Update on the

Impact of Welfare

Reform in Cumbria February 2013

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Contents

1.0 Introduction

2.0 Executive Summary

3.0 National Context

4.0 The Impact of Welfare reform in Cumbria

5.0 Considerations for organisations in Cumbria

6.0 Conclusion

7.0 Appendices

8.0 Acknowledgements

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1.0 Introduction

1.1 This briefing is a follow up from the ‘Responding to Welfare Reform’ report which was

produced in summer 2012. This outlined the Government’s welfare reform programme

and provided an initial assessment of the impact of those changes on people in

Cumbria, and identified issues for consideration by organisations delivering services in

the county.

1.2 This provides an updated assessment, using the latest available data, of the impact

being experienced of benefit changes which are already being implemented, and builds

on initial forecasting of future impact. It also develops further some issues for

consideration by organisations in Cumbria.

2.0 Executive Summary

2.1 This year, 2013, will be a particularly significant year as a number of reforms are

beginning to be implemented, including the introduction of Universal Credit, Housing

Benefit changes for social sector tenants, the introduction of a 1% cap on increases in

most working age benefits, and the reassessment of working age Disability Living

Allowance claimants in respect of Personal Independence Payments.

2.2 There are 43,600 working age benefit claimants in Cumbria (February 2012) - 35,440 of

these claim ‘out of work’ benefits. Approximately two-thirds of these claim incapacity

benefits. Approximately 30% of claimants in Cumbria who have so far been re-assessed

for Employment and Support Allowance have been determined as fit for work.

2.3 The number of households with an income of less than £10,000 a year has increased

which could be, in part, a result of some changes to benefits – particularly Tax Credit

changes and Housing Benefit changes for private sector tenants. The number of people

receiving Working and Child Tax Credits in Cumbria has reduced by 11,200 between

April and December 2012. The threshold changes to these Credits introduced in April

2012 could be part of the reason for this fall in numbers.

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2.4 The introduction of reforms to Disability Living Allowance for working age claimants

beginning in April 2013 is forecasted to affect 17,540 claimants in Cumbria. The

Government intends to realise savings of 20% by this reform introducing Personal

Independence Payments for those of working age.

2.5 The introduction of size criteria for Housing Benefit claimants in both the private, and

from April 2013, the social rental sector is expected to lead to pressures on availability

of suitable and affordable accommodation for claimants as well as potential increases in

rent arrears. This could lead to risks relating to the sustainability of levels of rent arrears

for housing providers in the county.

2.6 The Household Benefit Cap is expected to affect approximately 170 households in the

county.

2.7 Evidence is emerging of increased demand for advice and guidance services as a result

of reforms being introduced. Citizens Advice Bureaux nationally are reporting significant

increases relating to incapacity benefits re-assessments.

2.8 The Government is placing expectations on organisations at local level to work together

to provide support and advice to benefit claimants, particularly the most vulnerable.

Specific areas identified for consideration by organisations include facilities and support

to enable claimants to manage their claims online (for example in libraries, community

development centres, and other community facilities), signposting, advice and guidance

services, advocacy services, and support for claimants in developing their budgeting

skills to manage reduced incomes. These are as well as the co-ordination of national

and local programmes at local level aimed at moving people from benefits into

employment.

2.9 The programme of welfare reform is large scale and is being implemented over a period

of 4 to 5 years. This makes tracking the impact of reform complex as different groups in

different areas are experiencing change at different times. Individuals may experience a

number of changes over a period of a number of months or even years. This means that

whilst 2013 is significant as a number of major reforms begin implementation, with some

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transition protection arrangements also in place – most notably for Universal Credit

claimants - the overall impact will not be known for some years.

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3.0 National Context

3.1 The Government’s reforms of the welfare system aim to

• create the right incentives to get more people into work,

• reduce the cost of the benefits system,

• protect the most vulnerable in society,

• and offer fairness to those claiming benefit and to the taxpayer.

3.2 2013 will be a particularly significant year as a number of reforms are scheduled to

commence.

3.3 In April 2013, the following schemes commence

• Local Welfare Assistance schemes designed and managed by unitary/county

authorities replacing the national Crisis Loan and Community Care Grant

schemes of the Discretionary Social Fund

• The replacement of Council Tax Benefit with localised schemes by unitary/district

authorities

• The pilot of Personal Independence Payment in the north west of England,

replacing Disability Living Allowance for working age people

• Size criterion for the payment of Housing Benefit in the Social Housing sector

• The Household Benefit Cap, limiting the total amount of benefits that working-age

workless households can receive (piloted in London in April 2013; to be rolled out

by the summer of 2013)

3.4 In October 2013 Universal Credit will begin to be rolled out for new claimants, with a

gradual transfer of existing claimants taking place between April 2014 and April 2017.

3.5 A number of working age benefits and tax credits will be uprated by a maximum of 1%

for the next 3 years – starting from April 2013 – including Income Support Jobseeker’s

Allowance, Employment and Support Allowance, Housing Benefit, Working Tax Credit

and Child Tax Credit. This will also include elements of Universal Credit after its

introduction. Uprating of benefits and tax credits is currently based on the Consumer

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Price Index (CPI) rate of inflation which for the period from October to December 2012

stands at 2.7%. Disability, carer and pensioner elements of these benefits will be

unaffected by the cap.

3.6 Pension-aged benefits have until now been largely unaffected by the reforms, however,

the Government has also recently announced significant state pension reform which is

intended to take effect from April 2017.A single rate pension will be introduced which

will be set at a rate that is above the basic level of means-tested support. This means

the savings element of the Pension Credit will be abolished, with the income element of

Pension Credit becoming more targeted.

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4.0 The Impact of Welfare Reform in Cumbria

4.1 As welfare reforms are implemented data is becoming available to allow for tracking of

the impact on Cumbria’s population. In addition to the initial analysis outlined in

Responding to Welfare reform in the summer of 2012, the following is the latest analysis

of impact already being experienced and further forecasted impact:

Low income households and households in receipt of working age

benefits

4.2 The Government’s programme of welfare reform is focused on changing working age

benefits and moving people into employment so it is those aged 16 – 64, and their

families, who will be primarily affected.

4.3 Between 2011 and 2012 the numbers of households in Cumbria with an annual median

income of less than £10,000 per annum (CACI, Paycheck Data) have risen across all

districts in the county. The highest percentage of households with an annual median

income of less than £10,000 per annum occurs in Barrow at 20%. Loss of income

through welfare reforms already implemented could be a factor in the increase in low

income households; however, there could be a range of additional reasons.

4.4 There are 43,600 working age benefit claimants in Cumbria (February 2012) - 35,440 of

these claim ‘out of work’ benefits. These numbers increased slightly through late 2011

and early 2012, however, these numbers don’t cover the period following benefit

changes introduced from April 2012 onwards.

o The largest proportion of people on out of work benefits in the county

remains those in receipt of incapacity-related benefits

o 21,250 people are claiming Employment and Support Allowance or

Incapacity Benefit (February 2012) – nearly two-thirds of all out of work

benefit claimants in the county

o Just under a quarter of claimants are receiving Jobseekers Allowance

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The Household Benefit Cap

4.5 The Household Benefit Cap will affect some families in Cumbria with effect from April

2013. The latest data suggests that 170 households and 270 individuals will be affected

by the cap in the county. Approximate figures indicate that 50 households in Carlisle will

be affected, 40 households in Allerdale and Barrow, 20 households in Copeland, and 10

households in Eden and South Lakeland. These are most likely to be very large

families. These households will be required to adapt to a reduction in their income from

benefits and may respond by trying to obtain cheaper accommodation.

Transitional Protection

4.6 Transition protection will apply to existing benefit claimants when they are transferred to

a single monthly payment of Universal Credit until there is a relevant change of

circumstance. This means that existing claimants will not immediately lose income if

their Universal Credit would be calculated at an amount lower than their level of benefit

received at the point at which they are transferred. So as Universal Credit is phased in it

is unlikely that there is going to be an immediate widespread drop in the income of

families across the county due to the introduction of Universal Credit.

People with disabilities and individuals experiencing long term

sickness

Incapacity benefits

4.7 The re-assessment of claimants of incapacity benefits is continuing and this is resulting

in a significant number of claimants being determined as ‘fit for work’. This is particularly

significant in Cumbria as nearly 2 thirds of all out of work working age benefit claimants

in Cumbria are in receipt of Incapacity benefit or Employment & Support Allowance.

• Between October 2010 and February 2012, 4,100 claimants in Cumbria were re-

assessed – 1,250 claimants (approximately 30%) were determined as fit for work

• 42% of claimants reassessed in Barrow were determined as fit for work – the

largest proportion in the county and well above the national average of 34%

• In 2011 the Centre for Regional, Economic & Social Research forecasted that by

the time re-assessment was complete in 2014, 7,700 (35.3%) claimants in

Cumbria would be assessed as fit for work

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• The evidence up to February 2012 suggests that that figure countywide could be

slightly lower but is likely to be concentrated in Barrow, Copeland, Carlisle and

Allerdale which all have a percentage above the national average of people

claiming Incapacity benefits

• Advice services nationally are reporting significant increases in caseload in

respect of Incapacity Benefit and Employment & Support Allowance claims during

2012.

Disability Living Allowance

4.8 Reassessment of working age people in receipt of Disability Living Allowance (DLA), to

be replaced by Personal Independence Payment (PIP), is scheduled to begin in

Cumbria in April 2013. There are 17,540 working age (16 -64) DLA claimants in

Cumbria (February 2013) who will be affected by this process. The highest numbers

within the county are in Barrow and Carlisle. Nationally the forecasted impact of this

process is half a million fewer PIP claimants than current working age DLA claimants

securing a saving of 20%. This suggests that a significant number of people in Cumbria

could lose some or all entitlement to DLA through this process.

4.9 A small research project conducted by Cumbria Disability Network in the autumn of

2012 noted that disabled people in Cumbria were concerned at the prospect of changes

to their eligibility for benefits, the possibility of lower benefit entitlements, and the

communication of welfare changes to existing claimants.

Young people

4.10 Some elements of welfare reform have a particular impact upon young people.

• housing benefit reforms limiting the maximum amount of allowance a single young

person can be awarded was extended to those aged under 35 with effect from

January 2012

• appropriate housing availability for young people could become an increasing

problem with the potential to exacerbate existing homelessness issues across the

county and particularly in Barrow

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• lower entitlements for those aged under 25 than those over 25 years old will be a

feature of the calculation of Universal Credit – as it is currently for Income Support

and Income Based Jobseekers Allowance

• with a lower entitlement, the capping of benefit increases to a below inflation 1%

over the next 3 years will result in a bigger gap (dependent on inflation figure

changes) with the cost of living for those aged under 25 in receipt of benefits

4.11 Overall, 5.2% of young people aged 16-24 in Cumbria are claiming Jobseekers

Allowance (December 2012), just below the national average of 5.5% but almost double

the rate for the population as a whole in Cumbria. JSA claimant rates for young people

are particularly high in Copeland (7.5%) and Barrow (7.2%). As increased work

incentives are introduced through welfare reform, there could be increased demand for

job opportunities making the labour market more competitive for young people in

particular.

Households receiving Housing Benefit

4.12 Some benefit reforms related to housing costs have already been implemented with

some more to be implemented in 2013. Reforms targeted at claimants renting in the

private sector began implementation in 2011. Those renting in the social and council

sectors will primarily be affected by changes in 2013.

4.13 In Cumbria the general trend in numbers claiming help with housing costs is increasing

slightly:

• between March and August 2012 the number of Housing Benefit recipients

in Cumbria increased slightly by 420 to 32,790

• data indicates that 60% of recipients are of working age

4.14 It has been estimated that Housing Benefit reforms already implemented in the private

sector will see availability and affordability diminish across all rental markets in Cumbria

from their previous levels of between 50% and 60% to approximately 33%.

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• Barrow (50%) and South Lakeland (38%) are the areas of the county where the

highest proportion of Housing Benefit claimants hold Private Rented Sector

tenures.

4.15 A number of Housing Associations across the county are beginning to share their views

on impact. A single picture for the whole of Cumbria does not appear to be available at

this point; however views on the Cumbria picture provided by one source suggest that

housing associations have a total stock of 30,000 in Cumbria with a rental income

around £120 million, Approximately 10,000 tenants are of pension age, and between

66% and 74% of tenants claiming some benefits.

4.16 One provider has suggested that for every 2,000 working age housing association

tenants that the impact of welfare reform will result in:

• 150 tenants losing £12 or more a week housing benefit as a result of a

determination of ‘under occupying’ their house following the introduction of the

size criteria changes in the social sector from April 2013

• 350 tenants becoming eligible for housing benefit being paid direct to their social

landlord as a result of accruing substantial rent arrears

• Evictions increasing by 15 to 20% resulting in an additional 30 to 40 households

evicted each year on top of the current levels of 10 to 15 per year

4.17 A number of providers have provided forecasts over the last few months for the number

of their tenants likely to be affected by the introduction of the size criteria::

• Riverside Housing has identified 1,047 residents that may be affected – with 21%

of these wishing to downsize;

• Barrow Borough Council has estimated that 344 tenants in Barrow could be

affected;

• Derwent & Solway Housing has estimated that up to 1180 tenants could be

affected, and;

• South Lakes Housing anticipates that 200 of their tenants will be affected.

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4.18 Housing Associations in Cumbria are forecasting significant losses in income which

could result in reductions in staff, community support activities, and curtailment of home

improvement programmes – with a particular impact on affordable warmth activities.

4.19 DWP is running Direct Payment Demonstration Projects to test out one of the key

features of housing benefits reform which is benefit paid directly to the claimant in a

monthly payment. The findings from the first 4 months of these projects were that levels

of rent collection ranged between 88% and 97%. This indicates a likelihood that affected

claimants will experience an increase in rent arrears.

4.20 The Discretionary Housing Payments budget, administered locally by District

Authorities, has been increased for the period up until 2015 to provide help to people

adjusting to reduced income as a result of the reforms.

Families with Children

4.21 As set out above, some families with children may be affected by changes to housing

benefits and, where families include someone with disabilities or in receipt of incapacity

benefits, by the incapacity benefits and Disability Living Allowance reforms. Other

reforms which will impact a significant number of families with children are the reforms

implemented from April 2012 to Working and Child Tax Credits. The following sets out

the evidence so far:

• Between April and December 2012 the number of families in receipt of Working or

Child Tax Credit in Cumbria has dropped by 11,200 to 34,800

• This is likely to be at least partially as a result of reforms to Tax Credits

implemented from April 2012 which increased the minimum working hours

threshold in respect of Working Tax Credit to 24 hours a week, and reduced the

maximum income threshold in respect of Child Tax Credit

• Those who may have lost eligibility to Child Tax Credit because of the threshold

change are most likely to be families with incomes between approximately

£26,000 per annum and £42,000 per annum

• Those who may have lost eligibility to Working Tax Credit are most likely to be

families working between 16 and 24 hours a week – these families will have

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experienced a loss of income and if possible are likely to be seeking to increase

their working hours

• Localised Council Tax schemes in Cumbria for 2013/14 are continuing the

existing Council Tax Benefit rules

• In future, families may experience a reduction in the Council Tax support they

receive

• Families with income over £50,000 a year will, from January 2013, have lost all or

some of their Child Benefit

Older People

4.22 Pensioners are protected from the impact of a number of the welfare reforms as they

are largely focused on working age benefits. However, the simplification of the pension

system to be introduced from 2017 will have implications for many people in Cumbria.

Whilst it is not possible to accurately forecast impact at the moment it is likely that some

couples, mothers who take career breaks, self-employed, and those whose forecasted

basic and second tier pension combined will be less than the minimum income

guarantee (currently £144 a week) are likely to experience higher incomes.

4.23 The current pension provision will remain in place for existing pensioners and those who

reach pension age before the new system is introduced in April 2017. The analysis of the

impact of these changes will also need to take into account that the pension age will be

increasing. Those whose pension income remains lower than the minimum income

guarantee under the single rate pension, who are most likely to have people who do not

meet National insurance contribution requirements, will be eligible for Pension Credit.

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5.0 Considerations for organisations in Cumbria

The local labour market

5.1 Work incentives, and the concept that work is a means of moving out of poverty and

welfare dependency, are at the core of the government’s welfare reform agenda.

5.2 In the Government’s Local Support Service Framework, published 11th February 2013,

responsibility is placed on local organisations to join up national and local employment

support services – including the Work Programme – to ensure support is in place for

people to move from benefits into employment.

5.3 The reassessment of incapacity benefits claimants in Cumbria is already resulting in

additional people (1,250 up to February 2012) being identified as being fit for work. The

support needed for these people to move into employment will vary but it is likely some

will need significant levels of support.

5.4 The Cumbria Rural Forum considered the barriers to employment for people living in

rural communities in the autumn of 2012. Issues highlighted include the size of the jobs

market in rural areas, i.e. limited job opportunities, the low-paid and part-time nature of

many job opportunities in the dominant service and tourist industries in some areas,

5.5 In terms of unemployment, numbers of Jobseekers Allowance claimants are falling

slightly in the county .As the impact of reform is experienced by benefit claimants the

implications for the labour market will require monitoring. It may be that demand rises

for part-time work and increased hours more than full-time employment opportunities.

Payment of benefits

5.6 Universal Credit will be paid monthly for the vast majority of claimants, and the preferred

mode for application and managing accounts will be online.

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Online process

5.7 Accessing online services is likely to be challenging for many in Cumbria – either

because they live in areas with no broadband coverage, they do not have online access

at home for financial or other reasons, or do not have appropriate skills and knowledge.

The Government’s Local Support Services Framework places a responsibility on local

partners to work together to ensure appropriate support is in place, particularly for the

more vulnerable benefit claimants.

5.8 Internet services in the community are likely to face additional demand, for example, the

access to computers and the internet provided in community settings such as libraries

and community development centres. Related signposting, training, advice and support

services to help people with their claims will also be required.

Budgeting

5.9 Monthly payment, and in respect of housing benefit payment direct to the claimant, are

highlighting the importance of budgeting skills for many benefit claimants. The

Government has invited a range of suppliers to explore the feasibility of new financial

products to help benefit claimants budget and manage their money.

5.10 DWP demonstration projects have found that over half of social housing tenants feel

confident in budgeting and paying their monthly rental payments to their landlord;

however, just under quarter felt that they would need budgeting support. Significantly

increased levels of rent arrears are possible if tenants are unable to budget.

Housing

5.11 The forecasted challenges for housing policy makers and providers include:

• Movement of low income tenants from more expensive rental market areas to

cheaper ones

• Rising rent arrears

• Greater demand for debt and counselling services

• Greater demand on homelessness and housing options services

• Existing housing stock not meeting increased demand for smaller properties

• Increased applications to the Housing Register

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• Increased applications for Discretionary Housing Payments

• Greater reluctance by private landlords to let to benefit claimants leading to

increased pressure on the social sector

• Households struggling to access private rented accommodation

• Finding suitable affordable accommodation could be a particular issue for vulnerable

young people.

5.12 Forecasted increases in rent arrears resulting from reductions in household income are

likely to have implications for the operation of social housing providers in the county.

Health

5.13 Evidence shows that chronic illness is more common in disadvantaged groups with

poverty and social exclusion identified as key factors in deterioration of health. Reduced

incomes and increased levels of poverty as a result of benefit changes may increase

the health needs of those affected.

5.14 The number of people suffering stress, anxiety and depression because of worries

about the effect of welfare reform could increase.

5.15 As household income becomes more squeezed there is an increased likelihood of

families going into debt and therefore the potential for some households to borrow at

unaffordable rates. This places strains on individuals and relationships potentially

leading to mental health and other health problems as well as relationship breakdown

and the range of health and social problems which could result. Debt management

services are likely to experience an increase in demand.

5.16 People with existing mental health issues could experience a worsening of their

condition and may need additional support.

Crime

5.17 Reduced incomes and increased levels of poverty are linked to rises in acquisitive crime.

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Information, Advice and Guidance

5.18 Information, advice and guidance services are likely to experience increased demand as

a result of the implementation of reforms to the welfare system, and the Government

places an expectation on local organisations to work together to provide these and

support the most vulnerable benefit claimants..

5.19 Initial information and communication of what the changes to benefits are and what that

means for claimants will be important initial activity.

5.20 Advice and advocacy in relation to specific benefit changes will be sought by affected

claimants. Citizen Advice Bureaux are reporting nationally a substantial increase in

requests for advice and support in relation to re-assessment of incapacity benefits. As

people experience more change as more benefit changes are implemented it is likely

that these pressures will increase.

5.21 Social Landlords, local authorities, and other providers of advice and support services

are likely to experience greater demand in respect of Housing Benefit changes in

particular.

5.22 Debt management and financial and budgeting advice services are also likely to

experience increases in demand.

5.23 Providing a coherent ‘claimant journey’ through these services, providing for effective

signposting, is likely to be a significant challenge for local organisations.

Eligibility for services and concessions

5.24 Many eligibility criteria - criteria for accessing concessions, and charging policies - are

based on receipt of certain benefits. The changes to benefits will require all these

instances to be reviewed and revised where the relevant benefits are abolished and/or

changed.

5.25 Some criteria are statutorily defined, such as criteria for eligibility to free school meals,

and some are locally defined. Affected criteria include those in relation to school meals

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and clothing, school transport, and social care. There are interdependencies between

eligibility criteria for a number of key services. The implications of options for eligibility

and take-up levels, and service budgets, will require consideration.

6.0 Conclusion

6.1 The briefing ‘Responding to Welfare Reform’ produced in the summer of 2012 provided

a comprehensive picture of the expected implications of welfare reform for the people of

Cumbria and for organisations delivering services in the county.

6.2 This briefing has been able to provide some evidence of the impact already being

experienced across the county and, in some cases, has been able to add to some of the

forecasted impact in 2013 and beyond.

6.3 Analysis of the implications of the changes, and tracking of indicators to measure the

impact, will continue to be added to over the coming months as more information

becomes available and more benefit changes are implemented.

7.0 Appendices

Appendix 1 – Updated schedule of forthcoming welfare reforms.

Appendix 2 – Sources of information

Appendix 3 – Local summaries providing detailed information and analysis at district-

level

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8.0 Acknowledgements

With thanks to partners who have shared information, analysis and comment in the

production of this briefing.

Authors:

• John Marsh Policy Officer - Cumbria County Council

• Ali Wilson Senior Officer Research Information and Intelligence – Cumbria County Council

• Clare Killeen Strategic Policy Advisor - Cumbria County Council

Contact Details:

Cumbria Intelligence Observatory email ali.wilson@cumbria.gov.uk Policy Planning and Communities email clare.killeen@cumbria.gov.uk or john.marsh@cumbria.gov.uk

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Appendix 1 - Schedule of forthcoming welfare reforms

Date Change

April 2013

Universal Credit pathfinders begin implementation

Size criterion for housing benefit in social sector introduced

Council Tax Benefit abolished and localised council tax

assistance schemes introduced

Household Benefit Cap introduced

Replacement of Disability Living Allowance by Personal

Independence Payment for new claimants begins in pilot areas

– including Cumbria

Crisis Loans and Community Care Grants replaced by local

welfare assistance schemes

October 2013 National roll-out of Universal Credit to new claimants begins –

roll-out details yet to be confirmed

Spring 2014

Transfer of claimants to Employment and Support Allowance

completed

Transfer of existing benefit claimants to Universal Credit begins

2016

Re-assessment of existing Disability Living Allowance

claimants for eligibility to Personal Independence Payment

completed

2017 National roll-out of Universal Credit to all claimants completed

Single rate pension introduced

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Appendix 2: Sources of information

Measure/Indicator Source

Date

Population Office for National Statistics 2010

Disability Census, Office for National Statistics 2001

Earnings Annual Survey of Hours & Earnings 2010

Household income CACI, Paycheck 2010

Labour Market Analysis Business Register & Employment

Survey

2010

Unemployment Office for National Statistics 2012

Benefit claimant data Department for Work & Pensions 2011

Families on Child or Working Tax

Credit

Department for Work & Pensions 2012

Children aged 0-15 in out of work

benefit households

Department for Work & Pensions May 2010

% children in poverty HMRC 2009

Housing and Council Tax Benefit

data

Department for Work & Pensions November

2011

Estimated impact of incapacity

benefit reforms

Centre for Regional Economic and

Social Research

November

2011

Local Housing Allowance District/Borough Councils February

2012

Impact of changes to Local Housing

Allowance

Department for Work & Pensions July 2010