the Office for Budget Responsibility ( OBR) assuming no change in policy.

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. This is particularly the case for policies that have been introduced in the 2015-17 parliament. It should also be noted that all data in the report is only up to date to end of May 2017.

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, and these are included in this report's assessment.

1.5 Key changes in UK government policy since June 2016

As in previous versions of the annual report, this section highlights key changes to the welfare system since the last report was published in June 2016.

The most significant change was the reduction of the taper rate within Universal Credit (the rate at which benefit is withdrawn for every additional £1 of earned income). It was announced in the Autumn Statement that the taper rate will be reduced from 65% to 63% from April 2017. The change will benefit in-work families and will increase welfare spending by around £0.6 billion by 2020/21.

A number of previously announced measures have come into force since the publication of the last report, most taking effect in April 2017 ^[12] . Combined, the following measures are expected to reduce spending £2.9 billion (at a GB level) by 2021-22:

• Reduction of £29 a week for people making a new claim to ESA who are placed in the Work Related Activity Group ( WRAG). This is expected to reduce welfare spend by £230 million by 2021/22.
• Removal of the family element in child tax credits for new births and the equivalent first child premium in UC for new claims after April 2017. This is expected to reduce welfare spend £650 million by 2020/21.
• An abolition of child element for third and subsequent children, applying to new births in tax credits and new claims in universal credit. This is expected to reduce welfare spend by £1.9bn by 2021/22.
• End of entitlement to Housing Benefit for 18-21 year olds. This is expected to reduce welfare spend by £40 million by 2021/22.
• Tightening of UC conditionality with parents expected to prepare for work from when their youngest child turns 2 and to look for work when they turn 3. This is expected to reduce welfare spend by £35 million by 2021/22.
• Reduction of up to £137 per month and a reduction of up to 18 and a half years for new claims of Bereavement Support Payment (replacing Widowed Parents Allowance). The maximum potential loss to a family is up to £112,000 as a child could remain eligible for child benefit until age 20.