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Benefit reform will leave sick and disabled people trapped on the dole

Objections to welfare reform are economic as well as moral.

The last Government scrapped Incapacity Benefit (IB) and replaced it with a tougher Employment and Support Allowance (ESA). Claimants are eligible for ESA if they are determined by a computerised test called the Work Capability Assessment (WCA) to have a limited capability for work. The system has been roundly criticised, and the validity of its conclusions are in doubt. The system, introduced in 2007, would mean that one million of the (then) 2.71 million IB caseload would be judged fit for work and denied ESA.

The Department for Work and Pensions knew about the potential problems with ESA before it was implemented. It also knew what worked in terms of supporting people facing disability barriers into employment where possible, and caseload reduction. But the present Government’s economic policy reflects a desire to enfeeble the welfare state, and the stated aim of deficit reduction provides cover for this intention. As such, it has piloted new measures which further toughen up the criteria for the WCA with the intention of finding 350,000 more people fit for work. It has also introduced the Welfare Reform Bill 2011 which will put a one-year time limit on ESA for some claimants, a change intended to move a further 300,000 off ESA.

Half of those found fit for work are expected to move onto Job Seeker’s Allowance (JSA); 30% will move onto another benefit; 20% will stop claiming altogether. In total, this Government is planning to move nearly one million people into the labour market over the next five years. The number of job vacancies in the first quarter of 2011 was just below 500,000 while nearly 2.5 million people were unemployed (including 1.45 million claiming JSA). When Work and Pensions Secretary Iain Duncan-Smith claims there are enough jobs for everybody, he is wrong by a factor of five. On top of this, the number of people thrown off ESA is set to push the JSA claimant count past two million and total unemployment past three million.

Moving people into the labour market at a time when there are no jobs is potentially hugely damaging to the economy. A DWP-commissioned report points out that: “some aspects of the design of the system and the support available were initially designed for conditions of labour market growth”. That is, people moved onto JSA will be trapped there due to the lack of jobs, with all the economic and social problems that entails.

In addition, employers will be aware that nearly half of the unemployment register were previously on Incapacity Benefit, and that many who have been found fit for work by the WCA are not actually capable of full employment. Many involved in economic development and local government are concerned about the possible consequences of flooding the labour market with people whose fitness for work is doubtful.

Further, this Government’s vision of the future economy involves research, innovation, business and entrepreneurship. But Incapacity Benefit claimants tend to be older and less well-qualified than the average working-age person, and less likely to fill these types of posts. Indeed, business will avoid locating in regions with high unemployment due to low demand and dampened economic linkages in those regions.

For example, the many people found fit for work by the WCA and moved onto JSA will see a 14% average cut in their benefits. Given the level of competition for jobs, this means many people will receive a lower income for a long time to come. This income effect is also true for those found fit for work who move onto other benefits, or stop claiming altogether.

Welfare reform could be a good thing if done well. Many of my disability campaigning colleagues are excluded from the labour market despite being phenomenally gifted. Welfare reform should be about supporting those who can to do work that suits them under conditions of their choice. But the Government’s reforms are being carried out in the wrong way, for the wrong reason and at the wrong time. Alongside the moral objections to the current reform of Incapacity Benefit, there is a strong economic argument.

Rhydian Fôn James is a founder of The Broken of Britain campaign and economist.

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