Professor Christina Beatty and Professor Steve Fothergill
Centre for Regional Economic and Social Research
Sheffield Hallam University
National Association of Welfare Rights Advisers
11th March 2016
The uneven impact of welfare reform
on people and places
• Welfare reform and austerity
• Financial losses
– pre-2015 reforms
– post-2015 reforms
– cumulative impact over entire period
• Impact
– by place
– by household type
– by tenure
• How much will be offset by other changes?
• An assessment
Overview
• Financial crisis and world recession 2008/09
• Overhaul of the welfare system was central to deficit
reduction plan for new Coalition Government in 2010
– Emergency Budget June 2010; Spending Review October 2010
– 21st Century Welfare, DWP, November 2010
– Universal Credit: Welfare that works, DWP, November 2010
– Welfare Reform Act 2012; Welfare Benefits Uprating Bill 2013
• Conservative Government have continued the cut back of
the welfare system
– 2015 Emergency Budget and Spending Review
• Welfare reform not new - already underway by previous
Labour government
– Need a modern welfare state: Welfare to Work, New Deals, 'rights and
responsibilities', increased conditionality, making work pay
– Welfare Reform Act 2007, Welfare Reform Act 2009
National context for welfare reform and austerity
• What's the impact of the pre-2015 reforms when fully
implemented?
• Evidence gaps on the impact of reforms
– impact of the reforms as a whole
– highlight the uneven geography of the impacts
– highlight the uneven impact across households
• Research on the pre-2015 welfare reforms
– Hitting the Poorest Places Hardest 2013
• FT, Scottish Parliament, SHU
– Scottish Parliament Welfare Reform Committee - 4 reports
– Local studies - Northern Ireland, Welsh Valleys, Sheffield,
Hampshire
Adding to the evidence base
• Outturn of pre-2015 welfare reforms to March 2016
• Anticipated impact of post-2015 welfare reforms by 2020/21
– individual reforms
– overall
– by household type
– by tenure
• Anticipated impact of all pre and post-2015 welfare reforms
by 2020/21
• Current research funded by
– Sheffield Hallam University
– Oxfam
– Joseph Rowntree Foundation
New evidence
• Our estimates are firmly grounded in:
– HMRC budget announcements
– DWP Impact Assessments and Equality Impact Assessments
– For pre-2015 reforms updates since original announcements in
subsequent budgets and out-turn figures
• Government administrative statistics
− NOMIS, DWP STAT-XPLORE, HMRC, ONS
• See statistical appendix of report for all details of reforms,
data sources and methods
• Document the impacts, not comment on merits
Methods
• Housing Benefit: Local Housing Allowance
• Housing Benefit: Under-occupation SRS (‘bedroom tax’)
• Housing Benefit: Non-dependant deductions
• Household benefit cap
• Council Tax Support
• Personal Independence Payment
• Employment and Support Allowance
• Child Benefit
• Tax Credits
• 1 per cent up-rating
Pre-2015 reforms
Estimated annual financial loss by March 2016
from pre-2015 reformsLoss
(£m pa)
Tax Credits 4,210
Child Benefit 3,030
1 per cent uprating 2,700
Housing Benefit: LHA 1,670
Personal Independence Payments 1,190
Employment and Support Allowance 650
Council Tax Support 370
Housing Benefit: ‘bedroom tax’ 360
Non-dependant deductions 210
Household benefit cap 100
TOTAL 14,490
Source: Sheffield Hallam estimates based on official data
• Universal Credit tapers and thresholds
• Tax Credits
• Mortgage interest support
• 'Pay to stay'
• LHA cap in social rented sector
• Housing Benefit: 18-21 year olds
• Employment and Support Allowance (new reforms)
• Benefit cap (new reforms)
• Benefit freeze
Post-2015 reforms
Estimated annual financial loss by March 2016
from pre-2015 reforms
Estimated loss
£m p.a.
Benefit freeze 4,010
Universal Credit tapers & thresholds 3,220
Tax Credits 2,115
Personal Independence Payments(1) 1,680
Employment and Support Allowance 640
Benefit cap 495
Mortgage interest support 255
‘Pay to stay’ 240
LHA cap in social rented sector 225
HB: 18-21 year olds 40
TOTAL 12,920
(1) Additional post-2015-16 impact of pre-2015 reform
Sources: HM Treasury, Impact Assessments and Sheffield Hallam estimates based on official data
Anticipated financial loss by 2020/21 from post-
2015 reformsAverage loss per
affected
h'hold/individual
£ p.a.
Personal Independence Payments(1) 2,600
HB: 18-21 year olds 2,600
Benefit cap 2,350
‘Pay to stay’ 1,850
Mortgage interest support 1,500
Employment and Support Allowance 1,300
Universal Credit tapers & thresholds 1,050
Tax Credits 1,050
LHA cap in social rented sector 750
Benefit freeze 500
(1) Additional post-2015-16 impact of pre-2015 reform
Sources: HM Treasury, Impact Assessments and Sheffield Hallam estimates based on official data
£mpercentage of
2020/21 total
2016-17 2,225 17
2017-18 5,580 43
2018-19 8,885 69
2019-20 11,845 92
2020-21 12,920 100
Timing of additional financial losses arising from
welfare reform
Source: Sheffield Hallam estimates based on official data
Average financial loss £ p.a.
Pensioner couple 40
Single pensioner 40
Couple – no children 200
Couple – one dependent child 900
Couple – two or more dependent children 1,450
Couple- all children non-dependent 200
Lone parent – one dependent child 1,400
Lone parent – two or more dependent children 1,750
Lone parent – all children non-dependent 250
Single person household 250
Other – with one dependent child 1,130
Other – with two or more dependent children 1,360
Other – all full-time students 0
Other – all aged 65+ 50
Other 300
Source: Sheffield Hallam estimates based on official data
Anticipated loss in 2020-21 from post-2015 welfare
reforms, by household type
Number of
working age
households, GB,
millions, 2011
Average loss per
working age
household
£ p.a.
Social rented sector 3.6 1,690
Private rented sector 4.1 730
Owner occupied 12.2 290
Anticipated loss in 2020-21 arising from post-2015
welfare reforms, by tenure
Source: Sheffield Hallam estimates based on official data
Estimated
loss
£m p.a.
Loss per
working age adult
£ p.a.
North West 3,600 790
North East 1,300 790
Wales 1,450 770
West Midlands 2,650 750
Yorkshire and the Humber 2,550 750
London 4,250 730
East Midlands 2,000 680
Scotland 2,200 640
South West 2,100 630
East 2,200 600
South East 3,100 560
Great Britain 27,400 690
Anticipated loss by 2020-21 arising from all pre and
post-2015 welfare reforms, by region
Estimated loss arising from pre-2015 welfare reforms
by March 2016, by district
Loss per
working age adult
£ p.a.
TOP 10 DISTRICTS
Blackpool 720
Westminster 680
Knowsley 560
Brent 550
Middlesbrough 550
Hastings 540
Barking and Dagenham 540
Torbay 530
Enfield 530
Hartlepool 520
REGIONS
North East 410
North West 410
London 410
Wales 400
Yorkshire and the Humber 380
West Midlands 380
East Midlands 350
South West 330
Scotland 330
East 320
South East 310
Great Britain 360
Source: Sheffield Hallam estimates based on official data
Anticipated loss by 2020-21 arising from post-2015
welfare reforms, by district
Source: Sheffield Hallam estimates based on official data
Loss per
working age adult
£ p.a.
TOP 10 DISTRICTS
Blackburn with Darwen 560
Blackpool 560
Barking and Dagenham 530
Bradford 510
Knowsley 500
Sandwell 500
Oldham 490
Birmingham 490
Leicester 490
Middlesbrough 490
REGIONS
North West 380
North East 380
Wales 370
West Midlands 370
Yorkshire and the Humber 360
East Midlands 330
London 320
Scotland 320
South West 290
East 280
South East 250
Great Britain 320
Anticipated loss by 2020-21 arising from all pre and
post-2015 welfare reforms, by district
Source: Sheffield Hallam estimates based on official data
Loss per
working age adult
£ p.a.
TOP 10 DISTRICTS
Blackpool 1,270
Knowsley 1,070
Blackburn with Darwen 1,070
Barking and Dagenham 1,060
Middlesbrough 1,040
Hastings 1,010
Thanet 1,000
Burnley 1,000
Torbay 990
Hyndburn 980
REGIONS
North West 790
North East 790
Wales 770
West Midlands 750
Yorkshire and the Humber 750
London 730
East Midlands 680
Scotland 640
South West 630
East 600
South East 560
Great Britain 690
Anticipated loss by 2020-21 arising from all pre and
post-2015 welfare reforms, by district
Source: Sheffield Hallam estimates based on official data
Loss per
working age
household
£ p.a.
TOP 10 DISTRICTS
Newham 2,740
Barking and Dagenham 2,670
Enfield 2,610
Leicester 2,600
Blackpool 2,570
Luton 2,570
Birmingham 2,530
Sandwell 2,500
Blackburn with Darwen 2,500
Bradford 2,440
REGIONS
West Midlands 1,960
North West 1,860
Yorkshire and the Humber 1,860
East Midlands 1,860
Wales 1,840
North East 1,810
London 1,780
South West 1,540
East 1,500
Scotland 1,430
South East 1,380
Great Britain 1,690
Relationship between deprivation and anticipated financial loss
in 2020-21 from post-2016 welfare reforms, by local authority
Sources: Sheffield Hallam estimates and University of Cambridge adjusted IMD for GB
Universal Credit tapers and thresholds – anticipated
impact to 2020-21
Source: Sheffield Hallam estimates based on official data
Tax Credits (new reforms) – anticipated impact to 2020-21
Source: Sheffield Hallam estimates based on official data
Employment and Support Allowance (new reforms) –
anticipated impact to 2020-21
Source: Sheffield Hallam estimates based on official data
‘Pay to stay’ – anticipated impact to 2020-21
Source: Sheffield Hallam estimates based on official data
LHA cap in social rented sector – anticipated impact to
2020-21
Source: Sheffield Hallam estimates based on official data
Benefit cap (extension) – anticipated impact to 2020-21
Source: Sheffield Hallam estimates based on official data
How much will be offset?
• Personal tax allowances
– increase from £10,600 in 2015/16 to £12,500 by 2020/21
– worth £380 a year
BUT
– many in low paid part time work (especially women) will already be below these tax thresholds
– will not benefit those on out-of-work benefits
– half of this amount might be expected anyway if increases in line with inflation
• National Living Wage
– from April 2016 £7.20 per hour for 25yrs+ an increase of 70p on minimum wage - will benefit 2.7m low paid workers in short run (£25 per week, £1,275 per year if FT)
– aspiration to increase to £9 per hour by 2020
BUT
– UC revised tapers and thresholds will increase withdrawal rate of support
How much will be offset?
• Reduction in social sector rents
– 1 per cent a year reduction for four years (England only)
– affects landlords income rather than HB tenants
– about 1/3 tenants not on HB will benefit from lower rent
– government estimates £12 a week or £600 a year gain (£900m a year)
BUT
– widening gap between social sector and market rents means that higher-
income tenants may face even bigger payments under the new ‘pay to stay’
• Discretionary Housing Payments
– £800m over 5 year period - on average £160m p.a.
BUT
– £495m from the lower Benefit Cap alone by 2020/21
– DHP temporary, but welfare reforms permanent
How much will be offset?
• Extension of free childcare. – from September 2017, increase from 15 to 30 hours a week for working parents
of 3 and 4 year olds
– worth up to £2,500 a year per child
– tax-free childcare up to £2,000 per child from early 2017
– net cost to the Exchequer is estimated to be £585m a year in 2020-21
BUT
– households with dependent children estimated to lose £10.7bn p.a by 2020-21
– won't benefit those out of work
• Overall– Goes some way to offset financial loss
– But the winners and the losers are unlikely to be the same people
– Unlikely full loss will be offset in this way
An assessment
• Financial losses of £13bn a year to claimants by 2020-21
• Cumulative loss since 2010 to £27bn a year
• Over 80 per cent of the loss from the post-2015 reforms will fall on
families with dependent children
• Just under half of the financial loss from post-2015 reforms is
estimated to fall on working-age social sector households
• Older industrial areas, less prosperous seaside towns, some
London boroughs are hit hardest
• More deprived local authorities face greater financial losses
• Tax thresholds, the minimum wage, social sector rents, DHPs and
childcare entitlement will help offset some, but unlikely all of the loss
• Winners and the losers are only sometimes the same people
• Welfare reform will widen the gap in prosperity between the best
and worst local economies across the country
http://www.shu.ac.uk/research/cresr/sites/shu.ac
.uk/files/welfare-reform-2016.pdf
Dataset:
http://www.shu.ac.uk/research/cresr/sites/shu.ac
.uk/files/welfare-reform-2016.xlsx
Report:
https://public.tableau.com/profile/welfare.re
form.2016#!/vizhome/Impact_1/Maps
Interactive maps:
Contact details:
Professor Christina Beatty
http://www.shu.ac.uk/research/cresr/