Cuts to UK Benefits

This is an older article some of the data is now out of date. Our most recent report A Fair Society? gives the best overview of the impact of cuts on people in poverty and disabled people. However, some of the examples below are still relevant.

Author: Ben Baumberg

The UK government is planning a series of changes to the benefits system, which will result in cuts in the amount of money received by disabled people – with some of the cuts hitting many people a little, and other cuts hitting a few people a lot. To understand this, it is easiest to group the many individual benefits into three different types:

  1. Out-of-work benefits – paid to people because of an illness or disability that prevents them from working
  2. Extra-costs disability benefits – paid to help with the extra costs of disability
  3. Other benefits – paid for a variety of other reasons (having children, unemployment), which also affect people with disabilities.

Out-of-work disability benefits

Out-of-work disability benefits include the old Incapacity Benefit as well as the new ‘Employment and Support Allowance’ (ESA - see below). The rate of incapacity benefits will be progressively cut over time, as for other benefits. This is because of a change in how benefits are up-rated with inflation; while this seems like a minor technical change, the June 2010 Budget estimated that in 2014-15 this would save the Government nearly £6 billion, by far the biggest of the individual changes to benefits made in 2010.

As well as reducing the levels of the payments, the Coalition Government are continuing the previous Government’s policy of making the medical tests for ESA stricter so that fewer people with health problems are entitled to benefits. These medical tests are already being applied to new claimants, and by Spring 2014 everyone already claiming incapacity benefits will be reassessed. The tests have been very controversial, with Citizens Advice strongly criticising the fairness of the process, leading to a Government Review and a further four planned annual reviews, as well as an ongoing Select Committee investigation.

People with working partners or savings above £16k will also lose incapacity benefits completely after 12 months from April 2012, in further changes announced in the 2010 Spending Review. (This does not apply to the most severely disabled in the ‘Support Group’ of ESA, but it will apply to those people that pass the strict medical test and are put in the ‘Work Related Activity Group’. Only 3 in 10 new recipients of ESA are placed in the Support Group). The Treasury expect this to save a further £2bn in 2014-15.

As part of the introduction of the Universal Credit, means-tested out-of-work disability benefits will be completely overhauled by rolling them into a single benefit alongside other means-tested benefits. This change in itself will probably not lead to cuts to the amount of money received by disabled people (and it might even lead to some gains in the incentives to work part-time), although much depends on the yet-to-be announced details of the new system. The Government plans for the initial Universal Credit cohort to start in 2013.

Extra-costs disability benefits

The main extra-cost disability benefit for working-age people is Disability Living Allowance (DLA), and the June 2010 Budget announced plans to cut the number of people claiming this by 20% - a cut of nearly £2.5bn, affecting 350,000 people

The Independent Living Fund that pays £350m pa to 21,000 people with severe disabilities to help them live at home has also been closed to new applicants, and will be shut down completely by 2015.

We now know that this will be part of a wholesale replacement of DLA by a new benefit called the Personal Independence Payment (PIP) by 2013/14, which includes a new – and presumably stricter – medical assessment. It is currently planned that PIP will have two components (‘daily living’ and ‘mobility’), each of which is payable at two rates; people will have to have had the disability for 6 months prior to claiming, unless they have a terminal illness. Details of how PIP will work are continually emerging, and a regularly updated summary is available from the Disability Alliance.

A particularly controversial planned cut is to remove the mobility component of DLA from people in residential care homes. This would reduce the incomes of 80,000 people by £2,000 pa, but after some negative media attention the Government is currently reviewing whether this cut will actually take place – although some disability campaigners believe the Government has not changed its original plan.

Other benefits

The impact of changes to housing benefits are covered elsewhere – but disabled people will be among those whose incomes are hit by the variety of other cuts to benefits. For example, all benefits will become less generous over time due to the technical change in up-rating described above, VAT, income tax and tax credit changes lead to a number of net losers, crisis loans from the Social Fund are being restricted, while a cap is being introduced on the total amount of benefits received by one household (although households claiming DLA are exempt we must also bear in mind the Government’s intention to cut the numbers claiming DLA by 20%). These other cuts will be particularly important given that the medical tests for disability benefits are becoming increasingly strict, meaning many people with moderate disabilities losing entitlement to DLA or being pushed from ESA to Jobseekers Allowance.

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The publisher is The Centre for Welfare Reform.

Cuts to UK Benefits © Ben Baumberg 2011.

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