£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.
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
The impact of ESA on different claimants - Four
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.
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 aged 18-24
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
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
Single person aged under 25
Couple became sick 45 or over
(i.e. with adult dependent addition)
Single person became sick under 35
Single person became sick under 45
Couple became sick under 35
(i.e. with adult dependent addition)
Couple became sick under 45
(i.e. with adult dependent addition)
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
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.
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
Your applicable amount includes a severe disability
You have been incapable of work for 28 weeks;
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).
Income-based ESA claimant with rent of £100
p/w and £15p/w council tax, doing permitted work and earning
HB & CTB
Total effective income
Contribution-based ESA claimant
with rent of £100 p/w and £15p/w council tax, doing
permitted work and earning £80 p/w