April’s welfare changes

The cumulative effects and the questions they raise

Peter Kenway

The April welfare changes

Three absolute benefit cuts introduced this April:•Council tax benefit (CTB) replaced by council tax support (CTS)•Under-occupation penalty: the “bedroom tax”•Household benefit cap

One uprating restriction•Working-age benefits restricted to 1%

Official impact assessments•Where they do exist official impact assessments consider one change at a time only•None exist for the 326 local council tax support schemes

Scope of presentation

Findings:•The localisation of CTS: main findings from our recent study for the Joseph Rowntree Foundation•Combined impacts of the four changes: read our full report here

Thoughts:•The ‘bedroom tax’ – cuts as “reform”?•The household benefit cap – reform as “politics”?•The localisation of CTS – shifting risk as “localism”?•The1% uprating – expediency as “principle”?

Conclusions

Council Tax Benefit (CTB) to Council Tax Support (CTS): background

What was CTB?•Emerged alongside the creation of council tax (1993)•CTB was in effect a tax rebate not a benefit: •“Full”/“Partial” CTB = pay no/some council tax

The 2010 spending review•GB-wide CTB to be replaced by locally designed CTS schemes•From 2013, central government funding to be cut by 10% + pensioners to be fully protected from the changes.

Our research on the localisation of CTS•We documented the new support schemes of all 326 lower tier and unitary local authorities in England•We estimated of the numbers affected by the changes and the average hit.

CTB to CTS: an overview of English local authority schemes

CTB to CTS: spread in the size of the weekly “hit”

The combined impacts of April’s welfare changes: background

The poverty threshold compared with benefits•Poverty threshold: 60% of median income:•After housing costs the threshold is £125 p.w. for singles, and £215p.w. for couples•Income support/Job Seekers Allowance is £71p.w. for singles (aged 25+), and £112p.w. for couples•There has been no real increase in these benefits for 40+ years

How many will be affected by single cuts introduced this April:•Household benefit cap – 56,000 (£93p.w.)•Bedroom tax – 660,000 (£14p.w)•CTB to CTS – 2.4m, (average £2.60p.w.) •Uprating restriction – 9.6m (1.2%)

Combined impacts of April’s welfare changes: survey-based estimates

The bedroom tax – cuts as “reform”?

To change behaviour or save money?•The advertised aim: to better use social rented stock•Impact assessment: control spending on HB•These are broadly exclusive

The feasibility of moving is a vital issue here:•If not feasible, it suggests saving money is real goal•However, the “better use” argument is a less contentious reason to make cuts

Question/s raised•When is it right to use financial penalties to achieve socially desirable ends?

Household cap – reform as “politics”?

What is the household benefit cap really doing?•It saves money for Treasury but maybe not for local authorities•It caps amount payable for rent (as with Local Housing Allowance)•It caps the amount of payable for child support

Principles at stake•Personal allowance•Support related to family size

Question/s raised•Should there be transitional support available and if so, in what form?•Shouldn’t deep reforms that are targeting specific groups be presented as such?•Is this just a first step?

CTS – shedding risk as “localism”?

What is the localisation of CTS really doing?•It shifts responsibility for design of system to local authorities•It saves money for the Treasury but maybe not for local authorities•It is a tax increase for low income households

What are the principles at stake•A national system of benefits•That risk (e.g. factory closure) is borne nationally

Question/s raised•What’s the case for local variation in benefits?•Do local authorities have the legitimacy to design benefits?•Is this just a first step: will other benefits be localised too?

1% uprating – expediency as “principle”?

What is it really doing?•It links rises in benefits to rises in wages•It is a “real” income squeeze, but not a reform •It hits lots of people by a small amount•It Saves lots of money for Treasury

Principles at stake•Link between incomes in work and out of work

Question/s raised:•Why restrict to working-age?•Why restrict to the bad times?

Pre 2008, the “welfare” spending share was stable

Source: Monitoring Poverty and Social Exclusion 2012

Conclusions

“Welfare” spending does exceed past cyclical highs•UK’s deep economic problems date from 2002•Several other factors are heavily implicated: eg. housing problems, job shortages, low pay, demographics (an aging working-age population) and social change (long term trends towards two adult working families).•Nevertheless, it is at the governments discretion whether less must be spent

Are cuts to benefits an effective solution?:•Change is needed, but real and lasting change will require time and money•If cuts need to be made, they should be broad but shallow; spreading the hit•Rhetoric that the reforms will protect the most vulnerable, while hitting those who are less so, is misleading: serious savings will inevitably hit the ‘blameless’

Centrally driven “localism” is a danger to England•Resources, capability, legitimacy, risk, cohesion