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

4. Local authority level impacts of latest welfare measures

4.1 Methodology

The analysis in this section estimates the likely financial impacts of welfare reforms across local authority areas in Scotland. The impact of the reforms varies significantly from area to area, largely because benefit claimants are unevenly spread across Scotland.

All the figures presented in this analysis are estimates based on figures from OBR's latest Welfare Trends report, the latest Treasury estimates of financial savings, UK government impact assessments and relevant benefit claimant data. A summary of the methodology used is presented in annex B.

The estimates presented in this section provide a local authority level breakdown of the financial impact of welfare measures (£870 million in total) introduced in the 2015-17 parliament. The analysis does not take into account measures passed during the 2010-15 parliament. This is because there is too much uncertainty around projections of the impact of most 2010-15 measures forward to 2020/21.

4.2 Financial impact of 2015-17 reforms at a local authority level

The estimated financial impact of reductions in welfare spending (by 2020/21) by each local authority is set out in Table 7. The table gives a central estimate for the financial impact of each welfare measure in each local authority and a total across all Conservative government welfare measures.

Table 7 is colour-shaded from red through to green, with red/orange colours denoting areas with particularly high impacts from each measure and yellow/green colours denoting areas with smaller impacts.

The table is ordered by the total impact divided by the number of working age adults in each local authority. This illustrates the scale of the reduction and is not an accurate reflection of the average loss per person from each of these measures. For example, claimants in a Local Authority area where benefit claimants make up a smaller proportion of population may experience similar average losses in income, however, the average loss per head in table 7 would show smaller impacts compared to areas where there are more claimants as a share of LA population.

Table 7: Reduction in welfare spending from Conservative government measures by 2020/21 by local authority
(£millions unless otherwise stated)

*Proxy measure for loss per working age adult (per year) in £s (not £millions)

4.2.1 Total financial loss

In terms of financial impacts of welfare reform measures, the total loss to benefit claimants in Glasgow amounts to around £120 million by 2020/21, representing around 13% of the total reduction in welfare spending in Scotland. For North Lanarkshire, Fife and Edinburgh the figure is around £65 million in each area by 2020/21, which in total represents around 22% of the total reduction in welfare spending in Scotland.

The Benefit Freeze is the most significant measure in each LA, followed by the work allowance reduction to Universal Credit, with little variation in the ranking of each measure in terms of financial loss across all areas ^[38] .

However, because each local authority varies considerably in its population, it is more relevant to look at the scale of spending reductions relative to population size.

4.2.2 Financial Loss per Person

Each welfare reform measure affects either households or individuals in receipt of the benefits. As set out above, it illustrates the scale of the reduction in relation to the working-age population of each areas, and is not an accurate reflection of the average loss per person from each of these measures, as the number of claimants as proportion of population will vary from area to area.

The average reduction per head of working age population is around £250 per year across Scotland as a whole, with the range varying from as low as £160 per year (Aberdeen), to as high as around £330 per year (West Dunbartonshire).

It is clear that older industrial areas of Scotland are hardest hit by these reforms. These include West Dunbartonshire, Inverclyde, Dundee, North Lanarkshire, Clackmannanshire, Glasgow, and North and East Ayrshire. Similar findings were reported by Sheffield Hallam in their report to the Social Security Committee in their report in November 2016 ^[39] .

By contrast, the financial loss to Edinburgh - an estimated £78m a year, or £185 per adult of working age - is significantly smaller taking the relative size of Edinburgh's working-age population into account.

The parts of Scotland that are least affected by the reforms are in North East Scotland, Orkney, Shetland, Stirling, East Renfrewshire and East Dunbartonshire. However, it is worth noting that even in some of these local authorities the absolute losses remain large. Households in Aberdeen, for example, can still expect to receive around £26m a year less than they would have been had the welfare measures introduced in the 2015-17 UK Parliament not been implemented.

We have compared our analysis to that done by Sheffield Hallam as the main source of analysis done at this level ^[40] . Although the findings are broadly similar, there are some difference due to the methodology and use of more up to date data. Most notably, the Sheffield Hallam analysis estimated that Glasgow would be the biggest loser from the 2015-17 policies reforms. This is partly explained by the inclusion in the Sheffield Hallam report of the impact of PIP in these figures. We have analysed the impact of PIP separately ( see section 4.3) because it was introduced in the 2010-2015 parliament and because the expected savings have not been realised. However, there are also other key differences in our approach to LA analysis. For example, whilst Glasgow has a working-age population seven times larger than West Dunbartonshire, the number of 25-35 year olds claiming housing benefit is only three times as large. This means that the impact of the LHA social sector cap will have a disproportionally greater impact in West Dunbartonshire. This analysis is additional to what was done by Sheffield Hallam.

4.3 Impact of Personal Independence Payment by local authority

This section analyses the additional impact of the introduction of Personal Independence Payment, which was introduced in the Welfare Reform Act 2012.

The latest costings from the OBR suggest that the introduction of PIP ( see section 9.1 for the background to PIP) saved £0.1 billion by 2015/16 and will have saved £0.6 billion by 2020/21 at a GB level. PIP was initially expected to reduce spending by almost £1.4 billion by 2015/16. The Scottish share of the £0.6 billion by 2020/21 is expected to be around £65 million ^[41] .

In terms of the impact at a local authority level, Glasgow experiences the biggest impact, with households losing around £11 million by 2020/21 (see table 8). Households in Edinburgh, North Lanarkshire, South Lanarkshire and Fife are also set to lose over £4 million each due to the introduction of PIP.

Table 8: Financial impact of the introduction of PIP by local authority, 2020/21

	Financial loss (£m)	Proxy loss per adult
Aberdeen City	£2.0	£12
Aberdeenshire	£1.9	£11
Angus	£1.2	£17
Argyll and Bute	£0.9	£17
Clackmannanshire	£0.7	£21
Dumfries and Galloway	£1.9	£21
Dundee City	£2.3	£23
East Ayrshire	£1.7	£22
East Dunbartonshire	£0.9	£14
East Lothian	£1.0	£15
East Renfrewshire	£0.7	£13
Edinburgh, City of	£4.6	£13
Falkirk	£1.9	£19
Fife	£4.1	£18
Glasgow City	£11.1	£26
Highland	£2.4	£16
Inverclyde	£1.3	£26
Midlothian	£1.0	£19
Moray	£0.8	£14
Na h-Eileanan Siar	£0.3	£17
North Ayrshire	£1.9	£22
North Lanarkshire	£4.9	£22
Orkney Islands	£0.2	£13
Perth and Kinross	£1.4	£15
Renfrewshire	£2.4	£22
Scottish Borders	£1.1	£16
Shetland Islands	£0.2	£13
South Ayrshire	£1.4	£21
South Lanarkshire	£4.2	£21
Stirling	£0.9	£15
West Dunbartonshire	£1.6	£28
West Lothian	£2.3	£20

On a per capita basis (adjusting for the size of the working-age population in each area), West Dunbartonshire (£28), Inverclyde (£26), Glasgow (£26) and Dundee (£23) are losing the most from the introduction of PIP. This is similar to the pattern observed in section 4.1 for all 2015-17 measures. The North East, Orkney, Shetland, East Dunbartonshire, East Renfrewshire, Edinburgh and Stirling are all impacted to a lesser degree on a per head of population basis.

The findings above are based on expected expenditure savings figures. The number of people affected by PIP in Scotland is more difficult to estimate.

Based on reassessment outcome statistics ^[42] , around 55% of people who are reassessed are initially successful in maintaining or increasing their award level in Scotland. This means the remaining 45% either receive a lower award, or go on to have a mandatory reconsideration or appeal against the initial decision ^[43] . If these proportions are maintained until all reassessments are competed, around 100,000 people in Scotland will lose some or all of their entitlement to disability benefits because of the introduction of PIP ^[44] , whilst around 120,000 will have kept their award or had it increased because of PIP.

When accounting for mandatory reconsiderations and appeals, the OBR expect that 83% of DLA cases will be successfully reassessed to PIP (at any level of award) ^[45] which means that the total number of people who lost their disability benefit award entirely in Scotland would be around 37,000 whilst 183,000 would retain entitlement either at a lower, same or higher level.