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A question of benefits

Newspaper article

In April the government introduced cuts to the benefits system.  Here we examine the main effects of the changes, who is and will be affected, and the ways in which future recipients of the allowance may respond.

April saw the introduction of significant cuts to the generosity of the working-age benefits system. New recipients of employment and support allowance deemed healthy enough to carry out ‘work related activities’ will get up to £1,500 less each year than existing recipients. Combined with reductions in benefits through tax credits and universal credit for families with new-born third and subsequent children, the changes are expected to reduce government spending by over £5 billion a year in the long run.

Employment and support allowance (ESA) is the main out-of-work benefit for working age individuals who are judged not to be ‘fit for work’ due to a health condition. There are currently around 2.4 million individuals claiming ESA, of whom 350,000 are waiting for a health assessment, 1.6 million are in the ‘support group’, and 400,000 are the ‘work-related activity group’ (WRAG). The latter are those deemed healthy enough to carry out ‘work-related activities’, such as CV preparation or skills training.

Since April new WRAG claimants receive £73.10 a week – the same as jobseekers’ allowance (JSA) claimants – rather than £102.15 a week as was previously the case (those in the support group are unaffected). This change will not create immediate losses of benefit income, because only new recipients are affected. Ultimately though, of course, all claims will be assessed under the new, less generous rules. To give a sense of how quickly this will cut the generosity of benefits in practice, in the recent past around 60,000 people a year have started an ESA claim and ended up in WRAG – so we would expect approximately that number to get less money over the coming year than they would otherwise have got. In the long run this is expected to save the government about £650 million per year, with around 500,000 recipients getting £1,400 a year less than they would otherwise have got, on average.

What do we know about the sorts of people who are placed in the ESA WRAG? First, around half of them are entitled to ESA because of mental or behavioural disorders. Second, they tend to be somewhat older than JSA claimants, with about half being between 50 and the state pension age compared to about a quarter for JSA. Third, they tend to be on ESA for a relatively long time. Hence, while this change will align the weekly entitlements of ESA WRAG and JSA claimants, it is worth bearing in mind that the ESA claimants will tend to live on these amounts for substantially longer – around four in five WRAG claimants have been claiming for over two years, compared to less than one in five for JSA.

People might respond to this change in several ways. First, they may not choose to claim ESA in the first place: as JSA will afford the same financial support as WRAG, the financial incentives to go through the medical assessment rather than accept the additional work conditions of JSA are reduced.

Second, those placed in the WRAG might challenge the decision to try to get into the support group and receive the now much higher entitlement. At the moment around 20% of those placed in WRAG challenge the decision at least once, so there is considerable scope for this to become more prevalent.

Third, as the government’s policy costing document points out, they may try to claim other benefits. The main option available is personal independence payment – a non-means tested disability benefit. Not only does this provide income directly (between £22 and £141.10 per week), but receipt can also be an automatic passport to higher ESA entitlements.

Fourth, they could move into work. Claimants may be constrained in the extent to which they can respond in this way – WRAG claimants have after all been declared by the government to have ‘limited capability for work’. On the other hand, a DWP survey found that 30% of WRAG claimants are already looking for work, and some research suggests that employment decisions among the disabled can be sensitive to the level of disability payments. However, many – perhaps the majority – will not respond in any of these ways and will therefore have to make do with an average of £1,400 a year less than they would otherwise have got.

This article first appeared in Society Now