Comment Blog 3 April, 2017

Nothing compassionate about the welfare status quo

Today, the controversial reduction in the rate paid to someone in the Work Related Activity Group (WRAG) of Employment and Support Allowance (ESA) comes into force. New claimants of this segment of the main out-of-work incapacity benefit will receive almost £30 a week less than someone claiming before today. This represents a benefit cut of around 30 per cent.

There are several important caveats to this change that are worth highlighting. Firstly, no one currently receiving the benefit is affected – it only applies to new claims. Secondly, “linking rules” mean that an existing ESA claimant could move off the benefit for up to three months and still receive the higher amount on reclaiming. This means that if, for example, they took a job that didn’t work out in that time, they would be no worse off for having tried. Thirdly, there is no change whatsoever to the amount being paid to someone in the support group of ESA (those with the most serious disability or illness).

Nonetheless, the cut has been attacked from all sides. And understandably so – someone who needs to claim out-of-work-benefits due to ill health or a disability, who is found to have limited capacity for work, will now receive the same weekly benefit payment as someone who is unemployed and claiming Jobseeker’s Allowance (JSA). The only difference to their JSA counterpart will be the level of conditionality applied to them.

But whilst on the surface this may appear the compassionate response, it is not.

In its third term, Tony Blair’s Government recognised that there is nothing compassionate about abandoning people to a life on incapacity benefits. In a speech ahead of launching the 2006 green paper (which introduced Employment and Support Allowance), then Secretary of State for Work and Pensions John Hutton stated:

“…as we all know, the best form of welfare comes from the security of having a decent, well-paid job. Not from the myth that being on benefit alone can provide this level of security.

Even if our economy could support keeping people on ever higher benefits with little expected in return, which it demonstrably cannot – where would be the value in that?

…Incapacity benefit remains one of the greatest barriers to social justice in Britain today. While 80-90 per cent of people coming onto the benefit expect to get back to work – many never do. After two years on the benefit, someone is more likely to die or retire than to find a new job. This is just not good enough.”

John Hutton was right that “[r]adically changing incapacity benefit is critical to giving more opportunity to those trapped by the current system”, but the goal of moving a million people off welfare into work within a decade never materialised. The caseload today is just 200,000 lower, and is forecast at 2.5 million people in 2016-17.

As Reform has previously argued, the failure to deliver a step change in outcomes is at least in part because Labour’s reforms were not in fact that radical. Achieving dramatically different employment outcomes for disabled people – a goal few could disagree with – will require a dramatically different approach.

Critics of the WRAG cut have claimed there is no evidence that a lower rate would encourage more people to seek and take work. In fact, evidence from multiple countries suggests the rate at which incapacity benefits are set has a behavioural effect – higher benefits increase the likelihood and duration of claims.

The danger, however, in reducing only the WRAG rate is the unintended consequence of more people moving into the support group – which under Universal Credit will be worth double the standard allowance. Reform has called for a single rate of out-of-work benefit to be introduced for all claimants regardless of circumstances (other benefits contribute to the extra costs incurred due to a severe disability). This would remove the perverse behavioural incentives present in differential rates. It would also reduce a claimant’s fear of trying work and ending up back on benefits but at a lower rate, having demonstrated some capacity for work – a big barrier to helping more disabled people into employment. And it would enable a much more personalised approach to support and conditionality – as others such as Professors Paul Gregg and Roy Sainsbury have argued.

Of course, such a radical (though repeatedly called for) reform must be accompanied by an equally ambitious approach to employment support. Much greater investment is needed than the Government has committed. And employers must step up, recognising the skills and talents of those with disabilities. On this, critics of benefit reform are agreed.

The Government’s failure to adequately resource employment support services for those who will receive the lower WRAG rate has made criticism of the benefit cut much easier. But critics should nonetheless recognise that there is nothing compassionate in fighting to keep a broken system which traps people in dependency. The status quo is harming the life chances of the very people critics of change are championing.