Welfare reform ‘doesn’t lead to higher employment’

THERE is little evidence to justify Government claims that welfare reforms have led to more people being in work, a new study has suggested.

Iain Duncan Smith was adamant new reforms would encourage more people into work. Picture: Greg Macvean

Academics at Sheffield Hallam University and the University of Glasgow said that while employment has risen, this could not simply be attributed to controversial welfare reforms.

While the report said its analysis “remains exploratory”, it stated: “Nevertheless, there is sufficient evidence in the present report to cast doubt on one of the central claims used to justify welfare reform.

“Welfare reform does reduce public expenditure and thereby the budget deficit but it does not, it would seem, lead to higher employment or lower unemployment.”

MSPs on the Scottish Parliament’s Welfare Reform Committee commissioned the research, with convener Michael McMahon saying it “presents firm evidence that welfare reforms are not working”.

He added: “Thousands of people in Scotland have faced upheaval in their lives as a result of these changes, yet they are not leading to more people entering the job market.”

The research, by Christina Beatty and Steve Fothergill of the Centre for Regional Economic and Social Research at Sheffield Hallam University along with Donald Houston from the Department of Urban Atudies at Glasgow University, is believed to be the first of its kind to look at the cumulative impact of benefit reforms on the labour market.

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The Conservative/Liberal Democrat coalition at Westminster brought in a number of reforms, including changes to housing benefit, the introduction of a benefits cap, changes to Child Tax Credit and Working Tax Credit and the replacement of Disability Living Allowance (DLA) with Personal Independence Payments (PIP), with the report stating this has led to “more stringent and frequent medical tests”.

The UK Government justified these on the basis that they would help reduce the UK’s deficit, and would also encourage people on benefits to find work or work longer hours, rather than rely on the payments.

But Professor Fothergill said: “This research delivers a severe blow to the Westminster Government claims about the positive impact of welfare reforms on the labour market, not just in Scotland but potentially across the rest of the UK as well.”

He spoke out after the research concluded: “On balance the evidence in this report provides little support for the view that welfare reform is having important and positive impacts on the labour market in Scotland.”

It said the number of people claiming out-of-work benefits, particularly Jobseeker’s Allowance, had fallen faster in the parts of Scotland where the welfare reforms had resulted in the greatest financial losses, adding that “superficially, this might be interpreted as evidence that welfare reform is working in the way the Westminster Government intended”.

However the report went on: “On closer investigation it is also apparent that the larger than average reductions in unemployment in the places hit hardest by welfare reform also happened in previous economic upturns. This makes it impossible to attribute recent trends to welfare reform.”

While the jobless total is lower than it was in 2012, the report pointed out “in the UK economic growth accelerated from mid-2012 onwards after a period of stagnation in the wake of the 2008/9 recession, at much the same time as several of the welfare reforms took effect”, adding that it was “wrong to assume” that the rise in employment and the fall in unemployment could be “attributed in whole or in part to welfare reform”.

Previous research for the committee has found that when the coalition’s welfare reforms are fully implemented, benefit claimants in Scotland will be £1.5 billion a year worse off.

With the Conservative Government planning a further £12 billion reduction in welfare spending, the latest research suggested “it is hard to see this new round of reductions having any greater labour market impact”.

The report said its analysis was “exploratory” and added that a “final word on the labour market impact of welfare reform would require a substantially larger and more wide-ranging exercise”.

A spokesman for the Department for Work and Pensions said: “Our welfare reforms are transforming the lives of some of the poorest families in our communities while making the system fair for those who pay for it. There are 173,000 more people in work in Scotland since 2010 and we provide more than £80 billion a year in support to people of working age, ensuring there is a strong safety net in place.

“With substantial new powers on the way, there will be also scope for the Scottish Parliament to make greater decisions on welfare spending in Scotland, whilst continuing to benefit from sharing the risks and resources with the rest of the UK.”

But Mr McMahon said the report “shows that people are fighting on several fronts to make ends meet as they are hit by cuts to multiple benefits”.

He added: “The report also argues that it is economic recovery, in the form of improved consumer spending and higher borrowing, that has contributed to higher employment levels (and reduced numbers of unemployed people in Scotland), rather than welfare reform.

“Larger than average reductions in unemployment in the places hit hardest by welfare reform also happened in previous economic upturns. This makes it impossible to attribute recent trends to welfare reform.”