The Scottish Government has published its fourth and final annual report on the impacts of welfare reform in Scotland, looking back to reforms introduced since 2010 and looking ahead to 2020. The report focuses on the financial impacts of welfare reform which are expected to reduce annual spending in Scotland by £3.9 billion by 2020/21. The report is comprehensive in its findings in relation to the financial impacts but what does this mean for the families affected?
CPAG in Scotland’s Early Warning System has been gathering evidence about the impacts of welfare reform since 2013 and to date has collected over 3000 case studies which illustrate the impacts of welfare reform on individual families.
When we started collecting evidence one of the first things we started to see emerge through the case studies was the dynamic nature of poverty. Some were experiencing persistent poverty, some were in poverty due to a sudden crisis.
We were seeing long term, slow-grinding poverty where it is a struggle to make ends meet and cover all the essentials, and there is no money for large costs such as a broken washing machine. One of the reasons for this is that the value of benefits has been reduced. Instead of increasing alongside the cost of living, means-tested benefits were capped at 1% for three years and then frozen from 2016 until 2020 so, as the cost of living goes up, the value of benefits does not. Simply put money does not go as far as it used to. This means a total loss of £1.9 billion by 2020/21
Our Early Warning System also found people in income crises, where people suddenly and unexpectedly found they had no income or their income had vastly reduced. This was largely down to sanctions, delays getting claims processed, administrative error or benefits being stopped. One of the surprise findings from the Early Warning System is that a third of all the cases include some kind of administrative error or misinformation. Claimants are not just impacted by welfare reform, but also day to day operations of the social security system.
A young couple with two small children were left with very little income for five months and substantial rent arrears as they were repeatedly incorrectly advised by DWP that they were not entitled to universal credit. Initially their claims were not accepted and they were advised to claim tax credits, but this was refused as the couple live in an area where all new claims for means-tested benefits trigger a claim for universal credit. After three months a claim was accepted but immediately erroneously closed. There are no grounds for backdating UC for the three month period before the claim was accepted. Up till now the clients have relied on family assistance but now have no money.
The first groups to emerge from our Early Warning System findings as experiencing severe and prolonged destitution were European nationals. Changes made it very difficult for European nationals to access benefits unless they were working and living in the UK - affecting people who were ill or disabled, people with caring responsibilities, lone parents of small children, and those who had recently escaped domestic abuse. It was the first time that it was possible for all options to be exhausted and people still be left without a financial safety net and without any money.
A European national lone parent who has lived in the UK for more than 10 years, including some periods of work and studying, applied for income support but was refused. She and her child are fleeing domestic abuse and are staying in temporary accommodation with no means of paying her rent.
Move away from minimum income
The next thing we started to see was a move away from the principle of benefits providing a minimum income corresponding to your circumstances. For the main means-tested benefits, your maximum award is calculated based on the amount of money you need to live on, for example you might be entitled to an amount for yourself, for your children and for housing costs. This minimum amount is less than generous, with out of work benefits for a couple with two children falling 41% below the minimum income standard budget.
If you have any income your award is reduced accordingly, but still leaving you with a minimum amount to live on. However there have been a series of changes that have moved away from this principle and benefit awards have been capped or reduced by an arbitrary figure that bears no relation to the minimum amount a family might need to live on. For example, the benefit cap limits the maximum amount of benefit an individual or family can receive each year. For families the cap started at £26,000 which didn’t affect many families in Scotland, although for the ones it did, it had severe financial consequences. The cap was further reduced in November last year to £20,000 a year encompassing many more families. The effect of the cap is to reduce housing benefit or the UC award, in many cases leaving only 50p towards the rent, with families having to meet the shortfall themselves.
A couple with three small children are subject to the benefit cap. Dad is bi-polar but recently failed the work capability assessment for employment and support allowance and has had to claim jobseeker’s allowance and agree to look for work. He didn't appeal the decision because he missed his welfare rights appointment because he had to attend court and has not been offered another appointment. Mum has investigated employability but is worried about leaving the children with Dad because of his mental health and she is still breastfeeding the youngest child. One of the children is suspected probably has Asperger Syndrome but has not yet been diagnosed. She has sensory impairment which means she can't eat free school meals and has to have a packed lunch. The family are already struggling financially. They had been living off payday loans, but their debt was written off due to mis-selling. Mum shops in charity shops and relies on assistance from family and food banks.
We have also seen the introduction of universal credit. There are some advantages to universal credit. You do not have to claim a new benefit every time your circumstances changes, for example, you move in or out of work or ill health. It should rise and fall alongside your income unlike tax credits which were based on your previous year’s income. In theory it should provide better support to people starting work. However we have also found:
• many people receive lower amounts of universal credit than they would receive through one of the benefits being replaced by universal credit
• financial pitfalls built in to the administration of universal credit, for example the seven day waiting period at the beginning of the claim and the six week wait for the first payment
• administrative errors leaving claimants without money for themselves or to pay the rent.
A client was receiving employment and support allowance during her pregnancy and hoped to claim income support as a lone parent once the baby was born, but she is in an area where she will have to claim universal credit instead and wait at least five weeks for the first payment. She will be significantly worse off on universal credit than she would have been on income support because she was receiving the severe disability premium in her employment and support allowance and there are no disability premiums payable in universal credit.
Looking ahead we expect to see an increasing number of families affected by universal credit as it rolls out across the UK and to see the impact of the two-child limit.
What can you do?
We collect case studies from queries to CPAG in Scotland’s second tier advice line and from frontline workers who have direct contact with families who have been affected by welfare reform. If you would be interested in submitting case studies, please contact:
0141 611 7091
More information on the Early Warning System and its findings can be found here.