Social Security and Welfare Reform

Welfare reform making poor people poorer

  • Published: Nov 30, 2012
  • Author: Tom MacInnes
  • Category: Social Security and Welfare Reform

Every year, the New Policy Institute produces a comprehensive overview of patterns and trends in poverty and social exclusion for the Joseph Rowntree Foundation. In this, our fifteenth annual report, we focus specifically on the effects of welfare reform on people in poverty.

In many cases, these reforms will make things worse for people in poverty – reducing the incomes of those with little money to spare. Some of these changes will hit a small number of families incredibly hard; for instance the changes to local housing allowance, and the forthcoming introduction of the overall benefit cap. Such changes will mean that some workless families simply cannot afford to live in the areas they currently live in, in many cases moving miles away from family and schools.

There are other examples of changes which will hit a lot of people by a smaller amount of money. Changing the uprating of benefits to the less generous CPI index will cost workless families a few pounds per week over the next few years. This seems like little, but such families are already surviving on very low incomes. Job seeker’s allowance is only £71 per week, no higher in real terms than four decades ago.

And families will not just be hit by one change to their income, but many changes. Many low income families will be affected by the combined effects of changes to out of work benefits, housing benefits and disability benefits. For instance, 80% of people claiming an out of work benefit also claim housing benefit or council tax benefit. The overlaps really matter, but they have not been considered by government, who have only looked at the changes in isolation.  

The changes do not end there. Council tax benefit is being localised in April, with one national system being replaced by myriad local schemes. Then the entire system of in and out of work benefits is being overhauled with the introduction of universal credit, beginning next year. A number of concerns have been expressed about the practical operation of UC. For instance, research by a group of charities has highlighted that households including a disabled person may be worse off under the new system, despite government promises that the most vulnerable will be protected.

Welfare reform rests on the idea that an individual’s motivation it the determining factor in whether or not they can move out of poverty. Change the work incentives and you can change that motivation. In some cases it may well work, and while the original figures of 900,000 people lifted out of poverty now look somewhat optimistic, universal credit will certainly increase the incomes of many people in poverty.

But while for some people there may be an improvement, for others – families who cannot afford to live near their child’s school, the 20% of sick and disabled people set to lose their disability living allowance– the picture is much, much worse. As well as the number of people in poverty, we must now also consider the depth of that poverty. In some cases the effects will be actual destitution – something we’ve never had to consider in the 15 years of writing these reports.

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