The government has dropped its controversial personal independent payment (PIP) cuts, and the Treasury has confirmed that there are no plans to fill the PIP-shaped £4.6bn hole in the budget through further welfare changes. But despite ministers’ conciliatory noises, plenty of other social security cuts remain in place for this parliament, amounting, in theory, to billions of pounds of savings.
Employment support allowance (ESA)
Just over a fortnight before last week’s Tory backbench PIP rebellion, the government forced through plans to cut £30 a week from the unemployment benefit of ill and disabled claimants found unfit to work. Ministers said it would incentivise the 500,000 people in the ESA work-related activity group (Wrag) – assessed as unfit to work now but possibly able to work in the future – to get a job. Peers (who voted down the proposal twice) and campaigners said it would push claimants further from the job market and pitch them into deeper poverty. The cut applies to new ESA Wrag claimants from April 2017.
Estimated saving: £1.4bn over four years
Working age benefits freeze
A range of benefits will be frozen for four years from April 2016, including tax credits, jobseeker’s allowance and ESA Wrag payments (but not PIP, or for ESA support group claimants who are deemed unlikely to work again because of illness or disability). The freeze will ensure that the lowest-income households continue to get poorer, and follows a series of below-inflation uprating decisions. Between 2010 to 2020, for example, child benefit is projected to lose 28% of its value, according to the Child Poverty Action Group charity. Though freezing or capping benefits rarely attracts political attention, it proved the most effective way of cutting social security under the last government, accounting for an estimated two-thirds of the £18bn savings.
Estimated saving: £7.2bn over four years
Housing benefit freeze
More than 300,000 low-income working families will face substantial shortfalls – in some cases amounting to hundreds of pounds a month – as a result of a freeze on local housing allowance starting in April. The gap between rent and housing benefit levels on a two-bedroom flat in high-cost areas such as central London by 2020 could reach £1,440, according to Shelter, while even in less expensive areas such as Birmingham (£107) and Bristol (£236) the shortfall will be substantial. (Total Treasury savings from the change are wrapped into the working age benefits freeze assumptions, above.)
Household benefit cap
The welfare and work bill, passed earlier this month, reduces the level of the benefit cap (the total value a household is entitled to in benefits) to £23,000 in London (formerly £26,000) and £20,000 in the rest of the UK from April. PIP recipients (and its disability living allowance predecessor) are exempt, but sick and disabled people in the ESA Wrag are not. The benefit cap has proved popular with voters, though its real-world impact has until now been small. That may change in April, when as a result of the changes the government estimates that 330,000 children in low-income families will be hit, predominantly in the south of England.
Estimated saving: £1.1bn over four years
Local housing allowance caps
This aligns housing benefit payments in the social sector with local limits in the private sector. Though it was barely noticed when it was slipped out in the autumn statement in November, housing associations quickly pointed out that the cut was likely to lead to widespread closures of specialist social housing, including homeless hostels, domestic violence refuges, and sheltered housing for elderly and vulnerable people. After a furore, ministers delayed the cut for a year while they worked out whether they should exempt supported accommodation.
Estimated saving: £300m by 2020
Tax credit and universal credit reforms
Despite the government’s much trumpeted U-turn on tax credit cuts in October, reductions to universal credit (UC) work allowances announced in the summer budget and the autumn statement will see working families with children lose on average £1,300 a year, and as much as £3,000 in 2020, according to the Resolution Foundation. The UC changes impose a “two-child” benefit limit on households with at least two children, meaning that no extra support will go to children born after April 2017 in families making a new tax credit claim. Families making new claims for UC will be able to claim for only two children, regardless of when they were born. The changes also see the scrapping of the £545-a-year family element in UC and a cut to the £17.45-a-week housing benefit family premium.
Estimated saving: £5.4bn over four years (work allowances); £2bn by 2020 (two-child limit); £1.2bn (family element) by 2020
Other social security cuts
Housing benefit for 18-21-year-olds will be abolished from April 2017 (unless the claimant has a child or is deemed vulnerable). This will save the Treasury £95m by 2020, but threatens thousands of teenagers with homelessness, says the YMCA charity. Mortgage interest support was converted from a grant to a loan (saving £620m over four years).
And not forgetting ...
The bedroom tax, introduced in April 2013, is still in place for working age social tenants deemed to have more rooms than they require. Those affected lose an average £14 a week in housing benefit. The DWP claims savings in the housing benefit bill of £400m a year. But the government’s official evaluation published in December noted that many tenants were “in severe poverty and unable to pay the shortfall”.