APPENDIX 2
Memorandum submitted by Ms Lorna Reith,
Disability Alliance (TAB 63)
DISABLED PERSON'S TAX CREDIT
1. INTRODUCTION
In his Budget speech Chancellor Gordon Brown
announced that the Government would be replacing Disability Working
Allowance (DWA) with a Disabled Person's Tax Credit (DPTC) from
October 1999. The new credit would be more generous than DWA in
two ways. The threshold for entry onto the benefit would be higher,
bringing more people potentially into its scope, and the rate
at which benefit is reduced as earnings rise (the taper) would
be less steep than DWA. No further details were announced but
the impression given was that in other respects DPTC would mirror
DWA.
2. THE BACKGROUNDDISABILITY
WORKING ALLOWANCE
2.1 What is DWA?
DWA is a means-tested benefit introduced in
April 1992. It is available to disabled people who are in employment
but earning a low wage and is based on the model for Family Credit.
To qualify people must be:
in employment and working 16 hours
or more a week;
have an illness or disability which
puts them at a disadvantage in getting a job;
be in receipt of disability living
allowance or have been in receipt of incapacity benefit, severe
disablement allowance or a disability premium (with one of the
means tested benefits) in the 8 weeks before making a claim for
DWA;
have an income below a set threshold*;
have savings less than £16,000*.
(* both these limits are affected by the income
or savings of a spouse)
2.2 How many people get DWA?
Current estimates put the number of recipients
of DWA at approximately 14,000. At the time of its introduction
in 1992 DWA was expected to reach 50,000 disabled people, two-thirds
of whom would be people moving off incapacity benefits and back
into work. Estimated projected savings from the introduction of
DWA were £10 million. However, as an incentive to encourage
disabled people back into work DWA has been spectacularly unsuccessful.
Research (Disability, Benefits and Employment, DSS Research Report
No. 54, TSO Rowlingson and Berthoud 1996) shows that most recipients
had not even heard of DWA until after they started work. In practice
the most common qualifying benefit is DLA (which someone can get
while in employment).
2.3 DWA has failed as a work incentive measure
but has been marginally successful in terms of job retention and
despite its limitations has been very helpful for those people
who do manage to qualify.
3. WHY HAS
IT FAILED?
3.1 The assumption behind DWA was that it would
act as a partial capacity benefit, providing support to those
less severely disabled people who were most likely to be able
to enter the labour market. In practice however, the stricter
test of entitlement introduced for Incapacity Benefit (receipt
of which is one of the qualifying conditions) effectively ruled
out the very group of disabled people who might otherwise have
been assisted by DWA.
3.2 Once entry onto DWA had been limited to
more severely disabled people (those on DLA or IB) the benefit
was doomed to fail as a means of assisting people into employment.
3.3 DWA was designed as a work incentive. It
took as its starting point the disabled person on incapacity benefit
and looked at how that person might be encouraged into employment.
This assumption meant that the person who developed health problems
or became disabled while in work could not easily access the benefit.
It was not designed with them in mind. In practice (unless they
were severely disabled enough to qualify for DLA) someone in this
position would have to give up their job, leave the labour market,
move on to incapacity benefit, then try and re-enter employment,
to meet the qualifying conditions for DWA.
4. DISABLED PERSON'S
TAX CREDIT
4.1 The introduction of DPTC provides an excellent
opportunity to create a benefit which will assist disabled people
both to access and to keep employment.
4.2 The importance of help with job retention
cannot be overestimated. The 1.5 million recipients of incapacity
benefit all once had a job. IB is, after all, a contributory benefit.
If appropriate help had been provided at the right time a proportion
of those on IB might have remained in the labour force. A DPTC
could provide much needed financial support for someone whose
condition (multiple sclerosis for example) means they need to
move from full to part-time work, but wish to remain with the
same employer.
4.3 We recommend that the "qualifying benefit"
rules for the new DPTC should enable people to claim immediately
if they are working and satisfy the condition of being disabled
and at a "disadvantage in getting a job". The test currently
used for DWA renewals (all DWA claims have to be renewed every
six months) could be easily adapted to become the main entry test
for DPTC. See Annex 1 to this paper.
4.4 We suggest the following changes are considered
as a means of making the benefit more successful:
lessening the means-testing element
either by disregarding a spouse's income, or by including a spouse's
earnings disregard;
disregarding DPTC when calculating
Housing Benefit or Council Tax Benefit entitlement;
add in an allowance for mortgage
interest paymentsthis would assist those people who became
disabled after taking out a mortgage and whose reduced earning
capacity means they are not able to command earnings sufficiently
high to pay their mortgage. It seems unfair that a tenant who
becomes disabled can obtain help with their rent through housing
benefit but a homeowner in a similar position cannot.
5. DECISION MAKING,
APPEALS AND
ACCOUNTABILITY
5.1 All social security benefits come with a
legally defined set of entitlement conditions, claiming processes
and appeals procedures. Proposed changes in regulations have to
be sent to the Social Security Advisory Committee for their views
before implementation. It is unclear whether the new tax credit
regimes will include any of this. We believe it is important that
statutory entitlements, whether labelled as benefits or tax credits,
should be subject to similar rights of appeal. There should also
be a process to ensure that the consequences of any proposed changes
are properly considered and see no reason for the SSAC not to
continue carrying out this important role.
6. CARING FOR
A DISABLED
CHILD
6.1 Both Family Credit and DWA include provision
for an extra earnings disregard for childcare costs, which will
also be included in the Working Families Tax Credit and DPTC.
To qualify under the current rules parents must use a registered
childminder or an out-of-school-hours scheme run on school premises
or by a local authority. The child must be under the age of 12
years. Although very helpful for many parents on low incomes current
provision rarely meets the needs of parents with a disabled child.
6.2 Parents with a disabled child can face enormous
difficulties securing appropriate childcare. The child may require
one to one care or at least a higher ratio of staff to child than
would be usual in a nursery. If the child is a wheelchair user
it is highly unlikely that a childminder in an accessible property
will be found. If the child's home has been specially adapted
it may be far better that the care is provided in the child's
home. Yet, under current provisions there is no mechanism by which
someone caring for a child in the child's home can be registered.
If the child has behaviour problems or needs medical treatment
during the day it may be far better that they are cared for by
a relative that they trust - but such a person is unlikely to
meet the registration provisions. We recommend that, where the
most suitable childcare for a disabled child is that provided
in their own home, the childcare costs of their parents are fully
taken into account for benefit purposes.
6.3 The cut-off at age 12 is not appropriate
for many disabled children who continue to require higher levels
of care than their non-disabled peers. For example, a child with
severe learning difficulties will continue to need out-of-school-hours
care up to school leaving age. We recommend that the age limit
is removed for parents caring for a disabled child.
7. CONCLUSION
7.1 The adoption of the recommendations listed
above would help ensure that these two new credits were much more
successful in meeting their objectives than the benefits they
are to replace.
Lorna Reith
Disability Alliance
May 1998
|