Austerity and welfare cuts

6449741467_dc1a81af70_bIn today’s post, Ines Newman discusses the implications of current and future welfare reforms, including the cuts planned for April. She argues that this will lead to increasing inequality and poverty, rising household debt levels with higher levels of rent and council tax arrears and that we are witnessing increased levels of maladministration by the Department of Work and Pensions.

In the first budget of this Parliament, George Osborne put in place £12b welfare cuts which came on top of the cuts in the previous Parliament. But with his departure following the Brexit vote and the worrying policies of Donald Trump, the impact of these cuts on families in the UK has slipped out of the limelight. They are however substantial and the Resolution Foundation has recently argued that they will result in ‘falling living standards for almost the entire bottom half of the working-age income distribution between this year and 2020-21’.

In April 2016, working age benefits, tax credits and the Local Housing Allowance were all frozen for four years. For example, Job Seekers Allowance (JSA) for a single unemployed person over 25 stood at £73.10. In 2009, it was already being argued that JSA was not sufficient for the essentials of life, such as food, bills and travel, and was inconsistent with a minimum standard. The real value had not changed for at least 30 years while per capita household consumption had doubled over this period. In relative terms the value had therefore halved. Now, as post Brexit inflation gathers pace, the real value of working age benefits will fall sharply, generating acute poverty.

Those with disabilities have traditionally been slightly protected through the higher Employment and Support Allowance (ESA) and through Disability Living Allowance (DLA). However in 2015, the DWP started to contact anyone getting DLA and asking them to make a new claim for a Personal Independence Payment (PIP). The Government estimates https://fullfact.org/economy/personal-independence-payment-who-are-winners-and-losers/    that out of 1.75 million DLA reassessments, 510,000 will have a reduced payment and 450,000 will have their payments removed altogether.

All those with disabilities have to go through an assessment process which is as inadequate as the Work Capability Assessment for ESA. The PIP assessment is run by ATOS who finally bowed out of the contract on the Work Capability Assessment after receiving massive bad publicity. Meanwhile as Ken Loach’s recent film I, Daniel Blakemade clear, the new contractors, Maximus, for the work capability assessment, are no better than ATOS. Finally, from April 2017, new claimants who have a recognised disability on the work related assessment but are deemed to be capable for work will see the removal of work related activity components for ESA. It will mean those receiving the benefit will see their weekly payments cut from £103 to £73 a week. Far from protecting ‘vulnerable’ households the Government is pushing more disabled households into poverty. Half of those people living in poverty are now either themselves disabled or are living with a disabled person in their household, when the higher costs they face are taken into account.

Because successive governments have failed to deal with the housing crisis, rising rents combined with the bedroom tax, council tax benefit reductions, the cap on the local housing allowance and the total benefit cap are forcing low income households into poverty and debt. Sometimes they are forced to move into poorer areas, disrupting their children’s schooling and losing the support of families and friends. In December, the New Policy Institute https://www.jrf.org.uk/report/monitoring-poverty-and-social-exclusion-2016   reported that the number of private renters in poverty has doubled over the last decade and homelessness and temporary housing has increased five years in a row. In the London Borough of Camden where I live, we know that the lower benefit cap of £23,000 is affecting 1,110 children in 383 families. While some of these are being protected by discretionary housing payments (DHP) it is unclear for how long they can be supported and we are expecting a cut in DHP in April. A household caring for a disabled child over 18 who are not able to work because of their caring responsibilities will almost inevitably be hit by the benefit cap, as will a lone parent with several small children.

Meanwhile Universal Credit (UC) is gradually being rolled out. Using the language of giving more responsibility to the claimant, UC includes housing benefit (rather than this benefit being paid direct to the landlord) and is paid monthly in arrears. The result has been a massive increase in council rent arrears (85% of those on UC in Camden), partly as a result of delays and miscalculations in the housing element and by an understaffed DWP. From 11 April 2016, the rules on UC work allowances were changed to make them far less generous in a number of cases. The work allowance is the amount an individual or family can earn before their maximum UC award starts to be reduced. The reductions to the UC work allowances announced in the Summer Budget will ultimately have a similar impact to the changes to tax credits which were fought off by various lobby groups at the time of Osborne’s budget. Other changes in UC are significant too. From April 2017, young people aged between 18 and 21 claiming universal credit will not be eligible for housing benefit and will be expected to take part in a Youth Obligation for the first six months and then apply for an apprenticeship or trainee-ship, gain work-based skills or go on mandatory work placement. This is coming in despite the Government having to scrap the previous Mandatory Work Activity programme in 2015 when many charities boycotted it and research showed it was ineffective and merely punitive. Households will not receive Universal Credit for any children born after April 2017, when they already have two children. A lone parent with no child under 3 will be expected to look for work to claim any benefit after April this year. How such parents can then provide the type of parental support that numerous studies have shown is invaluable seems not to be a consideration for this so-called ‘family orientated’ government.

The Resolution Foundation concludes:  ‘the result is that the parliament from 2015-16 to 2020-21 is on course to be the worst on record for income growth in the bottom half of the working age income distribution. At the same time, we project the biggest rise in inequality since the 1980s, with inequality after housing costs reaching record highs by 2020-21.  This will be the legacy of austerity.

Ines Newman is a visiting senior research fellow at CURA, a trustee of Paddington Development Trust and does social policy research on a voluntary basis for Citizens Advice Camden.

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