People Councils Economy

Transcription

1 People Councils Economy the 2 nd editionv 3 An assessment of the impact of proposed changes to the UK Benefits System on people, councils and the economy in Scotland. March

2 Authors The Scottish Local Government Forum Against Poverty is a network of more than twenty Scottish local authority members and officers, together with other public and third sector organisations with a specific interest in anti-poverty and social justice policy issues. The Forum is primarily concerned to highlight problems of poverty, inequality and social justice in Britain today. It is also interested in developing and replicating good practice in anti-poverty strategy development amongst its members. Rights Advice Scotland is an organisation representing the many Welfare Rights Officers in Scottish Local Authorities. It aims to be a key player in the field of Social Welfare Law and to promote the excellent work and breadth of knowledge of its members. Rights Advice Scotland will work in partnership with other organisations to ensure the delivery of high quality advice across the field, providing information and training on benefit related matters to its own members and to advisers in other organisations throughout Scotland. Additionally it campaigns for the uptake of benefits and for benefit reform. The Scottish Local Government Forum Against Poverty and Rights Advice Scotland can be contacted through their joint Co-ordinator, Graham Kerr, on or at graham.kerr@rascot.org.uk Clarification and corrections A report from the Scottish Government issued 24 March (four days after this report was first published) estimates welfare reform losses for Scotland of 4.5billion over the next two years. The Scottish Government s methodology is significantly different from that used here as it draws information from share of welfare budgets and accumulates losses year on year. This report instead uses a bottom-up approach based on the official number of actual claimants in each local authority area. Losses that are known to be recurring as a result of the removal of benefit provision (see Housing Benefit section) are accumulated in this report. However any losses that are not guaranteed to recur have not been included in totals for future years as it is impossible to state with any certainty that the losses will be repeated. Although overall losses are not changed a spreadsheet error affected some of the data in the second edition. This has now been corrected, as follows: Text and tables on pages 5 updated to reflect corrected Income data and totalling. Tables on pages and 35 updated to show correct Income claimant totals and consequential change to total benefit claimed in area at February. ling on tables pages 34 and 44 corrected for consistency with regard to total benefit ruary. Inverclyde table on page 26 corrected. 2 People Councils Economy II

3 Executive Summary The UK s coalition Government will use its five year term of office to harvest more than 2billion of its planned 18billion welfare savings from Scotland s poorest people. The scale of the cuts to welfare is conservatively estimated in this report, drawing as it does on official figures from both UK and Scottish Government agencies and departments. Those hardest hit by the reforms are children, people with disabilities and social housing tenants with all three groups losing close to half a billion pounds each over the parliamentary term. The biggest benefit changes are for people with disabilities, for people previously deemed unfit for work, for social housing tenants and low income families. All are set to have often already low living standards reduced further by the controversial use of capability assessments, the discriminatory targeting of non-home owners and the ongoing devaluation of Child Benefit. The flawed capability assessment process, recently slated by the National Audit Office as being of poor value with far too many wrong decisions being made, will come under further high-profile scrutiny through the introduction of the Personal Independence Payment. All benefit recipients, with the exception of those solely in receipt of state pension, are sharing the experience of seeing the value of their fall as a direct result of the apparently cynical and unjustifiable switch from RPI to CPI for benefit uprating. And the devaluation is being compounded with the recent decision to limit the uprating of many benefits including Maternity, Statutory Sick Pay and Housing Benefit to just 1% from and Child Benefit by 1% from. It is worth noting that the Government announced the 1% restriction as being for out-of-work benefits. The vast majority of Maternity, Statutory Sick Pay and Housing Benefit recipients are in work and it is self-evident that most children are not of working age. The RPI to CPI trick also devalues public sector pensions with a pensioner on a 10,000 annual pension set to lose more than 11,000 cumulatively over the next 20 years. And even state pensioners are not entirely protected. The age of receipt creeps ever upwards as does the age of eligibility for Pension Credit which has seen take-up in Scotland fall by more than 13,000 in the two years to February. In addition changes to Tax Credits, Housing Benefit and the introduction of Universal Credit will all have an adverse impact on Pensioners incomes in the future, as will restrictions to the level of savings allowed before becoming eligible for Pension Credit itself. With individuals and communities across Scotland set to reel at the impact of the reforms, particularly post when the big changes start to bite, local authorities will attempt to pick up the pieces resulting from central Government s actions. Advice and information services are already at full capacity; homelessness, addictions and family services are finding it harder to cope with increased demand and static or shrinking budgets, and councils charging policies will be tested, perhaps to breaking point, in a bid to maintain income to cover service costs. Receipts from Housing Benefit and Council Tax Benefit are set to fall and their will be the additional costs of operating the Scottish Welfare Fund and new Council Tax Benefit regimes. Partner agencies such as the Police Service and National Health Service are also braced for the impact of welfare reform. And many public agencies will see huge extra demands made on training budgets as organisations prepare staff for dealing with the new environment. Another challenge for Scottish Local Authorities and the NHS, among others, is the need to redefine eligibility criteria for passported benefits such as free school lunches, free bus travel, and Blue Badge parking, which have traditionally been made available to individuals or households in receipt of particular welfare benefits. The disappearance of those named benefits with the advent of Universal Credit will result in significant changes to existing local and national schemes. Finally for councils the welfare reforms present a serious threat to their reputations in their communities, some of the most controversial cuts, including the bedroom tax will be administered through councils and there is a real danger that the messenger will become the target for public anger rather than the policy-makers. People Councils Economy II 3

4 Executive Summary (continued) And what of the economy itself? At best static growth will not deliver the work opportunities that the welfare reform programme is predicated on. Upwards of 90% of benefits income is spent locally and removing 2billion over five years from an already weak economy presents immense challenges for Scotland s retailers and providers of goods and services. It is likely that the black hole in accounts caused by the benefit losses will accelerate a downward spiral of service reduction, business failure and unemployment. The welfare reform programme is the single biggest challenge facing Scotland, its people, councils and its economy. This impact report illustrates the depth and breadth of that challenge. Contents 5. The Big Picture 5. Benefit changes and their impact 6. Individual benefit changes Income 8. Employment 9. Incapacity Benefit/Severe Disablement Carers 11. Attendance 12. Tax Credits 13. Housing Benefit 14. Child Benefit 15. Benefit Cap 15. Pension Credit 16. Council Tax Benefit 17. Linked Benefits 18. Local Insight 34. Benefit profiles 46. Sources and methodology 4 People Councils Economy II

5 The National Picture From a population of 5,295,000, 1,631,520 people receive benefits, 481,600 of which are out-ofwork benefits. From a total of 2,368,034 households there are 620,650 households receiving Child Benefit of which 372,200 receive tax credits. The total amount of benefits, excluding State Pension, paid in Scotland in 2011/12 was 9,794,427,607*. Claimants by benefit and annual amount paid in Scotland (Feb ) Benefit Claimants Annual amount paid 346,940 1,360,310,676 Income 146, ,348,985 Employment 104, ,826,768 Incapacity Benefit 177, ,683, , ,652,919 Carers 52, ,414,848 Attendance 161, ,009,753 Housing Benefit 484,800 1,660,335,768 Council Tax Benefit 562, ,431,910 Pension Credit 241, ,230,424* Child Benefit 621, ,373,521 Tax Credits 468,800 1,954,808,600* 9,794,427,607 *An element of approximation is included in these figures Benefit changes and their impact Summary of losses per year directly resulting from welfare reforms Claimants at Feb Losses so far losses 346,940 1,360,310,676 5,455, ,399, ,091, ,288, ,234,707 Income 146, ,348,985 2,465,396 7,810,374 15,870,681 24,187,198 50,333,649 Employment 104, ,826,768 1,859,307 5,867,973 11,923,721 18,171,963 37,822,964 Incapacity 177, ,683,435 2,418,734 7,633,524 15,511,320 23,639,527 49,203,105 Benefit 149, ,652,919 1,970,612 6,219,250 12,637,517 19,259,800 40,087,179 Carers 52, ,414, ,659 1,258,560 1,942,454 2,658,454 6,465,127 Attendance 161, ,009,753 2,152,039 4,471,937 6,901,959 9,446,065 22,972,000 Housing Benefit 483,900 1,710,218,791 61,527, ,894, ,105, ,024, ,551,839 Child Benefit 621, ,373, ,659, ,953, ,607, ,642, ,862,429 Tax Credits 468,800 1,954,808,600* 46,270,500 46,270,500 46,270,500 46,270, ,082,000 Benefit Cap 0 7,000,000 14,000,000 14,000,000 35,000,000 6,796,839, ,383, ,779, ,862, ,588,783 2,116,615,000 People Councils Economy II 5

6 Individual benefit changes The UK Government has said that it wants to cut the number of DLA recipients by 20% through the introduction of medically assessed Personal Independence Payments that, from, will replace DLA for working age people and for new applicants of all ages. This is in addition to changing the way the annual uprating is calculated by using CPI rather than RPI. Medical assessments will eventually be applied to all existing DLA recipients and ultimately achieving the 20% reduction target would see almost 70,000 of Scotland s current DLA recipients lose entitlement to the benefit. Financially, those currently entitled to DLA can expect to share in losses totalling 683,234,707 for the period up to. DLA Claimants Feb Feb DLA DLA Change to Average annual Average annual Increase in Claimants Claimants claimants weekly Feb weekly Feb annual Feb 2010 Feb 2010 in Feb 2010 Feb 24 months 340, ,940 6, ,277,320, ,360,310,676 82,990,658 Working Age DLA Claimants only after CPI April from uprating restriction to CPI rather than RPI in April Number of claimants after 20% cut in after 20% cut in Losses as a result of 20% cut after CPI rise in 2.2% from uprating restriction to CPI rather than RPI in April 2.2%/2.6% after CPI rise in 2.2% from uprating restriction to CPI rather than RPI in April 2.2%/2.6% 855,317,061 6,612, , ,253, ,063, ,307,229 2,737, ,691,988 5,605,406 Non-Working Age DLA Claimants only Non- Working age at Feb 2010 Non- Working age at Feb Increase in claimants Average weekly Feb 2010 annual Feb 2010 Average weekly Feb annual Feb Increase in after CPI April from uprating restriction to CPI rather than RPI in April 142, ,570 2, ,695, ,319,488 34,624, ,872,102 2,273,278 Non-Working Age DLA Claimants only after CPI after CPI rise in April 2.2% from uprating restriction to CPI rather than RPI in April from uprating restriction to CPI rather than RPI in April 2.2%/2.6% after CPI rise in 2.2% from uprating restriction to CPI rather than RPI in April 2.2%/2.6% Number of claimants after 20% cut in after 20% cut in Losses as a result of 20% cut 611,025,288 4,723, ,467,844 7,290, ,206,137 9,978, , ,564, ,641,227 6 People Councils Economy II

7 DLA Case Study The following is a typical example of an individual who may be one of the 20% of claimants who may lose their entitlement to DLA Mr D lives alone and stopped working four years ago due to a long term limiting condition. Mr D is in receipt of DLA high rate care and other means tested benefits. Mr D s DLA was reviewed and was unsuccessful. Prior to review Weekly income After review Weekly income DLA high rate care Income related ESA main phase Income related ESA main phase support group support group enhanced disability premium severe disability premium total income total income Mr D lost in addition to the DLA making the total loss in income per week. Housing and Council Tax Benefit were unaffected. In addition where recipients of DLA are in receipt of chargeable care at home services from the Local Authority the service users should request a review of the financial assessment which could result in a potential loss in income from charging to the Local Authority. Income The amount of people claiming Income has fallen by almost 40,000 in the two years to February. Eligibility rules have been tightened and recipients moved to other benefits such as Employment, however the biggest impact on the amount claimants receive has been the initial decision to uprate benefits by CPI rather than RPI and then squeeze further savings from the benefit by limiting uprating to 1% 13. These changes mean that claimants will lose out on more than 50million over the period. IS claimants Feb 2010 IS claimants Feb Reduction in claimants in 24 months Average weekly Feb 2010 Annual Feb 2010 Average weekly Feb Annual Feb Lost annual in 24 months Estimated lost income as a result of CPI being used to uprate in April 186, ,890 39, ,465, ,348, ,116,774 2,465,396 After April after 1% April if CPI had been used for April from uprating restriction to 1% rather than CPI in April after 1% April if CPI had been used for April 2.2% from uprating restriction to 1% rather than CPI in April after 1% rise in if CPI had been used for April 2.2% from uprating restriction to 1% rather than CPI in April 657,373, ,183,548 7,810, ,946, ,817,586 15,870, ,586, ,773,573 24,187,198 People Councils Economy II 7

8 Employment At February there were 104,820 Employment claimants in Scotland, with a further 177,460 claimants (still) on Incapacity Benefit. Employment (ESA) is now the benefit for those unable to work and replaces Incapacity Benefit, Income through incapacity and Severe Disablement ; the UK Government intends that the change will result in less claimants receiving benefit due to inability to work. The migration from the older benefits continues; the Government intends that by all of these claimants will have been moved from these benefits, other than claimants who will reach pension age by 6 April. A notable feature of ESA is the number of appeals. Across the UK for April-June 2011, of the 102,300 appeals received by SSCS, 59% related to ESA - the highest proportion to date. This was accounted for at least in part by a corresponding drop in Incapacity Benefit appeals due to migration and the end of new claims to it. In the period 1 April to 30 June there was a 40% ESA appeals received by the Tribunals Service, across the UK. This presents advice services and the Tribunals Service itself with a considerable challenge. As regards factors influencing appeal results, some information is available from early results from a joint Department for Work and Pensions (DWP) and Her Majesty s Courts and Tribunal Service (HMCTS) pilot exercise within Great Britain. It addressed around 28,000 successful appeals during the period between 9 July and 31 October. 64.3% had reasons and of that group 40.5 per cent were due to cogent oral evidence provided by the appellant, 15.1 per cent were caused by a different conclusion being reached on substantively the same facts and 8.1 per cent were based on new documentary evidence provided by the appellant. These findings broadly support the view that claimants benefit from oral hearings and that representation and support to give cogent and focused evidence is vital. ESA claimants Feb 2010 After April ESA claimants Feb Claimants who had been in receipt of Incapacity Benefit and had been reassessed Feb Increase in claimants Average weekly Feb 2010 Average weekly Feb annual Feb Increase in average weekly Feb Increase in total annual Feb Estimated lost income as a result of CPI being used to uprate in April 49, ,820 21,300 55, ,826, ,782,614 1,859,307 after 1% April Loss if arising CPI had been from used for uprating restriction April to 1% rather than CPI in April after 1% April if CPI had been used for April 2.2% from uprating restriction to 1% rather than CPI in April after 1% rise in if CPI had been used for April 2.2% from uprating restriction to 1% rather than CPI in April 493,887, ,755,710 5,867, ,826, ,750,336 11,923, ,814, ,986,843 18,171,963 8 People Councils Economy II

9 Incapacity Benefit/Severe Disablement Incapacity Benefit applications can no longer be made. New claimants are directed towards Employment and existing recipients are being migrated to ESA and other benefits after they have completed a stringent work capability assessment. ICB/SDA ICB/SDA Decrease Average annual Average annual Lost annual Lost wkly Estimated claimants claimants in weekly Feb weekly Feb income in 24 income in lost income Feb 2010 Feb claimants Feb Feb months 24 months as a result of CPI being used to uprate in April 239, ,460 62, ,725, ,683, ,042,304 3,212,352 2,418,734 After April after 1% April if CPI had been used for April from uprating restriction to 1% rather than CPI in April after 1% April if CPI had been used for April 2.2% from uprating restriction to 1% rather than CPI in April after 1% rise in if CPI had been used for April 2.2% from uprating restriction to 1% rather than CPI in April 642,488, ,121,767 7,633, ,913, ,424,446 15,511, ,402, ,041,784 23,639,527 The amount of people out of work and claiming has risen by more than 5% in the two years to February. Although eligibility rules remain unchanged the biggest impact on the amount claimants receive has been the initial decision to uprate benefits by CPI rather than RPI and then squeeze further savings from the benefit by limiting uprating to 1% 13. These changes mean that claimants will lose out on more than 40million over the period. JSA claimants Feb 2010 JSA claimants Feb Increase in claimants Percentage increase Average weekly Feb 2010 annual Feb 2010 Average weekly Feb annual Feb Increase in in 24 months Estimated lost income as a result of CPI being used to uprate in April 141, ,510 7, % ,079, ,652,919 53,573,640 1,970,612 After April after 1% April if CPI had been used for April from uprating restriction to 1% rather than CPI in April after 1% April if CPI had been used for April 2.2% from uprating restriction to 1% rather than CPI in April after 1% rise in if CPI had been used for April 2.2% from uprating restriction to 1% rather than CPI in April 523,453, ,672,830 6,219, ,688, ,325,632 12,637, ,974, ,234,796 19,259,800 People Councils Economy II 9

10 Carers Currently Carers is paid to claimants who provide regular and substantial care, totalling at least 35 hours a week, to people who are in receipt of the middle or higher rates of the care component of, or the lower or higher rates of Attendance. People claiming Carers can t earn more than 100 a week, though it doesn t matter how much they have in other income or savings. Although Carers itself isn t means tested many carers do rely on means tested benefits, such as Income, to get by, as the rules for Carers (as well as the burden of providing care) prevent them from more than a minimal amount of work. Their net financial reward for providing care is in the form of a premium paid with means tested benefits, which is currently a week. Carers will remain outside of Universal Credit, though many carers will have to claim Universal Credit to supplement their income. The main impact from Welfare Reform will be a knock-on effect from the replacement of by the Personal Independence Payment. is being replaced by the new Personal Independence Payment for working age claimants, with a phased introduction from. Rules for Carers are being amended so that entitlement to either rate of the daily living component by the cared for person will qualify a person as a carer in the same way as did. At time of writing it appears likely that many disabled people on the higher or middle rates of care for DLA may lose entitlement under Personal Independence Payments. Carers would then lose entitlement to Carers as a result. Carers will be directly affected by the 1% benefits over the next 3 years. Although the carer s premium is exempt from 1% limit, the rest of the allowance that carers receive on means tested benefits will only increase by 1% over the next 3 years. CA claimants Feb 2010 CA claimants Feb Increase in claimants Average weekly Feb 2010 annual Feb 2010 Average weekly Feb annual Feb Increase in in 24 months Estimated lost income as a result of CPI being used to uprate in April 47,980 52,500 4, ,587, ,414,848 18,827, ,659 After April after CPI April if RPI had been used for April from uprating restriction to CPI rather than RPI in April after CPI rise in 2.2% after RPI rise in 2.6% from uprating restriction to CPI rather than RPI in April after CPI rise in 2.2% after RPI rise in 2.6% from uprating restriction to CPI rather than RPI in April 162,792, ,051,326 1,258, ,374, ,316,660 1,942, ,034, ,692,893 2,658, People Councils Economy II

11 Attendance Although there have been no direct cuts to this benefit (other than the change in uprating from RPI to CPI) the number of Attendance claimants fell between 2010 to by 6,940. The average weekly payment for Attendance rose from in 2010 to in. With the abolition of and the introduction of the new Personal Independence Payment with a much stricter eligibility criteria and assessment, it remains to be seen if there will be changes to Attendance in the future. However the main impact on Attendance a benefit for Older People is the change announced last year of increasing benefits with CPI rather than RPI, this change means that the Older People in Scotland in receipt of Attendance lose out to the tune of 2,152,039 in, 4,471,937 in, 6,901,959 in, rising to 9,446,065 in. AA claimants Feb 2010 After April AA claimants Feb Decrease in claimants Average weekly Feb 2010 annual Feb 2010 Average weekly Feb annual Feb Changes in in 24 months Estimated lost income as a result of CPI being used to uprate in April 168, ,540 6, ,900, ,009,753 2,108,798 2,152,039 after CPI April if RPI had been used for April from uprating restriction to CPI rather than RPI in April after CPI rise in 2.2% after RPI rise in 2.6% from uprating restriction to CPI rather than RPI in April after CPI rise in 2.2% after RPI rise in 2.6% from uprating restriction to CPI rather than RPI in April 578,437, ,909,895 4,471, ,163, ,065,552 6,901, ,169, ,615,256 9,446,065 People Councils Economy II 11

12 Tax Credits A couple must now work at least 24 hours a week, up from 16 hours for a single person, to qualify for Working Tax Credit. It means up to 212,000 working couples earning less than around 17,000 a year will lose close to 4,000 all their Working Tax Credit if they cannot increase their hours at work. A couple with two children on the minimum wage could be better off giving up their jobs and going on benefits if they cannot work at least 19 hours per week. Early HMRC reports estimated that up to 54,900 families in Scotland would lose out due to the changes, however other HMRC statistics suggest that a more accurate estimation of the number of Scottish families who will lose out due to the changes is 84,900 and if this is the case then the estimated loss of income to families raises to 46,270,500 per year. This loss of income via tax credits is lost every year, resulting in hard working families losing out on 185,082,000 in tax credits between 2010 and. Other tax credit changes include lowering the level of allowable household income before entitlement to tax credit is lost. This change affects any lone parent family earning over 26,000 per year and any two parent family earning over 32,000, reduced from the previously allowable 42,000. In addition, the amount that can be credited to cover the cost of childcare is reduced from 80% to 70%, resulting in families having to pay 30% of childcare costs themselves. Given the complex nature of the tax credit system it is extremely difficult to estimate the total impact of the changes on households in Scotland. Official statistics are thin on the ground and that it why the financial analysis below is limited to the one area that has been officially documented by HMRC - the number of families who will lose entitlement to the basic 545 family element of tax credit. The real financial loss delivered by the tax credit changes will be significantly higher than the figures reported here. Number of families in receipt 2011 Number of families in receipt Decrease in number of families in receipt tax credits paid 2011 Estimated However 84,900 decrease in tax families are already credits paid if identified as losing all 54,900 lose family element Family element therefore loss will be at least 523, ,800 54,900 2,176,497,200 29,920,500 46,270,500 Tax Credit Case Study Rose and John have two children aged 3 and 4. Rose and John both work as catering assistants. Rose works 16 hours per week and John 4 hours. Both get paid the minimum wage which means they jointly earn 140 per week. They have childcare costs of 60 per week. They receive working tax and child tax credits. 2011/12 Weekly income /13 Weekly income Earnings Working Tax Credit Child Tax Credit Child Benefit Child Benefit Earnings Child Tax Credit Child Benefit Child Benefit Rose and John s weekly loss is , in a month the loss amounts to and over a year their loss is 5, People Councils Economy II

13 Housing Benefit Housing Benefit is paid to assist claimants with the costs of rented accommodation when they have a low income. It is paid to claimants in or out of work. Three changes have already taken place removing more than 42 million in Scotland from private sector tenants Housing Benefit and a further 12 million from recipients under the age of 35. Housing Benefit has also been subject to uprating by CPI rather than the higher RPI and uprating will be restricted to 1%. April will also see the implementation of the social sector size restriction rules (the bedroom tax) for working age claimants. This introduces in the social sector a 14% or 25% cut in a claimants eligible rent for Housing Benefit purposes, if they are deemed to be under occupying their property by one, or two or more bedrooms using a size formula developed for the private sector. While exemption rules are still undergoing last minute review, it is estimated that 94,000 claimants will be effected by this in Scotland with 53,825,200 taken from the Housing Benefit spend across the country. The bedroom tax has the potential for a massive rent arrears across Scotland and or an other debts as claimants prioritise their rent over other spend. Such a scenario of increased rent arrears could see an evictions with all the knock on effects and costs to the local authority. Housing Benefit losses so far (to April ) Estimated Local Housing losses Scotland-wide after percentile change Number of tenants affected Annual loss 54,930 25,051,411 Estimated LHA losses Scotland-wide after removal of 15 top up Number of tenants affected Annual loss 28,620 17,118,400 Estimated losses Scotland-wide resulting from upping sharing age to under-35s Number of Weekly loss Annual loss Annual loss in claimants affected by claimant by claimant Scotland , ,269,013 Restriction of uprating to CPI rather than RPI Claimants Claimants Increase in Average annual Average annual Increase in Estimated Mar 2010 Mar claimants weekly Mar weekly Mar in lost income months as a result of Mar 2010 Mar CPI being used to uprate in April 466, ,900 17, ,520,404, ,657,253, ,849,191 6,629,014 After April after 1% April if CPI had been used for April from uprating restriction to 1% rather than CPI in April after 1% April if CPI had been used for April 2.2% from uprating restriction to 1% rather than CPI in April after 1% rise in if CPI had been used for April 2.2% from uprating restriction to 1% rather than CPI in April 1,767,560,252 1,781,786,116 14,225,864 1,785,235,854 1,820,985,410 35,749,556 1,803,088,213 1,861,047,089 57,958,876 People Councils Economy II 13

14 Housing Benefit (continued) Reduction in benefit as a result of under-occupancy Number of claimants affected Average weekly loss by claimant Average annual loss by claimant Annual loss in Scotland 94, ,825,200 Housing Benefit Case Studies Example 1 Mrs Smith is 59, single and lives alone in the three bedroom house that she and previously her family lived in for over 20 years. Although she lives alone Mrs Smith will regularly look after her grandchildren whilst her daughter is at work. Currently Mrs Smith works 20 hours at minimum wage as her hours have been reduced by her employer. Prior to the bedroom tax Mrs Smith would have been entitled to per week in housing benefit. After the bedroom tax comes into play she will have housing benefit of which represents a weekly loss of 9.73 Mrs Smith s only way of avoiding this loss is to move from her family home and give up looking after her grandchildren. Example 2 Miss Green is a lone parent with two children. She works 35 hours doing nightshift in a supermarket at 7.50 per hour. She lives in a 3 bedroom council house and currently receives tax credits of per week and housing benefit of 6.75 per week. Due to the age and sex of her children under new housing benefit rules she will be judged to be under occupying by one bedroom and so will have housing benefit of which represents a loss of.94 per week. Unfortunately for Miss Green her mother can no longer provide childcare to allow her to go to work due to having to having moved into a one bedroom property to avoid the bed room tax. As Miss Green works nightshift she is unable to find suitable childcare elsewhere and so is faced with giving up her job. Example 3 A and his partner C are in their late 30 s and have twin boys aged 14, presently they live in a 3 bedroom property with an eligible rent of 110 per week which is covered by housing benefit. Under the bedroom tax the family under occupy by one bedroom as their sons (who are under 16) are expected to share a room. This means there will be a shortfall of per week which means that A and his partner will have to find every month to avoid rent arrears. Child Benefit Child Benefit has been frozen since April 2010 and will lose further value when the April is restricted to 1%. Other losses associated with the benefit will be the restrictions on made to higher rate tax payers. Across Scotland the freeze will cost families close to 500million over the period. families children Benefit paid loss so far 2010 Annual loss in year Annual loss in year Annual loss in year 621, , ,373, ,659, ,953, ,607, ,642, People Councils Economy II

15 Benefit cap From October the UK Government will introduce a cap on the total amount of benefit that working-age people can receive. The cap will be set at 500 per week for couples and single parent households and at 350 per week for single adult households without children. The cap will apply to the combined income from benefits including: the main out-of-work benefits (Jobseeker s, Income, and Employment and except when the Component is in payment); Housing Benefit; Child Benefit Child Tax Credit; and other benefits such as Carer s. The table below shows a breakdown of the family groups affected by the Cap in Scotland. Most notable is that two thirds of the households who will have benefits cut are families with children. households % No children 1 to 4 children 5 or more children % 44% 20% Couple with no children Couple with children Lone parent Single Loss - Up to 50 per week Loss - Over 50, up to 100 per week Loss - Over 100, up to 150 per week Loss - Over 150 per week estimated annual losses 14,000,000 2% 34% 31% 34% 48% 23% 12% 16% The number of households affected has been drawn from Scottish Government figures however indications from local authorities suggest that the number of households affected is significantly less than originally estimated. However the lack of alternative official statistics means this report has to rely on what has been published even though the financial impact could be significantly less than estimated. Pension Credit Whilst the overall numbers of pensioners have increased since 2010, the biggest increase was in the number of pensioners in receipt of State pension only, this increased by 21,700. However the numbers of pensioners in receipt of State Pension, Pension Credit and Minimum Income Guaranteed fell by 12,080 and pensioners in receipt of Pension Credit and Minimum Income Guaranteed only also fell by 1,750. Overall pensioners have not been too badly affected by the majority of the Welfare Reform changes (these have still to come for pensioners and indeed future pensioners). However pensioners can still be caught with the current changes, for example from October, when Universal Credit is introduced, if either member in a couple is under the qualifying age for pension credit then the couple will be treated as working age. This means they would be expected to claim Universal Credit, and would therefore be subject to the under occupancy rule and benefit cap. Pensioners may also be affected if they have dependent children living with them as Child Tax Credits will be abolished. In future financial help will be provided under Universal Credit or through additional amounts of Pension Credit or if they are working in a low paid job and over Pension Credit age, they will no longer be able to claim Working Tax Credits. Since Housing Benefit is being abolished, Pension Credit will change. It will include a new housing credit to help towards rent. The government has said however that pensioners will be able to ask for this to come straight to their landlord. Pension Credit will also include additional amounts for dependent children as Child Tax Credit is being abolished. There will be a new savings limit for Pension Credit. At the moment the amount of savings held does not affect eligibility for Pension Credit. However, the Government has said it plans to introduce a savings limit, over which pensioners will not qualify at all. The savings limit is expected to be 16,000. Pensioners not qualifying for Pension Credit because of this rule will also not be entitled to any help towards their rent. People Councils Economy II 15

16 Council Tax Benefit The UK Government decided that as of Council Tax Benefit will be abolished and replaced with systems of locally administered assistance. In Scotland the replacement will be a Scotland-wide Council Tax Reduction Scheme. The UK Government however have simultaneously implemented a cut in the level of support available in this area. In Scotland this amounts to a reduction of 40 million in /14, however the Scottish Government and COSLA have stated they will cover this in the first year. A further reduction in central government support in year two is anticipated and as yet there has been no undertaking to provide cover beyond /14. The end of Council Tax Benefit and its replacement with a new scheme also means and end to discretionary housing for help with Council Tax and the end of accessing funeral from the social fund if you received Council Tax Benefit. At April Number of Council Tax Benefit recipients Council Tax Benefit recipients as % of households Average weekly payment Average annual payment annual 562, % ,431, People Councils Economy II

17 Linked benefits Within the benefit system it is not unusual for an award of one benefit to have a positive knock-on effect regarding entitlement to another benefit. Conversely the loss of a benefit can often have a negative impact greater than just the loss of that benefit. For instance the potential loss of (DLA) as a result of the move to Personal Independence Payment (PIP) has the potential to create issues greater than just the lost of DLA monies. For example, at the moment an award of DLA care component protects Housing Benefit claimants from loss of Housing Benefit were they to have what is known as a non-dependent living with them (typically a family member over the age of 18). The loss of the care component without it being replaced by PIP could therefore see some Housing Benefit recipients lose not just DLA monies but also substantial parts of their Housing Benefit. Linked benefit case study A commonplace example that illustrates such a scenario is as follows: Kevin is 56 and receives DLA low rate care component and high rate mobility on top of his income based ESA and full Housing Benefit. He also has his 30year old son Richard living with him. Richard works full time and earns 260 per week (before tax and national insurance). While receiving low rate care component Kevin is protected from the loss of per week from his Housing Benefit which he would incur as a result of Richards presence. If Kevin does not receive PIP and Richard continues to live there then Kevin will lose per month (using / figures) of his Housing Benefit entitlement. In addition Kevin also has a bus pass because he gets DLA high mobility. If he is then not awarded PIP Kevin will also lose his bus pass which means he has to meet the cost of bus fares out of his meagre benefit income this could lead to increased social isolation and difficulty accessing services especially in areas where public transport is expensive. People Councils Economy II 17

18 Local Insight A summary of losses per year in each local authority area directly resulting from welfare reforms Aberdeen City loss 62,592,184 Feb Losses so far losses ,209, ,838 5,328,011 5,276,955 8,541,736 19,295,539 Income 4,420 17,665,502 70, , , ,242 1,442,639 Employment 3,670 16,893,157 67, , , ,422 1,374,597 Incapacity Benefit 5,760 19,765,325 79, , , ,707 1,608,305 3,590 11,721,637 46, , , , ,790 Carers 1,130 3,235,326 12,941 26,892 41,505 56, ,142 Attendance 4,930 16,140,426 64, , , , ,166 Housing Benefit 15,860 54,357,295 1,230,821 2,710,815 3,416,784 4,145,242 11,503,663 Child Benefit 21,720 31,509,421 4,612,727 3,926,093 4,390,581 4,869,068 17,798,469 Tax Credits 13,300 52,628,100 1,471,500 1,471,500 1,471,500 1,471,500 5,886,000 Benefit Cap 250 affected , , ,750 1,901, ,125,620 7,805,571 14,812,454 17,261,058 22,713,101 62,592,184 Aberdeenshire loss 70,405,795 Feb Losses so far losses 10,240 39,978, ,914 5,335,763 5,297,881 9,213,720 20,007,278 Income 2,980 11,623,550 46, , , , ,228 Employment 2,800 12,681,760 50, , , ,781 1,031,915 Incapacity Benefit 4,710 17,565,662 70, , , ,713 1,429,318 2,440 8,015,010 32, , , , ,182 Carers 1,410 4,031,867 16,127 33,513 51,724 70, ,153 Attendance 4,700 15,267,668 61, , , , ,901 Housing Benefit 10,840 36,937,950 1,356,851 2,883,025 3,362,759 3,857,775 11,460,409 Child Benefit 30,375 43,363,856 6,348,122 5,403,163 6,042,399 6,700,902 24,494,586 Tax Credits 15,500 53,630,000 2,180,000 2,180,000 2,180,000 2,180,000 8,720,000 Benefit Cap 110 affected , , , , ,095,921 10,321,629 16,760,052 18,746,164 24,577,949 70,405, People Councils Economy II

19 Angus loss 39,998,441 Feb Losses so far losses 6,390 24,798,056 99,192 3,260,301 3,238,959 5,719,727 12,318,179 Income 2,280 9,067,469 36, , , , ,488 Employment 1,590 7,088,983 28,356 89, , , ,831 Incapacity Benefit 3,030 11,040,229 44, , , , ,344 2,310 7,566,359 30,265 95, , , ,675 Carers 990 2,858,684 11,435 23,761 36,673 50, ,060 Attendance 3,590 11,947,520 47,790 99, , , ,137 Housing Benefit 8,670 26,558,984 1,117,256 2,356,259 2,701,196 3,057,120 9,231,831 Child Benefit 13,500 18,504,564 2,708,920 2,305,680 2,578,460 2,859,461 10,452,522 Tax Credits 9,600 37,641,600 1,035,500 1,035,500 1,035,500 1,035,500 4,142,000 Benefit Cap 50 affected , , , , ,072,449 5,159,146 9,596,168 10,788,834 14,444,293 39,988,441 Argyll & Bute loss 36,140,133 Feb Losses so far losses 4,810 19,079,154 76,317 2,538,246 2,520,524 4,397,864 9,532,950 Income 1,690 7,164,856 28,659 90, , , ,112 Employment 1,500 6,807,060 27,228 85, , , ,891 Incapacity Benefit 2,220 7,556,702 30,227 95, , , ,889 2,060 6,754,987 27,020 85, , , ,653 Carers 720 2,046,845 8,187 17,013 26,258 35,937 87,396 Attendance 3,380 11,123,850 44,495 92, , , ,967 Housing Benefit 6,760 22,933,165 1,667,977 3,441,081 3,738,927 4,046,260 12,894,245 Child Benefit 9,535 13,395,850 1,961,045 1,669,131 1,866,602 2,070,025 7,566,804 Tax Credits 7,000 27,881, , , , ,000 3,052,000 Benefit Cap 30 affected ,645 91,290 91, , ,743,470 4,634,157 8,923,973 9,875,534 12,706,469 36,140,133 People Councils Economy II 19

20 Clackmannanshire loss 22,064,472 Feb Losses so far losses 3,650 14,185,652 56,743 1,822,750 1,812,388 3,275,901 6,967,782 Income 1,640 6,746,501 26,986 85, , , ,948 Employment 1,120 4,821,107 19,284 60, , , ,294 Incapacity Benefit 2,020 7,097,553 28,390 89, , , ,528 1,890 6,162,156 24,649 77, , , ,415 Carers 540 1,575,569 6,302 13,096 20,212 27,663 67,274 Attendance 1,230 4,055,064 16,220 33,706 52,021 71, ,144 Housing Benefit 5,390 19,117, ,426 1,070,489 1,318,784 1,574,989 4,455,688 Child Benefit 6,560 8,953,121 1,310,665 1,115,564 1,247,544 1,383,502 5,057,276 Tax Credits 5,100 20,420, , , , ,000 2,180,000 Benefit Cap 150 affected , , ,450 1,141,125 93,135,021 2,525,666 5,142,574 6,089,928 8,306,305 22,064,472 Dumfries & Galloway loss 55,986,748 Feb Losses so far losses 10,310 41,570, ,283 5,365,543 5,334,130 9,597,715 20,463,672 Income 3,370 13,687,996 54, , , ,154 1,117,819 Employment 2,450 11,097,814 44, , , , ,029 Incapacity Benefit 4,420 16,272,672 65, , , ,165 1,324,108 3,550 11,653,798 46, , , , ,270 Carers 1,710 4,927,057 19,708 40,954 63,208 86, ,376 Attendance 5,540 18,699,273 74, , , , ,424 Housing Benefit 12,280 40,529,403 1,172,134 2,530,056 3,056,434 3,599,580 10,358,204 Child Benefit 16,900 23,163,889 3,391,008 2,886,235 3,227,699 3,579,455 13,084,396 Tax Credits 14,700 60,799,200 1,580,500 1,580,500 1,580,500 1,580,500 6,322,000 Benefit Cap 60 affected , , , , ,401,847 6,615,280 13,316,103 15,037,947 21,017,419 55,986, People Councils Economy II

21 Dundee City loss 71,354,700 Feb Losses so far losses 11,530 44,373, ,494 6,186,457 6,132,878 10,201,920 22,698,749 Income 5,740 24,144,047 96, , , ,478 1,971,704 Employment 3,460 15,250,019 61, , , ,185 1,240,894 Incapacity Benefit 6,590 21,403,793 85, , , ,761 1,741,627 5,600 18,406,752 73, , , ,595 1,497,758 Carers 1,710 4,911,941 19,648 40,828 63,014 86, ,731 Attendance 5,080 17,051,528 68, , , , ,068 Housing Benefit 19,500 71,314,620 2,656,089 5,639,085 6,565,288 7,520,996 22,381,458 Child Benefit 16,690 22,634,227 3,313,470 2,820,239 3,153,895 3,497,607 12,785,211 Tax Credits 14,900 70,283,300 1,144,500 1,144,500 1,144,500 1,144,500 4,578,000 Benefit Cap 200 affected , , ,600 1,521, ,773,663 7,696,225 17,278,179 19,921,033 26,459,263 71,354,700 East Ayrshire loss 54,423,118 Feb Losses so far losses 9,270 37,367, ,471 4,826,575 4,798,184 8,627,012 18,401,242 Income 3,980 16,664,419 66, , , ,957 1,360,887 Employment 2,610 11,621,704 46, , , , ,658 Incapacity Benefit 4,550 15,700,776 62, , , ,807 1,277,572 4,840 16,127,654 64, , , ,495 1,312,308 Carers 1,590 4,580,472 18,322 38,073 58,761 80, ,577 Attendance 4,470 14,699,506 58, , , , ,641 Housing Benefit 13,310 42,343,902 1,648,880 3,491,864 4,041,808 4,609,271 13,791,822 Child Benefit 15,205 20,181,725 2,954,443 2,514,656 2,812,159 3,118,629 11,399,886 Tax Credits 12,500 50,537,500 1,144,500 1,144,500 1,144,500 1,144,500 4,578,000 Benefit Cap 70 affected , , , , ,825,398 6,214,872 13,004,040 14,800,680 20,403,526 54,423,118 People Councils Economy II 21

22 East Dunbartonshire loss 31,842,875 Feb Losses so far losses 5,160 20,615,026 82,460 2,636,896 2,622,361 4,761,759 10,103,476 Income 1,590 6,466,403 25,866 81, , , ,074 Employment 1,280 5,527,142 22,109 69, , , ,744 Incapacity Benefit 2,210 8,299,522 33, , , , ,332 1,870 6,053,190 24,213 76, , , ,548 Carers 690 1,987,752 7,951 16,522 25,500 34,900 84,873 Attendance 3,740 12,571,187 50, , , , ,766 Housing Benefit 4,500 17,659, ,643 1,148,239 1,377,599 1,614,265 4,673,746 Child Benefit 12,670 17,558,039 2,570,356 2,187,743 2,446,569 2,713,197 9,917,866 Tax Credits 6,600 23,872, , , , ,000 3,924,000 Benefit Cap 60 affected , , , , ,610,442 4,331,080 7,499,087 8,473,346 11,539,362 31,842,875 East Lothian loss 37,425,754 Feb Losses so far losses 5,420 21,462,116 85,848 2,783,894 2,767,075 4,953,816 10,590,634 Income 1,970 8,029,247 32, , , , ,702 Employment 1,500 6,700,200 26,801 84, , , ,195 Incapacity Benefit 2,620 9,576,310 38, , , , ,225 2,190 7,115,222 28,461 89, , , ,966 Carers 800 2,302,976 9,212 19,142 29,544 40,434 98,333 Attendance 2,870 9,388,688 37,555 78, , , ,879 Housing Benefit 7,140 23,357,225 1,176,714 2,460,497 2,763,850 3,076,867 9,477,928 Child Benefit 12,500 17,559,058 2,570,506 2,187,870 2,446,711 2,713,355 9,918,442 Tax Credits 8,400 32,692, , , , ,000 3,924,000 Benefit Cap 60 affected , , , , ,183,843 4,986,518 8,998,776 10,097,999 13,342,460 37,425, People Councils Economy II

23 East Renfrewshire loss 26,709,329 Feb Losses so far losses 4,250 17,103,190 68,413 2,218,968 2,205,544 3,947,658 8,440,583 Income 1,320 5,441,093 21,764 68, , , ,343 Employment 1,170 5,200,603 20,802 65, , , ,173 Incapacity Benefit 1,860 6,986,086 27,944 88, , , ,458 1,460 4,731,334 18,925 59, , , ,989 Carers 640 1,849,037 7,396 15,369 23,721 32,464 78,950 Attendance 3,120 10,527,754 42,111 87, , , ,515 Housing Benefit 3,890 14,582, , ,968 1,058,358 1,253,780 3,582,168 Child Benefit 11,430 16,419,811 2,403,729 2,045,919 2,287,967 2,537,310 9,274,924 Tax Credits 6,000 22,050, , , , ,500 2,834,000 Benefit Cap 30 affected ,645 91,290 91, , ,891,273 3,720,647 6,273,399 7,084,523 9,630,760 26,709,329 Edinburgh, City of loss 223,274,603 Feb Losses so far losses 22,650 86,827, ,310 12,674,060 12,544,388 19,909,434 45,475,191 Income 11,710 51,246, , ,398 1,319,577 2,011,059 4,185,022 Employment 7,350 33,794, , , ,886 1,321,149 2,749,829 Incapacity Benefit 13,550 41,437, , ,107 1,062,954 1,619,961 3,371,772 11,980 39,315, , ,313 1,008,507 1,536,983 3,199,063 Carers 3,210 9,232,345 36,929 76, , , ,204 Attendance 10,710 34,930, , , , ,281 1,491,446 Housing Benefit 39, ,731,790 13,793,126 28,451,399 30,902,566 33,431, ,578,906 Child Benefit 47,545 67,455,206 9,874,903 8,404,961 9,399,332 10,423,675 38,102,870 Tax Credits 33, ,709,000 2,834,000 2,834,000 2,834,000 2,834,000 11,336,000 Benefit Cap 840 affected 0 0 1,278,060 2,556,120 2,556,120 6,390, ,679,142 27,689,161 56,104,992 63,060,877 76,419, ,274,603 People Councils Economy II 23