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BRIEFING PAPER

Number CBP 07181 , 18 September 2015

Employment and Support Allowance: An introduction

By Elizabeth Parkin

Inside: 1. Background 2. The benefit rules 3. The Work Capability

Assessment 4. Conditionality 5. ESA and paid work 6. Reassessment of the

remaining incapacity benefit claimants

7. Universal Credit 8. Further information

Number CBP 07181 , 18 September 2015 2

Contents Summary 3

1. Background 4

2. The benefit rules 8 2.1 Basic conditions of entitlement 8 2.2 Contributory ESA 8

National Insurance contribution conditions 8 Contributory ESA and private/occupational pensions 9 Time-limiting of contributory ESA 10

2.3 Income-related ESA 10 2.4 ESA rates 10 2.5 Budget announcement: aligning ESA rate with JSA 12

The Welfare Reform and Work Bill 2015 12 Comment 12

3. The Work Capability Assessment 15 Outcomes from the WCA 16 Reviews of the WCA 16

4. Conditionality 17 4.1 Sanctions 17

Safeguards 18

5. ESA and paid work 19

6. Reassessment of the remaining incapacity benefit claimants 20

7. Universal Credit 21 Work rules 21 Conditionality 22

8. Further information 23

3 Employment and Support Allowance: An introduction

Summary Employment and Support Allowance (ESA) replaced incapacity benefits for new claimants from 27 October 2008. It replaced both Incapacity Benefit, and Income Support for people judged incapable of work. There are two forms of Employment and Support Allowance: contributory ESA, for those who have a sufficient National Insurance contribution record; and income-related ESA, which is means-tested.

To be eligible for ESA, a person must undergo a Work Capability Assessment (WCA). Claimants are assessed during the first 13 weeks of their claim (or longer if necessary) to determine whether they have a “limited capability for work”, and also whether they are capable of engaging in “work-related activity.” This second part of the assessment determines whether the person is placed in the “Support Group” or the “Work-Related Activity Group”; for those in the latter group, access to the full rate of benefit may be conditional on participation in Work-Focused Interviews (WFIs) and undertaking “work-related activity.” Claimants do not however have to be available for work or apply for jobs. Further information on the WCA is provided in the Library note on The Work Capability Assessment for Employment and Support Allowance.

In the Summer Budget 2015, the Government proposed to align ESA rates for those in the Work-Related Activity group with Jobseekers Allowance (currently £73.10 for people aged 25 and over) for new claims from April 2017, while providing “new funding for additional support to help claimants return to work.”1 This would “ensure the right incentives and support are in place for those closer to the labour market to help them make this transition when they are ready.”2 ESA claimants in the Support Group are unaffected.

From April 2013, Universal Credit (UC) began to replace a range of means-tested benefits and tax credits for working age families, including income-related ESA. The timetable for full roll-out of Universal Credit is not yet certain. Universal Credit will introduce a new conditionality regime, and claimants will be required to undertake activities tailored to their personal circumstances.

1 Ibid. 2 Summer Budget 2015, HC 264 2015-16, para 41

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1. Background The Department for Work and Pensions Five Year Strategy, published in February 20053, set out the Labour Government’s plans for a ‘radically reformed incapacity benefit’ which would focus on ‘what people can do rather than on what they cannot.’4 In January 2006, the Green Paper A new deal for welfare: Empowering people to work5 announced proposals for an ‘Employment and Support Allowance’ to replace incapacity benefits. The Welfare Reform Act 20076 laid the framework for the new benefit, and the detailed rules are set out in the Employment and Support Allowance Regulations 2008.7 ESA replaced incapacity benefits for people making new claims from 27 October 2008.

The following DWP press release – issued when the regulations were laid before Parliament on 27 March 2008 – gives the background to the changes and outlines the main features of the new benefit (the benefit rates quoted are those which applied between October 2008 and April 2009):

More support to help people into work – Purnell announces rates for new Employment and Support Allowance

The poorest, most disabled people in society will be given more financial support from the Government, while other disabled and long-term ill people who could work will get greater help to find employment, Secretary of State for Work and Pensions James Purnell said today.

The announcement was made as regulations finalising plans to replace Incapacity Benefits (IB) in Great Britain for all new and repeat claimants with the new work-focused Employment and Support Allowance (ESA) were laid in Parliament today.

The move marks the next major phase in implementing the Government’s radical welfare reform programme and getting one million people off IB by 2015.

Mr Purnell also revealed for the first time how much money people on ESA will get. The new rates of payment will mean extra support to the poorest, most disabled members of society.

Mr Purnell said:

“Gone are the days when writing a sick note is writing people off for life. ESA will give more financial support to the poorest, most disabled people in society whilst extending the opportunity of employment to all those who can work.

“For those who can work, today’s measures are a key cultural shift in the benefit system which puts work at the heart of support.

3 Cm 6447 4 HC Deb 2 February 2005 c842 5 Cm 6730 6 For further background see Library Research Paper 06/39, The Welfare Reform Bill

2005-06 7 SI 2008/794

5 Employment and Support Allowance: An introduction

“Work is the best route out of poverty and gives people independence over their lives - we want to help them to help themselves.”

From October this year, all new and repeat claimants will undergo the Work Capability Assessment (WCA) – a new medical test designed to look at what people can do rather than what they cannot. ESA claimants will then be split into two groups, depending on the outcome of the assessment:

• The “Work-related activity group”: Those claimants who pass the assessment and are identified as capable of taking part in some form of work-related activity will be entitled to claim ESA at a rate of £84.50 a week. They will be required to attend work-focused interviews through the pioneering Pathways to Work scheme, to help them overcome their barriers to work and support them into long-term sustainable employment. Those who don’t fulfill these conditions without a good reason could have their ESA partially cut.

• The “Support Group”: Those identified as not able to take part in any work- related activity (the most severely disabled group) will not be expected to take part in work-focused activities unless they want to, but will not face any sanctions. We are targeting more resources to the poorest in this group with a guaranteed income of £102.10 a week (£17.60 more than the long-term rate of Incapacity Benefit), while everyone else in this category will receive a minimum of £89.50 a week.

All people claiming ESA may also continue to be eligible for other benefits, such as Disability Living Allowance and Housing and Council Tax Benefit.

Those who do not qualify for ESA can instead apply for Jobseeker’s Allowance and will be expected to take part in the work-focused interviews and programmes to help them get back to work.

The main changes to the current system of incapacity benefits announced in the regulations are:

• A move away from an inactive benefit to an active benefit which takes away incentives to stay on benefit for a long period of time. At the moment the amount of money someone gets goes up after six months and then again after one year.

• Removal of the ‘age addition’ which gives more money to people who start their claim before they are 45 – taking away another outdated incentive to stay on incapacity benefit for a long time.

• Medical assessments to be conducted much sooner – within 13 weeks – helping to prevent people from falling into benefit dependency. Those who need it receive support much faster and those who are able to work get the help they need to get back into the workplace.

• A simpler benefit – people will apply for just one benefit instead of the current system where they either claim Incapacity Benefit or Income Support on grounds of incapacity, or even a combination of both.

Number CBP 07181 , 18 September 2015 6

The changes will build on the success that has already been made over the last ten years - claimant unemployment count is at its lowest level for 32 years, there is record employment and there are now more than one million fewer people on out-of-work benefits. The most recent statistics showed that there are currently 678,500 vacancies in the UK, so there are jobs out there for anyone who wants one.

Disability and welfare rights organisations expressed concern however that the regulations did not meet the Government’s intentions and undertakings. In a report published on 2 May 20088, the House of Lords Merits of Statutory Instruments Committee summarised the key concerns of organisations as follows:

• the ESA rate for single people £89.50 [2008-09 rate] does not exceed the current rate of Incapacity Benefit contrary to Government undertakings given during the course of the Bill;

• two individuals with similar circumstances will receive different incomes depending on whether their benefit is based on National Insurance contributions or not;

• earned income and tax may have a perverse effect on a benefit designed to help people back into work;

• the different treatment of ESA claimants' access to other "passported" benefits, e.g. prescription charges, free school meals, legal aid and the social fund. Those on income-related ESA will have an automatic right to those additional benefits, whereas those on contribution-based ESA will be subject to a separate means-test for each one;

• the potentially negative effect of these changes on households which include children;

• the increased restriction on disabled students pursuing a course of study. 9

One of the complaints at the time was about the proposed ESA rates. The Disability Benefits Consortium stated that repeated assurances were given by Ministers that the main phase rate of ESA for those in the work-related activity group would be paid above the present long-term Incapacity Benefit rate, but believed those commitments were not followed through.10 The Government’s reply to the Committee on criticisms of the proposed ESA rates stated [emphasis added]:

The government does not accept that the rates which have been announced are incompatible with statements made to Parliament. The rate of £84.50 for those in the work-related activity component is above the rate of long-term Incapacity Benefit (£81.35) at the time the statements were made. In addition the rate of benefit for those in the support group will be £89.50 and those in this group will be made automatically eligible for the Enhanced Disability Premium of £12.60 making a minimum income guarantee for those without any other income of £102.10

8 HL 100 2007-08 9 Ibid. para 10 10 Ibid. p16, original emphasis

7 Employment and Support Allowance: An introduction

a week. Existing customers at the point of change will continue to have the cash level of their benefit protected.11

In 2014, the Department for Work and Pensions, explained that ESA places a greater emphasis on what claimants are able to do, and encouraging claimants to move towards employment:

It is our firm belief that enabling individuals and offering them the support they need to return to the labour market will, in most cases, improve not only the individual’s health but will help to reduce the hardship and deprivation they may experience as a result of their health condition or disability. This principle is in keeping with the body of evidence that people are better off in work; not only financially, but in terms of their health and well-being, their self-esteem and the future prospects of both themselves and their family. Work is an integral part of life, in terms of meeting the financial demands and psychosocial needs placed on individuals, and is central to individual identity as well as social status.

In this vein, ESA places greater emphasis on a claimant’s functional capabilities and the importance of moving towards employment where reasonable.12

11 Ibid. p7 12 Work and Pensions Select Committee, Employment and Support Allowance and

Work Capability Assessments, 23 July 2014, HC 302-I 2014-15, Ev 17 WCA0196

Number CBP 07181 , 18 September 2015 8

2. The benefit rules

2.1 Basic conditions of entitlement Employment and Support Allowance is payable to people who:

• Are at least 16 but under pension age; • Following a Work Capability Assessment are judged to have a

“limited capability for work”, i.e. they have a physical or mental condition which means that it is not reasonable to require them to work; and

• Satisfy either National Insurance contribution conditions, or a means-test, or both.

Employment and Support Allowance (ESA) has two forms:

• Contributory ESA, for those with a sufficient National Insurance contribution record; and

• Income-related ESA, which is means-tested (i.e. entitlement can be affected by other income and capital of the claimant and their partner).

2.2 Contributory ESA National Insurance contribution conditions For contributory ESA, the National Insurance contribution conditions initially mirrored those which applied for Incapacity Benefit, but as a result of measures in the Welfare Reform Act 2009 the rules were changed from November 2010 to link entitlement to contributory ESA more closely to periods of recent work.13

For the purposes of determining entitlement to contributory Employment and Support Allowance, the Department for Work and Pensions will usually look at a claimant's National Insurance contribution record for tax years ending before the beginning of the benefit year in which the claim is made. “Benefit years” run from the first Sunday in January to the end of the first Saturday in the following January.

For most claimants, the contribution conditions for contributory ESA are14:

• In one of the last two tax years before the beginning of the year in which the claim is made, the claimant must have paid or treated as paid at least 26 weeks’ Class 1 (employee) contributions on earnings above the NI lower earnings limit (LEL), or 26 Class 2 (self-employed) contributions, or a mixture of class 1 and 2 contributions totalling at least 26 times the LEL for that year; and

• In each of the last two tax years before the year in which the claim is made, the claimant had Class 1 or Class 2

13 For background to the changes see Library Research Paper 09/08, Welfare Reform

Bill: social security provisions, Part F 14 There are however exceptions to these rules in certain cases – see Disability Rights

UK Handbook 2014-15 (pages 69-72) and CPAG Welfare Benefits and Tax Credits Handbook 2014-15 (pages 861-864)

9 Employment and Support Allowance: An introduction

contributions or credits equivalent to 50 times the lower earnings limit.

To be entitled to contributory Employment and Support Allowance therefore, a claimant must normally have actually worked and paid the necessary National Insurance contributions as an employed earner (Class 1 contributions) or self-employed person (Class 2 contributions) over the period leading up to the claim; and have the necessary Class 1 or Class 2 contributions, or credits, to satisfy the second condition.

Until May 2012, special rules applied for people incapacitated in youth, who qualified for contributory ESA without satisfying the usual contribution conditions. However, the Welfare Reform Act 2012 contained provisions which abolished the ESA “youth rules”15. The DWP’s impact assessment for the Act stated that the intention of this change was to “simplify the benefits system and ensure a consistency of treatment for those claiming ESA.”16

Contributory ESA provides a standard rate of benefit for the claimant only. It does not include additional amounts for partners; enhanced disability, severe disability, carer or pensioner premiums; or support for mortgage interest. These are only available through income-related ESA, so in order to qualify for additional amounts a person receiving contributory ESA must also satisfy a means-test (see below).

Contributory ESA and private/occupational pensions Contributory ESA may be reduced in the person has a pension in excess of a certain amount. The abatement of contributory incapacity benefits for people in receipt of private/occupational pensions has applied since 2001, as a result of measures in the Labour Government’s Welfare Reform and Pensions Act 1999.

If a person is claiming contributory Employment and Support Allowance, the amount they receive is reduced by 50 per cent of the excess pension over £85 a week.17

The rules on abatement were introduced by the Labour Government’s Welfare Reform and Pensions Act 1999. The White Paper A new contract for welfare: Support for disabled people, which preceded the Welfare Reform and Pensions Bill, argued that the existing rules governing Incapacity Benefit were no longer appropriate given changes in working patterns and retirement provision, and that private pensions should be taken into account:

We also plan to introduce a fairer balance between public and private provision. When an insurance benefit for incapacity was first introduced, fewer people had occupational or personal provision and very few retired early. Now pension provision is widespread and early retirement is common. Incapacity Benefit is

15 For further information, see Library Research Paper 11/23, Welfare Reform Bill:

reform of disability benefits, Housing Benefit, and other measures, 4 March 2011, pages 7-8

16 Department for Work and Pensions, Equality impact assessment for abolition of concessionary Employment and Support Allowance (ESA) ‘youth’ National Insurance qualification conditions, October 2011

17 The Employment and Support Allowance Regulations 2013, 67(1)

Number CBP 07181 , 18 September 2015 10

thus often paid on top of a reasonable pension, in effect topping-up early retirement income. This duplication of provision is not a sensible use of resources and we propose to take some account of occupational pensions in calculating Incapacity Benefit entitlement.18

Time-limiting of contributory ESA As a result of provisions in the Welfare Reform Act 2012, receipt of contributory ESA for claimants in the Work-Related Activity Group is now limited to 365 days. Those still on benefit at that point may then claim income-based (i.e. means-tested) ESA, but they may not be entitled to any benefit if they or their partner have other income, or capital above a certain level. The time limit will affect those “migrated” to ESA from Incapacity Benefit, in addition to those claiming ESA. Contributory ESA is not time-limited for claimants in the Support Group.

For further information, see the Library note on Time limiting of contributory Employment and Support Allowance.

2.3 Income-related ESA For income-related ESA, the means-test is similar to that for Income Support.19 To be entitled to income-related ESA, the claimant (and, if part of a couple, their partner) must have no other income, or income below their “applicable amount.” This is the weekly amount of money necessary to cover their needs, according to the regulations. The applicable amount comprises a basic personal allowance for the claimant or couple; a Support Component” or “Work-Related Activity Component”; and additional premiums for disability, pensioners or carers. It may also include an amount for certain housing costs (principally mortgage interest). Further details are given below.

Income received by the claimant and their partner, (including, where relevant, contributory ESA and excluding certain types of income set out in the ESA regulations) is deducted from the applicable amount to determine the amount of benefit payable.

Capital (which includes savings and assets, unless the regulations state the particular source is to be disregarded) must be below £16,000. If capital is between £6,000.01 and £16,000, a ‘tariff income’ of £1 a week for every £250 or part of £250 that they have in capital is deducted from the applicable amount. If capital is above £16,000 then no benefit is payable.

2.4 ESA rates The 2015/16 rates for ESA are below:20

18 Cm 4103 October 1998, p6 19 The DWP’s Technical Guide, A guide to Income Support, IS20, March 2014, gives a

useful overview of the means-test, and how different forms of income and capital are taken into account

20 Gov.uk, Proposed benefit and pension rates 2015 to 2016

11 Employment and Support Allowance: An introduction

Contributory ESA

Assessment phase

Under 25 £57.90

25 or over £73.10

Main phase

Basic Allowance £73.10

Work-related activity component £29.05

Support component £36.20

Income-related ESA

Personal allowances Assessment phase

Main phase

Single Under 25 £57.90 £73.10

25 or over £73.10 £73.10

Lone parent Under 18 £57.90 £73.10

18 or over £73.10 £73.10

Couple Both under 18

£57.90 £114.85

Both 18 or over

£114.85 £114.85

Components

Work-related activity - £29.05

Support - £36.20

Premiums

Carer £34.60 £34.60

Severe disability £61.85 £61.85

Number CBP 07181 , 18 September 2015 12

Enhanced disability £15.75 £15.75

2.5 Budget announcement: aligning ESA rate with JSA

In his Budget speech the Chancellor referred to the “perverse incentive” whereby ESA claimants in the WRAG received more money than claimants of Jobseeker’s Allowance “but get nothing like the help to find suitable employment,” noting that while the JSA caseload had fallen by 700,000 since 2010, over the same period the numbers on incapacity benefits including ESA had fallen by just 90,000, despite 61% of claimants in the WRAG saying they wanted to work.21 The Government proposed to align ESA rates for those in the WRAG with JSA (currently £73.10 for people aged 25 and over) for new claims from April 2017, while providing “new funding for additional support to help claimants return to work.”22 This would “ensure the right incentives and support are in place for those closer to the labour market to help them make this transition when they are ready.”23 ESA claimants in the Support Group are unaffected. Savings of £640 million a year are expected by 2020-21.

The Welfare Reform and Work Bill 2015 Clause 13 of the Welfare Reform and Work Bill 2015 amends the Welfare Reform Act 2007 to remove provision for the payment of the ESA Work-Related Activity Component, in both contributory and income-related ESA. Income-related ESA is to be replaced by Universal Credit. Clause 14 abolishes the corresponding Limited Capability for Work element in UC.

Regulations will include provision for claimants already in receipt of the ESA WRAC (or the UC Limited Capability for Work element) at April 2017 to continue to receive it. There will also be protection for Incapacity Benefit, Severe Disability Allowance and Income Support claimants who at that point have not yet had their awards converted to ESA, and who are subsequently placed in the WRAG.

The Explanatory notes do not say whether transitional protection will also extend to ESA claimants in the Support Group who move to the Work-Related Activity Group as a result of a reassessment after April 2017.

Comment Responding to the announcement in the Budget, Rob Holland, Parliamentary Lead at Royal Mencap Society and Co-Chair of the Disability Benefits Consortium, said they were “deeply concerned” about the proposal to abolish the Work-Related Activity Component for new claims. He added:

21 HC Deb 8 July 2015 c333 22 Ibid. 23 Summer Budget 2015, HC 264 2015-16, para 41

13 Employment and Support Allowance: An introduction

Cutting this essential payment to the bare minimum will prevent people seeking work effectively and fly in the face of the Government’s aim to halve the disability employment gap.

Many disabled people have been put in this group because they have long term health conditions which prevent them from working for a certain amount of time. Those who are in this group will often only receive it for a limited time only.

Putting pressure on the incomes of disabled people at a time when they need the extra money because they’re too unwell to work can make it less likely they would be fit enough to work in the future.

The cut will hit households with a disabled person hard – a third of whom are living below the poverty line. Furthermore official Government figures show that the number of disabled people living in poverty has increased by 300,000 over the last year.

The cut must also be seen in the context of other cuts and freezes to support for disabled people, their families and carers such as housing benefit, tax credits and social care.24

Paul Farmer, Chief Executive of Mind, said they were “extremely disappointed” at the ESA announcement, which would “make people’s lives even more difficult and will do nothing to help them return to work.” He added:

“People being supported by ESA receive a higher rate than those on JSA because they face additional barriers as a result of their illness or disability, and typically take longer to move into work. Almost 60 per cent of people on JSA move off the benefit within 6 months, while almost 60 per cent of people in the WRAG need this support for at least two years. It is unrealistic to expect people to survive on £73 a week for this length of time. We’re concerned that the impact of these changes will be felt by our overstretched NHS services, as these cuts hit individual’s mental health as well as their pockets.”

“It is insulting and misguided to imply that ill and disabled people on ESA will be more likely to move into work if their benefits are cut. The vast majority of people with mental health problems want to work but face significant barriers as a result of the impact of their condition and the stigma they often face from employers."25

The Institute for Fiscal Studies comments that abolishing the addition for ESA WRAG claimants strengthens the incentive for claimants to try to get into the ESA Support Group,26 a point also made by Ben Baumberg of the University of Kent, who argues that it could thereby discourage claimants from risking work. He also states that removal of the addition could lead to an increase in the proportion of claimants placed in the Support Group on the grounds that being put in the WRAG would be a risk to their health.27

24 DBC responds to the budget, Disability Benefits Consortium press release, 9 July

2015 25 Budget benefit cut ‘insulting and misguided’, Mind press release, 8 July 2015 26 Andrew Hood, Benefit changes and distributional analysis, IFS presentation, 9 July

2015 27 Ben Baumberg, Why the Budget’s cut to ESA may backfire, Rethinking Incapacity

blog, 8 July 2015

Number CBP 07181 , 18 September 2015 14

The abolition of the Limited Capability for Work element in Universal Credit also means that, for adults, only those in the Support Group will receive additional support for disability with their UC award.28

28 UC claimants in the WRAG may still however benefit from the higher work

allowance for those with a “limited capability for work.” See Commons Briefing papers SN06548, Draft Universal Credit Regulations 2013, section 6, for information on support for disabled people in UC

15 Employment and Support Allowance: An introduction

3. The Work Capability Assessment

The WCA was developed by DWP in consultation with medical and other experts alongside specialist disability groups. It looks at an individual’s physical and mental capabilities and concentrates on the functional effects of an individual’s condition rather than the condition itself.

ESA claimants are assessed during the first 13 weeks of their claim (or longer if necessary) to determine whether they have a “limited capability for work”, in which case they are placed in the “Work Related Activity Group”. If claimants are also found to have “limited capability for work-related activity” they are placed in the “Support Group”. ESA is paid at an “assessment rate” during this time. Claimants not placed in the Work Related Activity Group or the Support Group are deemed “fit for work”.

For further information, see the Library note on The Work Capability Assessment for Employment and Support Allowance.

Support Group:

Claimants in the support group are identified as having the most severe functional impairment. Their condition means they have limited capability for work and limited capability for work-related activity. They receive a higher rate of benefit and there is no conditionality on their benefit, i.e. they are not expected to undertake any further activities as a condition of receiving their benefit. However, claimants in this group can elect to take part in employment support if they choose.

Work Related Activity Group (WRAG):

People in this group have been identified as able to prepare themselves for employment with support. They are identified as having limited capability for work, but able to take part in work-related activity. It is considered that people in this group should be able to return to work in due course. For people in this group access to the full rate of benefit may be conditional on participation in work focused interviews and mandatory “work-related activity”, such as work experience, training programmes or participation in the Work Programme. Claimants are not however expected to apply for jobs or undergo medical treatment.

Claimants are not required to take part in work-related activity if they:

• are a lone parent and have a child under the age of 3; or • receive carer’s allowance or a carer premium.

Claimants placed in either the Support Group or WRAG will, where appropriate, receive a back-dated payment of the component to which they are entitled, payable from the fourteenth week of their claim.

Fit for Work

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Those who are assessed as “fit for work” are not entitled to ESA. Claimants may be able to make a claim for Jobseeker’s Allowance (JSA). Claimants should be notified over the telephone and in writing about alternative benefits available.

Outcomes from the WCA The DWP publishes quarterly figures on the outcomes of completed Work Capability Assessments. The latest figures published in March 2015 provide information on claims started in April 2014 to June 2014. For completed claims relating to this period:

• 79 per cent of claimants were entitled to Employment and Support Allowance. Within this

─ 14 per cent of claimants were placed in the Work Related Activity Group, and

─ 65 per cent of claimants were placed in the Support Group;

• 21 per cent of claimants were assessed as Fit for Work.29

Reviews of the WCA Section 10 of the Welfare Reform Act 2007 committed the Secretary of State for Work and Pensions to publish an independent report each year for the first 5 years of operation.

Independent reviews were carried out annually from 2010 to 2014. The first three reviews were carried out by Professor Malcolm Harrington, and the last two by Dr Paul Litchfield.

Further information on the independent reviews can be found on the DWP’s webpage on Improving the Work Capability Assessment.

29 DWP, Employment and Support Allowance: outcomes of Work Capability

Assessments, Great Britain, Quarterly official statistics bulletin, 12 March 2015

17 Employment and Support Allowance: An introduction

4. Conditionality ESA claimants in the Support Group are not required to undertake any activities to continue to receive benefit. They can however access certain work related support on a voluntary basis throughout their claim.

ESA claimants in the Work-Related Activity Group (WRAG) may have to undertake work-related activity as well as attend and participate in “Work-Focused Interviews” which are carried out by Jobcentre advisers. The Work Focused Interview helps to assess the claimants needs and enables an action plan to be drawn up to provide a suitable programme of work related activities. This must be reasonable with regard to the claimant’s circumstances, and must not require the claimant to apply for a job, undertake work or undergo medical treatment.

The DWP’s submission to the Work and Pensions Committee 2014 inquiry provides further information on work-related activity and outlines the requirements and the type of support that may be offered to claimants through Jobcentre Support, the Work Programme and Work Choice.30

4.1 Sanctions Failure to undertake a work-focused interview or work-related activity without “good cause” when mandated to do so may result in a benefit sanction, i.e. a reduction in the amount of benefit payable.

From 3 December 2012, a revised sanctions regime for ESA claimants who are in the Work-Related Activity Group was introduced. The DWP set out its rationale for introducing a new conditionality and sanctions regime:

Research suggests that increased conditionality (the principle of benefit receipt be independent on meeting certain requirements) for claimants with limited capability for work to engage in employment preparation programmes has been successful in increasing participation and reducing benefit caseloads. This is supported by DWP research which shows that around 83% of ESA claimants felt that the compulsory nature of work-focused interviews (which are backed by sanctions for failure to attend) made them more likely to participate.31

Under the pre-December 2012 regime, ESA claimants in the WRAG who failed to meet requirements were subject to open-ended sanctions which were lifted when they “recomplied” with the relevant requirement. The sanction amount was 50% of the work-related activity component, rising to 100% of the component after four weeks. For 2015/16 rates, the work-related activity component is £28.75 a week.

From December 2012, the rules changed so that:

30 Work and Pensions Select Committee, Employment and Support Allowance and

Work Capability Assessments, 23 July 2014, HC 302-I 2014-15, Ev 17 WCA0196 31 Employment and Support Allowance (Sanctions) (Amendment) Regulations 2012,

Equality analysis, November 2012

Number CBP 07181 , 18 September 2015 18

• Claimants in the WRAG who fail to comply with the conditions for receiving benefit now receive an open-ended sanction, followed by a fixed period sanction when they re-comply

• The fixed period sanction following re-compliance is one week for a first “sanctionable failure,” two weeks for a second failure within 52 weeks, and four weeks for a third or subsequent failure within a 52 week period

• The sanctionable amount increased to 100% of the prescribed amount for a single claimant (currently £73.10 a week)

• Reduced rate “hardship payments” were introduced for ESA claimants subject to a sanction who would be in hardship unless a payment was made. When deciding whether to make hardship payments, the Secretary of State must take various matters into consideration, including whether there is a disabled adult or child in the household, the wider resources available to the household, and whether there is a “substantial risk” that the household would not have access to essential items. Hardship payments aren’t made automatically; people who have been sanctioned need to apply for them.

• Claimants have the right of appeal against the imposition of a sanction, if they can demonstrate “good cause” for their failure. Good cause is not defined in ESA rules; the regulations merely state that “all the circumstances of the case including in particular the person’s physical or mental health or condition” must be taken into account.”

Safeguards Safeguards should be in place to minimise adverse effects for “protected groups” as defined in the Equality Act 2010. These include ensuring work-related activity requirements are reasonable for each individual claimant; ensuring decision makers consider all evidence presented as “good cause” for non-compliance; and providing access to hardship payments for ESA claimants who are sanction. Further information is provided in Employment and Support Allowance (Sanctions) (Amendment) Regulations 2012, Equality analysis, November 2012 (see paragraph 33).

Claimants have the right to request further information about the sanction decision, request reconsideration and appeal the decision.

19 Employment and Support Allowance: An introduction

5. ESA and paid work Employment and Support Allowance is an “income replacement” benefit for people who have a health condition or disability which limits their capability for work. However, under the “Permitted Work Rules”, ESA claimants can do some paid work without it affecting their benefit. Claimants must inform DWP before undertaking any permitted work.

The provisions for permitted work (also called “exempt work”) are set out in the Employment and Support Allowance Regulations 2013.32 Permitted work is work of any kind that someone can do:

• As part of a treatment programme done under medical supervision while they are in hospital or regularly attending hospital as an outpatient, provided they do not earn more than £104 a week; or

• For an unlimited period, provided they do not earn more than £20 a week. This is called the “permitted work lower limit”; or

• For an unlimited period, provided they do not earn more than £104 a week and they are in “supported” work33; or

• For up to 52 weeks, or indefinitely in certain circumstances, provided they work, on average, for less than 16 hours a week and do not earn more than £104 a week. This is called the “permitted work higher limit”.34

• If an individual’s earnings in any week are higher than the relevant limit, they are not entitled to ESA for that week.

Further information on the Permitted Work Rules, is given in the Disability Rights UK factsheet F35, Permitted work.

32 The Employment and Support Allowance (Work-Related Activity) Regulations 2011

as amended, 2011/1349 33 Supported work is supervised by someone employed to find work for disabled

people 34 Welfare benefits and tax credits handbook 2014/15, Child Poverty Action Group,

page1020 [n.b. the permitted work higher limit increased from £101 to £104 in 2015]

Number CBP 07181 , 18 September 2015 20

6. Reassessment of the remaining incapacity benefit claimants

Existing claimants of incapacity benefits (Incapacity Benefit, Severe Disablement Allowance and Income Support for incapacity for work) were not initially affected by the introduction of ESA, but in late 2010 a programme began under which around 1.5 million people are being reassessed for ESA. Claimants may be assessed as eligible for ESA – in the support group or work-related activity group – or fit for work. The reassessment process was due to be completed in spring 2014.

Further information can be found on the DWP website35 and in the Library briefing on Incapacity benefit reassessments. Statistics released by DWP on 12 March 2015 show that, from the start of the reassessment process up to June 2014, a total of 1,403,100 incapacity benefit claimants had been referred for assessment.36

35 GOV.UK website, Incapacity benefits – reassessing claims, updated April 2013 36 This is the total number of claimants who had been referred to Atos Healthcare for

reassessment by June 2014. There is a reporting lag of approximately 9 months at the issuing date of this statistical output owing to the time needed to process data and time allowed to enable each cohort's reassessment phase to elapse – see DWP, Employment and Support Allowance: outcomes of Work Capability Assessments, Great Britain: Quarterly official statistics bulletin, 12 March 2015

21 Employment and Support Allowance: An introduction

7. Universal Credit Under the Welfare Reform Act 2012, from April 2013 Universal Credit began to replace a range of means-tested benefits and tax credits for working age families. Universal Credit will replace income-related Employment and Support Allowance, income-based Jobseeker’s Allowance, Income Support, Child Tax Credit, Working Tax Credit and Housing Benefit. Contributory ESA will remain as a separate benefit.

A precise timetable for full roll-out of the benefit has not yet been announced, although it is now expected that there will be no new claims for legacy benefits from 2016. The Department for Work and Pensions estimates that in December 2019, 165,000 (out of 1.8 million) Employment and Support Allowance claimants will not have transferred on to Universal Credit.37

The DWP have stated that Universal Credit aims to simply the current system of benefits and tax credits associated with disability. Universal Credit will provide two additions for people with a disability or health condition - limited capability for work and limited capability for work-related activity – which will be assessed through a Work Capability Assessment.

• The limited capability for work element is £126.11 a month from April 2015

• The limited capability for work-related activity element is £315.60 a month from April 2015.38

For further information on how the introduction of Universal Credit will affect disabled people, see Library briefing SN06548 Draft Universal Credit Regulations 2013.

Work rules There are no “Permitted Work rules” under Universal Credit. Instead, claimants who have limited capability for work (LCW) or limited capability for work related activity (LCWRA) and who take the step of moving into work, will retain their existing LCW or LCWRA element in their Universal Credit assessment. Their earnings will be subjected to a work allowance, where claimants’ earnings up to a certain level are ignored when calculating how much Universal Credit a claimant should receive. For claimants who earn more than their work allowance, their Universal Credit is reduced to take account of those additional earnings. Universal Credit has a single taper rate of 65%, which means that 35 pence for every pound earned39 is kept by the claimant.

Although there are no Permitted Work rules under Universal Credit, the Government has stated that the more generous “work allowance” (earnings disregards) for disabled people, together with the single taper rate, provide “clear work incentives” for disabled people:

37 National Audit Office, Universal Credit: progress update, HC786 Session 2014-15,

26 November 2014, page 17 38 Gov.uk, Proposed benefit and pension rates 2015 to 2016 39 For every pound of net earnings, after tax and National Insurance.

Number CBP 07181 , 18 September 2015 22

Mark Harper:

Universal Credit replaces the complex “Permitted Work” rules that apply to ESA with clear work incentives for disabled people through generous work allowances and a single taper. The Limited Capability for Work (LCW) and Limited Capability for Work and Work-Related Activity (LCWRA) elements – entitlement to which is based on the outcome of a Work Capability Assessment – are available to claimants both in and out of work, further strengthening the incentives for disabled people to move into work. These measures reflect the Government’s strong commitment to help more disabled people into work and employment now stands at a record level.40

In its submission to the Work and Pensions Committee, the DWP explained the intended benefits of this policy:

Their earnings will be subjected to a work allowance, which, coupled with the Universal Credit taper, enable disabled claimants to try work, even for a small number of hours, with financial gain and without the fear of losing their benefit

[…]

Depending on their circumstances, these rates of work allowance are more generous than those for claimants in similar circumstances who are not disabled. For example, a household without dependent children or housing costs included in the UC assessment with a LCW element will have a work allowance of £647 per month - whereas a similar household without a LCW element will have a work allowance of £111 per month.41

Conditionality All Universal Credit claimants will be required to agree to a Claimant Commitment. This will record the activities they are required to undertake, including, including, where appropriate, doing all that can reasonably be expected of them to find work or prepare for work.42

Unlike ESA, claimants for Universal Credit who are waiting for a Work Capability Assessment or waiting for the outcome of an appeal will, with some exceptions, be subject to the all work related requirements level of conditionality. These requirements will be personalised to their circumstances. The DWP stated that:

This approach is intended to support more claimants by keeping them in touch with the labour market to reduce the damage caused by labour market detachment.43

Further information on the provisions in Universal Credit for people with health conditions and disabilities is provided in the Library note on Draft Universal Credit Regulations 2013.

The DWP also have a guide on Universal Credit if you have a disability or health condition.

40 PQ 218585 [on Universal Credit], 17 December 2014 41 Work and Pensions Select Committee, Employment and Support Allowance and

Work Capability Assessments, 23 July 2014, HC 302-I 2014-15, Ev 17 WCA0196 42 EXPLANATORY MEMORANDUM TO THE UNIVERSAL CREDIT REGULATIONS 2013,

para 7.10 43 Work and Pensions Select Committee, Employment and Support Allowance and

Work Capability Assessments, 23 July 2014, HC 302-I 2014-15, Ev 17 WCA0196

23 Employment and Support Allowance: An introduction

8. Further information The following sources provide further information on Employment and Support Allowance:

• Child Poverty Action Group, Welfare benefits and tax credits handbook, 2015-16

• Disability Rights UK Handbook, April 2015-2016 • Disability Rights UK, Factsheet 31: Employment and support

allowance overview • Work and Pensions Select Committee, Employment and Support

Allowance and Work Capability Assessments, 23 July 2014, HC 302-I 2014-15

• DWP, Employment and Support Allowance: the Work Capability Assessment, detailed guide, 1 January 2013

BRIEFING PAPER Number CBP 07181 , 18 September 2015

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