Welfare Reform and Avoiding the Worst Case Scenario

26 Sep 2014 Seamus McAleavey    Last updated: 10 Nov 2015

Earlier this week NICVA issued a statement on Welfare Reform.

NICVA representing the views of many organisations in the voluntary and community sector is opposed to the Coalition government’s welfare reform policy. We believe it creates more hardship by squeezing those most in need of support. However, we recognise the decision was not of the Northern Ireland Assembly’s making and that the Assembly could not pick up the entire shortfall.

We have lobbied the previous DSD Minister Nelson McCausland and DWP Minister Lord Freud for mitigation.

In respect of the ‘bedroom tax’, Northern Ireland has had a long-standing policy of building three bedroom houses, and therefore there is a shortage of suitable smaller accommodation. If the proposals were implemented without variation, the resulting under-occupancy and reduction in housing benefits would create more debt problems for people already struggling on low incomes.

Further variations asked for by NICVA were direct payment of housing benefit to landlords where claimants wanted it; fortnightly rather than monthly payments; split payments where requested rather than a single payment to a head of household. This was to protect families from unfair distribution of resources within a family.

NICVA also believes there should be a statutory right to independent advice for those affected by the reforms and that steps should be taken to ensure the opportunity presented by the devolution of the social fund puts in place protection for people most affected by any changes.

Our worst case scenario now is that if the NI Executive was to collapse over failure to reach a workable agreement, we return to Direct Rule and Welfare Reform could be implemented at the stroke of a pen with none of the mitigation highlighted above. That’s a bad outcome for people in need.

It is also the case that good public services are a critical support to those in need. Northern Ireland cannot be allowed to descend into a round of shambolic budget cuts because the NI Executive cannot agree decisions on its wider budget.

The £750m figure

There has been a great deal of confusion over the £750m figure in the Sheffield Hallam University report for NICVA on the Impact of Welfare Reform on Northern Ireland by Professors  Fothergill and Beatty.

Depending on which position commentators took they used the figure as it suited. The authors were very clear they included every adjustment including those already made by the Labour Government and those being carried through by the current coalition.

Many of the ‘savings’ or ‘cuts have already taken place and are actually outside the control of the NI Executive like HMRC Tax credits and Child Benefit.  Child Benefit has been frozen for 3 years and interestingly the Labour Party has now said it will only rise by 1%  for the first two years if they win in May 2015. Nothing was hidden. The figures used were, in general, the governments mostly Treasury and the Department of Work and pensions. Everything referred to as a saving was itemised.  Savings meant freezing a benefit, or reducing a future uplift to 1% instead of the previous policy of CPI, the consumer price index.

Here is how the figures break down:

 Estimated net loss £m/yr by 2014/15
 The Welfare Reform Bill 2012 ie not implemented yetEmergency Budget 2010 – Legislated April 2011Labour Government introduced 
Incapacity Benefit (ESA)14090*  
Tax Credits 135**  
1% uprating 120***  
DLA/PIP105   
Child Benefit 80  
Housing Benefit: LHA****55  
Housing Benefit: underoccupation20   
Non-dependant deductions 10  
Household benefit cap3  Total net loss/yr
 268490 758

We haven’t included any possible increases due to Universal Credit calculations as it is not expected to result in net reduction of benefit entitlement, and full impact in NI unlikely before 2018.

Lastly, the Social Security bill is still increasing overall but it has to be remembered that the coalition did not include the State Pension in their reforms. That Pensions were protected is a good thing and their uplifts continued. The state pension accounts for 47% of spending on welfare in the UK. That is £78 Billion; a lot more than the £5 Billion spent on Jobseekers Allowance.

* The time limiting element of ESA (12 months non-means tested entitlement for those assessed as able to work in the future) is included in the 2012 Welfare Reform Bill, but the figures in the NICVA report do not separate this from other elements of ESA reform that have already taken place (eg impact of work capability assessment). An assumption has therefore been made to split ESA between these two elements based on the same ratio of differences as GB.

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Links:
No easy way out on welfare reform for Northern Ireland - New Policy Institute

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