The data behind the story
The research by Christina Beatty and Steve Fothergill from the Centre for Regional Economic and Social Research at Sheffield Hallam University measured the impact of the government’s welfare cuts on individual local authorities. This is the lower-tier level of local government, meaning district councils and unitary authorities in England, Welsh unitary authorities, and Scottish council areas. The majority of the welfare policy changes are modelled from 2010 to 2014-15, with the exceptions of incapacity benefits changes and the one per cent uprating hitting fully in 2015/16 and changes to disability living allowance in 2017/18.
Their calculations were based on the local caseload of claimants and official impact assessments of the likely losers. All costs are taken directly from the Treasury figures for 2014-15 unless stated otherwise. Full methodology and sources are detailed in full below.
For each benefit they calculated the impact on a number of criteria: yearly loss per working age adult (£), estimated yearly loss (£m), number of households (or individuals) affected, proportion of households (or individuals) affected per 10,000.
Additionally, to put the funding changes in the context of the economic strength and social context of each local authority, we’ve also included additional information for each area.
1. UK index of deprivation
England, Wales and Scotland each produce separate indices of multiple deprivation which are not normally comparable. Sheffield Hallam University have utilised a UK-wide index of deprivation devised by Rupert Payne and Gary Abel of Cambridge University. Because this deprivation index is computed at the neighbourhood (lower-level super output area) level, these have been pooled to local authority level by listing the proportion of LSOAs in each local authority that fall within the worst 20 per cent of LSOAs in Britain.
2. Gross disposable household income
The gross household disposable income (GDHI) - effectively spending power - data is collected at using the NUTS3 units of geography used by Eurostat. In England and Wales, NUTS3 regions are upper-tier local authorities (county councils) or groups of lower-tier (district or unitary) authorities.
We have therefore aggregated the total impact data for each lower-tier authority up to their respective NUTS3 area before dividing it by the most recent available GDHI figure for that area. Wherever possible, we have used the same approach in Scotland. However, wherever Scottish council areas are split between two or more NUTS3 regions, these councils have been excluded from the analysis.
3. Parliamentary constituencies
Because parliamentary constituencies do not follow the same boundaries as local authorities, we list each MP whose constituency covers all or part of an authority. Where constituencies straddle district boundaries, an MP will be listed in more than one district. The list of MPs is the FT’s master list of current MPs, which is assembled manually following each general election and by-election from official data published by the Electoral Commission and the House of Commons library.
The 10 benefit reforms studied
These are ordered by size of overall impact
1. Incapacity benefits
This category encompasses out-of-work payments to men and women of working age with health problems or disabilities, including Employment and Support Allowance (ESA) and its predecessors incapacity benefit, income support on grounds of disability, and severe disablement allowance.
ESA was introduced for new claimants in 2008, along with a new, tougher medical test (the work capability assessment). This new assessment has been applied to existing incapacity claimants from autumn 2010 onwards and those claimants not deemed ‘fit for work’ are being migrated to ESA. From 2012-13 the non-means tested entitlement for an element of ESA - the work related activity group - is being time limited to a year. New conditionality rules apply to all those in the ESA work related activity group.
Total estimated loss: £4.4bn a year by 2015-16, comprising £2.6bn a year from time limiting of non-means tested entitlement (Source: HM Treasury estimates for 2014-15, revised to take account of inflation and additional numbers affected by 2015-16) and £1.8bn a year from remaining measures
Methods and data sources
By 2015-16, an estimated 700,000 will be affected by time limiting non-means tested ESA entitlement. Of these, 40 per cent are anticipated to lose benefit entirely and the remaining 60 per cent will experience a reduction in payment (Source: DWP Impact Assessment Time limit contributory Employment and Support Allowance to one year for those in the Work-Related Activity Group).
By 2014 an additional 550,000 are estimated to be denied ESA by other elements of the reforms, of which 30 per cent will not claim alternative benefits (Source: Beatty and Fothergill 2011, Incapacity benefit reform: the local regional and national impact, CRESR, Sheffield Hallam University).
Numbers affected by local authority allocated on the basis of methods in Beatty and Fothergill (2011) based primarily on DWP claimant data, DWP impact assessments and DWP evidence from pilot areas.
· Financial loss arising from time limiting allocated in 3:1 ratio between those losing benefit entirely and those retaining benefit at reduced rate, on the basis of estimated numbers in each group by local authority.
· Financial loss arising from other elements of the reforms estimated to be two-thirds that arising from time limiting, given of numbers affected and proportion expected to be denied benefits. (Treasury or DWP estimates have not been published). Loss allocated in 2:1 ratio between those denied benefit entirely and those claiming other benefits at a lower rate, on the basis of estimated numbers in each group by local authority.
2. Tax credits
These are payments made through the tax system to lower and middle income households encompassing Child Tax Credit (CTC) and Working Families Tax Credit (WFTC). From 2011-12 there have been adjustments to thresholds, withdrawal rates, supplements, income disregards and backdating provisions, changes to indexation and up-rating and a reduction in the childcare element of WFTC. From 2012-13 there is also an increase in the working hours requirement for WFTC.
Total estimated loss: £3.7bn (net) a year by 2014-15 (Source: HM Treasury)
Methods and data sources
· Overall loss allocated on the basis of the total number of families in receipt of CTC or WFTC in December 2012, by local authority (Source: HMRC Child and Working Tax Credits Statistics: geographical analysis)
· All families in receipt of CTC or WFTC affected by one or more of the changes
3. One per cent uprating
Benefits are to be increased by one per cent a year, instead of by inflation (Consumer Prices Index) for three years from 2013-14 for main working-age benefits, and for two years from 2014-15 for child benefit and for local housing allowance within housing benefit.
Total estimated loss: £3.4bn a year by 2015-16
(Source: HM Treasury)
Methods and data sources
· Total loss divided equally between DWP-administered benefits and HMRC-administered benefits child benefit, CTC, WFTC), reflecting split of overall expenditure on relevant benefits (Sources: DWP and HMRC)
· HMRC benefits loss allocated on basis of total number of families in receipt of CTC or WFTC in December 2012, (Source: HMRC Child and Working Tax Credits: geographical analysis)
· DWP benefits loss divided 75:25 between working age benefits and Housing Benefit, reflecting split of overall expenditure on relevant benefits (Source: DWP)
· DWP working age benefits loss allocated on basis of non-employed working age benefit numbers in February 2012, by local authority (Source: DWP)
· Housing benefit loss allocated on basis of estimated expenditure on claimants in the private rented sector, by local authority, derived from overall housing benefit expenditure data for 2011/12 and share of claimants in the private rented sector in August 2012 (Sources: DWP)
4. Child benefit
Formerly an universal benefit based on the number of children up to age 16 or if they remain at school or in further education up to 19, from January 2013 this is being restricted for households with a high earner. The benefit is being partially withdrawn from households including a high earner, defined as an individual earning £50,000 or more, and entirely for those with an individual earning £60,000 or more.
Additionally, the benefit rate is being frozen for three years from 2011-12 instead of being increased with inflation.
Total estimated loss: £2.8bn a year by 2014-15 (Source: HM Treasury)
Methods and data sources
· Numbers of families in receipt of child benefit, by local authority in August 2011, from HMRC (Source: HMRC Child Benefit Statistics: geographical analysis). NB All recipients affected by freeze.
· Financial loss arising from freeze (£975m pa) allocated on basis of number of families in receipt of child benefit in each local authority (see above)
· Financial loss arising from withdrawal of benefit from high earners (£1,870m pa) allocated on basis of number of families in receipt of child benefit multiplied byan index of median earnings in the three years 2010, 2011 and 2012 of residents in each local authority relative to the UK average (Source: Annual Survey of Hours and Earnings). County averages used where earnings data for districts is unavailable.
5. Local housing allowance
Local housing allowance is a system under which housing benefit is paid to low-income households that rent in the private sector. From 2011-12 maximum rents covered by Housing Benefit are based on the rents of the cheapest 30 per cent of properties in each area, rather than the cheapest 50 per cent. Additionally from 2011-12, caps have been introduced on maximum rents payable by housing benefit claimants for each property size (with a four-bed maximum) and the £15 “excess”, which tenants were previously allowed to keep if their rent was below the allowed maximum has been abolished.
Since January 2012 the age limit for receiving the shared room rate has been increased from 25 to 35, meaning that under 35s will not be eligible for the higher one-bedroom rate of assistance. From 2013-14 payment rates will be updated according to inflation (CPI) rather than in line with the market rent level of the cheapest 30 per cent of properties.
Total estimated loss: £1.65bn a year by 2014-15 (Source: HM Treasury)
Methods and data sources
· Total loss arising from 30th percentile, size caps and £15 excess (£1040m pa) allocated to local authorities on the basis of DWP estimates of the number of households affected and the average final loss (Source: DWP Impacts of Housing Benefit proposals: changes to LHA to be introduced in 2011-12)
· Loss arising from increase in age limit for shared room rate (£215m pa) allocated to local authorities on the basis of estimates of the numbers losing and average loss per week in each authority (Source: DWP Housing Benefit equality impact assessment: increasing the shared accommodation rate age threshold to 35)
· Loss arising from CPI indexation (£390m pa) allocated to local authorities on the basis of the number of Housing Benefit claims in the private rented sector in each authority in August 2012 (Source: DWP)
· Number of affected households based on number of Housing Benefit claimants in August 2012 in the private rented sector in each authority and the national share receiving LHA (Source: DWP). NB All LHA recipients affected by shift to CPI indexation.
6. Disability living allowance
This is a payment designed to help individuals with disabilities, whether in or out of work, with the extra financial costs they face because of their disability. From April 2013, there will be a phased replacement of Disability Living Allowance (DLA) for working-age people with a new benefit called Personal Independence Payments (PIP). This will involve the introduction of more stringent medical test and regular re-testing and a reduction in the number of payment categories.
Total estimated loss: £1.5bn a year by 2017-18
(Source: DWP Impact Assessment Disability Living Allowance reform, adjusted for inflation and revised implementation timetable)
Methods and data sources
· Anticipated reduction in national caseload of working age to 1.7m (Source: DWP Impact Assessment) represents a 23 per cent reduction in anticipated numbers in absence of reform
· Numbers affected refer to the 23 per cent reduction in claimants, allocated on the basis of stock of working age DLA claimants in each local authority in February 2012 (Source: DWP). Additionally, a number of claimants in receipt of PIP instead of DLA may experience a reduction in payment.
· Financial loss allocated to each local authority on basis of reduction in claimant numbers (see above)
7. Under-occupation
Dubbed the “bedroom tax” by some opponents, these are new rules which govern the size of properties for which payments are made to working age claimants in council and housing association properties.
From April 2013 that means, for example, a working-age couple without children can only claim housing benefit for a property with one bedroom. Pensioners are exempt from the change. If a household is deemed to have more bedrooms than justified by the composition of the household, housing benefit payments will be reduced.
Total estimated loss: £490m a year by 2014-15 (Source: HM Treasury)
Methods and data sources
Estimated number of households affected in each region (Source: DWP Impact Assessment Housing Benefit: under-occupation of social housing, June 2012 update) allocated by region to each local authority on the basis of the number in social housing claiming Housing Benefit in August 2012 (Source: DWP)
Financial loss allocated to each local authority on the basis of estimated number of affected households (see above) and estimated average loss per claimant in each region (Source: DWP Impact Assessment, June 2012 update)
8. Council tax benefit
Paid to low income households to offset council tax bills in whole or in part. The Treasury is cutting 10 per cent from the funds allocated to local authorities to pay for council tax benefit and transferring responsibility to councils to decide how much reduction in bills is available. Pensioner households are not affected.
Some local authorities in England have chosen not to pass on the cut in benefit to claimants, absorbing the cut within their budget. In other cases this is not the case and people will receive less benefit than they did before. In Scotland and Wales, the devolved administrations are arranging the budget so that the cut is not passed onto claimants.
Total estimated loss: £490m a year by 2014-15 (Source: HM Treasury) of which an estimated £340m a year is being passed on to claimants
Methods and data sources
· Number of households affected and average weekly loss, by authority, from statistics assembled by the New Policy Institute, as updated on 7th February 2013 atwww.npi.org.uk. The NPI calculations are based on information assembled from each local authority.
· The NPI data shows that some local authorities in England have chosen not to pass on the benefit reduction to claimants, in whole or in part, absorbing the cut elsewhere within their budget. In Scotland and Wales the devolved administrations have not passed on the cut to local authorities, thereby avoiding any impact on claimants.
· Where the NPI identifies only ‘minor changes’ the impact has been set to zero.
9. Non-dependant deductions
These are deductions from the amount of housing benefit, council tax benefit and other income-based benefits a household can receive to reflect the contributions a “non-dependent person” (such as an adult child or relative) living with them is expected to make towards the household’s costs.
The rates of these deductions are rising in stages between April 2011 and April 2014. This is to reflect growth in rents and increases in council tax since 2001, when the deductions were frozen, and subsequent link to prices.
Total estimated loss: £340m a year by 2014-15 (Source: HM Treasury)
Methods and data sources
· Estimated 300,000 claimants affected (Source: DWP Equality Impact Assessment: income-related benefits: changes to the non-dependent deduction rates) allocated on the basis of the number of Housing Benefit and Council Tax Benefit claimants in each local authority in August 2012 (Source: DWP).
· Financial loss allocated to local authorities on the basis of the estimated numbers affected (see above)
10. Household benefit cap
This is a new cap on the total payments a household can receive applying to wide range of benefits, including child benefit, child tax credit, employment and support allowance, housing benefit, incapacity benefit, income support and jobseeker’s allowance
The limit is designed so that no working age workless household receives in benefits a sum higher than the average wage, after tax and national insurance. From 2013-14, the benefit is initially set at £500 a week for single parents and couples with children and £350 a week for single people. This translates to £26,000 a year for families. This will be administered through housing benefit payments
Total estimated loss: £270m a year by 2014-15
(Source: HM Treasury)
Methods and data sources
· Loss allocated to local authorities on the basis of the number of individuals in each authority in receipt of a letter notifying them that they may be affected by the benefit cap (Source: DWP)
· National total of 56,000 households expected to be capped in 2013/14 (Source: DWP Benefit Cap (Housing Benefit regulations 2012): impact assessment for the benefit cap) allocated to local authorities in proportion to letters of notification.
Download the full dataset and read the full Sheffield Hallam report
