Social Security and Welfare Reform

DLA and PIP: how not to cut

  • Published: Apr 08, 2013
  • Authors: Peter Kenway, Tom MacInnes
  • Category: Social Security and Welfare Reform
Over the past few days, we have been assessing the benefit changes coming into effect this April but without criticising them simply because they hit people who are poor or disadvantaged.
 
Here we look at two changes together. One is the replacement of disability living allowance (DLA) by the personal independence payment (PIP) for those of working-age. This is a process that will take several years to implement. The other is the decision to restrict the up-rating most working-age benefits by just 1% in April instead of the 2.7% which (based on the rate of consumer price inflation) is what the previous rule would have implied.
 
Over time, both of these changes save a lot of money, well in excess of a billion a year in each case. This compares with just over £1 billion in total from the other three changes considered last week –council tax support, the bedroom tax and the household benefit cap.
 
But as ways of saving large sums of money, the two could not be more different. The replacement of DLA by PIP is a major reform affecting a group of people some of whom are very vulnerable indeed. Following the consultation and the government’s response to it, Spartacus produced a report of its own, Responsible Reform,  written and researched by sick and disabled people and their supporters.
 
In line with our theme here, this report did not oppose the reform just because it would hit people who were poor or disabled. Nor did it oppose reform of DLA; on the contrary. But it did challenge both the government’s interpretation of key evidence, the process it had followed and its subsequent response to consultation. For a reform affecting any group so profoundly, such criticisms must be taken seriously.
 
Government is entitled to question whether benefits are working and whether reform is needed. It is also inevitable that politicians will use hard, even extreme, cases to do so. But alongside this right, government also has an abiding duty to undertake reform in a measured way, seeking to accept reasoned objections and to accommodate them if at all possible. If a better DLA had really been the over-riding goal, a critical but reasoned document like Spartacus would have been seen as helpful in moving towards it. 
 
Even if this ‘better DLA’ had been required to make a small saving, reform would still have been possible. But the actual requirement, imposed in the 2010 Budget, for a saving of 20% made this impossible. It meant that DLA to PIP could only be an exercise designed to reduce support without regard to its adequacy or the need for it. To present a deep and arbitrary cut as ‘reform’ is simply dishonest.
 
By contrast, the decision announced in autumn 2012 to restrict the annual up-rating of working-age benefits to 1% for three years, was not a reform. This restriction was widely opposed, not least because (contrary to the impression given by the government) it impacted working as well as workless households. 
 
While we understand this if a government decides that it must save money on the benefit bill, this is the best way to do it. It does not muck up or undermine reform. It does not cost anything to implement. Nobody suffers an absolute, sudden or large cut in their money. Rather it is just that the relief on the squeeze they have suffered from inflation is less than it would have been. There is time to adjust. Applying to a large number of people, a small reduction can still yield a lot of money in total. It is honest. 
 
We actually think the government should have gone further. First, why exempt pensions and pensioner benefits? With pensioners accounting for roughly half of total benefit spending, extending the restriction in this way could be expected to double the yield. Political reality rules this out, we expect to be told, because pensioners are powerful. But if the need is imperative, a strong politician would still make the case.
 
Second, the government’s argument for restricting working age benefits appealed to the fact that wages had risen more slowly than benefits in the previous few years. Although this has certainly not been true over the longer term, it is true at the moment. If it is sustained for more than a year or two, such a difference strikes us as dangerous. The government’s argument was a reasonable one.
 
But if ‘all in this together’ means this, as it does, then it should also mean that when the economy eventually recovers and wages start to grow again, benefits should start to rise in line with earnings. Political reality rules this out, we expect to be told, because the poor are too weak. But if justice is imperative, a strong politician would still make the case.

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