Committee commissioned research demonstrates poor to get poorer through welfare reform

11.04.2013

The most deprived areas in Scotland will take the biggest financial hit when the present welfare reforms come into effect. This is the conclusion of research published today (Thursday 11 April) commissioned by the Scottish Parliament’s Welfare Reform Committee.

The study, undertaken by the Centre for Regional Economic and Social Research at Sheffield Hallam University, has estimated that when fully implemented, the welfare reforms will take more than £1.6 billion a year out of the Scottish economy. This is equivalent to around £480 a year for every adult of working age in Scotland. In Glasgow, this rises to £650 a year.

Whilst the Scottish average is broadly on a par with the British average, this makes Glasgow second to only Birmingham within Britain in terms of financial loss. The research also details the number of households affected by each part of the welfare system and its impact. It shows that although Child Benefit changes affect the largest number of households, the largest financial impact is on those in receipt of incapacity benefits and Disability Living Allowance.
 
Committee Convener Michael McMahon MSP said:

“Our Committee wanted a detailed picture of what would happen on the ground when these reforms were fully implemented. It is obvious to all that the impact is dramatic – and more so in the areas that can least afford it. It will no doubt cast a long shadow over our meeting in Glasgow on 23 April.

“We have been hearing during the past year people’s concerns about the reform and to see these numbers in black and white demonstrates just how bleak the picture is. Coping with disability is physically and emotionally difficult, even if the incapacity is short lived. It is also expensive and our research has highlighted that in Scotland, for the 144,000 working age adults adversely affected by incapacity benefit loss is on average £3,480 a year. I don’t see how this is supporting people in their time of need or helping people break out of the cycle of poverty.”

The research was undertaken by Professor Christina Beatty and Professor Steve Fothergill. It focussed on adults of working age as this is the group most affected by welfare reforms. It concludes that more than £1.6 billion a year will be taken out of the Scottish economy when the reforms come fully into effect. This is considerably higher than previous estimates as this research takes into account the impact of reforms on payments of incapacity benefits, Tax Credits and Child Benefit.

Deputy Convener Jamie Hepburn MSP said:

“We have been taking evidence for a long time that the approach to welfare reform was wrong. A lot of attention has been paid, quite rightly, to the so-called ‘bedroom tax’. What our research has shown is that the impact of the bedroom tax will be 50% higher in Scotland than in Great Britain as a whole. However, our figures also show that the changes to Tax Credits affect more people more significantly than the ‘bedroom tax’. If people were outraged before, imagine how they will feel after reading this research.”

Professor Steve Fothergill will give evidence to the Committee in public on Tuesday 16 April. Speaking ahead of this he said:

“Welfare Reform is a deeply contentious issue and in documenting the impacts, our report does not attempt to comment on the merits of the reforms. However, it is important that the impact on different places is fully exposed because this is a key dimension that is too often overlooked. The impact on different places is also one of the yardsticks by which the reforms should be judged.”

Key findings include:

The research details the impact of each part of welfare reform on Scotland, as well as by local authority. It is available on the Parliament’s website, whilst an interactive version can be found on the partners’ website, details at the end.

Top-line figures
The biggest financial losses will arise from reforms to incapacity benefit (£500 million loss a year), Tax Credits (£300 million loss a year) and the 1% up-rating of most working age benefits (£290 million loss a year). This compares with £50 million for Housing Benefit reforms (‘bedroom tax’).

Impact on Scottish households

• 144,000 individuals in Scotland will be adversely affected by changes to incapacity benefits, with individuals on average losing £3,480 a year.
• 372,000 households in Scotland will be affected by changes to Tax Credits, with households on average losing £810 a year.
• 80,000 households in the social rented sector in Scotland will be affected by changes to Housing Benefit (‘bedroom tax’), with households on average losing £620 a year.

Impact on local authorities

• It is estimated reforms will cost Glasgow almost £270 million a year, equivalent to £650 a year for every adult of working age in the city.
• The other three areas expected to be most affected are Inverclyde (£33 million a year, equivalent to £630 a year for every adult of working age) Dundee (£58 million a year, equivalent to £600 per adult of working age) and West Dunbartonshire (£36 million, £600 per adult of working age)
• The three areas of Scotland estimated to have the smallest impact are Shetland Islands (£4 million a year, £290 per adult of working age), Aberdeenshire (£49 million a year, £300 per adult of working age) and Aberdeen (£52 million a year, £330 per adult of working age)
   
  Comparison within Great Britain
• Scotland in terms of loss ranks 7th out of 11 of the categorised areas.
• The North West of England is estimated to have the biggest loss at £2,560 million a year, equivalent to a loss of £560 per adult of working age. The North East of England is estimated to have a loss of £940 million a year, although, owing to its population, this is equivalent also to £560 per adult of working age.
• The South East of England will have the smallest impact, with an estimated annual loss of £2,060 million, equivalent to £370 per adult of working age.
• Within this wider picture, Glasgow ranks 23rd out of 379 ‘districts’ across the GB in terms of the financial loss per working adult age, with Dundee 51st, Edinburgh 238th and Aberdeen 299th.
• The overall scale of the financial loss in Glasgow (£269 million a year) will be second only to Birmingham (£419 million a year), which has a substantially larger population.

Background

The full report is available on the Parliament’s website. Professor Steve Fothergill will give evidence on the report to the Committee on Tuesday 16 April at 10am in Committee Room 5. This will be webcast live on the Parliament’s website.

This evidence session comes the week before the Committee is due to meet in Glasgow on Tuesday 23 April as part of its ‘Your Say’ evidence gathering exercise.

As a leading UK policy research centre, CRESR seeks to understand the impact of social and economic disadvantage on places and people, and assess critically the policies and interventions targeted at these issues. For more information, go to www.shu.ac.uk/cresr. For more information, please contact Laurie Harvey, Public Relations Officer, Sheffield Hallam University.
Direct line +44 (0)114 225 2621