B. Employment and Support Allowance
Regulations 2008 (SI 2008/794)
Employment and Support Allowance (Transitional
Provisions) Regulations 2008 (SI 2008/795)
Summary: These Regulations set out the conditions
of entitlement and procedure for the new Employment and Support
Allowance (ESA). ESA will be payable to those who have a health
condition or disability which affects their ability to work and
will replace incapacity benefit, severe disablement allowance
and sickness-related income support. The objective of the Regulations
is both to reduce the number claiming the benefit and to help
people more actively to take up work. Although there has been
extensive consultation and there appears to have been general
support for the principles behind the Regulations, a number of
organisations have written to the Committee to express considerable
concern that the Regulations do not meet with their understanding
of the Government's intention. DWP argue in return that the Regulations
fulfil all of the Government's undertakings. The Regulations are
complex and claimants may find it difficult to understand the
operation of this allowance. The Government need to do more to
explain how this system will work and to address the concerns
of interest groups that are in a position to offer significant
assistance in helping claimants understand the new system.
These Regulations are drawn to the special attention
of the House on the ground that they give rise to issues of public
policy likely to be of interest to the House.
9. The Department for Work and Pensions (DWP)
have laid these Regulations under the Welfare Reform Act 2007,
together with an Explanatory Memorandum (EM) and Impact Assessment
(IA). They set out the conditions of entitlement and procedure
for the new Employment and Support Allowance (ESA). ESA will be
payable to those who have a health condition or disability which
affects their ability to work and will replace incapacity benefit,
severe disablement allowance and sickness-related income support.
ESA implements proposals in Part 1 of the Welfare Reform Act 2007
and will apply initially to new claims made after 27 October 2008[2].
10. The ESA will focus on how people can be helped
into work and will not automatically assume that, because a person
has a significant health condition or disability, they are incapable
of any work; entitlement will be based on assessments of the individual's
abilities carried out during the first 13 weeks of their claim.
This will be followed by a series of work-focused interviews to
help the individual into work commensurate with their abilities.
A note provided by DWP is published at Appendix 1 which explains
key elements of the new process in relation to the claimant. A
further note explains some of the operational and administrative
issues such as how sanctions might be applied or the conditions
under which a work focused interview might be deferred. The Government
are preparing fuller guidance.
11. The Government have consulted extensively
on the issues involved and there appears to have been general
support for the principle of the change from the incapacity benefit
regime to ESA. A number of organisations have however written
to the Committee to express considerable concern that the Regulations
do not meet their understanding of the Government's intentions
and undertakings. The organisations are the Disability
Benefits Consortium, the Citizens Advice Bureau, the Chartered
Institute of Taxation, the Child Poverty Action Group, the Disability
Alliance and Leonard Cheshire Disability, and their letters are
printed at Appendix 1. Their key concerns are:
- the ESA rate for single people £89.50 does
not exceed the current rate of Incapacity Benefit contrary to
Government undertakings given during the course of the Bill;
- two individuals with similar circumstances will
receive different incomes depending on whether their benefit is
based on National Insurance contributions or not;
- earned income and tax may have a perverse effect
on a benefit designed to help people back into work;
- the different treatment of ESA claimants' access
to other "passported" benefits, e.g. prescription charges,
free school meals, legal aid and the social fund. Those on income-related
ESA will have an automatic right to those additional benefits,
whereas those on contribution-based ESA will be subject to a separate
means-test for each one;
- the potentially negative effect of these changes
on households which include children;
- the increased restriction on disabled students
pursuing a course of study.
12. DWP have responded to clarify the position,
stating that in introducing ESA they have attempted, wherever
possible, to align the rules for contributory and income-related
benefit recipients. Certain over-arching rules, such as the treatment
of income for tax purposes, may prevail. The Department have said:
"The tax position
- "The fundamental principle
is that benefits such as contributory ESA, which take the place
of earned income, are taxable. And because the amount of contributory
ESA payable will not, in most cases, be reduced by any other income
it should be taken into account when computing the customer's
income for tax. However it should be noted that a person whose
only taxable income is a contributory benefit is unlikely to have
an income which results in a tax liability (since ESA rates will
be below the basic personal allowance). Income-related benefit
is not taxable because it is withdrawn one-for-one if the claimant
has other income. Tax rates and allowances are matters for the
Treasury.
"Permitted work
- "To incentivise and help
people make a gradual move into full-time employment, the Government
announced last year that the existing permitted work higher earnings
limit would be aligned across the contributory and income-related
elements of ESA. This means that anyone claiming contributory
or income-related ESA will be able to earn up to £88.50 per
week for up to 52 weeks without affecting their day- to- day earnings
replacement benefit entitlement. This is an important change which
will provide many more people with the opportunity to realise
their aspirations. Currently a customer in similar circumstances
on Income Support would have benefit reduced pound for pound for
any earnings over £20, and would therefore have less of an
incentive to try work This means that customers in this position
could be around £3,500 a year better off as a result.
"Interaction with other benefits
- "The way the permitted work
rules will interact with Housing and Council Tax Benefits for
contributory ESA only customers, the situation will be no different
to how Incapacity Benefit only customers are currently treated.
The permitted work limits and earnings disregards are finely balanced
between allowing a person to try out work and build confidence
whilst not undermining work incentives and helping them to move
into full time work. The 85% taper means that, overall, a person
is better-off as they are able to keep around £30 of their
Housing and Council Tax Benefits, rather than £20.
- "In addition, a person who is undertaking
permitted work and receiving contributory ESA only is in exactly
the same position as a person currently on contributory Incapacity
Benefit undertaking the same work in relation to passported benefits
such as health costs and legal aid. The fact that they received
contributory benefit would not make them ineligible, although
they would not be passported onto these benefits, and they could
still make a separate application. Where a customer receives contributory
ESA with an income-related ESA top-up, they will remain entitled
to full housing and council tax benefits entitlement. A customer
whose only income is contributory ESA would also be entitled to
full Housing Benefit and Council Tax Benefit.
"The ESA benefit rate.
- "The government does not
accept that the rates which have been announced are incompatible
with statements made to Parliament. The rate of £84.50 for
those in the work-related activity component is above the rate
of long-term Incapacity Benefit (£81.35) at the time the
statements were made. In addition the rate of benefit for those
in the support group will be £89.50 and those in this group
will be made automatically eligible for the Enhanced Disability
Premium of £12.60 making a minimum income guarantee for those
without any other income of £102.10 a week. Existing customers
at the point of change will continue to have the cash level of
their benefit protected."
13. The Regulations are complex and it is difficult
to work out the interactions between their different components.
The Government need to do more to explain how this system will
work and to address the concerns of interest groups, groups which
are in a position to offer the Department significant help in
furthering claimants' understanding of the new system.
2 See also Employment and Support Allowance (Consequential
Provisions) Regulations (SI 2008/1082) Back
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