The Department for Work and Pensions' failure to scrutinise the consequences of disability benefit reform raises serious questions about their competence.
Neil Coyle is director of policy and campaigns for Disability Rights UK, and a Labour councillor in Southwark. He writes here in a personal capacity.
Disabled people and charities’ concerns that government proposals to abolish Disability Living Allowance (DLA) for 16-64 year olds needed proper consultation were brushed aside during the rush to enact the Welfare Reform Bill. Yet the government’s attempts to steamroller legislation through Parliament, without examining the potential consequences, is returning to haunt the Department for Work and Pensions (DWP).
The government is rushing to deliver a 20% saving in overall DLA expenditure by 2015/16. It aims to achieve this by abolishing working age DLA, while introducing ‘Personal Independence Payments’ (PIP) with 500,000 fewer disabled people eligible for support.
The coalition’s approach to abolishing DLA assumed that expenditure is ‘deadweight’, and thus that cuts were achievable without knock on effects for other government revenue or expenditure. This falsehood would have been exposed had the government undertaken a full impact assessment.
Yet in March this year, the Joint Committee on Human Rights (JCHR) highlighted that its inquiry into disabled people’s right to independent living had ‘received evidence that impact assessments of current reforms were not adequately carried out’.
Given the potential costs of 500,000 disabled people becoming ineligible for support, this lack of adequate analysis is irresponsible.
In the largest recent survey of the use of DLA, respondents highlighted risks of losing DLA very relevant to government expenditure. Most alarmingly, 56% of the people in work said they may have to stop work.
DLA is not an out of work benefit. Introduced from 1992, under the last Conservative government, to help with disabled people’s routine higher living costs, DLA supports many disabled people in work: the DWP estimates that around 9% of current recipients are employed.
However, these figures can be distorted by excluding part time work, the inclusion of which can yield a total of 40% of single, disabled recipients living with their parents. Disability Alliance’s survey suggested 27% of respondents were in either full or part-time employment.
Yet even if 9% of the 500,000 disabled people losing eligibility under government DLA plans are in work, this represents 45,000 people. If 56% of those 45,000 people then lost work, as the survey suggests, this would be 25,200 people whose lost National Insurance and income tax contributions and new out of work benefit claims would massively increase the bill for abolishing DLA.
According to the National Statistics Office, average UK earnings are £26,100 a year . The 2012/13 income tax rate (£3,599) and NI contribution (£2,220.96) provide the Treasury £5,819.96 per person. If 25,200 disabled people are forced out of work the Treasury could lose £146.7 million a year.
Yet 25,200 is a conservative estimate. Using a median figure of 18% (of the 9% DWP estimate and the 27% of respondents in the survey), 90,000 disabled people could be affected; the total losing work could be 50,400. By these figures, the Treasury stands to lose £293.3 million per annum.
It is inexplicable that the DWP failed to provide this data. Questions of competence must be asked, especially when additional out of work benefit payments have to be made to disabled people forced out of employment. If everyone losing work received Jobseeker’s Allowance (JSA) it would cost £71 for people over 25 a week and £56.25 per week for people under 25.
Of the working age people receiving DLA, 11.4% are under 25 . If 25,200 lose work, of whom 11.4% are under 25 (2,873), this would cost £8.4 million per year (rising as people reach 25 to full adult rates). The cost of people over 25 (22,327) would be £82.4 million per year.
Out of work benefits could cost at least £90.8 million a year: if the 25,200 figure is conservative, the costs are even higher. But disabled people out of work could access Employment and Support Allowance (ESA). ESA is paid at a higher rate than JSA: £99.15 per week for people over 25 (£5,155.80 per year) and £84.40 for under 25s (£4,388.80 a year).
If all 25,200 that stand to lose work received ESA, this could increase the cost of out of work benefits to £12.6 million a year for under 25s and £115.1 million for people over 25; £127.7 million a year unaccounted for by DWP.
Other benefit costs are also applicable. For example, Housing Benefit payments would rise dramatically for people leaving work. Again, these costs have been ignored in the coalition’s rush to deliver a 20% reduction in DLA expenditure.
Moreover, accessing out of work benefits is not free. The Work Capability Assessment (WCA) – the route for new claimants – is currently run by Atos Healthcare at a cost of £100m per annum. Atos are supposed to see 15,000 people per week (780,000 a year), equating to £128 per assessment. Assessing 25,200 people losing work adds an additional £3.2 million.
Given the chancellor’s statement during the 2012 Budget announcement that a further £10 billion may be cut from welfare, the need for government to understand welfare could not be more pressing. Nonetheless, the approach thus far to cutting welfare has appeared to view DLA payments, in particular, as deadweight expenditure.
The idea that DLA represents a ‘nil return’ cost is inaccurate. It is essential the Tory-led coalition properly assess welfare cuts, undertake debate in the context of facts and analysis, and not purely view welfare through the prism of political ideology or an incompetent understanding of a complex area of expenditure.