Fife’s Elected Representatives Briefing Note Welfare Reform in Fife
This paper sets out the current position of the major reforms in welfare benefits and gives an up to date position with regard to the implications for the Fife area. To date only around 20% of the total welfare reform changes have been implemented. A lot more reductions in welfare benefits will take place in the coming years.
Under Occupation Reductions in Housing Benefit (commonly known as Bedroom Tax/Spare Room Subsidy)
This was implemented with effect from 1st April 2013 and has been the most significant change in terms of numbers affected and the political and media interest generated. In total 5,529 have seen their HB reduced by either 14% for having 1 extra bedroom or by 25% for having 2 or more extra bedrooms. The average loss per Council Tenant is £ 10.07 per week and Housing Association tenant is £ 12.15 per week. The total housing benefit reduction in 13-14 amounts to £ 2.8 million per annum.
This change, which sees a cap of £350 per week for single persons and £500 per week for couples and lone parents, was introduced from July 2013. In Fife there are 75 customers affected by the cap. Whilst the number of tenants affected is small, the amount they are losing is considerable. The average loss is £ 56.74 per week. The total housing benefit reduction annually equates to £ 221,000.
Local Housing Allowances Changes (Private Sector)
Various limits were introduced into the private sector; these commenced earlier in April 2011 and January 2012 for under 35’s. These are summarised:
- Limit HB for single persons aged under 35
- Cap number of bedrooms awarded under size criteria
- Move the rate from 50 percentile to 30 percentile
- Removal of £15 per week excess payment
Overall the changes have affected 2,727 tenants and the average loss is as follows:
296 under 35’s lost an average £ 25.35 per week with an annual loss of £38,000
1,431 private tenants lost an average £ 3.40 per week due to the percentile change with an annual reduction of £ 251,000.
An estimated 1,000 tenants lost an average £9 per week as a result of the removal of the £15 excess payment with an annual reduction of £ 465,000.
The total reduction from LHA changes amounts to £754,000 per annum.
Discretionary Housing Payments (DHP)
To mitigate the above changes, the Department for Work & Pensions (DWP) has increased the DHP fund. As with previous briefings and for contextual purposes the DWP have increased the fund to £ 539,010 for 2013-14. Fife Council agreed for 2013-14 to increase the fund by the maximum allowed (1.5 times the DWP contribution). The Scottish Government have recently announced that they will provide the 1.5 times funding so Fife Council can return this portion of funding back to the welfare reform budget. Thus the total fund amounts to £1.35 million for 2013-14.
In terms of current level of claims Fife Council has now received 3,600 application since April and committed awards already of over £1 million. New applications continue to be received at over 100 per week. This compares with less than 400 received in all of 2012-13. A ten-fold increase already and with the current spend projections, it is envisaged that the complete fund will be utilised for 2013-14.
In addition to the above the DWP made £20 million available nationally in additional DHP funding available by a bidding process. Fife Council has submitted a bid for £150,000 to assist a further 300 applicants obtain support from the fund. We await the outcome of the bid which should be known by the end of 2013.
Council Tax Reduction Scheme
Unlike in England where each local council had to devise a replacement scheme for Council Tax Benefit, Local Authorities in Scotland worked with the Scottish Government via COSLA and agreed a strategy that a national scheme would operate in Scotland. This scheme has been implemented without any major issues except that the funding of the scheme was subject to a 10% cut from the DWP. This meant in Scotland a £40 million black hole needed to be met and the choice was either to reduce the support we give to recipients of the scheme or meet the shortfall from other funding. The Scottish Government and COSLA agreed a funding package for 2013-14 and extended to 2014-15 which meant customers would see no reduction in the level of support and the Scottish Government would commit £23 million with LA’s contributing the £17 million. In terms of Fife Council our contribution is £1.2 million per annum for the two years. This was funded from the Council’s welfare reform budget.
Incapacity Benefit (IB) Reassessment
This process commenced from Oct 2011 and will continue to run until 2016. The DWP are reassessing all current recipients of Incapacity Benefits for entitlement and transfer to Employment Support Allowance. Over 30,000 customers with face a medical assessment by ATOS health and over 3000 will find they have no entitlement to ESA and will have to become Job Seekers. This leads to an increase in appeals which need to be supported by third sector agencies such as CARF and Fife Law Centre. The potential average loss for the customer is £ 39 per week. The total loss to Fife area is in the region of £ 6 million.
Changes in Tax Credits have limited entitlement to many recipients by changing the required number of hours worked.
Changes have been made to Income Support for lone parents. The DWP have reduced the age of children from 7 to 5 where a lone parent is required to make themselves available for work. It is envisaged that this will be reduced further to 3 years old. This has the effect of transferring them from Income Support to Job Seekers allowance (see next change).
From October 2013 the DWP have introduced the new claimant commitment for Job Seekers. This will be rolled out in Fife shortly. This introduces significant sanctions for job seekers who do not demonstrate that they are looking for employment. The second part of this process is the mandatory work program where long term job seekers will be compelled to undertake unpaid employment to get them ready to re-enter the workplace.
Disability Living Allowance (DLA) replaced by Personal Independence Payment (PIP)
From July 2013 no new claims for DLA are allowed, instead customers have to claim PIP. From October 2013 on a phased basis all current claimants of DLA will be reassessed under the PIP rules. The phasing will run until 2016 and during this period an estimated 36,000 DLA customers will be reassessed. The DWP’s own predictions is that 20% will lose their DLA and unlike IB reassessment where if a person appeals their ESA is reinstated until the appeal is heard, if a customer is found to be not entitled to PIP, they can appeal but will lose their benefit until the appeal is heard. The potential reduction in DLA payments is estimated at £79 per person which equates to a total annual reduction if Fife by 2016 of £30 million per annum. This is only the reduction in DLA and not the reductions in other benefits such as Income Support or Housing Benefit as a result of the person losing DLA will also lose the disability premium in other benefits. The changes will also impact on blue badges etc.
Child Benefit has been withdrawn from families where there is an earner whose income exceeds £60,000 per annum and is reduced where there is an earner whose income exceeds £50k but is less than £60k per annum.
Indexing of Welfare Benefits
In his last budget statement, the chancellor announced that for the next three years, welfare benefits for the working age, will only be increased by 1% per annum. After this period the increases will revert back to CPI increases instead of RPI which was used in the past. This will result in lower than inflation rises for all welfare benefit customers who will see their incomes and spending power eroded over time.
Universal Credit (UC)
The flagship of the welfare reform changes which aims to combine 6 means tested working age benefits (Job Seekers, ESA, Income Support, Working & Child Tax Credits and Housing Benefit) into a universal credit. We are still in the early stages of pilot/roll-out with only one job centre in Scotland (Inverness) currently working with UC. We estimate that the roll-out will commence in Fife by January 2015 but due to the lack of a current migration plan from the DWP this is speculation. The impacts on working age customers and the Council is profound.
Further information will be shared once it is available.