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Using benefits data to assess the impact of welfare reform in London


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Giovanni Tonutti, Policy in Practice, presented his work on Using benefits data to assess the impact of welfare reform in London at the International Conference for Administrative Data Research, Queens University, Belfast on Friday 22 June 2018.

This conference is aimed at researchers who use administrative data to better understand populations and societies. His presentation falls under the conference theme of The World of Work which focusses on the labour market experience of those in, and out, of work.

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Using benefits data to assess the impact of welfare reform in London

  1. 1. Policy in Practice Using benefits data to assess the impact of welfare reform in London Giovanni Tonutti
  2. 2. Outline 1. Introduction to Policy in Practice 2. Welfare reform in London 3. Findings a) Benefit Cap: what effects on employment outcomes? b) Self-employment and Universal Credit 4. Conclusion
  3. 3. We make the welfare system simple to understand, so that people can make the decisions that are right for them We help people toward independence by making the welfare system simple to understand.
  4. 4. Policy national impact Analytics local impact Benefit Calculator individual impact
  5. 5. Low-income Londoners and Welfare Reform
  6. 6. Welfare Reform • Ongoing and unprecedented reform process led by the DWP during the last 3 parliamentary terms. • Objectives: • Simplify the benefit system (Universal Credit) • Reduce costs (Benefit Cap) • Improve work incentives (Universal Credit, Benefit Cap)
  7. 7. Gap in the literature Most analysis on welfare reform is static (survey data, typically FRS) and backward-looking. Our research questions: 1. What’s the impact of the benefit cap on employment outcomes? [behavioural responses] 2. How is Universal Credit likely to affect self-employed households on low-income? [forecasting]
  8. 8. The impact of the benefit cap in London
  9. 9. 8,828 households affected in July 2017 • A cap on amount of benefits a family can receive (from November 2016, £23,000 a year for families with children in London) • Exemption granted for those households working a certain threshold of hours. • Average reduction in their housing benefit is £60.07 per week • 18,362 children affected • 61.7% are single parents
  10. 10. Since February: -23% in caseload
  11. 11. The dynamic effects
  12. 12. Has the benefit cap improved the employment outcomes of affected households?
  13. 13. Two sample groups Sampling technique: 1. Treatment group: all households with income from benefit above the £23,000 threshold as of April 2016. 2. Control group: all households with income from benefit close to the benefit cap threshold. • Exempted households excluded from the cohort Analysis: • DIF in DIF of the employment outcomes across the two groups in the months before and after the lowering of the cap
  14. 14. Higher movement into work • Households subject to the benefit cap showed a 3.5 pp higher change in employment rates than families in the control group • The analysis fails to control for the additional support from local authorities received by households capped
  15. 15. Fall in living standards
  16. 16. Universal Credit and self-employed households
  17. 17. 10% of working age households on low income are self- employed • Outer London boroughs see highest rate of low- income self-employment • 54.9 % of self-employed households are private renters • Average monthly earnings £672.47 vs £840.79 of other households in employment
  18. 18. Increasing divergence between employed & self-employed earnings Average % change in earnings ↑ 7.9% ↑ 4.3%
  19. 19. …rise in wages arw more than offset by increasing rents
  20. 20. Self-employment & UC: Minimum Income Floor • An assumed level of earnings for self- employed people in establishing benefit entitlements • If actual self-employed earnings fall below this, UC calculated assuming this amount is being earned • Applies after 12 months of self- employment Borough UC roll out Southwark Applicable H&F Applicable Enfield Applicable Tower Hamlets Applicable Sutton Applicable Croydon Applicable Lambeth Dec-17 B&D Mar-18 Ealing Mar-18 Waltham Forest May-18 Barnet May-18 Islington Jun-18 Harrow Jul-18 Haringey Oct-18 Hackney Oct-18 Greenwich Oct-18 Brent Nov-18 K&C Dec-18 Camden Dec-18
  21. 21. Average self-employed household faces a £844.67/month gap between earnings and MIF Over 90% face a shortfall On average, an extra 26 hours/week at NMW needed to overcome this shortfall. 78.2% of those facing a shortfall have been self- employed for 12 months. MIF will apply immediately
  22. 22. £344 p/m worse off under UC £2,233 • Self-employed among the worst affected group as UC rollout • Awareness among claimants? Research to focus on choices self-employed households on low-income make. Are they entrepreneurs or adapting to new labour structures (i.e gig economy, freelancing)?
  23. 23. Conclusions • Positive impact of the benefit cap on employment outcomes. Also as result of LAs’ support to residents affected. On the other hand, households for whom employment is not an option faced a worsening in living standards. • Self-employment as a popular option for low-income families in London. Increase in income not keeping up with increase in living costs and rent. With UC, the support available to this group will be significantly reduced. • Admin data holds a huge potential in driving operational decisions, particularly relevant for local welfare providers (local authorities, charities and other third sector organisations) .
  24. 24. Next steps.. • Final phase of findings in July 2018 • An interactive public dashboard • Project has secured funding for an additional 18 months • Scrapping the surface • Homelessness key issue in London – can predictive analytics be the key?
  25. 25. 252525 Thank you Giovanni Tonutti