Why the Budget’s cut to ESA may backfire
One of the lessons we learnt from Gordon Brown’s budgets is that some announcements can seem minor at the time of the budget, but which come back to haunt the Chancellor in later years. To my mind, one aspect of today’s budget might be the same. Osborne’s change to Employment and Support Allowance (ESA), the out-of-work benefit for sick & disabled people, didn’t even merit a mention in the BBC’s early summary. But not only will this hit vulnerable claimants, which may lead to more criticism in the long run than the short run, it might also defeat the Government’s own commitment to getting disabled people into work too.
What today’s announcement said
In short, the policy involves a £30 per week cut in benefits for many new ESA claimants so that they receive the same amount as unemployed (JSA) claimants, starting from April 2017. Here is the policy in the Chancellor’s own words:
“We also want to increase employment among those who have health challenges but are capable of taking steps back to work.
“[ESA] was supposed to end some of the perverse incentives in the old Incapacity Benefit. Instead it has introduced new ones. One of these is that those who are placed in the work-related activity group receive more money a week than those on Job Seekers Allowance, but get nothing like the help to find suitable employment. The number of JSA claimants has fallen by 700,000 since 2010, whilst the number of incapacity benefits claimants has fallen by just 90,000. This is despite 61% of claimants in the ESA WRAG benefit saying they want to work.
“For future claimants only, we will align the ESA Work-Related Activity Group rate with the rate of Job Seekers Allowance. No current claimants will be affected by this change and we will provide new funding for additional support to help claimants return to work.”
[While I’m focusing on this policy, there’s obviously lots of other announcements that affect disabled people that have been well summarised by DRUK].
So who is losing out?
There are two answers to who loses out: the technical answer, and the contentious answer.
The technical answer is that this change affects the ESA Work-Related Activity Group (the ‘WRAG’). These are people who have been assessed (in the Work Capability Assessment or ‘WCA’) as having limited capability for work, but capable of doing some work-related activity. The WRAG currently includes 490,000 people, compared to 1.2m who are classified as being unable to even do work-related activity (the ‘Support Group’).
At the moment, single claimants in the WRAG get £102/week
(£111 – see comment by imajsaclaimant below), whereas JSA claimants get £73 £72 – but from April 2017 new ESA WRAG claimants will get the same amount as JSA claimants, which is nearly £30 less than before. Because this only affects new claimants, the savings will be <£100m in its first year, but this will rise year-on-year to £640m in 2020-21 (see the Budget Costings p57) – i.e. it’s a major change.
But this technical description conceals intense controversy about who the WRAG actually are.
George Osborne has for some years treated the WRAG as not ‘really’ disabled. So for example, whenever Osborne says that disabled people will be protected from benefit freezes/cuts (which has done on multiple occasions, including today), he means the ESA Support Group, who implicitly are considered as ‘the most seriously disabled’. He has NOT been including the WRAG as ‘disabled people’ – and while any classification of incapacity/disability always imposes a binary distinction on the continuum that exists in real life, it is worth noting that those in the WRAG have been found to have limited capability for work. The initial reaction from many people I respect (such as Grahame Whitfield, Declan Gaffney, Jonathan Portes and Nicola Smith) has therefore been to say that the new policy will simply be a cut in living standards to disabled people who cannot work.
The difficulties go deeper than this though. Despite its claimed aims, the WCA simply does not assess whether people are capable of work-related activity. Instead, the WRAG vs. Support Group distinction depends on three poorly-understood things (as I explain on page 28 of this Demos report, which argued the WCA should be overhauled):
- Multiple impairments ‘add up’ to one more severe impairment in determining capability to work, but NOT capability for work-related activity;
- Some impairments are considered to prevent people from work, but not from work-related activity – e.g. people who ‘cannot pick up a £1 coin or equivalent with either hand’;
- Some special and exceptional circumstances may make people incapable of working, but not incapable of work-related activity – e.g. the risk to the health of the claimant.
It is sometimes assumed that the WRAG is for people who are expected to be capable of work in the near future, but this simply isn’t true, and some people with incurable progressive diseases are in the WRAG.
In other words, not only have all of the people in the WRAG been found to have limited capability for work, but the flaws of the WCA make it difficult to claim that all ‘seriously’ or ‘genuinely’ disabled people (whatever those might mean) are in the Support Group.
When I recently blogged about the possibility of today’s cut to the WRAG, I said that ‘I strongly doubt that this will happen because the political consequences might be very high’. I was obviously wrong about whether it would happen – but I still think that there is a possibility of an eventual backlash, because even if no-one has any understanding of the complexities of the WCA, too many people that the public see as ‘deserving’ will ultimately be affected in practice.
Why the change might backfire
[I added the following paragraph on Thu 8th July – it was in my original draft, and re-reading the post I thought it was fairer to include it, despite the extra length]
In his speech, Osborne explicitly said that in general he was protecting disabled people – and he would probably argue that despite benefit cuts that he felt were necessary, DLA/PIP were not cut further in any way (despite rumours they would be taxed), while a freeze on working-age benefits explicitly excluded those in the ESA Support Group. Perhaps with an eye on future budgets, at least some of the disability charities seemed to be trying to balance their criticisms of the ESA WRAG cut with gratitude for the potential cuts that weren’t made.
My further worry, though, is that the WRAG change will reduce the employment of disabled people rather than raise it, for two reasons.
Firstly, many sick and disabled people don’t know if they will able to work, or how employers will react to them. If they think that the system is Kafka-esque, they are more likely to cling onto benefits rather than trying to work – something Paul Gregg has described ‘hunkering’ down’. And if people are worried about having enough money to live on, then this will get even worse. The logical reaction to this policy for sick and disabled people will be to try and get into the Support Group, and then once on the Support Group to make sure they don’t try anything ‘risky’ like trying to work. This is precisely the opposite behaviour that the Chancellor said he was trying to encourage in this move.
Secondly, assessors have been placing ever-more people in the Support Group in recent years, and placing ever-fewer in the WRAG or finding them fit-for-work (as I go into in detail in the Demos report). The main explanation is that assessors have increasingly been citing the health risk if people weren’t placed in the Support Group. Among other reasons, this is probably because of the increasing conditionality/sanctioning applied to people in the WRAG and the deep public unease over the WCA, which makes assessors (and those providing evidence to them) ever more worried about the health consequences of being in the WRAG.
If the WRAG/Support Group distinction is made even sharper, then claimants, their GPs, Maximus assessors, and DWP decision-makers may be ever-more likely to say that there is a health risk to placing someone in the WRAG. The net result would be that people who might otherwise be placed in the WRAG are instead placed in the Support Group – and as I’ve said, the logical reaction once in the Support Group will be to stay as far away from the labour market lest their eligibility is called into question.
A key part of the long-term solution – as I have argued in the Demos report – is to replace the WCA with an assessment that makes sense to people, which understands the barriers they face and what they can reasonably be expected to do. Instead, by making the stakes of the Support Group vs. WRAG distinction even higher, I think that today’s announcement will push the already-damaged WCA beyond breaking point.