Jeff Cuthbert, Minister for Communities and Tackling Poverty
This was published under the 2011 to 2016 administration of the Welsh Government
In 2011, the Ministerial Task and Finish Group on Welfare Reform, which I now chair, commissioned a three-stage programme of research to assess the impact of the UK Government’s welfare reforms in Wales.
Today, the first part of the Stage 3 research has been published. The report aims to provide an evidence base for the potential impacts of the welfare reforms on those with protected characteristics in Wales. However, the evidence base is limited for some of the aggregate impacts and for the impact on certain protected characteristics. Therefore, where possible, this report has looked at the impacts of each of the main reforms in isolation and focuses on four protected characteristics (gender, disabled people, age, and race and ethnicity). It analyses the numbers affected, income losses, impacts on poverty, work incentives (i.e. the proportion of earnings lost in tax and withdrawn benefits) and employment, and wider considerations such as online access.
The benefit system distinguishes between disabled and non-disabled people and younger and older people given that these characteristics generally require different support needs. The same is not true for gender, race and ethnicity; therefore, the benefit rules do not differentiate between these characteristics. However, this analysis shows that some groups may be more affected by the welfare reforms because other characteristics, such as income, skill levels, qualifications, work status and family structure, are more prevalent in some groups than in others.
With a few exceptions, the benefit and tax credit changes tend to adversely affect more females than males in terms of the impact on incomes. Overall, non-working lone parent households, most of whom are female, are amongst those who incur the largest income losses. However, lone parents are expected to benefit from a significantly increased incentive to work more hours. By contrast, many women in couples (particularly those with children), are more likely to be second earners than men, and so will see a reduced incentive to work. This is because of the focus of Universal Credit (UC) on helping to get the first earner into work. A greater proportion of women will also be affected by the significantly tougher work-search requirements under UC. Furthermore, the single UC household payment is more likely to be paid to the head of the benefits unit, which is more likely to be male. This may disadvantage some women.
Major changes have already been made to disability and sickness benefits with more to come later this year. The impacts of such reforms are expected to be more pronounced in Wales than in the UK as a whole given the relatively high proportion of people in Wales receiving these benefits. The Department for Work and Pensions has put in place some protection for disabled groups via exemptions and increased Discretionary Housing Payments (DHPs); however, there will be significant impacts on disabled people and also their carers. Although sample sizes on which conclusions are based are small, research by the Institute for Fiscal Studies (IFS) suggests that, on average, households with someone receiving a disability benefit will have an improved incentive to be in work. In addition, those who are already in work and in receipt of a disability benefit will see a substantial improvement in the incentive to increase their earnings. However, incentives to increase their earnings will deteriorate for those in work with a partner receiving a disability benefit.
Overall, pensioners are largely unaffected as most reforms apply to working-age benefits. Given that some of the reforms specifically relate to certain age groups, they will inevitably have a disproportionate impact on these groups. Although older working-age people are more likely to see an income loss under UC than younger people (who will tend to see an income gain), overall the reforms in aggregate will mean that they see a greater strengthening of the incentive to be in paid work. On average, older working-age people who are already in work will also see an improvement in the incentive to increase earnings, although this improvement is greater for those aged 25–54. However, incentives for those who are under 25 and already in work to increase their earnings will deteriorate.
Some of the welfare reforms, such as the household benefit cap, are likely to have a disproportionate impact on Black and minority ethnic claimants because of the characteristics of some of these households (for example, larger family size among certain ethnic minority groups). Although sample sizes are small, IFS research suggests that, on average, the reforms will strengthen the incentive for white people to be in work and weaken the incentive for non-white people to be in work. This is because non-white people have a greater likelihood of having dependent children, and therefore tend to fall into groups that see a weakening of the incentive to be in work. For those in work, on average, both white and non-white groups are expected to see an improvement in the incentive to increase their earnings. However, the improvement for non-white groups will likely be smaller, again because of other characteristics such as earnings.
Some of the above groups, such as disabled and older people, may also have difficulty making online claims for UC. The changes that will be implemented are numerous and complex and in some instances offset each other in terms of likely impacts on income and employment incentives. However, it is clear that there are instances where the reforms are likely to lead to a disproportionate impact on some groups with protected characteristics. Given these findings, the Welsh Government will aim to target its policies and support to help mitigate such adverse impacts where possible.
Welfare is not devolved, and given the scale of the UK Government’s welfare reforms, the Welsh Government is not resourced to compensate for all of the impacts on people in Wales. However, we are committed to do all in our power to mitigate some of the worst impacts of the reforms.
On 21 May, the then Minister for Communities and Tackling Poverty made a statement in the Siambr, setting out the Welsh Government’s reaction to the UK Government’s changes in the provision of welfare. He outlined the Welsh Government’s strategy which focuses on tackling poverty, and on action to build resilient communities, alongside local government, the third sector and Communities First clusters.
It is no coincidence that some of those with protected characteristics are also more likely to find themselves experiencing poverty. On 3 July I jointly launched Building Resilient Communties: Taking Forward the Tackling Poverty Action Plan. The Plan focuses on three aims, and includes targets and milestones to support the delivery of these aims:
- Preventing poverty will contribute to reducing inequality at the earliest possible stage and breaking the link between socio-economic disadvantage, educational under-achievement and the impaired life chances that flow from these. Therefore, the Welsh Government aims to improve the overall attainment levels of Flying Start children and students eligible for free school meals.
- Helping people into work - The best route out of poverty is through employment, therefore the Welsh Government will continue to help people to improve their skills and qualifications, and address other barriers to employment. These include the accessibility of transport and buildings, and poverty of aspiration. Therefore, the Welsh Government's aims include reducing the number of workless households, especially those with children, and the number of young people who are not in employment, education or training.
- Mitigating the impact of poverty - The Welsh Government aims to ensure fair and equal access to high-quality health, housing, financial and digital services regardless of where people live or what their incomes are. This will also help to mitigate in-work poverty.
Recognising employment as a route out of poverty, the Plan also includes an ambitious target to provide an additional 5,000 training and employment places for people in workless households. It will work with the Welsh Government's Strategic Equality Plan to improve outcomes for people in Wales.