Welfare Reform and Work Bill Committee

Written evidence submitted by Disability Rights UK (WRW 73)

Disability Rights UK submission to the Work and Welfare Reform Bill scrutiny committee in respect of the amendments laid as of October 8th 2015

Executive summary

Disability Rights UK presents evidence below on the financial hardship that will be the consequence of the changes proposed to the benefits system. The justification for the changes stems from a skewed view of incentives for work. We believe that correct and proper incentives to work must include: access to personalised and specialist employment support chosen by disabled people themselves; government using its procurement powers to drive accessibility and job opportunities for disabled people and enhanced legal protection to newly disabled employees to reduce the likelihood they will fall out of work. In this way we will have the real incentive of job opportunities and not the disincentive of reductions in income. We hope that the Government will one day permit an impact assessment that allows for these approaches to be contrasted and evaluated.

1.0 Introduction

Disability Rights UK is a pan-disability organisation of and led by disabled people. We are pleased to be taking this opportunity to present disabled people’s views and in submitting this response we have been informed by the queries and concerns expressed to us through their communication with us and in particular our advice lines.

2.0 Equality Impact Assessment, General Comments on incentives

2.1 The E.I.A. takes as its starting point that the benefit system has trapped people in poverty by disincentivising work but has not questioned whether other factors are responsible such as the failure of back to work support. The Work Programme has placed a mere 29,460 disabled people into work over the four year period from June 2011 to June 2015. The specialist Work Choice programme has placed 15,710 into sustained and unsupported work over the first nineteen quarters of its operation. This means an annual average of 10,660 per year or a total of 42 per working day. These outcomes are out of a total of 191,090 attachments of disabled people to these two programmes over this period. In summary a success rate of only 6.4% of all job outcomes are being achieved by disabled people on the Work Programme and only 17.6% of starts are obtaining a job on the Work Choice programme.

2.2. The second assumption is that all the previous changes have acted to create incentives. The abolition of the linkage rules for those moving from ESA to work may be just one example of a "perverse incentive" whereby the removal of the ability to go back to a benefit may have deterred many from making the journey in the first place.

2.3 The Equality Impact Assessments often fails to understand the reason people are on employment Support Allowance i.e. they have not been found fit for work. So why does the E.I.A. suggest that the removal of the Work Related activity Group premium could be replaced if the claimants simply did four or five hours work. A further consequence of this approach is that it makes the individual claimants responsible for any mitigation measures – surely it is for the Government to offer mitigations measures to alleviate the hardship faced by the E.I.A.s estimate of 500,000 affected people.

2.4 Finally the EIA is highly selective in its use of data. There is no mention of the job growth forecast by the Office of Budget Responsibility or the Institute of Fiscal Studies critique of the budget and their judgement that the changes in tax credits would act as a disincentive to people coming of benefits. If the E.I.A. takes an optimistic outlook and doesn’t look at evidence in the round or even present any evidence for either incentives or disincentives then the resulting policy will be both questionable and suspect.

Comments on specific clauses

3.0 Full employment target (clause 1-2)

3.1 Disability Rights UK welcomes the clauses committing the Government to reporting on progress towards full employment and the apprentice target though we would wish to see the former defined in the supportive regulations to the Bill. Since disabled people are the largest demographic group not in employment we would wish to see specific mention of the Government’s ambition to halve the disability employment gap as a subset of the employment target and for this to appear in the final bill. The current debate on definitions of child poverty that have been opened by the Bill reinforce the importance of this.

3.2 Changes to child tax credit and the child element of universal credit - child tax credit to be amended to remove the family element of child tax credit for any claims which do not include a child born before 6 April 2017, and also to limit the number of children that can be included in a claim to two unless there is a prescribed exception (Clause 11). Universal credit also to be amended to limit the number of children that can be included in the claim to two, and also to remove the higher amount paid for the first child (Clause 12).

3.2.1 The explanatory notes to the bill outline that –

"(ii) The changes will restrict the individual element of CTC to two children per family where specified conditions apply. A claimant will only be entitled to an individual element for a maximum of two children or qualifying young persons unless they are claiming for more than two children or qualifying young persons who were born before 6 April 2017.

New births after that date will not qualify for the individual element.

(iii) The changes will, however, ensure that any disabled or severely disabled child born or qualifying young person born on or after 6 April 2017 will qualify for the additional individual element regardless of the changes referred to in (ii) above. This is achieved by the creation of a new disability element, which through changes to secondary legislation is intended to reflect additional individual element currently payable for disabled and severely disabled children (for 2015-16, £3,140 and £4,415). This will be paid for all disabled children or qualifying young persons".

3.2.2 The effect of (iii) above is wholly inadequate as the ‘standard child element’ (£2,780 for 2015-16) will not be paid for any third of more disabled child.

3.2.3 Straightforwardly, the child disability additions within child tax credit are in place to recognise the additional costs of a disabled child. Research shows that families with disabled children are more likely to be living in poverty than other families and that it costs three times as much to raise a disabled child .

3.2.4 Clause 11 (and Clause 12 in relation to universal credit) means that low paid parents of a disabled child will lose out on child tax credit of over £50 per week at current rates.

3.2.5 Data is available to help establish the numbers of affected individuals and families. HMRC has only published finalised tax credits stats up to 2013/2104: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/430534/cwtc_Finalised_annual_awards_2013-14.pdf

In terms of adults, the only way to identify disabled people benefiting from tax credits is via the number being paid the disabled worker element. The total number of families benefiting from tax credits (both WTC and CTC) for 2013/2014 was 4.53 million –see page 1.While the above figure is in ‘millions’ the following figures are in the ‘thousands’. This means that, at least under the qualifying criteria for tax credits disability related elements, claims by disabled people are few in number in comparison to those form non-disabled people. Page 2 of the stats explains the qualifying criteria for all the ‘disability elements’. The total number of families where the disabled worker element was in payment was only 116 thousand - page 22. Of these 37,000 were getting WTC and CTC and 72,000 WTC only – see page 22. The total number of families where the severely disabled adult element was in payment was only 31,000 - page 22. Of these, 13,000 thousand were in receipt of both WTC and CTC and 13,000 WTC only – see page 22. The number of families benefiting from the disabled child element was 149,000 – see page 23. The number of families benefiting from the severely disabled child element was 62,000 – see page 23.

3.2.6 DR UK submits that both clauses be removed on the grounds that help be given to all low paid working families regardless of size or make-up because the extra costs of supporting a disabled child can affect the capacity of parents to support non-disabled children within a family.

3.3. Benefit cap - reduction of the benefit cap to £23,000 per year (£15,410 for single people) in Greater London and £20,000 per year (£13,400 for single people) outside Greater London ( Clause 7 ).

3.3.1 It is commonly thought that disabled people are exempt from the benefit cap.

3.3.2 However, disabled people are exempt from the benefit cap only insofar as they receive a certain benefit. For example, you are exempt from the cap if you or anyone in your household (a partner or dependent child) is getting attendance allowance, disability living allowance (DLA), personal independence payment (PIP) or the employment and support allowance support component.

3.3.3 However, if you are receiving ESA and are in the work related activity group you are not exempt from the benefit cap.

3.3.4 While DLA does exempt someone from the benefit cap, DLA itself is being replaced by PIP. The DWP has estimated a 2015/2016 caseload of 1.7 million people receiving PIP, whereas without introducing the new benefit it would expect the number of DLA claimants in 2015/2016 to be 2.2 million .

3.3.5 Both the above mean that the reduction in the benefit cap threshold will lead to more disabled people having their benefit capped.

3.3.6 Research by the disability charity Scope has estimated that disabled people spend on average, £550 a month on disability-related expenditure . Welfare payments aimed at alleviating these costs – Disability Living Allowance (DLA), Personal Independence Payment (PIP) and Attendance Allowance (AA) – fall far short of meeting them. In 2015/16, the average award of DLA or PIP will be around £360 a month.

3.3.7 We believe the Government should urgently reassess the impact of the cap on disabled people and their families before any further reduction is made to the cap.

3.4. Clause 13 amends the Welfare Reform Act 2007 to remove provision for the payment of the ESA Work-Related Activity Component, in both contributory and income-related ESA. Income-related ESA is to be replaced by Universal Credit. Clause 14 abolishes the corresponding Limited Capability for Work element in Universal Credit.

3.4.1 DR UK submits that both these clauses be removed from the Bill.

We submit that –

· the rationale for the changes has no evidential base;

· the changes will lead to more disabled people living in poverty; and

· changes are needed instead to disabled people’s employment support.

Their effect would mean that ESA for claimants in the Work-Related Activity Group (WRAG) would be reduced to Jobseeker’s Allowance [JSA] rates for new claims from April 2017- currently £73.10 per week for people aged 25 and over. The Work-Related Activity Component is worth around £30 per week and its removal would amount to a substantial drop of over £1,500 a year under current rules [around 40%].

3.4.2 The rationale for the changes has no evidential base

These measures were announced by the Chancellor in his 2015 Budget.

In his Budget speech the Chancellor referred to the "perverse incentive" whereby ESA claimants in the WRAG received more money than claimants of Jobseeker’s Allowance.

3.4.3 Aligning ESA rates for those in the WRAG with JSA while providing "new funding for additional support to help claimants return to work" would "ensure the right incentives and support are in place for those closer to the labour market to help them make this transition when they are ready."

3.4.5 In addition, the DWP’s Welfare Reform and Work Bill: Impact Assessment makes clear that -

"This measure is intended to provide the right incentives and support to enable those who have limited capability, but who have some potential for work to move closer to the labour market and when they are ready, back into work. Aligning the rate of benefit paid to new claims for Employment and Support Allowance and Universal Credit with limited capability for work with the standard rate paid to claimants who are fully capable of work from April 2017 will remove the financial incentives that could otherwise discourage claimants from taking steps back to work."

3.4.6 However, there is no evidential basis for the belief that the Work-Related Activity Component has or will act as a barrier to disabled people gaining employment.

3.4.7 If Clauses 13 and 14 are enacted, new ESA claimants from April 2017 will be uniformly financially penalised with no justification – in effect sanctioned.

3.4.8 In respect of ESA claimants, the latest DWP statistical release shows that in the period from 3 December 2012 - when the new ESA sanctions regime was introduced - to 31 March 2015, the total number of adverse sanction decisions was 66,846.

3.4.9 According to DWP statistics supplied in response to a freedom of information request almost 60% of the ESA claimants sanctioned between October 2013 and September 2014 had mental health problems. Similarly, more than 60% of the ESA claimants sanctioned in Scotland between December 2012 and August 2014 had "mental and behavioural disorders".

3.4.10 However, the DWP has no evidence that the new ESA sanction regime has given those whose ESA was significantly reduced a greater incentive to remain in touch with the job market or move into work.

3.4.11 In its 24 March 2015 report, Benefit sanctions policy beyond the Oakley Review , The Work and Pensions Committee called for a full independent review of the benefit sanction scheme –

3.4.12 "There is evidence that more ‘active’ unemployment benefit policies are more effective than the alternatives; but evidence on the specific part played by financial sanctions in successful active regimes is very limited and far from clear-cut.

3.4.13 DWP should increase the evidence base through a series of evaluations. In particular, it should test the efficacy and impacts of the longer minimum sanction periods which were introduced under the Welfare Reform Act 2012, and investigate whether the application of a longer sanction makes it more, or less, likely that the claimant moves into employment."

3.4.14 Again, in its 21 July 2015 report, Universal Credit: priorities for action the Social Security Advisory Committee concluded that -

"Successive administrations have strengthened the regime of penalising compliance failures with withdrawal of, or reductions in, benefit payments. SSAC, amongst others, has raised concerns about the increased use of sanctions, not because we believe that they are necessarily ineffective, but because we do not know for certain that they are effective, at least in terms of getting people into good quality jobs. We believe that the sanctions regime needs to be tested. The Department is committed to evaluating their effectiveness and we think further changes in the system should be deferred until a firm evidence base to underpin the policy has been established."

3.4.15 In his major 24 August speech o     n work, health and disability, the Secretary of State for Work and Pensions Iain Duncan Smith maintained that the gap between the employment rate of disabled and non-disabled people "isn’t because of a lack of aspiration on the part of those receiving benefits….in fact, the majority want to work or stay in work."

3.4.16 Instead the gap exists because of two factors -

"First, some employers are reluctant to employ people with disabilities.

Second, the poor quality of support they receive leads to many sick and disabled people languishing in a life without work, when work is actually possible for them."

3.4.16 Again, in going on to explain why ESA needed to be reformed, the Secretary of State stressed the need to change the work capability assessment so that it "focussed on what a claimant can do and the support they’ll need – and not just on what they can’t do."

3.4.17 Surely if the level of ESA paid to the WRAG group of claimants itself was a currently "perverse incentive" to them becoming employed – such that it requires a 40% reduction – then the Secretary of State would have also highlighted this?

3.4.18 Instead he said the opposite – that those on ESA do not "lack aspiration" and "in fact, the majority want to work or stay in work."

The changes will lead to more disabled people living in poverty

3.4.19 The proposed 40% cut to ESA will hit households with a disabled person hard – a third of whom are living below the poverty line.

3.4.20 The latest annual Family Resources Survey , which is funded by the DWP show that after housing costs are taken into account – the percentage of people living in households where at least one member was disabled who were in "absolute poverty" rose from 27% in 2012-13 to 30% in 2013-14. And they show that the number of people in "disabled households" who were living in absolute poverty rose by 300,000 in that one year. The Family Resources survey results also show that the proportion of disabled people living in relative poverty – those who are poor in comparison with the general population – increased in 2013-14 by two percentage points (about 300,000 people), while relative poverty among non-disabled people stayed roughly at the same level.

3.4.21 The proposed 40% cut must also be seen in the context of other cuts and freezes to support for disabled people, their families and carers such as the bedroom tax, personal independence payment, council tax support and social care.

3.4.22 Disabled people being supported by ESA receive a higher rate than those on JSA because they face additional barriers as a result of their illness or disability, and typically take longer to move into work.

Almost 60 per cent of people on JSA move off the benefit within 6 months , while almost 60 per cent of people in the WRAG need this support for at least two years .

3.4.23 It is unreasonable and unrealistic to expect disabled people to survive on £73.10 a week for two or more years.

3.4.24 Making higher social security payments to disabled people who are not readily able to gain employment as opposed to those who are has been a major plank of the welfare state for over 40 years.

3.4.25 Richard Berthoud in a 1998 report, Disability benefits: A review of the issues and options for reform set out why benefits had been paid at a higher rate than for those who were unemployed:

"The primary reason historically, was that those who have to live for a long time on social security could not be expected to survive on the very low level of income available as a temporary measure for short-term claimants.

3.4.26 Pensioners will be pensioners for the rest of their lives. Those who become incapable of work before pensionable age can also expect a long period on benefit (depending on the nature of their condition). Unemployed people can expect (or are at least expected) to return to work after a relatively short period – as indeed the great majority of them do.

3.4.27 This is reflected in another major difference between the treatment of disabled people/pensioners and unemployed people: the former receive non-means-tested insurance payments for life; the latter have only six months’ entitlement to contributory benefit, before having to submit to a family means test."

3.4.28 Research by the disability charity Scope has estimated that disabled people spend on average, £550 a month on disability-related expenditure . Welfare payments aimed at alleviating these costs – Disability Living Allowance (DLA), Personal Independence Payment (PIP) and Attendance Allowance (AA) – fall far short of meeting them. In 2015/16, the average award of DLA or PIP will be around £360 a month.

3.4.30 Even with the addition of the Work Related Activity Component a shortfall of around £60 a month exists.

Changes are needed instead to disabled people’s employment support

3.4.31 According to the DWP’s Office for Disability Issues , disabled people are now more likely to be employed than they were in 2002, but disabled people remain significantly less likely to be in employment than non-disabled people.

3.4.32 In 2012, 46.3% of working-age disabled people are in employment compared to 76.4% of working-age non-disabled people. There is therefore a 30.1 percentage point gap between disabled and non-disabled people, representing over 2 million people.

3.4.33 The August 2015 Office for National S t     atistics (ONS) figures show a rise of 225,000 in the number of disabled people in work, compared with the same period last year. This is very welcome news.

3.4.34 However, the ONS statistics also show that the number of unemployed disabled people had also risen, from 399,000 in October to December 2014, to 401,000 the following quarter, and now to 423,000 in April to June 2015.

3.4.35 In addition, there has been a large rise in the last quarter in the number of sick and disabled people described as "economically inactive" – those not in work and neither seeking nor available to work – from 3,313,000 to 3,399,000, an increase of 2.6% in just three months.

3.4.36 The DWP’s Quarterly Work Programme National Statistics to Mar 2015 show that just 8.7% of new ESA claimants who joined the Work Programme in March 2014 year had a 'job outcome' by March this year. In addition only 13,000 of 162,000 mentally ill participants since 2011 have found work - just 8%.

3.4.37 While it is clear that the Work Programme is still failing disabled people, nether Ministers nor Work programme Providers has previously suggested that any cause of this is the "perverse incentive" of the work related activity component.

3.4.38 Instead of reducing the ESA of some disabled people by 40% priority needs to be given to improving their employment support.

3.4.39 In preparation of our 2013 report Taking Control of Employment Support DR UK asked over 500 disabled people for their experiences and views of employment support and also analysed research evidence.

We found that:

· there is a huge appetite for a personalised service and personalised disability employment budget support. 78% of respondents would like to know more about the resources available for their support, and types of support available. 74%would like to decide how the money on their employment support is spent;

· most respondents had not had support from the Work Programme. Support to get and keep work came most commonly from family (44%), friends (35%) or a disability organisation (33%). 63% said the support they had received did not help them get a job; and

· disabled people want to be involved in shaping and directing their support. Successful employers positively embrace people with potential and the desire to learn and develop. Working together, we believe successful employers and disabled people are best placed to work out the support each requires to achieve these goals.

3.4.40 Furthermore the suggestion that the additional £30 acts to disincentivise people from moving toward work is highly questionable. Many within ESA WRAG are managing a fluctuating condition, coping with pain and fatigue or recovering from illness. While some may take steps towards work related activity at some point (and indeed they are sanctioned if they do not) others may actually experience a deterioration in their condition.

3.4.41 Cutting this benefit to the bare minimum, thereby causing debt and stress, is unlikely to help disabled people seek work effectively and would contradict the Government's aim to halve the disability employment gap as set out in the Conservative manifesto.

3.5. Freezing of certain benefits and tax credits for four tax years - provision for rates of specified benefits and tax credits to be frozen for four years from April 2016 (Clause 9 and Clause 10);

3.5.1 We welcome the exemption of Disability Living Allowance and Personal Independence Payments from the four year freeze.

3.5.2 However these clauses would freeze a number of other key benefits that many disabled people receive - jobseekers allowance, housing benefit (HB) and universal credit (UC).

3.5.3 In addition specific elements focused on disabled people such as the basic rate and work related components of ESA, HB and the limited capability work component of UC are subject to the freeze.

3.5.4 We believe this does not meet the spirit of the Conservative Party manifesto commitment which stated (p28) – ‘We will freeze working age benefits for two years from April 2016, with exemptions for disability and pensioner benefits – as at present’

3.6. Personalised and specialist support

3.6.1 Disability Rights UK welcomes this clause but cautions that the prime contracting – sub contracting method of contracting is failing to deliver personalised and specialist support and that a review of this is required with an outcome that would allow for disabled people themselves to be able to have a personal budget and contract themselves for effective employment support. We have responded to the consultation on future contracting of the Work Programme with specific suggestions of how this could be implemented.

October 2015

Prepared 16th October 2015