Issues

Welfare reform: the highest impact?

12283506_xxl A NICVA-commissioned report suggests that cuts to some welfare budgets will affect local households more than those in Britain.

Northern Ireland will be the region most affected by welfare reform, according to a report commissioned by the Northern Ireland Council for Voluntary Action (NICVA). The paper was written by Christina Beatty and Steve Fothergill from Sheffield Hallam University.

Most welfare reforms have been initiated by the Coalition Government although Labour’s incapacity benefit reforms are also taking effect. Child benefit and tax credit policy is set directly by Westminster but the rest of social security policy is decided by Stormont. In practice, Northern Ireland has traditionally maintained parity with Britain.

Social Development Minister Nelson McCausland plans to introduce these reforms through the Welfare Reform Act 2012, mainly in line with parity but also with some administrative flexibility for Northern Ireland.

The proposals have been opposed by the other Assembly parties in varying degrees. If the Executive broke with parity, it would have to fund higher benefits from other budgets or raise more money to cover that cost.

The authors acknowledge that universal credit will result in higher welfare spending although there will be “winners and losers” at a household level.

The report claims that the other reforms will reduce welfare spending in Northern Ireland by £758 million but does not account for the potential increased income from benefit claimants who find new jobs.

Beatty and Fothergill estimate that the annual financial reduction, per working age adult, will be highest in Derry (£900), Strabane (£870) and Belfast (£840) but lowest in North Down (£450). The province’s average reduction – across working age adults – would be the highest in the UK (£650).

“The facts in this report make for stark reading for everyone in Northern Ireland – whether they receive benefits or not,” NICVA Chief Executive Seamus McAleavey remarked. “Not only will Northern Ireland fare much worse than anywhere else as a result of welfare reform but we will also be even pushed further down the ladder when it comes to levels of prosperity across the UK.”

Ian Parsley helped to write the Centre for Social Justice’s ‘Breakthrough Northern Ireland’ report which argued that the current welfare system encourages long-term dependency.

The Beatty and Fothergill report, in his view, is “seriously flawed” and made “assumptions about financial ‘loss’ without clarity”. Its use of terms such as “hard hit” and “worse off” was “deliberately loaded, doing no justice to the purpose of the reforms.”

Parsley added: “More people contributing to the economy through work, more targeted support for those suffering poor health, and a more understandable system of benefits will relieve the burden on hard-working tax payers who pay for the system, and thus improve the economy.”

In 2011-2012, the Social Security Agency paid out £2.2 billion to working age claimants in Northern Ireland while another £2.2 billion was spent on state pensions. A very small proportion of benefits and pension claims were fraudulent: 0.4 per cent.

Estimated welfare cuts

Source £ million
Incapacity benefit 230
Tax credits 135
Cap on increases (1 per cent) 120
Personal independence payment 105
Child benefit 80
Housing benefit 75
Other 13
Total 758
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