5th Report, 2014 (Session 4): Report on Local Impact of Welfare Reform

5th Report, 2014 (Session 4): Report on Local Impact of Welfare Reform (1.96MB pdf)

Impact of welfare reform by electoral ward >>>

SP Paper 563

WR/S4/14/R5

5th Report, 2014 (Session 4)

Report on Local Impact of Welfare Reform

Remit and membership

Remit:

To keep under review the passage of the UK Welfare Reform Bill and monitor its implementation as it affects welfare provision in Scotland and to consider relevant Scottish legislation and other consequential arrangements.

Membership:

Annabelle Ewing
Linda Fabiani
Jamie Hepburn (Deputy Convener)
Alex Johnstone
Kenneth Macintosh
Michael McMahon (Convener)
Kevin Stewart

Committee Clerking Team:

Clerk to the Committee
Simon Watkins

Assistant Clerk
Rebecca Macfie

Committee Assistant
Kevin Dougan

Report on Local Impact of Welfare Reform

The Committee reports to the Parliament as follows—

1. In January 2014, the Committee commissioned research on the local impact of welfare reform from the Centre for Regional Economic and Social Research at Sheffield Hallam University

2. The research is attached as Annexe A to this report.

ANNEXE A: THE LOCAL IMPACT OF WELFARE REFORM

THE LOCAL IMPACT OF WELFARE REFORM

A report for the Scottish Parliament

Christina Beatty and Steve Fothergill

Centre for Regional Economic and Social Research

Sheffield Hallam University

June 2014

Key points

A 2013 report by the present authors documented the impact of welfare reform on Scotland as a whole and on its constituent local authorities. This new report extends the analysis down to ward level.
Revised figures confirm that when the reforms have come into full effect they will take more than £1.6bn a year out of the Scottish economy. This is equivalent to around £460 a year for every adult of working age.
Although the financial loss is large, the scale of the loss in Scotland is broadly on a par with the GB average.
At the level of electoral wards, there is a roughly four-fold difference between the worst and least hit communities. Calton ward in Glasgow is hit hardest (£880 per adult of working age per year). St Andrews in Fife (£180) escapes lightest.
A dozen Glasgow wards figure prominently among the list of worst affected places in Scotland.
There is a clear relationship between the extent of deprivation and the scale of the financial loss. The most deprived wards are hit hardest.
The reforms to incapacity benefits are resulting in the biggest financial losses, particularly in more disadvantaged communities.
Some households and individuals are hit by several different elements of the reforms. Incapacity claimants, for example, will often also lose out because of the reforms to Disability Living Allowance and may lose from reforms to Housing Benefit if they live in the private rented sector or if they have grown-up children still living at home. They are also hit by the failure to uprate benefits with inflation.
In the absence of a big shift into employment, a key effect of the welfare reforms will be to widen the gaps in income between communities.

THE LOCAL IMPACT OF WELFARE REFORM

Scope and purpose of the report

The Westminster Government is implementing welfare reforms that apply to all parts of the UK. The impact of the reforms, however, varies enormously from place to place, not least because benefit claimants are so unevenly spread across Britain.

This report looks specifically at the impact of the reforms within Scotland at the level of electoral wards. This fine-grain picture is important because there is large variation in the impact not only between local authorities but also between individual neighbourhoods and communities. The report also considers the impact on different types of households and individuals.

In April 2013 the Scottish Parliament published a report by the present authors which for the first time documented the impact of the reforms across Scotland as a whole and in each of its 32 constituent local authorities¹. The new report builds directly on the foundations of this earlier study.

As in the 2013 report, all the figures presented in the report are estimates but in every case they are deeply rooted in official statistics – for example in the Treasury’s own estimates of the financial savings, the Westminster government’s Impact Assessments, and benefit claimant data.

Welfare reform is a deeply contentious issue and in documenting the impacts the report does not attempt to comment on the merits of the reforms. However, it is important that the impact on different places is fully exposed because this is a key dimension that is too often overlooked. The impact on different places is also one of the yardsticks by which the reforms should be judged.

The welfare reforms

The figures in the 2013 report covered all the major welfare reforms that have been underway in Scotland since 2010. Some of these reforms are now fully in place, others are currently underway and a small number still have a long way to run before coming to full fruition.

The reforms covered by the present report are:

Housing Benefit – Local Housing Allowance
Changes to the rules governing assistance with the cost of housing for low-income households in the private rented sector. The new rules apply to rent levels, ‘excess’ payments, property size, age limits for sole occupancy, and indexation for inflation.

Non-dependant deductions
Increases in the deductions from Housing Benefit, Council Tax Benefit and other income-based benefits to reflect the contribution that non-dependant household members are expected to make towards the household’s housing costs

Household benefit cap
New ceiling on total payments per household, applying to the sum of a wide range of benefits for working age claimants

Disability Living Allowance
Replacement of DLA by Personal Independence Payments (PIP), including more stringent and frequent medical tests, as the basis for financial support to help offset the additional costs faced by individuals with disabilities

Incapacity benefits
Replacement of Incapacity Benefit and related benefits by Employment and Support Allowance (ESA), with more stringent medical tests, greater conditionality and time-limiting of non-means tested entitlement for all but the most severely ill or disabled

Child Benefit
Three-year freeze, and withdrawal of benefit from households including a higher earner

Tax Credits
Reductions in payment rates and eligibility for Child Tax Credit and Working Tax Credit, paid to lower and middle income households

1 per cent up-rating
Reduction in annual up-rating of value of most working-age benefits

A fuller description of each of these reforms, including the timing of implementation and the expected savings to the Exchequer, is contained in the appendix to the report.

The vast majority of these welfare reforms have been initiated by the present Coalition government in Westminster, notably but not exclusively through the Welfare Reform Act 2012. Some of the incapacity benefit reforms, however, are Labour measures that pre-date the 2010 general election but are only now taking full effect. They have been included here, alongside the Coalition’s reforms, to provide a comprehensive view of the impact of the reforms that are currently underway.

In the Scottish context, two important omissions from the list are worth noting:

Council Tax Benefit. In collaboration with Scottish local authorities, the Scottish Government has chosen not to pass on to claimants the Westminster Government’s 10 per cent cut in the value of Council Tax Benefit payments.
Housing Benefit: under-occupation in the social rented sector. This reform, better known as the ‘Bedroom Tax’, is effectively not being implemented in Scotland from 2014-15 as a result of the decision to make available sufficient funding for Discretionary Housing Payments to fully offset the reduction in Housing Benefit.

The ‘Bedroom Tax’ was included in the Scottish figures published in the 2013 report but, in the light of the new arrangements, is not included here. The ‘Bedroom Tax’ and the reductions in Council Tax Benefit continue to be included in the comparative figures for the other parts of the UK where they have been implemented.

Three further omissions are worth noting:

Universal Credit. This is scheduled to replace just about all means-tested working age benefits and is arguably the most ambitious reform of all. The introduction of Universal Credit is however distinctly different from the other reforms. Unlike the others, it is not expected to lead directly to a reduction in welfare spending and is better understood as a repackaging of existing benefits that for the first time introduces a consistent benefit withdrawal rate, but the rules governing eligibility are essentially carried over from the existing benefits it replaces.
Income Support for lone parents. The qualifying age of the youngest child has been reduced from under 7 to under 5. The effect is to transfer the lone parent from Income Support to Jobseeker’s Allowance at the same payment rate.
RPI to CPI for benefits up-rating. This was introduced from 2011-12 but is really part of a much wider accounting reform, including for example all public service pensions.

When fully implemented, the welfare reforms covered in this report, including those that no longer apply to Scotland, are expected to save the UK Treasury almost £19bn a year.

Measuring the impacts

The data sources and methods underpinning the estimates are set out in full in the appendix to the report.

In essence, this new report takes the estimates for local authorities published in the 2013 report for the Scottish Parliament and drills them down to the local, ward level. The 2013 estimates by authority have been modified only to remove the impact of the ‘Bedroom Tax’ and to take account of new data on the impact of the household benefit cap.

The Westminster Government has in most cases not produced estimates of the impact of the reforms by local authority, let alone by ward. It does however publish a range of statistics that allow the local impact to be estimated. This information includes:

HM Treasury estimates of the overall financial saving arising from each element of the reforms, published in the Budget or in the government’s Autumn Statement. The estimates in the report are fully consistent with these Treasury figures².
The Impact Assessment and (where available) Equality Impact Assessment that Westminster departments publish for each element of the reforms³
Benefit claimant numbers and expenditure, by local authority, published by DWP and HMRC
Additional official statistics – for example on median earnings by local authority to help calibrate the impact of the withdrawal of Child Benefit
DWP evidence from pilot schemes, in the context of the incapacity benefit reforms

The figures the report presents show the impact when the reforms have come into full effect. This is important because some of the reforms, particularly those affecting incapacity and disability benefits, are being implemented in stages over a number of years. In most cases, the figures show the expected impact in the 2014-15 financial year⁴.

In comparing the impact on different areas, the report looks in particular at the financial loss per adult of working age⁵. A focus on adults of working age (16-64) is appropriate because the welfare reforms impact almost exclusively on this group. By contrast, benefit claimants of pensionable age are largely unaffected⁶.

Some of the welfare reforms focus on households – the reforms to Housing Benefit for example. Others – the reforms to incapacity benefits for example – are about the entitlement of individuals. Additionally, several of the reforms impact simultaneously on the same households and/or individuals. It is possible to estimate how many people are affected by each element of the reforms, and how much they lose. The financial losses can be added together but to avoid counting the same people twice the number of households/individuals affected cannot be summed to an overall total.

Finally, in estimating the impact of the welfare reforms the report holds all other factors constant. What this means in practice is that it makes no assumptions about the growth of the UK and Scottish economies, or about future levels of employment and unemployment.

Westminster ministers take the view that the welfare reforms will increase the financial incentives to take up employment and because more people will look for work more people will find work. This assumes, of course, that extra labour supply leads to extra labour demand from employers. Whether labour markets really do work in this way, especially in places where the local economy is relatively weak, is a moot point and one that many economists would contest. Some individuals will undoubtedly find work to compensate for the loss of benefit income but whether the overall level of employment will be any higher as a result is questionable. More often than not, they will simply fill vacancies that would have gone to other jobseekers. The figures in this report (and its 2013 predecessor) therefore do not assume that loss of income from benefits will wholly or in part be replaced by additional income from employment.

The impact on Scotland as a whole

To provide a context for the local figures, Table 1 shows the estimated impact of the welfare reforms on Scotland as a whole. These figures are taken from the 2013 report but have been up-dated to incorporate new data on the household benefit cap and now exclude the ‘Bedroom Tax’, so in detail they differ a little from those previously published⁷

Overall, when the reforms have come into full effect it is estimated that they will take more than £1.6bn a year out of the Scottish economy, or around £460 a year for every adult of working age.

These revised estimates are £60m, and £20 a year per adult of working age, down on the figures in the 2013 report. The difference is attributable to the measures to avert the ‘Bedroom Tax’ (worth around £50m a year to claimants in Scotland) and also to the smaller-than-expected numbers impacted by the household benefit cap.

The individual welfare reforms vary greatly in the scale of their impact, in the number of individuals or households affected, and in the intensity of the financial loss imposed on those affected. In Scotland, and indeed in the rest of the UK, the biggest financial impact comes from the reform of incapacity benefits – an estimated loss in Scotland of £500m a year. Changes to Tax Credits and the 1 per cent up-rating of most working-age benefits from April 2013 also account for substantial sums - £300m and £290m respectively.

Table 1: Impact of welfare reform on Scotland (revised figures)

	No of h'holds/individuals adversely affected	Estimated loss £m p.a.	Average loss per affected h'hold/indiv £ p.a.	No. of h'holds/indiv affected per 10,000	Loss per working age adult £ p.a.
Incapacity benefits(1)(3)	144,000	500	3,480	410	145
Tax Credits	372,000	300	810	1,600	85
1 per cent uprating(3)	n.a.	290	n.a.	n.a.	85
Child Benefit	621,000	225	360	2,660	65
Disability Living Allowance(1)(2)	106,000	165	1,560	310	50
Housing Benefit: LHA	80,000	80	1,010	340	25
Non-dependant deductions	28,000	30	1,130	120	10
Household benefit cap	1,900	10	4,600	<10	<5
Total	n.a.	1,600	n.a.	n.a.	460

⁽¹⁾Individuals affected; all other data refers to households
⁽²⁾By 2017/18
⁽³⁾By 2015/16
All other impacts by 2014-15

Source: Sheffield Hallam estimates based on official data

Child Benefit changes affect the largest number of households – more than 600,000 in Scotland. This is because the three-year freeze in Child Benefit rates up to April 2014 (instead of up-rating with inflation) impacted on all recipients.

The household benefit cap, by contrast, impacts on relatively few households in Scotland – just 1,900 according to the latest figures – but the average financial loss for each of these households is relatively large.

As the 2013 report noted, the overall scale of the financial loss in Scotland (now estimated to be £460 per adult of working age per year) is more or less on a par with the GB average (£470). Scotland is hit harder than South East England (£370) but less than Wales (£550), London (£520) or North East England (£560)⁸.

It should not escape note, however, that the impact in Scotland would have been around £35 a year higher (i.e. around £495 per adult of working age) if the Scottish Government had not struck a deal with local authorities to avoid passing on the cut in Council Tax Benefit or put in place arrangements to defray the impact of the ‘Bedroom Tax’. The financial burden of these welfare reforms is being borne by public sector budgets in Scotland rather than by benefit claimants.

The impact by local authority

Table 2 shows the estimated overall impact by local authority of the reforms. Again, this is a modified and up-dated version of the figures published in the 2013 report and the figures now exclude the ‘Bedroom Tax’. Tables in the appendix to the 2013 report presented detailed figures for each authority, benefit by benefit.

The biggest impact, in absolute terms and on a per capita basis, falls on Glasgow where the welfare reforms are estimated to result in a loss of £259m a year, equivalent to £620 a year for every adult of working age in the city. On per capita basis a number of other older industrial areas are also hit hard. These include Inverclyde, Dundee, West Dunbartonshire, North Lanarkshire, Clackmannanshire and North and East Ayrshire.

By contrast, the financial loss to Edinburgh – an estimated £130m, or £390 per adult of working age – is significantly smaller.

The parts of Scotland that are least affected by the reforms are in North East Scotland, Orkney and Shetland, and two relatively affluent districts (East Renfrewshire and East Dunbartonshire) in the central belt. However, it is worth noting that even in some of these local authorities the absolute losses remain large. Aberdeen, for example, can still expect to lose £50m a year.

Table 2: Overall impact of welfare reform on Scotland, by local authority (revised figures)

	Estimated loss £m p.a.	Loss per working age adult £ p.a.
Glasgow	259	620
Inverclyde	32	600
West Dunbartonshire	35	580
Dundee	56	560
North Ayrshire	49	560
North Lanarkshire	119	540
East Ayrshire	42	520
Clackmannanshire	18	520
Renfrewshire	58	510
South Lanarkshire	101	490
South Ayrshire	34	490
West Lothian	55	470
Fife	109	460
Dumfries and Galloway	43	460
Midlothian	25	460
Falkirk	46	450
Argyll and Bute	23	420
East Lothian	26	410
Highland	59	400
Angus	29	400
Edinburgh	130	390
Scottish Borders	28	390
Perth and Kinross	35	380
Eilean Siar	6	370
Stirling	22	370
East Renfrewshire	20	350
Moray	20	340
Orkney Islands	5	340
East Dunbartonshire	22	330
Aberdeen	50	310
Aberdeenshire	48	290
Shetland Islands	4	270
Scotland	1,600	460

All impacts by 2014-15 except DLA by 2017/18, incapacity benefits and 1% up-rating by 2015/16

Source: Sheffield Hallam estimates based on official data

As the 2013 report explained, there are no surprises in this geography. It is to be expected that welfare reforms will hit hardest in the places where welfare claimants are concentrated, which tend to be in the poorest areas with the highest rates of worklessness.

At the level of individual local authorities, Glasgow ranks 23^rd, out of 379 districts across Britain in terms of the financial loss per working age adult⁹. This places Glasgow below Liverpool (8^th) but above Birmingham (43^rd) and Manchester (45^th)¹⁰. The worst-hit place in Britain is Blackpool in North West England, at an estimated £910 a year per adult of working age, compared to £620 a year in Glasgow.

The overall scale of the financial loss in Glasgow – an estimated £259m a year when the reforms are fully implemented – is second only in Britain to Birmingham (£419m)¹¹, which has a substantially larger population.

The impact by ward

The new, local estimates in the present report are all for electoral wards. There are 353 of these across Scotland as a whole. Scottish wards have an average population of 15,000 but tend to be larger (in terms of population) in cities than in rural areas.

Wards are the lowest spatial scale at which reliable estimates of the impact of welfare reform can be generated. At a finer geographical scale – in Scotland the option would be datazones – there is plenty of data to assist the estimation process but the relatively small number of residents in each zone – between 500 and 1,000 – means that the resulting figures would be subject to a wide margin of error. Electoral wards have the added advantage of being recognisable units, often familiar to politicians, administrators and residents.

The estimates for wards presented here are for the overall financial loss, per adult of working age per year when the reforms have come to full fruition. These overall estimates have been built up from benefit-by-benefit calculations. The appendix to the report presents maps and statistics by ward for each of Scotland’s 32 local authorities.

Table 3 list the wards with the highest and lowest financial losses. Unsurprisingly, the size of the gap between the ‘worst’ and ‘best’ wards is greater than between local authorities. Whereas the welfare reforms hit Glasgow rather more than twice as hard (per adult of working age) as Shetland, the least affected authority in Scotland, the worst affected wards are hit around four times harder than the least affected. The extremes are Calton. in Glasgow, with an estimated financial loss of £880 a year per adult of working age, and St Andrews, in Fife, where the loss is just £180 a year.

Table 3: Wards with the highest and lowest financial loss arising from welfare reform

Authority	Ward	Overallfinancial loss per adult of working age £ per year
WORST AFFECTED 20 WARDS
Glasgow	Calton	880
Glasgow	Springburn	780
Glasgow	North East	750
Glasgow	Drumchapel/Anniesland	740
Glasgow	Southside Central	730
Dundee	East End	730
Glasgow	Shettleston	720
Fife	Buckhaven, Methil and Wemyss Villages	700
Glasgow	Canal	700
Inverclyde	Inverclyde East Central	690
Glasgow	Garscadden/Scotstounhill	690
Glasgow	Govan	690
Glasgow	Ballieston	680
Glasgow	East Centre	680
Dundee	North East	670
Fife	The Lochs	670
Glasgow	Linn	670
Renfrewshire	Paisley North West	660
Inverclyde	Inverclyde North	660
West Dunbarton	Clydebank Central	660
LEAST AFFECTED 10 WARDS
Edinburgh	Meadows/Morningside	220
Aberdeenshire	Banchory and Mid Deeside	220
Aberdeen	Bridge of Don	220
East Renfrewshire	Netherlee, Stamperland and Williamwood	220
East Renfrewshire	Newton Mearns South	220
Stirling	Dunblane and Bridge of Allan	210
Aberdeenshire	East Garioch	210
Aberdeenshire	Westhill and District	210
Aberdeen	Hazlehead/Ashley/Queens Cross	200
Fife	St Andrews	180

Source: Sheffield Hallam estimates based on official data

Figure 1: Relationship between impact of welfare reform and deprivation, by ward

Sources: Sheffield Hallam estimates and Scottish Indices of Deprivation 2012

The list of hardest-hit wards is dominated by Glasgow, which accounts for 12 of the worst-hit 20. Other parts of older industrial Scotland also figure on this list. By contrast, 5 of the 10 wards that escape most lightly are in Aberdeen or Aberdeenshire.

The 2013 report demonstrated that at the level of local authorities there is a clear relationship between the financial loss arising from welfare reform and the level of deprivation: as a general rule, the more deprived the local authority the greater the financial loss. Figure 1 confirms this relationship at the level of wards: the higher the average deprivation score¹² of the ward, the greater the estimated loss per adult of working age.

The source of the financial loss varies between the richest and poorest wards. Because there are relatively large numbers of children in nearly all areas, the freeze in the value of Child Benefit impacts more or less everywhere, but in the most affluent areas the loss is compounded by the withdrawal of Child Benefit from higher earners. As a result, in the most affluent wards the reduction in Child Benefit can account for a quarter or a third of the overall financial loss.

By contrast, the really big financial losses in the poorest wards arise from the reforms to incapacity benefits. In Calton ward in Glasgow for example, the estimated loss from the incapacity benefit changes alone (£350 a year per adult of working age) is almost double the financial loss from the whole welfare reform package in St Andrews. In the poorest wards, like Calton, this loss is compounded by further big losses arising from DLA reform, reductions in Tax Credits and below-inflation up-rating.

The measures to offset the ‘Bedroom Tax’ have gone someway towards narrowing the differences between the wards worst and least affected by welfare reform. In the worst affected wards, averting the impact of the ‘Bedroom Tax’ has reduced the loss by around £30 per adult of working age per year. This reflects the high proportion of social housing in these wards and high numbers claiming Hosing Benefit. By contrast, the wards least affected by welfare reform generally have little social housing and low claimant numbers, so the arrangements to avert the ‘Bedroom Tax’ have little impact there.

What should still be noted is that even in mid-2014 much of the financial loss in the poorest wards is still in the pipeline. The incapacity benefit reforms will not come to full fruition until 2015-16, when means-testing for ESA claimants in the Work Related Activity Group – one of the very largest of all the welfare reforms, anticipated to save the Treasury six times as much as the ‘Bedroom Tax’ – will finally kick in for many. The changeover from DLA to PIP has barely started and is not anticipated to be completed until 2017-18, and the below-inflation up-rating still has another year to run.

As a rule of thumb, it would be reasonable to assume that in the poorest wards around 40 per cent of the overall financial loss arising from welfare reform has, in mid-2014, still to make itself felt.

The impact on households and individuals

The welfare reforms impact on a wide range of households and individuals, and not just on those on out-of-work benefits.

As a guide, Table 4 identifies the types of households and individuals most affected by each of the reforms. This list draws on information in the Westminster government’s Impact Assessments but also on a wider understanding of which groups claim which benefits.

A key point about the welfare reforms, however, is that they often impact simultaneously on the same individuals and households.

This point is best illustrated by considering incapacity benefit claimants. This very large group of out-of-work men and women tends to be older (IB/ESA claimant rates increase with age) and most have previously worked in low-grade manual jobs. They tend to be concentrated in the most difficult local labour markets, where age, low skills and poor health severely limit their chances of finding work. Among incapacity claimants, the group most exposed to loss of benefit are those with less severe health problems or disabilities. They run the risk of being found ‘fit for work’ at the point they undergo the new medical assessment or, if they remain on ESA in the Work Related Activity Group, of losing their entitlement to non-means tested benefit after a year.

This group of incapacity claimants is also most exposed to the loss of DLA as the changeover to PIP takes place. At present, around half of all incapacity claimants also claim DLA. In theory, the most severely disabled should retain entitlement to PIP, meaning that the reductions in eligibility that the Westminster government anticipates will hit those with less severe health problems or disabilities. Many of these will be the same people who are having their entitlement to incapacity benefits removed or reduced.

Added to this, the age and income level of incapacity claimants means that they are also exposed to reductions in Housing Benefit. Many are tenants in the social rented sector and, if their children have grown up and moved away, they would have been hit by the ‘Bedroom Tax’. This impact has been averted in Scotland, but they may still face reductions in Housing Benefit if they live in the private rented sector. And, if their grown-up children are still living at home the new, larger non-dependant deductions come into play. The failure to uprate the value of benefits with inflation adds a further twist to their financial difficulties. In Scotland a still further financial hit on this group has only been averted by the decision not to pass on the claimants the Westminster Government’s reduction in funding for Council Tax Benefit.

Table 4: Groups typically most affected by individual welfare reforms

HOUSING BENEFIT: LOCAL HOUSING ALLOWANCE

Low income households, mostly of working age, in the private rented sector
Under-35s, often single men, in the private rented sector
Families with large numbers of children in the private rented sector

NON-DEPENDENT DEDUCTIONS

Low-income households with grown-up children living at home

HOUSEHOLD BENEFIT CAP

Large out-of-work families in high rent areas

DISABILITY LIVING ALLOWANCE

Less severely disabled of working age, mostly older, mostly out-of-work

INCAPACITY BENEFITS

Out-of-work, mainly older adults with ill health or disability, except the most severely ill or disabled

CHILD BENEFIT

All households with children (a little)

Households with higher earners (a lot)

TAX CREDITS

Low-to-middle income families with children, including workless households

Part-time workers on less than 24hrs a week

1 PER CENT UP-RATING

Everyone on the main working age benefits (JSA, IB/ESA, IS, HB(LHA), Tax Credits)

Source: Impact Assessments

The effect is that many individuals and households face a loss of benefits from more than one source. Estimating just how much particular groups will lose in total is not easy and this is not an exercise the Westminster government has so far undertaken. Indeed, in the absence of this information it is impossible at this stage to provide an estimate of the total number of individuals or households adversely affected by the reforms, in Scotland or the rest of the UK¹³.

What should nevertheless be noted, from the table listing the groups most affected by the welfare reforms, is the frequency with which a number of descriptive terms appear – ‘older’, out-of-work’, ‘low-income’, ‘sick and/or disabled’. These give a fair indication of who is being hit hardest by the welfare reforms.

Concluding remarks

Our 2013 report noted that Scotland has not been singled out as the target for welfare reform, and that the financial loss in Scotland is close to the GB average. The slightly revised figures presented in this new report do not alter this assessment.

But just as the 2013 report identified big variations in the impact between local authorities within Scotland, the new report shows that there are even larger variations between wards. This is not unexpected because the socio-economic differences between small areas such as wards are generally larger than between whole authorities. Nevertheless, it is striking that across Scotland the wards facing the greatest financial loss (per adult of working age) are sometimes losing four times as much as the wards losing the least. Moreover, there is a clear pattern to the losses, with Scotland’s most deprived wards being hit hardest.

Westminster ministers are keen to claim that the welfare reforms will increase the incentive to work and will therefore lead to higher employment. As we noted, this is a bold assumption based on a questionable view of how the labour market works, especially in less prosperous areas. If Westminster ministers are not proved right, the evidence in this report suggests that the gaps in income and living standards between communities in Scotland are set to widen.

APPENDIX 1: Impact of welfare reform by electoral ward

Aberdeen