Select Committee on Merits of Statutory Instruments Eighteenth Report

 
 

 
APPENDIX 1: EMPLOYMENT AND SUPPORT ALLOWANCE REGULATIONS 2008 (SI 2008/794) AND EMPLOYMENT AND SUPPORT ALLOWANCE (TRANSITIONAL PROVISIONS) REGULATIONS 2008 (SI 2008/795)


Written evidence

Letter from the Disability Benefits Consortium

1.  The Disability Benefits Consortium (DBC) brings together a wide range of disability organisations, cancer charities, older people's organisations, advice services, carers' organisations and other organisations. The DBC aims to lobby and campaign on welfare benefits as they relate to disabled people.

2.  The changes introduced by the statutory instruments have tremendous ramifications for the lives and livelihoods of the people affected by disability or ill health that we represent. Throughout the parliamentary progress of the Welfare Reform Act 2007, DBC members were very active, both individually and collectively, lobbying parliamentarians in the Bill Committees and all other Bill stages in both Houses; and meeting with Government Ministers and Department for Work and Pensions officials.

3.  While we fully recognise the willingness of Ministers and officials to hear our concerns during the preparation and passage of the legislation, we believe that the regulations now before Parliament do not fulfil important commitments and reassurances given to ourselves and to Parliamentarians. We also believe that they are contrary to specific policy objectives on welfare reform and employment and broader policy objectives on the wellbeing of disabled people and the reduction of poverty.

4.  Below, we set out our principal concerns about regulations currently laid before Parliament. Some DBC members will also be making individual submissions.

Core policy objectives

5.  The policy objectives for incapacity benefit claimants laid out in the Green Paper A new deal for welfare: Empowering people to work, (published prior to the Welfare Reform Bill), were increasing the numbers of claimants, or those who would otherwise become claimants, able to obtain or retain employment and "better addressing the needs of all those who need extra help and support." (p.24).

6.  While there was an expressed intent to reduce the number of people moving onto the new benefit, this was to be achieved by "prevention and proactive intervention"(p.29) rather than the narrowing of the gateway to receive the benefit.

7.  Stakeholders were also given to understand that better addressing the needs of all those who need extra help and support would include steps to address the economic insecurity of IB claimants, the majority of whom subsist on incomes well below the poverty line.

8.  DBC members believe that these objectives are not being met in the regulations laid before Parliament. Contrary to expectations, existing IB claimants will soon be required to undergo the Work Capability Assessment, instead of the current Personal Capacity Assessment for IB. The Government has estimated this will result in 10% of those people losing their entitlement and being required to claim other benefits, most likely Jobseeker's Allowance. This clearly could result in them having less support and lower income. We estimate from current claimant data that there are up to 40,000 children who could be affected by the resulting fall in income for their family. We believe this is completely contrary to the Government's commitment to eradicate child poverty and contrary to the specific commitment made by former Work and Pensions Secretary, John Hutton, to 'child poverty proof' every departmental policy.

9.  The economic security of ESA claimants and their families is also not being addressed according to the policy objectives stated by the Government, as further detailed below.

ESA rates

10.  Repeated assurances were given by Ministers in the House that the main phase rate of ESA for those in the work group would be paid above the present long-term Incapacity Benefit (IB) rate. Those commitments included:

11.  Our organisations and the people we represent believe these commitments have not been followed through and that Parliamentarians have in effect been misled.

12.  Furthermore when the range of rates and circumstances are compared more closely for existing IB levels and proposed ESA levels, it becomes apparent that there will be very many losers, when it had been expected claimants should in general receive greater economic support under the new benefit, both in the main phase and in the support group.

13.  Key examples of this include:

  • People entitled to the main phase rate will receive just £84.50 after 13 weeks. This compares with existing claimants who receive Income Support with entitlement to the Disability Premium, ensuring they receive £86.35. This amounts to a reduction of £1.85 per week for those on the new benefit. When combined with the lower income of £60.50 for the 13-week assessment phase, this group will be over £400 worse off in the first year of their claim.
  • Those on contribution-based only ESA will lose entitlement to age additions and additions for spouses. For example, under the current system someone who became sick when under 35 will receive a long term rate of £102.25. Under the new system they will receive just £89.50 if they are in the support group.
  • The basic allowance of ESA is £60.50. But during the initial 13 week assessment phase under 25 year olds will receive a lower amount of £47.95. For those eventually entitled to the main phase, they will have had to survive for 3 months at £36.55 less than it is ultimately decided is their necessary weekly income. For those eventually placed in the support group they will be left £41.55 short for this period.

14.  Some of the larger differences in entitlement are as a result of the loss of age additions. DBC members knew to expect that age additions would be lost, however there was an expectation that these resources would be reallocated through the new benefit being set at a significantly higher rate than the long-term IB rate. As discussed above, this has failed to happen.

Contribution-based ESA claimants and lack of passported benefits

15.  For contribution-based recipients of ESA with no other income, they will be in receipt of the same income as those with income based entitlement, but denied automatic access to many important passported benefits, such as free school meals, free prescriptions, the social fund, legal aid etc. This means that recipients of ESA(C) will have to apply separately, and undergo a separate means-test, for each of these benefits..

16.  The starkest injustice for this group of contribution based claimants results from how permitted work earnings will be treated in calculations for Housing Benefit and Council Tax Benefit entitlement.

DBC members were firmly in favour of the Government's proposal to extend permitted work to income based ESA claimants on an equal basis to contribution-based claimants. We believe that the opportunity to earn up to £88.50 per week without losing any ESA is strongly in line with the policy objectives to increase work activity for claimants, raise the chances of return to sufficient employment to leave the benefit and improve economic security.

17.  However, it is only the income-based claimants that will be passported to full Housing and Council Tax Benefits. For contribution based claimants a large part of their permitted earnings will be lost through the HB and CTB tapers, set at 65% and 20% respectively.

18.  For an income-based ESA claimant with rent of £100 p/w and £15p/w council tax, doing permitted work and earning £80 p/w, their financial situation will be:

Income-based ESA     £84.50

HB & CTB       £115.00

Permitted work    £80.00

Total effective income    £279.50

19.  For a contribution-based ESA claimant with rent of £100 p/w and £15p/w council tax, doing permitted work and earning £80 p/w, their financial situation will be:

Income-based ESA     £84.50

HB & CTB       £64.00 (HB reduced by £39, CTB by £12)

Permitted work    £80.00

Total effective income    £228.50

20.  The difference amounts to over two and a half thousand pounds per year. It is against the principle of national insurance for those who have paid into the system to be left worse off as a result by such a massive amount.

21.  This appears to have been a major oversight in the drafting of the regulations and DBC members regret that despite warnings made by member organisations to DWP this problem remains unaddressed. The Government must look at ideas such as how the automatic passporting of benefits can be extended to contribution-based claimants with no other sources of income, or how permitted earnings can be fully disregarded for contribution-based claimants for HB and CTB claims.

22.  The Government recognises in the Explanatory Memorandum to the ESA Regulations that approximately one in six incapacity benefit claimants also have children. Given all of the above, we feel that Employment and Support Allowance may actually serve to undermine the Government's commitments on child poverty by actively reducing the income of families with disabled parents.

Disabled students

23.  During the Lords Committee stage of the Welfare Reform Bill, assurances were given regarding protection of existing rights within IB for disabled students with the introduction of ESA:

"We also make specific provision for certain groups of disabled students to access income support while they are studying, and we are bringing forward that access to benefit for income-related ESA." (Lord McKenzie, Hansard Grand Committee debate, 20 February 2007, Column GC19).

24.  However, the regulations as published are far more restrictive than under the current rules which allow full-time disabled students to claim income support on grounds of incapacity if they have been incapable of work for over 28 weeks, are registered blind, or qualify for a disabled student's allowance because they are deaf.

25.  Under the ESA regulations, only those entitled to Disability Living Allowance will be able to study full-time, excluding many who would previously have been entitled. Given that currently disabled people are less likely to achieve the same level of qualifications and skills as non-disabled people due to barriers to educational attainment, and given the importance of education and skills to gaining and progressing in employment, we believe this contradicts the policy objective to increase the number of disabled people in employment.

26.  In all, we feel that the ESA regulations represent a missed opportunity to improve the lives of disabled people, failing, as they do, to present a coherent approach to wider policies on poverty and skills. Moreover, however, we feel that they fail to achieve the promised better standard of living and increased security for millions of people.

15 April 2008

Memorandum by the Citizens Advice Bureau

1.  Citizens Advice is the national body for Citizens Advice Bureaux (CAB) in England, Wales and Northern Ireland. The CAB service is the largest independent network of free advice centres in Europe, with 430 main bureaux in England, Wales and Northern Ireland. Bureaux provide advice from over 3,300 outlets, including bureaux in the high street, community centres, health settings, courts and prisons. All Citizens Advice Bureaux are registered charities.

2.  The CAB service has twin aims: to ensure that individuals do not suffer through a lack of information about their rights; and equally to exercise a responsible influence on the development of policies and practices, both at a local and national level.

Introduction

3.  Citizens Advice welcomes this opportunity to provide comment to the Select Committee on the Merits of Statutory Instruments following the introduction of the Employment and Support Allowance regulations. Our comments are in addition to the comments of the Disability Benefits Consortium, of which we are a member, and organisations such as CPAG and Disability Alliance.

4.  Employment and Support Allowance (ESA) will replace Incapacity Benefit (IB) for new claimants only from October 2008. Citizens Advice is concerned that there has been an oversight in the way that the new benefit has been designed which, if enacted, will be extremely unfair for some claimants. Passported benefits - including prescription charges, access to the social fund, legal aid, entitlement to travel and leisure passes, free school meals etc. - are a crucial tool in keeping people out of poverty and engaged in their local communities.

5.  Under the new arrangements, people who are in receipt of income-related ESA (ESA(I)) will be automatically passported to these benefits; people whose only income is ESA(C) will have to apply separately for each one. This will entail a separate means-test for each 'benefit', making the claiming process for this group of low-income disabled people much more difficult than necessary.

The problem

6.  Those claimants who have worked and paid National Insurance contributions, and will, therefore, be entitled to contribution-based ESA (ESA(C)), but have no partner and no other income or savings, will be worse off than those who have paid no contributions and so will be entitled to income-related ESA (ESA(I)).

7.  If they do permitted work the difference will be considerable; it could be nearly £60 per week (or more if the lack of automatic entitlement to other 'passported benefits' is taken into account).

8.  For the first time a system is being proposed where, as a result of having worked and paid contributions, or having a sickness/disability benefit as of right (because they have had no opportunity to build a contributions record), ESA(C) claimants will be very considerably worse off than those who have not paid contributions.

9.  We believe that it is an absolute and essential requirement of any legislation that it should be demonstrably fair and we are concerned that ESA does not meet this criteria.

How this problem arises

10.  In March 2007 Lord McKenzie announced that -

'... within ESA, we will be aligning the existing permitted work higher earnings limit between the contributory and income-related elements of the benefit.

This will be a significant step in addressing the issues raised. Anyone claiming ESA will be able to earn up to £86 per week for up to 52 weeks, without it affecting their benefit entitlement.'

11.  At present, those who are unfit for work and on IB can keep their earnings from permitted work but those who are on Income Support only keep the first £20 (disregarded income) and then lose it pound for pound.

12.  The new measure in ESA is a well-intentioned attempt to address this and allow those who haven't paid contributions to gain. The following table[3] demonstrates the effect for those on housing benefit and council tax benefit:


 Not enough contributions  Sufficient contributions  
INCOME UNDER THE PRESENT SYSTEM  £70 earnings but Income Support will be reduced by £50

Full Housing & Council Tax Benefit  

£70 earning and full Incapacity Benefit

But Housing & Council Tax Benefit reduced  

Those who have not paid contributions are about £7 worse off than those who have paid contributions
INCOME UNDER ESA  £70 earnings ESA(I) Full Housing & Council Tax Benefit of £75  £70 earnings ESA(C)

Housing & Council Tax benefit of £32 50  

Those who have not paid contributions will be about £42.50 better off than those who have paid contributions.

13.  This problem arises because those on ESA (I) will be automatically passported through to full Housing Benefit and Council Tax Benefit (HB/CTB). Those on ESA (C) will still have 85% of their earnings above £20 clawed back from their (HB/CTB) as happens now. There is no plan, as we understand at present, to change the HB/CTB regulations to disregard permitted work. As ESA(C) is not a means-tested benefit they will not be automatically passported to full HB/CTB.

Some examples

14.  Here are four examples of how the planned benefit structure will affect some people.

15.  The following fictional examples are all single adults who are unable to work because of sickness or disability and living in rented accommodation costing £60/ wk and paying council tax of £15/ wk. Though some are entitled to ESA (C) while others are entitled to ESA (I) they all have exactly the same income from ESA. They also all have earnings from permitted work of £70 per week but no other income. They all have savings of less than £6000.

The impact of ESA on different claimants - Four scenarios

A.  A young adult had patches of work and unemployment after leaving school. He then had a motorcycle accident which left him with permanent brain damage. He is now living in supported housing and doing some supported permitted work. Because he has not got enough contributions, but was once capable of work, he will be getting ESA (I) and so will be automatically passported to full Housing Benefit / Council Tax Benefit (HB / CTB).

B.  A young adult with Down's Syndrome is living in supported housing and doing some supported permitted work. Because he has always been incapable of work, he will get ESA (C) and so will not be automatically passported to HB/CTB. Permitted work earnings will be treated as normal earnings so he will have to pay £42.50 towards his rent and council tax. He will be £42.50 per week worse off than claimant A.

People who suffer from a life-long disability like Down's Syndrome will get ESA(C), which is supposed to be advantageous. They are able to choose to claim the 'inferior' ESA (I). Yet this could easily leave them up to £50 per week worse off than those who haven't paid sufficient contributions and haven't got this 'advantage'.

C.  A man in his forties damaged his back whilst working for a number of years as a labourer. Since then he has found it difficult to find work and has cycled between Income Support and Jobseekers Allowance. He claims ESA when his back gets worse. Later someone offers him a part-time job. He has not got sufficient contributions so will receive ESA (I) and so receive full HB and CTB.

D.  A man worked continuously for the last forty years but has had cancer and chemotherapy. He is keen to get back to some work and starts with permitted work. He has paid contributions consistently for the last forty years so will get ESA (C) and will not be passported to HB and CTB. He will be therefore £42.50 per week worse off than claimants A and C.

Those who receive the 'better' ESA (C)

16.  Those who receive the 'better' ESA(C) will be £42.50 worse off in these examples, because they will not automatically get full HB/CTB. Claimants B and D above will also lose all the other benefits of passporting. They will face great complication and many separate means-tests to get help with or exemption from health costs, including prescriptions or legal aid, which those on income based will get automatically. If they are doing permitted work they may well find that they are not eligible for these benefits either, even through a means test, if the regulations are not adjusted to take account of this. Claimants B and D will also lose out on many concessionary rates. Receipt of a means-tested benefit is used by a huge variety of public and private bodies to judge who to whom they should offer extra help. They may well lose out on entitlement to travel and leisure passes, lower cost of membership of organisations, cheaper access to services such as pest control, help with education costs etc.

What needs to be done to put this right

17.  There are a number of ways in which this problem could be solved:

1.  People who apply for ESA, and have sufficient contributions, could still be offered a means test and, if they fulfilled the requirements, would have a marker on their benefit showing they were entitled to ESA(C) with passporting.

2.  People who apply for ESA and have sufficient contributions could still be offered a means test and if they fulfilled the requirements could elect to be awarded ESA(I) but with the option of switching to ESA(C) if circumstances change and they are no longer eligible for ESA(I).

3.  ESA(C) could be changed to be worth £1 less than ESA(I) so that those on ESA(C) with no other income would be eligible to a top up of the income based benefit which would 'passport' them to the other entitlements.

4.  Regardless of these options, the Housing and Council Tax Benefit regulations should be changed to disregard earnings from permitted work.

April 2008

Memorandum from the Chartered Institute of Taxation

1.  The Low Incomes Tax Reform Group is an initiative of the Chartered Institute of Taxation, the main tax advisers' professional body in the UK, to give a voice to the unrepresented in the tax system - whether tax payer, NI contributor, or tax credit claimant.

2.  We see an important part of our role as investigating new proposals on welfare reform to see what impact they will have on tax or tax credits. In this spirit we considered the Welfare Reform Act 2007 (the Act) and now the consequential regulations.

3.  We are concerned that in debating the merits of the Act and these regulations it may be possible that those doing so may not fully appreciate the income tax ramifications. We hope that this submission will add to that debate and it will be possible to clarify those implications prior to implementation.

The incidence of taxation in considering the rates of CBESA and IBESA

4.  In Schedule 3 of the Act, paragraph 24 determined the tax treatments of the Contribution-Based Employment Support Allowance (CBESA) and the Income-Based Employment Support Allowance (IBESA). The former was set to be taxable and the latter to be tax free.

5.  It was not possible to make appropriate comparisons at the time of the Act as the levels of the respective ESAs had not been set and the starting rates of income tax were yet to be set in the Finance Bill 2008.

6.  Both of these have now been announced. Such matters are, of course, for the determination of Parliament. Our concern is that the interaction of taxation with welfare benefits is not a subject which receives much public debate and is also a subject which can slip through unnoticed until it impacts upon recipients.

7.  We wish to be certain that everyone connected with these reforms understands this interaction.

The interaction in practice

8.  It has been announced that the levels of ESA are going to be set at £84.50 for the main phase rate after 13 weeks. At first glance therefore the tax aspects appear unimportant as someone on that rate as their only income for 12 months would not pay tax (the weekly exemption given by the personal allowance for tax purposes is approximately £104.50). However, this is not the whole picture as the ESA has to be considered in combination with other income. Indeed, the whole thrust of the provisions is to see that someone moves seamlessly into work from the ESA. However the impact will be different dependent upon whether or not the recipient has already a hidden tax underpayment. Those coming off CBESA will be in a different position to those coming off IBESA.

9.  However the differential impact will be felt earlier than that.

Permitted earnings

10.  It is anticipated that under ESA more people will be involved in work and there are provisions allowing permitted work whilst receiving either CBESA or IBESA. We have been fortunate enough to be shown the submission to the CMSI by the Disability Benefits Consortium which includes the following example:

For an income-based ESA claimant with rent of £100 p/w and £15p/w council tax, doing permitted work and earning £80 p/w, their financial situation will be:

Income-based ESA     £84.50

HB & CTB £115.00

Permitted work£80.00

Total effective income    £279.50

For a contribution-based ESA claimant with rent of £100 p/w and £15p/w council tax, doing permitted work and earning £80 p/w, their financial situation will be:

Contribution-based ESA   £84.50

HB & CTB £64.00 (HB reduced by £39, CTB by £12)

Permitted work£80.00

Total effective income    £228.50

11.  In that example they were demonstrating the differential treatment between IBESA and CBESA.

12.  We could however take this example one step further.

13.  In both examples the weekly income (other than HB &CTB) is £164.50. However, other things being equal, the IBESA recipient would not suffer any tax on their weekly income, whereas the CBESA recipient would pay tax of £12 (being £164.50 - £104.50 personal allowance = £60 @ 20%). This tax levy almost doubles at this level of income in 2008/09 due to the abolition of the 10% rate band as compared with 2007/08. No compensation would be available through working tax credit.

Entering the world of work

14.  We are also concerned that the implications of starting work following a period of receiving CBESA may not have been fully evaluated.

15.  As we understand it, the DWP are not proposing to operate a normal PAYE system on the ESA. We are concerned in case this will cause both the individuals concerned and HM Revenue & Customs operational difficulties.

16.  Our principle concerns are two-fold:

17.  On a related matter, if CBESA is taxable then its status will presumably carry through into tax credits and has the potential for reducing entitlement there also.

And finally

18.  We think it would be appropriate at this juncture to receive assurances that those recipients of incapacity benefit who derive their entitlement due to the transition from Invalidity Benefit in 1995 will, on a future transition to ESA, retain their existing tax free status.

19.  We hope that this commentary illustrates our concerns that the impact of taxation should be appropriately considered before implementing the ESA regime.

April 2008



Memorandum by the Child Poverty Action Group

Rates of the Employment and Support Allowance

1.  Regulation 67 of The Employment and Support Allowance Regulations 2008 prescribes the various rates of ESA. The actual amounts are contained in Schedule 4 to the regulations, with the amounts of the support and work-related actively components contained in Part 4 of that Schedule. For more detail see our chart attached.

2.  The components only become payable once the assessment phase is over and, unlike the disability premium in income support, are paid at the same rate for couples as for single people. The overwhelming majority of ESA claimants will be in the work-related activity group. Many claimants in receipt of middle and higher rate Disability Living Allowance (DLA) may not meet the eligibility criteria for the support group and the higher rate of benefit it offers.

3.  We are concerned that the Government has not met the spirit of its commitments made in parliament regarding the rates of ESA, and that many claimants will in fact be worse off under ESA than they would be under the existing system: "new customers will have a higher rate of benefit than the current long term rate of incapacity benefit". Jim Murphy MP, Hansard House of Commons Standing Committee 17 October 2006 Column GC19).

4.  Many claimants on DLA will receive less under the new system than they would have under the old, due mainly to the lower amounts payable during the assessment phase. For example, a single person getting income support on the grounds of incapacity, and the lower or middle rate care component of DLA will receive a lower rate of benefit under ESA than under the current system, and in the first year of claim they will be about £400 worse off. Under the current system they would receive £86.35pw from day one of their claim. Under ESA they will receive only £60.50 for the first 13 weeks of their claim, and then £84.50 thereafter.

5.  Everybody in the work-related activity group will receive £84.50 after 13 weeks. This compares with existing claimants on income support who are entitled to the disability premium who get £86.35, amounting to a reduction of £1.85 per week.

6.  Those on contributory- ESA will lose entitlement to age additions and additions for spouses. For example, under the current system someone who became sick under the age of 35 on the long-term rate incapacity benefit will receive £102.25. Under the new system they will receive £89.50. For couples the losses are even greater. A couple where the claimant became sick under the age of 45 on long-term incapacity benefit would receive £143.95. Contributory-ESA will pay the same couple a maximum of £123.95 (support group). The vast majority will be in the work-related activity group and receive £118.95. For the most severely disabled claimants therefore, who have worked and paid NI contributions, the maximum payable under ESA is lower than under incapacity benefit.

Disabled students

7.  The rules on income-related ESA entitlement and studying are contained in Schedule 1 para 6(1)(g) Welfare Reform Act and Regulations 14 -18 The Employment and Support Allowance Regulations 2008. Schedule 1 para 6(1)(g) Welfare Reform Act disentitles anyone receiving education from the income-related allowance. This provision does not apply, by virtue of Regulation 18 ESA Regulations, to claimants entitled to DLA. What counts as education is set out in Regulation 14 ESA Regulations 2008. The only disabled students who will be entitled to claim income-related ESA will be those studying part-time or those entitled to DLA.

Key concerns

8.  This is a much more restrictive than under the current rules which allow full-time disabled students to claim income support on grounds of incapacity if they have been incapable of work for over 28 weeks, are registered blind, or qualify for a disabled student's allowance because they are deaf. This also goes against the assurance given by Lord McKenzie in Committee:

"We also make specific provision for certain groups of disabled students to access income support while they are studying, and we are bringing forward that access to benefit for income-related ESA." (Hansard Grand Committee debate, 20 February 2007, Column GC19).

9.  We think limiting it to those entitled to DLA is too restrictive and goes against the thrust of the Act which is about helping people into work - receiving education is likely to increase employment opportunities and lead to sustainable and better quality work.

10.  There are many examples of people with ill health or disability who do not receive DLA, but nonetheless have chronic ongoing health problems and are incapable of work. The two tests are quite different, one looking at someone's care and mobility needs, and the other looking at their ability to work/pass a work capability assessment. DLA is a benefit with notoriously uneven adjudication and which remains badly under-claimed. So we would argue that in addition to using DLA as a marker other routes should be available, such as those who currently count as a "disabled student" for income support purposes. Not having these qualifying routes would surely have a negative impact on the numbers of people with disability retraining and improving their education, and therefore employment opportunities.

11.  Moreover, some of these students, such as deaf students, will not be able to claim income support on the basis of being a deaf student because Regulation 2(1) The Employment and Support Allowance (Transitional Provisions) Regulations 2008 removes this right. Any income support claim made in this capacity will be treated as a claim for ESA but the ESA claim will not succeed if the deaf student is not getting DLA. Therefore some disabled students could be caught without any form of financial support.

12.  The bar only applies to income-related allowance - why restrict the educational activity of those on income-related ESA? Whether getting the contributory or income-related allowance both sets of claimants are sick or disabled people wanting to pursue education. One of the points made to us by the DWP was that they didn't want to subsidise a claimant's study. But the income-related allowance is means-tested so any applicable income the student gets by way of grants/loans will be taken into account anyway. We therefore do not understand why there needs to be such a restriction for students getting the income-related allowance.

Severely disabled claimants and the 'limited capability for work' test

13.  CPAG are concerned that some of the most severely disabled claimants may be subject to unnecessary stress and difficulty in the assessment of their entitlement to Employment and Support Allowance, because the regulations do not provide that they are automatically treated as having a limited capability for work.

14.  Under section 1(3)(a) of the Welfare Reform Act, a basic condition for entitlement to an Employment and Support Allowance is that the claimant has 'limited capability for work'. Under section 8, whether a person has such a limitation is left for determination in accordance with regulations. Regulations 20, 25 - 28, 30 and 33 of the Employment and Support Allowance Regulations make provision for treating certain claimants as having limited capability for work, with the effect that they will not have to provide information or attend for a medical examination to determine whether they have such a limitation.

15.  Those regulations do not include those claimants who are entitled to the support component. People entitled to this component are people who the Government have described as, 'people with the most severe functional limitations', 'people with the most serious disabilities and health conditions' (A new deal for welfare: Empowering people to work', Cm 6730, paras 67, 83), and 'the poorest, most disabled people in society' (More support to help people into work - Purnell announces rates for new Employment and Support Allowance, DWP News Release DRC - 067, 27 March 2008).

16.  To become entitled to the support component, the claimant must satisfy the test of 'limited capability for work-related activity' under Schedule 3 to the regulations. Claimants that will satisfy that include those with no voluntary control over their bowels, those who cannot eat or drink without physical assistance and those who due to mental health problems have with severe difficulties with learning, or tasks like planning and communication. It seems highly unlikely that many such claimants would in practice actually fail the test of limited capability for work. Subjecting them to it would seem likely to be a waste of public money.

17.  The absence of an express provision to treat people entitled to the support component as having limited capability for work means that, although they are recognised as being the most severely disabled claimants, they may be required to complete questionnaires and attend for medical examinations. Subjecting them to tests creates the possibility that some of those may encounter difficulties with the medical examination and subsequent decision-making, and find that they are initially refused ESA and have to appeal to get an obviously incorrect decision changed. There is a significant body of caselaw from the social security commissioners indicating a history of problems with medical assessments for benefits, and associated weighing of evidence and decision-making.

18.  In so providing, the regulations do not actually go beyond the powers laid down in the Act. However, CPAG believe that they may not properly reflect the overall policy intention, and certainly create the possibility that some of the most severely disabled members of the community may be subject to unnecessary stress and inconvenience.

19.  To rectify this, the category of 'the claimant is a member of the support group' could be added to regulation 20, for example as a new subparagraph (g).

Claims for income support on grounds of disability treated as claims for ESA

20.  Regulation 2 (1) The Employment and Support Allowance (Transitional Provisions) Regulations 2008 provides for a claim for income support on grounds of disability to be treated as a claim for ESA. Regulation 1(4) defines what counts as income support on grounds of disability.

21.  The result is that the following people will be excluded from claiming income support and will instead have to claim ESA. The only removal of routes into income support that seem explicable are those based on incapacity for work, e.g. - those set out in paragraph 7(a) and (b) Schedule 1B IS Regulations. It is not clear to us why the current routes into income support set out below are to be removed and replaced by ESA when they are not routes based on incapacity for work.

Persons not treated as engaged in remunerative work

22.  Regulation 6(4)(a) IS Regulations allows a disabled person whose earnings or hours of work are 75% or less of what a person without that disability would reasonably be expected to undertake/earn.

23.  It is not at all clear to us why this change is being made to not allow such a person to claim income support but instead make them claim ESA. They are in work. Their claim for income support is not on grounds of incapacity for work. It is on grounds of not being treated as in remunerative work to enable them to work over 16 hours a week and still get income support to top up their low earnings. In recognition that their disability causes them a lower earning power than someone without that disability.

Circumstances in which people in relevant education may be entitled to income support - Regulation 13(2)(b) IS Regulations

24.  This regulation allows a person entitled to a disability or severe disability premium whilst in relevant education to claim income support. Such a person could be getting this premium by virtue of getting DLA rather than having to show any incapacity for work. It is not clear to us then why this route to income support should be removed.

Disabled students - Paragraph 10 (a) Schedule IB IS Regulations

25.  This allows disabled students entitled a disability or severe disability premium to claim income support. Again, as this entitlement could well be by virtue of getting DLA rather than through having an incapacity for work we do not see why access to income support is being closed off for these students.

Deaf students

26.  Paragraph 12 Schedule 1B allows certain deaf students to claim income support - none of these conditions link to a need to show an incapacity for work.

Registered blind

27.  Paragraph 13 Schedule 1B allows those registered blind to claim income support. Again this route to income support is not based on a need to show incapacity for work.

28.  We are also concerned that full-time disabled students who are not getting DLA will not be able to access either income support or income-related ESA because of these rules.

Broader policy objectives

29.  CPAG is concerned that the regulations run counter to some of the Government's broader policy objectives on the economic security of disabled people and the eradication of child poverty.

30.  When John Hutton was Work and Pensions Secretary, he gave an undertaking that all departmental policy would be 'child poverty proofed', as confirmed to Parliamentarians by the then Minister for Welfare Reform, Jim Murphy MP:

"I shall deal with some of the specific points raised by my hon. Friend the Member for Bristol, East. She asked about child poverty-proofing policies. I know that she and other hon. Friends welcome the commitment by the Secretary of State for Work and Pensions to child poverty-proof every one of the Department's proposals and policies." (Jim Murphy, Hansard , 6 March 2007, Column 420WH).

31.  However, we believe that the regulations fail the child poverty proofing test for the following reasons:

  • The ESA rates will leave many families poorer than they would have been on the equivalent IB rates.
  • Sanctioning in the ESA regime will result in increased hardship for families affected and there is no indication that consideration will be given to children of claimants when sanctioning decisions are made.
  • With a government estimate of 10% of current IB claimants expected not to retain entitlement to IB following transition to the Work Capability Assessment, there are (according to current DWP claimant data) up to 40,000 children whose family income will drop as a consequence.
  • Lack of automatic passporting to benefits such as the social fund, legal aid and free prescriptions for contribution-based ESA claimants with no other income will inevitably mean some families fail to gain these important benefits.

32.  We are also concerned that the rates announced in the regulations do not support the Government's policy objectives for disabled people through their independent living agenda. The Government's long-term policy agenda for disabled people was established by the report Improving the life chances of disabled people (Jan 2005) from the Strategy Unit in the Cabinet Office. The report highlighted that:

"Among workless households with children the majority have at least one disabled parent: children are more likely to experience poverty if there are disabled adults in their family." (p. 37);

"Recognising the particular needs and circumstances of disabled parents will be vital to the achievement of policy objectives of increasing employment rates and tackling child poverty" (p.69);

and contained the following clear policy objective:

"The Government's vision: By 2025, disabled people in Britain should have full opportunities and choices to improve their quality of life, and will be respected and included as equal members of society." (p. 44)

33.  However, it was also found by a DWP research that:

"DLA/AA at their current levels are not sufficient to meet costs (rates are lower than most, but not all estimates - though some estimates include costs that DLA/AA are not intended to cover)." (DWP Working Paper no. 21 Review of Existing Research on the extra costs of disability)

34.  While DLA/AA are extra support benefits and IB/ESA are income replacement benefits, there is significant crossover between DLA and IB claimants and the demarcation between the costs that DLA and IB are meant to meet is unclear: DWP acknowledges that because DLA is limited to care and mobility needs, not all the extra costs of disability are met by the benefit. It is therefore inevitable under the regulations before Parliament that lower entitlement for any ESA claimants relative to what they would have received from IB will take some disabled people further from being able to meet the extra costs of their disability and will undermine progress towards the Government's 2025 vision for disabled people.

ESA rates: a comparison with IS and IB:
 IS from day 1 to 364.  IS (after 364 days) (i.e. with DP)  IS with DLA (no SDP or EDP) from day 1 of claim  Long Term IB income-based ESA assessment phase  income-based ESA work related activity  income-based ESA support group  contribution based ESA assessment phase  contribution based ESA work related activity  contribution based ESA support group  
Single person became sick 45 or over  £60.50 £86.35  £86.35 £84.50  £60.50 £84.50  £102.10 £60.50  £84.50 £89.50  
Couple became sick 45 or over  £94.95 £131.80  £131.80 £135.05 (i.e. with adult dependent addition)  £94.95 £118.95  £142.10 £94.95  £118.95 £123.95  
Single person aged 18-24  £47.95 £73.80  £73.80 £102.25  £47.95 £84.50  £102.10 £47.95  £84.50 £89.50  
Single person became sick under 35  £60.50 £86.35  £86.35 £102.25  £60.50 £84.50  £102.10 £60.50  £84.50 £89.50  
Single person became sick under 45  £60.50 £86.35  £86.35 £93.40  £60.50 £84.50  £102.10 £60.50  £84.50 £89.50  
Couple became sick under 35  £94.95 £131.80  £131.80 £152.80 (i.e. with adult dependent addition)  £94.95 £118.95  £142.10 £94.95  £118.95 £123.95  
Couple became sick under 45  £94.95 £131.80  £131.80 £143.95 (i.e. with adult dependent addition)  £94.95 £118.95  £142.10 £94.95  £118.95 £123.95  

Points to note:

There does not appear to be a "couple rate" of the components (i.e. the support or work-related activity component prescribed by sch. 4 paras 12-13 of the Regs. This has the effect of meaning that couples on the work related activity component will be much more significantly worse off than single people.

The people in the support group are better off in all cases except when compared to people who had been getting IB with age additions.

Income based ESA rates- comparison with IS only:
 IS from day 1 to 364.  IS (after 364 days) (i.e. with DP)  IS with DLA (no SDP or EDP) from day 1 of claim  income-based ESA assessment phase  income-based ESA work related activity  income-based ESA support group  
Single person  £60.50  £86.35 £86.35  £60.50 £84.50  £102.10 
Couple £94.95  £131.80 £131.80  £94.95 £118.95  £142.10 
Single person aged 18-24 £47.95  £73.80 £73.80  £47.95 £84.50  £102.10 

Couples on the work related activity phase lose out far more than single people on same phase.

Single people under 25 are treated the same as people over 25 provided they have got through the assessment phase (my reading of para 1(1)(a) of schedule 4).

Contribution based ESA rates- comparison with IB
 Long Term IB  contribution based ESA assessment phase  contribution based ESA work related activity  contribution based ESA support group  
Single person became sick 45 or over  £84.50 £60.50  £84.50 £89.50  
Single person aged under 25 £102.25  £47.95 £84.50  £89.50 
Couple became sick 45 or over £135.05

(i.e. with adult dependent addition)  

£94.95 £118.95  £123.95 
Single person became sick under 35  £102.25 £60.50  £84.50 £89.50  
Single person became sick under 45  £93.40 £60.50  £84.50 £89.50  
Couple became sick under 35 £152.80

(i.e. with adult dependent addition)  

£94.95 £118.95  £123.95 
Couple became sick under 45 £143.95

(i.e. with adult dependent addition)  

£94.95 £118.95  £123.95 

Note the loss of the age additions (last 4 rows) mean people who could get these (all claimant's whose incapacity started before age 45) are always going to be worse off on ESA than on long term IB.

Letter from the Disability Alliance

1.  Disability Alliance raises the following concerns about these regulations which introduce employment and support allowance (ESA) and a new work capability assessment (WCA). Disability Alliance is a membership organisation of more than 380 disability organisations from around the UK. In addition to our work on policy and campaigning around disability and poverty, we produce an annual Disability Rights Handbook that explains the benefits and tax credits systems, as well as other services, to disabled people and advisers.

2.  We trust that you will find our comments helpful in considering further action on these very important regulations.

Policy priorities

3.  Paragraph 7.1 of the explanatory memorandum notes that the Green Paper proposed three key areas to be tackled:

1.  increasing the number of people who remain in work when they fall sick or become disabled;

2.  increasing the numbers leaving benefits and finding employment;

3.  better addressing the needs of all those who need extra help and support.

4.  Point 1 is tackled in a totally separate initiative, Dame Carol Black's review of health, work and wellbeing.

5.  Point 2 states an ambition to move people off benefit and into work. Yet, as page 11 notes under 'Savings', the disallowance rate for ESA is expected to rise under the new WCA compared to the current Personal Capability Assessment, adding to the off-flow effect, which will gradually reduce the ESA caseload. The new test of entitlement is objectively more difficult.

6.  We feel that increasing the numbers of people leaving benefit simply by making the test of entitlement much more difficult, especially if plans to reassess all existing claimants from 2010 are implemented, does not meet the original intention of these measures in any way.

Applying WCA to existing claimants

7.  We have concerns about proposals to apply the new WCA to existing claimants. First, it is clear to us, and acknowledged by DWP, that the new test of entitlement will see many more claimants disallowed from benefit. We feel this goes against the spirit and ethos within which the Welfare Reform Act was introduced.

8.  Jim Murphy said "We have set a target for reducing the number [of claimants] by 1 million but we are not seeking to achieve that through a legislative cap; we are providing the support to enable that as a public policy intent." (Hansard Third Reading debate, 9 January 2007, Column 179).

9.  Lord McKenzie said "…whether this was all about harassing people with mental illness back to work. It demonstrably is not. This is about people we know want to work and helping them break down the barriers that prevent them working." (Hansard Lords Second Reading, 29 January 2007. Column 44)

10.  Lord McKenzie also said "…whether removing the three-point descriptors in the PCA was just a way of ensuring that fewer people are entitled to benefit. The answer to that is no." (Hansard Grand Committee Lords, 28 February 2007, Column GC208)

11.  Yet, we have been told that existing claimants of incapacity benefit and income support due to incapacity will be assessed using the new WCA but only offered the support that was promised, as resources allow. Further, the explanatory notes to the regulations clearly state that (page 9):

12.  We feel these statements demonstrate that the intention is to make the test of entitlement more difficult and reduce claimant numbers, even though the Personal Capability Assessment is acknowledged as being one of the toughest in the world. Further, the projected £1billion saving over 10 years that is estimated in the explanatory notes provides evidence of the prize on offer to the Department if these reforms are implemented.

13.  Finally, on a purely practical level, we question whether DWP is adequately equipped to begin a retesting exercise of all 2.6 million claimants over a three-year period as proposed? There is the shrinking operational budget for DWP, there is a higher than 50% success rate on appeal against decisions on incapacity benefit appeals currently and we would flag up the Benefits Integrity Project as an example of a similar reassessment exercise that had a disastrous impact on DLA claimants as well as DWP.

14.  Further, the explanatory notes predict an annual increase of 26,000 appeals against decisions when ESA is introduced. This is a 38% rise when compared to current numbers of appeals against decisions related to incapacity benefit currently (~60,000 per annum) and undertaking such a major reassessment exercise will inevitably add to these numbers.

Sanctions

15.  Point 3 above looks at better addressing the need for support. For those claimants placed in the work-related activity group, there is a mandatory requirement to engage with this support, with the risk of financial sanctions for failing to meet relevant standards of engagement. At page 20, it is noted that "Sanctions are not designed to be punitive", yet sanctions allow for 50% of the work-related component to be removed, followed by a 100% removal after 4 weeks. This feels very punitive in our opinion.

Rates of ESA

16.  Para. 7.14 notes that the consultation showed concerns about the levels of benefit. Page 11 of the Explanatory memorandum under Savings, Fewer people being paid benefit, notes that other benefits that claimants will move to (e.g. JSA) will pay less than ESA rates. As noted above, the amount of people failing to establish entitlement to ESA is set to rise, yet for many people, levels of benefit are set to fall.

17.  We are very disappointed that assurances made in Committee debates when the Welfare Reform Act went through Parliament about the rate of main-phase ESA have not been adhered to. Jim Murphy stated that "In respect of the new ESA customers the commitment will be above the present long-term IB rate" (Hansard Committee debate, 17 October 2006, Column 58). Lord MacKenzie said "We have made it clear that, in the main phase, the basic allowance will be above the long-term IB rate" (Hansard Grand Committee debate, 20 February 2007, Column GC9).

18.  The basic main phase rate of ESA for single claimants in the work-related activity group has been set at £84.50 p/w, which is exactly the same as the current long-term rate of IB. Compared to the equivalent rates of benefit currently payable with income support with a disability premium, this is £1.85 p/w less for a single person on income-related ESA. Given that Government estimates that more than 90% of ESA claimants will be in the work-related activity group, this represents a significant saving to the benefits bill.

19.  For couples, the situation could be even worse. Anyone claiming as part of a couple, and who is placed in the work-related activity group, stands to receive at least £12.85 p/w less than is currently payable byway of income support and a disability premium. The reason why couples lose more is because there is no equivalent to the couple rate disability premium within ESA. Both the work-related activity component and the support component will be paid at one uniform rate. The explanatory notes (page 25) states that this is because it is suspected that a couple rate encourages inactivity amongst the partners of claimants. We feel that this assertion is un-evidenced and will adversely affect somewhere in the region of 12% of claimants using DWP statistics.

20.  There are also significant reductions for some people on contribution-based ESA.

Contribution based ESA rates- comparison with IB
 Long Term IB  contribution based ESA assessment phase  contribution based ESA work related activity  contribution based ESA support group  
Single person became sick 45 or over  £84.50 £60.50  £84.50 £89.50  
Single person aged under 25  £102.25 £47.95  £84.50 £89.50  
Couple became sick 45 or over  £135.05

(i.e. with adult dependent addition)  

£94.95 £118.95  £123.95 
Single person became sick under 35  £102.25 £60.50  £84.50 £89.50  
Single person became sick under 45  £93.40 £60.50  £84.50 £89.50  
Couple became sick under 35  £152.80

(i.e. with adult dependent addition)  

£94.95 £118.95  £123.95 
Couple became sick under 45  £143.95

(i.e. with adult dependent addition)  

£94.95 £118.95  £123.95 

21.  Note, the loss of the age additions (last 4 rows) mean people who could get these (all claimant's whose incapacity started before age 45) are always going to be worse off on ESA than on long term IB.

22.  The explanatory memorandum (page 25) notes that approximately one in six incapacity benefit claimants also have children. Given all of the above, we feel that Government targets regards reducing child poverty will be severely undermined if the rates of ESA are set at these levels.

Disabled students

23.  The regulations stipulate that only income-related ESA students who also receive Disability Living Allowance will be able to study full-time. Again, this breaks assurances in Committee that current income support rules in relation to these people would be bought forward.

24.  Lord McKenzie said "We also make specific provision for certain groups of disabled students to access income support while they are studying, and we are bringing forward that access to benefit for income-related ESA." (Hansard Grand Committee debate, 20 February 2007, Column GC19).

25.  With income support, the rules are that someone is eligible for benefit when studying on a full-time course if they are a disabled student and:

  • Your applicable amount includes a disability premium; or
  • Your applicable amount includes a severe disability premium; or
  • You have been incapable of work for 28 weeks; or
  • You are claiming disabled students' allowance because of deafness.

26.  Under the ESA regulations, it seems that only people who are entitled to disability living allowance will be able to study full-time, which is nowhere near matching the current rules of entitlement.

Support group and enhanced disability premium

27.  We welcome the pledge to give all claimants placed in the support group with a low income access to the enhanced disability premium (EDP). We understand that where a claimant of contribution-based ESA is identified as having no other income or capital, they will have the EDP added to their entitlement automatically. However, we do have some concerns about whether this will actually be the case for everyone in such a situation, and would ask what provision will be made whereby Jobcentre Plus over look this premium?

Permitted work extension

28.  We welcome the extension of the Permitted Work rules so that they apply equally to both income-based and contribution-based ESA claimants, in terms of the ability to earn up to £88.50 per week without losing any ESA. However, claimants of contribution-based ESA and who have no other income stand to lose out in comparison to claimants on income-related ESA who are doing equivalent amounts of work and earning the same amount. This is because the contribution-based ESA claimant will have their earnings taken into account for housing benefit (HB) and/or council tax benefit (CTB).

  1. Income-based ESA claimant with rent of £100 p/w and £15p/w council tax, doing permitted work and earning £80 p/w

Income-based ESA  £84.50  
HB & CTB  £115.00  
Permitted work £80.00  

Total effective income  £279.50 

  1. Contribution-based ESA claimant with rent of £100 p/w and £15p/w council tax, doing permitted work and earning £80 p/w

Income-based ESA  £84.50  
HB & CTB  £64.00 (HB reduced by £39, CTB by £12)  
Permitted work £80.00  

Total effective income    £228.50

10 April 2008

Letter from Leonard Cheshire Disability

1.  Leonard Cheshire Disability is a member of the Disability Benefits Consortium (DBC), and as such we fully endorse the submission from the DBC to the Committee. This note should be read in addition to the submission from the DBC.

Rates of ESA - support component

2.  Throughout the progress of the Welfare Reform Act through Parliament Leonard Cheshire Disability maintained a strong focus on the support available to those furthest from the labour market. Leonard Cheshire Disability research has suggested that for those not expected to return to work welfare benefits can frequently fail to cover the additional costs of living with an impairment, leaving people with no realistic route out of poverty. We were pleased, therefore, with the proposal in the Welfare Reform Act for a 'support group' which would provide additional financial support for those furthest from the labour market. The Department for Work and Pensions (DWP) has identified that this will be only be a relatively small number of claimants, and will be made up of those facing the most significant barriers to work.

3.  For this group the DWP Green Paper 'A new deal for welfare: empowering people to work' stated that:

"after the assessment phase, they will be paid the Support component, and receive more money than they do now" ('A new deal for welfare: empowering people to work', page 42).

4.  Similarly when outlining the Department for Work and Pensions' Five Year Strategy, the then Secretary of State Alan Johnson referred to what has now become the 'support group', stating:

"Far from having their benefits cut, those recipients would get more money because they are at most risk of persistent poverty." (HC Deb 2 February 2005 cc843)

5.  This has been the basis on which developments in this area have proceeded. Leonard Cheshire supported this commitment, as it offers an opportunity to better support those least likely to work, and to help challenge the links that exist between disability and poverty. We are concerned, however, that the regulations as set out in the Employment and Support Allowance Regulations 2008 (No. 794) are failing to meet this commitment.

6.  Whilst for some there could be a welcome increase in support, the newly published regulations mean that some people who receive the 'support component' part of ESA will actually be worse off than they would have been under Incapacity Benefit. This runs counter to the commitment for those in receipt of the support component made in 'A new deal for welfare'.

7.  For example, for those in receipt of only the contributory benefit:

8.  For those in receipt of income-related benefits the drop could be mitigated by the welcome proposal to ensure entitlement of the Enhanced Disability Premium for those in the support group, but even then for some the loss of certain additions that are part of Incapacity Benefit could mean that they end up worse off. The policy commitment was for those in the support group to be better off under ESA, rather than for some to be better off, some to be worse off and some to remain in a similar position.

9.  The support group was devised specifically for those not expected to return to work because it has been recognised that this group needs increased support. The Government's response to the 'New deal for welfare' consultation stated:

"We believe that the more focused 'support' group will be much smaller than the current Personal Capability Assessment exempt group. We also think that it is right that this group should get additional financial support, as they are most likely [to] be on benefit for a longer time." ('A new deal for welfare: empowering people to work - consultation report', page 20)

10.  The pledge that people in this group receive more than they do now is therefore an essential and integral part of this policy. Current proposed benefit levels would seem to fail to meet this policy intention.

Backdating of ESA

11.  At present payment of Incapacity Benefit can be backdated to up to three months before the point of claim, if appropriate medical evidence can be provided.

14.  Leonard Cheshire Disability has been advised that this process would not be fully carried over to the new ESA system. We were told in discussions with officials, however, that backdating would be possible for 'late claims', where an individual could prove good cause as to why they had not applied for benefit sooner. A similar system exists on Income Support and Jobseekers Allowance.

15.  Given that such a system exists for Jobseekers Allowance and Income Support we assume that it would also apply to ESA, but we would like to seek clarification on this, for both the contributory and income-related allowances, as this was not clear in the recently produced regulations.

14 April 2008

Additional information from the Department for Work and Pensions

Claims Procedure

1.  Employment and Support Allowance (ESA) is intended to be a combined benefit, bringing together the rules from Incapacity Benefit (IB) and Income Support (IS) as far as possible. We have attempted to align these rules wherever possible, but in some cases this has not proved practical because of the different nature of income related and contributory benefits.

Qualification

2.  For both elements of ESA a customer must have limited capability for work. This is determined initially by a medical certificate but then by the Work Capability Assessment (WCA) which should be completed within 13 weeks of the claim.

3.  As part of the claims process for ESA, we will find out whether customers have paid sufficient National Insurance contributions to qualify for contributory ESA. If a customer does not have a sufficient contributory record, or they have additional needs they can make a claim for income-related ESA. They can qualify for this strand if they do not have capital of more than £16,000 or their household income (including that of their partner) is below their applicable amount (the full level of ESA).

Assessment Phase

4.  ESA has two phases an assessment phase which lasts for up to 13 weeks and a main phase once limited capability for work has been established by meeting the WCA threshold. If the WCA confirms eligibility, the customer will automatically move to main phase of benefit.

5.  During the assessment phase the rate of benefit rate is based on Jobseeker's Allowance personal allowances (£60.50) although additional premiums may also be payable if the customer satisfies the conditions of entitlement. During the assessment phase a Work Focussed Interview (WFI) takes place after 8 weeks.

Main Phase

6.  Once the customer satisfies the limited capability for work test (WCA), the work-related activity component of £24.00 becomes payable. This payment is conditional on complying with the work related activity regime. This is paid in addition to basic allowance payable during assessment phase, bringing the total amount payable to £84.50 which is equivalent to the long-term rate of Incapacity Benefit.

Support Component

7.  More severely disabled customers are not required to comply with the work-related activity regime and are entitled to the support component of £29.00 a week in addition to basic allowance of £60.50 making a total of £89.50 a week. In addition they are automatically entitled to the Enhanced Disability Premium of £12.60 a week making a total income guarantee of £102.10 a week for a single person.

Differences between contributory ESA and income-related ESA

Other income

8.  Because it is based on the contributions record of customers and is not means -tested, contributory ESA does not take into account other household income (apart from half of any occupational or personal pension income in excess of £85 a week). It is therefore possible to receive contributory ESA when a partner is working, or if a customer has substantial capital, for example from substantial savings over £16,000. In income-related ESA benefit is reduced if the household has another source of income, and if this level is above the overall level of their ESA entitlement the customer does not receive any benefit.

Household benefit claims

9.  Contributory ESA will be an individual benefit, and there will therefore be no increases for partners. However, partners will be able to make separate claims for contributory benefit. In income-related ESA couples will have additions made for partners, but only one of the partners can claim income related ESA. Couples can only claim one income-related benefit for day to day living expenses at a time. This means income-related ESA is not payable at the same time as income-based JSA, IS or Pension Credit, since otherwise there would be double provision from public funds.

Premiums

10.  Premiums are payable as part of income-related benefits to give additional support for specific reasons for example as a result of disability, age or caring responsibilities. Premiums will only be awarded in ESA (IR). The disability premium will not be part of the structure of ESA as it is replaced by the support and work related activity components. However, other disability premiums currently payable in income-related benefits will remain available on the same grounds. This means that the severe disability premium and the enhanced disability premium may be added to a claimant's applicable amount. In addition for more severely disabled people in the Support Group will be automatically entitled to the EDP. This means a single person in the Support Group will be guaranteed a minimum income of £102.10 a week.

11.  The other premiums currently payable in IS will be payable in ESA (IR) and will have similar qualifying conditions. So, for example, a carer premium or a pensioner premium may also be appropriate.

Housing costs

12.  Housing costs such as mortgage interest and service charges also form part of the applicable amount for people claiming income-related ESA and be calculated in a similar way to the current provisions. Contributory ESA does not provide help with such costs.

Taxation

13.  Income-related ESA is not liable to income tax, but contributory ESA is. This is in line with the treatment elsewhere in the benefit system for earning replacement benefits such as Incapacity Benefit and the Basic State Pension.

Children

14.  ESA makes no provision for children as such support is now provided by Child Tax Credits.

Extra Costs Benefits

15.  ESA customers under age 65 who have personal care and mobility needs may also qualify for DLA. DLA provides three rates of support for care costs dependent on needs £67.00, £44.85 or £17.75. Claimants may also receive £46.75 or £17.75 for mobility needs. The maximum DLA for a single person is £113.75 a week which does not reduce the amount of ESA payable.

Additional information from the Department for Work and Pensions

System Operation

1.  From October 2008 we will be introducing the new Employment Support Allowance which will replace Incapacity Benefit, and Income Support paid on the grounds of incapacity or disability. This will extend the support we offer to those that face barriers to work and change the focus to what a person can do, rather than what they can't. It is being introduced from October 2008 for new customers only.

Existing Customers

2.  It is our intention in the future to transfer existing incapacity benefits customers over to the Employment and Support Allowance over time and as resources allow. All current claimants will have the cash level of their benefit protected when any transfer to Employment and Support Allowance takes place.

Capacity to deliver Employment and Support Allowance

3.  Employment and Support Allowance (ESA) and the delivery of ESA work-focused interviews build on the roll-out of Pathways to Work.

4.  ESA is fully funded, and procedures are in place for Jobcentre Plus to deliver all the necessary interviews for ESA implementation. Pathways to Work contracts with Providers fully support the delivery of ESA interviews in Provider-led areas.

5.  Pathways to Work will be available across the whole of Great Britain from the end of this month (April 2008).

6.  The Work Capability Assessment is carried out by trained healthcare professionals (doctors or nurses) approved by the Secretary of State. The current contract holders are Atos Origin and the contracts to deliver the WCA for new claims from Oct 08 are fully funded. Atos is currently recruiting to ensure it can deliver this effectively.

Work Capability Assessment

7.  As part of the introduction of Employment and Support Allowance we will also be introducing a new Work Capability Assessment for all new customers. This assessment has been designed with the help of experts in the field and will help us better assess claimants when they apply. From 2009, existing Incapacity Benefit claimants under the age of 25 will have their repeat assessment conducted on the basis of the scoring used in the Work Capability Assessment. Additionally, and as the Chancellor announced in his Budget speech, from April 2010, the Work Capability Assessment will be introduced for all customers who started their claim before October 2008, as and when they are due to have their benefit entitlement reassessed.

8.  The Work Capability Assessment is comprised of three parts:

9.  The Work Capability Assessment is carried out by trained healthcare professionals (doctors or nurses) approved by the Secretary of State.

10.  Following the completion of the Employment and Support Allowance 13 week assessment phase, the majority of customers, those who with the right help should be able to make steps to return to work, will receive a work-related activity component on top of the basic rate. This component can be subject to sanctions if the customer does not engage in the conditionality requirements without good reason.

11.  Those with the most severe health conditions will receive the Support component, which is worth more than the work-related activity component and is free of any requirement to engage in work-related activities.

Repeat Assessments

12.  The timing of a repeat Work Capability Assessment will be set taking account of the advice of the medical assessor at the first assessment about the nature of the health condition and the likelihood that there will be any changes in the customer's condition and capability. In this way a repeat WCA could be set at 6 months, a year, 18 months, 2 years and so on.

13.  Repeat assessments can also be triggered by changes in a customer's condition, where the Personal Adviser would refer the customer for a repeat WCA. This could be because of an improvement in the customer's condition or a worsening, resulting in a change to their capability, and thus could result in them moving from the Work-related Activity Group to the Support Group or vice-versa.

What will ESA claimants be expected to do?

14.  When the new Employment and Support Allowance is introduced the requirements for new claimants of the benefit will be based on the successful Pathways to Work scheme.

15.  We will ask claimants to attend a work-focused interview around 8 weeks after they have claimed. A Personal Adviser will discuss with the claimant their benefit entitlement, their aspirations for work, the steps they might take to help them take up a job and the Pathways style support that is available to them.

16.  Subsequently most claimants in the Work Related Activity Group (i.e. those not in the Support Group) will have a further series of 5 interviews with a Personal Adviser focused on helping them back to work. These will usually take place approximately monthly although there is flexibility around this. The information from the work-related health-focused assessment will help inform discussion at these subsequent interviews.

17.  The Pathways style support on offer will provide a range of options including Condition Management Programmes. There will be no obligation on the claimant to take up this support at the time the benefit is introduced.

18.  The claimant will be provided with an action plan which will reflect the discussion at each interview including the steps a claimant could take to help them take up a job or prepare to return to work.

19.  It is intended that when the claimant has a repeat medical assessment (Work Capability Assessment) that subsequently they will have a minimum 1 additional work-focused interview.

20.  If a claimant is in receipt of the work-related activity component of the benefit and fails to attend an interview without good cause, then a sanction will be imposed. A work-focused interview can be waived or deferred by the Personal Adviser in certain circumstances. Please see Annex A for further information on the waiver and deferral procedures.

21.  Where eligibility for the Support Group has not been decided the interview around week 8 of the claim will be deferred for claimants so severely sick and disabled that such an interview would not be of assistance to them or appropriate for them.

Sanctions

22.  Customers are required to attend "one or more" Work-focused Interviews. The content of the Work-focused Interview and what constitutes taking part in a Work-focused Interview is specified in regulations. If the customer fails to attend or participate in the Work-focused Interviews without good cause then they may be sanctioned.

23.  The customer is sanctioned the equivalent of 50% of the Work-Related Activity Component for Employment Support Allowance for failing to attend and 100% of the Work Related Activity Component if they have not complied within 4 weeks of a sanction being imposed.

24.  There will be safeguards in place to ensure the system is fair. For example, every effort will be made to contact vulnerable customers before applying sanctions to make sure they understand what is required of them. We would not sanction someone with mental health problems without contacting them or their carer/healthcare professional first. Please see Annex B for further information on these safeguards.

25.  The sanctions are not designed to be punitive but an encouragement to engage actively with the conditionality requirements. When the customer fulfils the conditionality requirement the sanction will be removed.

Annex A: Waiving and deferring work-focused interviews

1.  Where appropriate and within the tests set out in the draft regulations, work-focused interviews can be waived (cancelled) or deferred (rearranged) by Personal Advisers.

2.  Draft regulations allow Personal Advisers to waive an interview when a claimant is very close to returning to employment. For example the claimant had a start date for a job or was undertaking permitted work with a view to increasing their hours and moving off the benefit. In those circumstances a work-focused interview would not be of assistance as it would not increase the claimant's chances of finding a job.

3.  Draft regulations allow Personal Advisers to defer an interview when it would not be of assistance to the claimant or appropriate in the circumstances. This is the same test that currently applies in Pathways regulations. It can cover a wide range of circumstances such as:

  • a worsened fluctuating condition
  • a period in hospital
  • inability to attend because of an illness
  • transport problems on the day
  • recent bereavement
  • caring responsibilities (e.g. for someone severely disabled or terminally ill)
  • claimant is in the late stages of pregnancy

4.  Interviews can be deferred for a range of periods. If it is a problem on the day of the interview (e.g. transport problems) then the interview would be rearranged in the days after the original date. However where the problems are more long term, such as a period of time in hospital, then the deferment would be until the person had come out of hospital and recovered, which could be a few months.

5.  The deferral test in regulations is designed to be wide because of the huge range of circumstances it might have to cover. As in Pathways to Work, Personal Advisers will have to apply the deferral test reasonably and we will provide them with guidance and training on the type of circumstances where a waiver or deferral would be appropriate. Giving similar powers to Personal Advisers has been successful in Pathways and we believe allowing the people who deal with customers week to week are best placed to make these decisions.

6.  We do not believe it is appropriate for waivers to be used more widely under the new benefit because it is important that claimants engage with the package of 6 interviews in order to give them the appropriate back to work support. Where deferrals are used we accept this may mean that the period over which claimants are required to take part in work-focused interviews will be longer for some claimants.

Annex B: Safeguards before a sanction is imposed

1.  Safeguards procedures are in place in Pathways to Work and we intend to carry these forward into the Employment and Support Allowance.

2.  The safeguards, which are working well in Pathways, ensure that a rigorous process is adhered to before a sanction is imposed to ensure that no-one has their benefit reduced inappropriately and to give each individual the chance to comply with the requirements. The purpose of the sanctions regime is not to punish people but rather to provide incentives for claimants to undertake activity that we believe will be beneficial to them.

3.  Safeguards are particularly important for claimants with mental health conditions for whom a home visit will be arranged before a sanction is to be imposed.

4.  The majority of safeguards are not set out in regulations but are in operational guidance to ensure that where necessary they can be adapted if evidence suggests they are not effectively protecting people.

5.  The safeguards procedures are:

  • advising the customer at the point of claim about the work-focused interview process;
  • contacting the customer before each work-focused interview to remind them that it is due;
  • considering in the context of each work-focused interview whether the interview should be waived or deferred;
  • notifying the customer of the date, time and place for the work-focused interview, telling them that fares are payable and asking them to get in touch if they cannot make it;
  • offering them a more convenient location or a home visit where appropriate, and encouraging advocacy support if needed;
  • identifying any relevant issues from medical evidence where available, that might impact on attendance;
  • visiting those customers with whom there has been no verbal contact prior to the WFI;
  • visiting every customer, with their representative if appropriate, with a stated mental health condition or learning disability if a sanction is to be imposed; and
  • lifting all sanctions and reinstating benefit in full when the customer participates in a WFI.

Additional information from the Department for Work and Pensions

Disabled Students

1.  Access to income-related ESA for disabled people whilst studying will be limited to those entitled to Disability Living Allowance. The changes will simplify the existing complex rules for qualification for customers and staff, and will ensure that disabled students can continue to claim income-related incapacity benefits where they receive any component of Disability Living Allowance. We believe that receipt of Disability Living Allowance is the correct way of qualifying for education within income-related Employment and Support Allowance. As DLA is based on how a disability impacts on an individual's life, it will ensure that the most vulnerable customers will be able to study and receive income-related ESA. Customers on contributory benefit will continue to have full access to education.

2.  In addition, we are amending the Housing Benefit regulations to remove the restriction for students who have been claiming IB for less than 28 weeks, who are studying for more than 16 hours a week and are not eligible for HB. This means that in the future students will be able to take a full-time course without losing entitlement to HB, irrespective of how long they have been claiming IB. The same will apply if they are claiming contributory ESA.

3.  Different provisions apply for the devolved administrations, but in general, financial support for students in advanced education takes the form of means-tested loans and grants for living expenses and tuition fees. For example, grants for maintenance are available depending on household income. Provision of income-based financial support like this means that access to income-related benefits is not necessary for most full-time students. In addition to these standard provisions for all students, the student finance system makes special provision for disabled people, through grants like the Disabled Students' Allowance, which are not affected by any income the student has. The most vulnerable customers will be able to study and receive income related ESA, where they receive any component of Disability Living Allowance.

4.  Whilst we expect many in the Support Group to be in receipt of DLA, entitlement to DLA is based on how a disability impacts on an individual's life and is not connected in any way to the qualifying conditions for ESA and entry into the Support Group which is based on the Work Capability Assessment.


3   The table considers single adults who are unable to work because of sickness or disability and living in rented acommodation costing £60 per week and paying council tax of £15 per week. They also all have earnings from permitted work of £70 per week but no other income. They all have savings of less than £6000. Back


 

 
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