Truth or Consequences: the potential impact of un-devolving welfare

One of the more idiosyncratic aspects of life in Northern Ireland is that the sort of constitutional crisis that would leave most countries in a spate of ear-to-the-radio, markets-tumbling panic, barely passes as newsworthy. The threat of dissolution of the Assembly and the end of the power-sharing Executive is regarded with the same complete lack of interest that, say, Louis Walsh threatening to leave the X Factor again might be.

Indeed, such is the widely perceived ineptitude of the devolved institutions that many people are beginning to reminisce fondly about direct rule, a halcyon era when the hospitals were only moderately worse than their equivalents in Great Britain, and the political class tended to spend more time in London and Brussels, where they could more easily be ignored. Say what you like about Peter Mandelson, but at least he made the trains run on time.

Due to a petition of concern signed by Sinn Féin, the SDLP, and the Green Party, the contentious welfare reform bill has been blocked from passing. Whether this will lead to the collapse of the current Executive and Assembly remains to be seen, but at the very least it is looking as though responsibility for welfare could be passed back to the Government in Westminster.

Welfare reform has been making the headlines in Britain as well recently, albeit for different reasons. The Conservatives had promised to cut £12bn from the welfare budget, possibly expecting that this pledge would have been watered down in the event of another Conservative-Lib Dem coalition. The Government are now looking to implement these cuts in full, with Work and Pensions secretary Iain Duncan Smith reportedly fighting a rearguard action to protect key schemes.

The Conservatives did not, for the most part, specify where the axe was to fall on welfare spending in their manifesto, although they did rule out any change to pensions. They did announce some areas where there would be cuts. This article from the Telegraph does outline some of these cuts, which including freezing working age benefits for two years, lowering the benefit cap from £26,000 to £23,000, and ending housing benefit for 18-21 year olds on Job Seeker’s Allowance.

However the cuts that they specified only sum to £1.5bn, which means that there is a significant shortfall. However, then Chief Secretary to the Treasury Danny Alexander did leak some of the proposals before the election. I have outlined these below, together with the impact may be on Northern Ireland if, as looks possible, welfare once again becomes the responsibility of the central UK government. These should all, of course, be considered as rough, “back of the envelope” estimates.

Limiting Child Benefit to two children only

One proposal under consideration is to limit Child Benefit to two children only. The financial impact of this change to Northern Ireland would, at current CB rates, be £44.5m. I have broken this down by assembly area below.

Child Benefit

Eliminating Housing Benefit for the Under 25s

Another potential cut being considered is the complete removal of housing benefit for the under 25s. I couldn’t find exact figures for under 25s claiming housing benefit, or the total child benefit paid to under 25s. However, in Great Britain the under 25s comprise roughly a quarter of the numbers under 35 claiming the benefit, so I used this to estimate the number of under 25s claiming the benefit in Northern Ireland, and multiplied this by the average Housing Benefit paid to under 25s in GB to derive a guess for what the number might be in Northern Ireland. As a rough guess, I reckon that this cut could be worth around £55.7m.

Housing Benefit

Abolition of Carer’s Allowance

One of the potential items on the agenda could be the abolition of Carer’s Allowance in its entirety. Were this change to be enacted, at current rates the financial impact on Northern Ireland would be around £209m.

Carers Allowance

Abolition of contributory JSA and PIP

Another potential reform of the welfare system could be the abolition of contributory Job Seeker’s Allowance and Personal Independence Payments, meaning all benefits would be means tested. Across the UK, implementing this change would reduce the combined bill for these benefits by £1.3bn. Very roughly, the impact of bringing in these changes in Northern Ireland would be to reduce JSA by around 10%, over and above the already planned changes in JSA (tougher sanctions), and the fact that the new PIP regime will be tougher than the existing DLA regime. I have reused the figures that I worked out when I did a previous post on welfare reform in February.

PIPs:

PIPs

JSA:

JSA

And so on and so forth. Whilst these estimates of the impact of extending these welfare cuts are rough, back-of-the-envelope approximations of cuts that have not even been agreed yet, there are two virtual certainties as to what the outcome will be if the cuts are implemented in line with the Government’s policy to reduce overall spending by £12bn. Firstly, the impact of the cuts in Northern Ireland will be in the order of hundreds of millions of pounds. Secondly, the cuts will impact the poorest areas of Northern Ireland the most. The cumulative effect, by Assembly Area, of the various measures discussed here can be found in the table below.

All Benefits

Of course, if these cuts are implemented, then the SDLP, Sinn Féin and the Green Party will be able to argue that they argued against these cuts, and will be able to denounce the hated “Tory cuts” to their hearts’ content. Whether they may have served their constituents better by accepting an element of compromise, taking the deal on the table and being in a position to mitigate against the worst of the cuts, is left as an exercise to the voter.

A qualified accountant and data analyst, interested in politics, economics and data. Twitter: @peterdonaghy