The impact of the government welfare reform programme in Cornwall

Cornwall’s economy  is losing  £521 per working age adult (age 16 to 64) per annum by year 2014-15 as a result of the government’s welfare reforms.

This is higher than the national average  of £470 a year per adult of working age across the whole of Britain. For some of the individuals affected by the changes the loss of income is much, much greater. What is also clear, however, is that the financial losses arising from the reforms will hit some places much harder than others.

The figures in this report>> published in 2013  by Sheffield Hallam University shows the impact when the reforms have come into full effect. The report obviously does not include further welfare reforms to the Tax Credit system and the  higher minimum wage proposed in 2015 by the current government.

As a general rule, the more deprived the local authority, the greater the financial hit and a key effect of the welfare reforms will be to widen the gaps in prosperity between the best and worst local economies across Britain.

The UK is  already one of the most unequal countries in Europe with vast gaps in wealth and income between different social strata and regions (see this post>>>). The welfare reforms are likely to accelerate that trend. 

Cornwall, with a population of  532,000, already  has the lowest GDP per head of all English sub-regions and stands to lose  £170m a year.  This makes it one of the twenty worst affected councils in terms of absolute financial impact of the reforms – see below – even if the relative impact per person is nowhere near as high as in some London and northern boroughs. In Blackpool for instance, the report estimates the loss of more than £900 a year for every adult of working age in the town.

sheffieldHallam_Cornwall
As the report states: “There are no surprises in this geography. It is to be expected that welfare reforms will hit hardest in the places where welfare claimants are concentrated, which in turn tend to be the poorest areas”.

Cornwall comparison with UK: Impact of welfare reforms, loss per working age adult

Cornwall_PieChart

Cornwall suffers a loss of £521 per working age adult and the pie chart above breaks this down into different categories. This is significantly higher than the national average of £470 which is also laid out in the pie chart below for ease of comparison.

UK_pieChart

The figures presented in the report cover all the major welfare reforms that are currently
underway. In brief, these are:

Housing Benefit – Local Housing Allowance

Changes to the rules governing assistance with the cost of housing for low-income households in the private rented sector. The new rules apply to rent levels, ‘excess’ payments, property size, age limits for sole occupancy, and indexation for inflation.

Housing Benefit – Under-occupation

New rules governing the size of properties for which payments are made to working age claimants in the social rented sector (widely known as the ‘bedroom tax’)

Non-dependant deductions

Increases in the deductions from Housing Benefit, Council Tax Benefit and other income-based benefits to reflect the contribution that non-dependant household members are expected to make towards the household’s housing costs.

Household benefit cap

New ceiling on total payments per household, applying to the sum of a wide range of benefits for working age claimants

Council Tax Benefit

Reductions in entitlement of working age claimants arising from 10 per cent reduction in total payments to local authorities

Disability Living Allowance

Replacement of DLA by Personal Independence Payments (PIP), including more stringent and frequent medical tests, as the basis for financial support to help offset the additional costs faced by individuals with disabilities

Incapacity benefits

Replacement of Incapacity Benefit and related benefits by Employment and Support Allowance (ESA), with more stringent medical tests, greater conditionality and time limiting of non-means tested entitlement for all but the most severely ill or disabled

Child Benefit

Three-year freeze, and withdrawal of benefit from households including a higher earner

Tax Credits

Reductions in payment rates and eligibility for Child Tax Credit and Working Families Tax Credit, paid to lower and middle income households.

1 per cent up-rating

Reduction in annual up-rating of value of most working-age benefits. Basically this limits annual increases in working-age benefits to 1% for the next three years.

As the report points out:  “the individual welfare reforms vary greatly in the scale of their impact, in the number of
individuals or households affected, and in the intensity of the financial loss imposed on those affected. A great deal of media coverage has focussed on, for example, the ‘bedroom tax’ and the overall household benefit cap. In fact, the biggest financial impact comes from the reform of incapacity benefits – an estimated reduction in spending of more than £4.3bn a year. Changes to Tax Credits and the 1 per cent up-rating of most working-age benefits, taking effect from April 2013, also account for substantial sums – £3.6bn and £3.4bn respectively”.

Comment: a rebuttal by more Conservative and right wing commentators will be along the lines that this report does not look at the jobs created and the relatively high employment rate that Cornwall enjoys as we emerge out of recession. In other words, what Cornwall loses as a result of diminished welfare support, it gains through the generation of new employment and self employment opportunities. However that case has yet to be proved and a recent separate post refers to a rise in the proportion of jobs being less than the minimum wage over a three year period (ref KPMG report – note this is nationally, but Cornwall is unlikely to buck the trend). The high prevalence of low paid, part time and zero hours contract work does not augur well for George Osborne’s vision of a ‘high pay, low welfare, low tax economy’.

Sources:

Sheffield Hallam University Report yr 2013: Hitting the Poorest Places Hardest

comment by Researchers: “All the figures presented in the report are estimates, but in every case they are deeply rooted in official statistics – for example in the Treasury’s own estimates of the financial savings, the government’s Impact Assessments, and benefit claimant data”

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2 comments

  1. When did child benefit become means tested , I thought it was universal ? We have never been asked to submit earning statements !

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    • The government limited child benefit to families where one or both earners salary is below somewhere around £50k. This led to protests from people where one earners salary exceeded this but where two earners on say £45k still got it.

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