Disabled people could face benefit cuts – even if they cannot work, Citizens Advice warns

The government’s plans for welfare reform could see disabled people facing significant benefit cuts and job centre conditions even though they cannot work, a new report has warned.

According to research from Citizens Advice, more than 80% of its advisers say that people currently eligible for the highest rate of the ‘new style’ employment and support allowance (ESA) – which the government is planning to scrap – would be unlikely to return to work if and when they lose their benefits.

The government wants to replace long-term new style ESA awards with a new, much more time-limited benefit called unemployment insurance (UI). It is not yet known whether current claimants would be forced to switch over, or when the new benefit might be rolled out.

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“The proposed unemployment insurance system could actually reduce expenditure on contributory unemployment benefits by at least £2 billion per year, by ending the long-duration new style employment and support allowance awards,” the report warns.

“At a time when income-related health and disability benefits are being cut, and the future of personal independence payment (PIP) remains under consideration, this is difficult to justify. Many of the people who will be affected are already experiencing hardship.”

The government announced its plans to introduce UI in its Pathways to Work green paper last year. It would be a major reform of contributory benefits, which people qualify by paying National Insurance when in paid work.

UI would replace two existing contributory benefits – new style ESA, which is based on sickness and disability, and new style jobseeker’s allowance (JSA), which is paid for six-months to able-bodied people who are out of work.

Virtually all new style ESA claimants are in the ‘support group’, which is for people with severe illness and disability and pays a higher rate of benefit. These payments continue until the claimant reaches retirement age or their health improves.

While UI would pay more than new style JSA, it would pay the same as the new style ESA support group – and crucially, last year’s green paper suggested those payments might only last for six or 12 months.

“The unemployment insurance proposals risk watering down vital benefits for disabled people – benefits they’ve built up by working and paying national insurance,” said Anne Pardoe, head of policy at Citizens Advice.

“Some people claiming unemployment benefits will see a higher income at first, but hundreds of thousands are at risk of losing long-term benefit awards. Our frontline advisers warn this would be ‘catastrophic’, driving yet more people into hardship.

“Anyone could find themselves falling unwell and seeing their circumstances change. People have paid their contributions in the expectation that support will be there if needed. The government needs to ensure unemployment benefits remain available for those who need them for a fair amount of time.”

In its green paper, the government justified the changes as supporting disabled people back into work by introducing compulsory work-related activity. At present, sick and disabled people on the highest rate of new style ESA do not have to take part in work-related activity, as they have already been assessed as being too ill or disabled to even prepare for a return to the workplace.

“Almost all disabled people and people with long-term health conditions receiving the new contributory benefit would be required, as a minimum, to participate in conversations as part of a new offer of tailored employment support with appropriate exemptions,” the green paper said. 

“Our expectation is that providing people with active employment engagement and a non-means tested, time-limited, financial award would allow them to get back to work, engage in meaningful activity and look for the right job, where they are able to.”

But the Citizens Advice survey found more than 80% of its advisers felt that people receiving the highest rate of new style ESA – meaning they are severely ill or disabled – would be unlikely to return to work if and when they lost their contributory benefits, with more than 45% saying they’d be “very unlikely” to return to work.

“Recipients of new style employment and support allowance are typically older people who become unwell before they reach state pension age and are unlikely to ever return to employment,” the Citizens Advice report said.

Department for Work and Pensions (DWP) data shows that 70% of people claiming the higher rate of new style ESA are over 50, with one in three claimants in their 60s. Older claimants’ primary condition is less likely to be related to mental health than among younger claimants.

The dramatically shortened time limits to unemployment insurance claims are likely to have a huge impact. Three quarters of current support group claimants have been receiving new style ESA for more than five years, compared to the potential UI time limits of six or 12 months.

“It is clear that our advisers are very concerned about this prospect, with many pointing to the significant financial hardship that will result,” the Citizens Advice report warns. “One described it as ‘catastrophic’, and another said it would be ‘hugely detrimental’.”

Charity Parkinson’s UK is also concerned about the impact of making contributory benefits short-term.

“The government’s proposal to introduce unemployment insurance ignores the realities of living with degenerative conditions, like Parkinson’s,” said Juliet Tizzard, Parkinson’s UK’s director of external relations.

“Some working age people with Parkinson’s have to stop work early, so losing non-means tested unemployment insurance after six months to a year would cause a major drop in their household income. This risks pushing people into poverty, damaging their mental health, and worsening their condition.

“People with degenerative conditions should be exempt from any unemployment insurance time limit. We agree with Citizens Advice that the government must consult on the impact of this proposal before pressing on, otherwise thousands of people could be pushed into avoidable hardship.”

Under the current system, new style ESA is most valuable to those who aren’t also claiming universal credit. This is because universal credit is only paid to those on the lowest incomes, and any money they get from new style ESA is deducted pound-for-pound from their universal credit payments – meaning there is normally no financial gain for them. 

Those who can’t claim universal credit – perhaps because their income or savings are too high to qualify – gain most from new style ESA. They also stand to lose the most if they are moved on to unemployment insurance and they reach the time limit. At that point they would have no income from unemployment insurance, universal credit or new style ESA, while being too disabled to work.

“They would instead be expected to live off their savings, or their partner’s income, until they reach state pension age,” the Citizens Advice report warns. “Many of our advisers identified this problem – i.e. having to draw down savings, or become reliant on their partners’ income – without a specific prompt. It is clear that our advisers are concerned about this prospect, with many describing it as unfair.”

Disabled people claiming both unemployment insurance and universal credit would lose protection from the latter’s financial means-testing after their time-limited UI expires – for example, if their partner’s income rises and takes their household finances above the qualifying limits for UC. They would gain little, if anything, compared to the current system.

The government has yet to decide on unemployment insurance’s final design, or the transitional arrangements that will be put in place. If ministers want to use it to bring down benefits spending, it is likely current claimants will eventually be moved onto UI with time-limited claims – nearly 90% of current spending on new style JSA and ESA is on claims lasting more than a year, which will all be in the new style ESA support group.

In any case, future claimants would be left in a much worse position than under the current system. And unemployment insurance would enter a broader benefits system that is becoming increasingly hostile to disabled people – the health element of universal credit is being slashed by nearly 50% for new claimants from this April.

Citizens Advice’s recommendations include:

• transitional protection for current and prospective new style ESA claimants
• disabled people claiming unemployment insurance should have longer or indefinite time limits rather than six or 12 months
• softening the pound-for-pound deductions of contributory benefit income from universal credit payments
• creating a new way of identifying disabled claimants who should be exempt from compulsory work-related activity

In response to questions from Big Issue, the DWP did not give any guarantee that current new style ESA claimants would not face benefit cuts under unemployment insurance, and did not provide a timeframe for its rollout, but did say it would require new primary legislation.

A DWP spokesperson said: “Unemployment insurance would not replace other types of benefits such as PIP and universal credit that support sick or disabled people.

“We consulted on aspects of it in the green paper and are currently working on developing the policy, which will ensure fairness and better protection for those who have contributed most.

“This comes alongside unlocking job opportunities for disabled people through our £1bn a year of employment support, and by redeploying 1,000 work coaches to help sick or disabled people who have been unfairly left behind.”

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