Do half a million disabled people stand to lose out under Universal Credit?

Published: 18 Oct 2012

"500,000 disabled worse off under Universal Credit changes."

Evening Standard, 17 October 2012

Yesterday saw the publication of a report from the inquiry led by Baroness Tanni Grey-Thompson into the impact of the welfare reform package on the lives of disabled people. The reforms will see a range of benefits replaced by Universal Credit.

The headline claim from the report - that half a million disabled people will lose out as a result of the switch - was picked up by a number of media outlets, including the BBC and the Evening Standard, and was also discussed at Prime Minister's Questions this week.

At the eye of the storm is the Department for Work and Pensions (DWP), which hit back by claiming the report is "highly selective and could result in irresponsible scaremongering."

According to the DWP, "there will be no cash losers in the rollout of Universal Credit." So are Baroness Grey-Thompson's findings true?

The Source

The inquiry's estimate is slightly more conservative than the headlines imply, putting the total that stand to lose out under Universal Credit at around 450,000.

This figure is reached by adding together individuals in three different groups that have been earmarked for lower entitlements.

The first comprises children who will see their premium entitlement in respect of disability reduced from £52 to £25.95 a week under the Universal Credit. According to a Parliamentary Answer given by the former Employment Minister Chris Grayling, 100,000 kids fall into this group:

"Departmental modelling estimates that, once fully implemented, approximately 100,000 children would have a lower entitlement as a result of the reform of disability benefits under universal credit."

The second group are those in-work families that currently receive the disabled worker element of either the Working Tax Credit or the Child Tax Credit, both of which are set to be phased out under Universal Credit. According to HM Revenue and Customs, 116,000 families fall into this category:

The final component of the 450,000 are people who currently receive the Severe Disability Premium, through which £58.20 is paid weekly to severely disabled people who either live alone or who have dependent children. 

According to figures given by the former Disability Minister Maria Miller last year, 228,560 households received the premium through Income Support and another 2,900 received it as part of a Jobseeker's Allowance claim, giving 231,460 households overall. This doesn't include those households that receive it through Pension Credit, and refers to households rather than individuals.

The Severe Disability Premium is not due to be replaced once Universal Credit is introduced.

Taking all three of these groups together gives us a grand total 447,460 - a little lower than the 500,000 quoted in the media, but close to the number that's actually mentioned in the report.

Analysis

Whether or not all these people will see their entitlements cut under Universal Credit is a more difficult question to answer.

The DWP claims in its impact assessment for the policy that no-one will see their benefits cut as a direct result of the shift to Universal Credit, because of the 'transitional protection' package put together by the Department:

"Around two million households will have lower entitlements under Universal Credit. However it is important to recognise that a package of transitional protection is being developed in order to ensure that there will be no cash losers as a direct result of the move to Universal Credit where circumstances remain the same."

As we have seen before, in theory transitional protection means that individuals who would receive less under Universal Credit will continue to be entitled to the higher level of payment they had received before the switch until the circumstances of their claim change. It would only be new benefits claimants who would receive a less generous payout.

In practice, this is hotly contested, as the change in circumstances that might see this protection removed are relatively common, including everything from a change in earnings (that lasts for at least three months) to a change in benefit entitlements.

We might therefore expect a significant number of those qualifying for this transitional protection to nevertheless lose out eventually as a result of the introduction of Universal Credit.

The second, and perhaps more substantive issue with the half a million claim is that, while the report can point to the groups claiming specific entitlements earmarked for the chop under Universal Credit, we don't know the circumstances of the individuals who make up these groups, and whether or not they might be eligible for increased entitlements elsewhere.

To illustrate the point, while the DWP does admit that two million households overall stand to lose out under Universal Credit, it also claims that 2.8 million will receive more money because of the switch:

"Around 2.8 million households will have higher entitlements under Universal Credit. The increase in benefit payments will generate welfare gains to households, with around 80 per cent of those with higher entitlements being in the bottom two quintiles." 

For instance, while the Severe Disability Premium is currently withdrawn when a dependent child becomes independent, the Government claims that additional levels of support under Universal Credit "will not be affected by the presence of non-dependent children in the household."

Conclusion

The 450,000 figure in Baroness Grey-Thompson's report is an accurate estimate of the number of disabled people currently claiming benefits that have been earmarked for some reduced entitlements under Universal Credit.

However it is harder to tell if all of these people will be 'net' losers under the switch, as some may see their entitlements topped up elsewhere under the new system. Similarly, even among those who would receive smaller payouts under Universal Credit, there is some dispute about how many would be 'transitionally protected', allowing them to continue on their previous rate beyond 2013.


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