"Northern Ireland's most deprived areas face the largest losses"

Steve Fothergill and Christina Beatty from Sheffield Hallam University

Steve Fothergill and Christina Beatty from Sheffield Hallam University

In a joint article written for The Detail, Christina Beatty and Steve Fothergill, from the Centre for Regional Economic and Social Research at Sheffield Hallam University, explain why Northern Ireland will be hit harder by welfare reform than any other part of the UK.

THE Westminster government has introduced a range of changes to the benefits system, some of which have already been implemented in Northern Ireland and others that will take effect once the Welfare Reform Bill in front of the Assembly is finally approved.

When the reforms have come into full effect, which in some cases will not be until 2018, the report estimates they will take £750m a year out of the Northern Ireland economy, equivalent to £650 a year for every adult of working age.This compares to an average of £470 a year across Great Britain.

These figures – ultimately rooted in the UK Treasury’s own estimates of the financial savings and in official claimant numbers – should set alarm bells ringing.

Comparisons with similar figures published for the rest of the UK, in an April 2013 report by the same team, show that, per adult of working age, Northern Ireland can expect to lose more than either Scotland or Wales, and more than any of the English regions.

Belfast, with an expected loss of £840 per adult of working age, is hit harder than any major city in Britain. Derry and Strabane are also hit very hard.

Generally in Northern Ireland, as in the rest of the UK, the most deprived areas face the largest losses.

In terms of the financial impact, Northern Ireland districts occupy three of the top four spots across the whole of the UK, seven out of the top 20 and eleven out of the top 50. Bearing in mind that there are only 26 local government districts in Northern Ireland, out of more than 400 in the UK, this is a disturbingly high representation.

The biggest financial losses to Northern Ireland arise from reforms to incapacity benefits (£230m a year), changes to Tax Credits (£135m a year), the 1 per cent up-rating of most working-age benefits (£120m a year) and reforms to Disability Living Allowance (£105m a year).

The Housing Benefit reforms result in more modest losses – an estimated £20m a year from the ‘bedroom tax’ for example – but for the households affected the sums are nevertheless still large.

The new household benefit cap, set at a ceiling of £500 a week, affects relatively few households in Northern Ireland – 620 is the official estimate – but the average loss could still be several thousand pounds a year.

Some households and individuals, notably incapacity and disability claimants, look set to be hit by several different elements of the reforms. They could be exposed to losses of up to £6-7,000 a year.

The loss would be even larger if the Northern Ireland Executive had not decided, at least for the moment, to avert reductions in Regional Rate Rebate by absorbing the cut in Treasury grant within its own budget.

The net effect of all the changes on on some older working-age couples, for example, who have hitherto managed to muddle through by combining benefits with other household income, will be to push them down to the poverty level.

The exceptionally large impact of the reforms on Northern Ireland owes much to the UK’s highest claimant rates of incapacity benefits and Disability Living Allowance, two of the main targets of the reforms.

In Northern Ireland, as in other weaker local economies across the UK, the high numbers out-of-work on incapacity benefits partly reflects the extent to which so many men and women with health problems or disabilities find it hard to find work. Parked on incapacity benefits, their unemployment has become hidden from view.

But in Northern Ireland the Troubles too may be casting a long shadow, resulting in mental health problems that have raised claimant rates.

There is nevertheless a certain inevitability that reductions in eligibility for incapacity and disability benefits lead to the largest financial losses in the places, like Northern Ireland, where claimants of these benefits are concentrated.

The large loss of income arising from the welfare reforms will have knock-on consequences for local consumer spending and thus for local employment, adding a further twist to a downward spiral in low-income communities.

These are effects that our new report stopped short of quantifying, though they are real enough. What we can conclude with certainty, however, is that a key effect of welfare reform will be to widen the gap in prosperity between Northern Ireland and the rest of the UK.

The Impact of Welfare Reform on Northern Ireland by Christina Beatty and Steve Fothergill can be accessed here

© The Detail 2013