Hitting the Poorest Places Hardest: The local and regional impact of welfare reform
ABSTRACT Given that benefit claimants are not spread evenly across the country, the large scale reform of the welfare system results in differential impact across the country. However, limited information existed in government documentation on the distribution of the impacts across the country. This research aims to plug the information gap by quantifying the overall impact of welfare reforms, and the impacts of individual benefit changes, for every local authority across Britain by 2014/15. The report highlights the scale of the reforms, shows the financial losses will hit some places much harder than others and that in general the most deprived areas in Britain are hit the hardest.
HITTING THE POOREST PLACES HARDEST
The local and regional impact of welfare reform
Christina Beatty and Steve Fothergill
Centre for Regional Economic and Social Research
Sheffield Hallam University
The research on which the report is based was funded by Sheffield Hallam University, by the
Scottish Parliament and by the Financial Times (by a grant from the Pulitzer Centre on Crisis
Reporting in Washington). The views expressed are those of the authors alone.
Note on the authors
Christina Beatty is a Professor in the Centre for Regional Economic and Social Research
(CRESR) at Sheffield Hallam University, and a statistician by background.
Steve Fothergill is also a Professor within CRESR at Sheffield Hallam University, and an
economist by background.
Both authors have an extensive record of research and publication on local and regional
trends across the UK, and on the benefits system. Their recent reports include Incapacity
benefit reform: the local, regional and national impact and The Real Level of Unemployment
• When the present welfare reforms have come into full effect they will take nearly £19bn a
year out of the economy. This is equivalent to around £470 a year for every adult of
working age in the country.
• The biggest financial losses arise from reforms to incapacity benefits (£4.3bn a year),
changes to Tax Credits (£3.6bn a year) and the 1 per cent up-rating of most working-age
benefits (£3.4bn a year).
• The Housing Benefit reforms result in more modest losses – an estimated £490m a year
arising from the ‘bedroom tax’ for example – but for the households affected the sums
are nevertheless still large.
• Some households and individuals, notably sickness and disability claimants, will be hit by
several different elements of the reforms.
• The financial impact of the reforms, however, varies greatly across the country. At the
extremes, the worst-hit local authority areas lose around four times as much, per adult of
working age, as the authorities least affected by the reforms.
• Britain’s older industrial areas, a number of seaside towns and some London boroughs
are hit hardest. Much of the south and east of England outside London escapes
• Blackpool, in North West England, is hit worst of all – an estimated loss of more than
£900 a year for every adult of working age in the town.
• The three regions of northern England alone can expect to lose around £5.2bn a year in
• As a general rule, the more deprived the local authority, the greater the financial hit.
• A key effect of the welfare reforms will be to widen the gaps in prosperity between the
best and worst local economies across Britain.
HITTING THE POOREST PLACES HARDEST
The local and regional impact of welfare reform
Scope and purpose of the report
The UK Government is implementing welfare reforms that apply to all parts of the country.
The impact of the reforms, however, will vary enormously from place to place, not least
because benefit claimants are so unevenly spread across Britain.
It is only reasonable to expect that the welfare reforms will hit the poorest parts of Britain
hardest. After all, one of the reasons why some places are so poor is that they have so
many people claiming benefits. On the other hand, the welfare reforms extend well beyond
just those who are out-of-work to include large swathes of the employed population as well.
So just how big will the impact be on different places? And just how much harder will the
reforms hit the poorer parts of Britain than more prosperous areas?
These are the questions to which this report provides answers. It provides figures not just
for Great Britain as a whole and for each of its constituent 379 local authority areas1. The
figures cover the number of households or individuals affected, and the total financial loss to
each local area. In the report itself a limited number of statistics are presented on the impact
of each of the individual benefit reforms in each local authority. The full dataset, by benefit
by authority, can however be accessed at:
All the figures presented in the report are estimates, but in every case they are deeply rooted
in official statistics – for example in the Treasury’s own estimates of the financial savings, the
government’s Impact Assessments, and benefit claimant data.
Welfare reform is a deeply contentious issue and in documenting the impacts the report
does not attempt to comment on the merits of each of the reforms. However, it is important
that the impact on different places is fully exposed because this is a key dimension that is
too often overlooked. The impact on different places is also one of the yardsticks by which
the reforms should be judged.
1 Unitary authorities and district councils, excluding Isles of Scilly
The welfare reforms
The figures presented in the report cover all the major welfare reforms that are currently
underway. In brief, these are:
Housing Benefit – Local Housing Allowance
Changes to the rules governing assistance with the cost of housing for low-income
households in the private rented sector. The new rules apply to rent levels, ‘excess’
payments, property size, age limits for sole occupancy, and indexation for inflation.
Housing Benefit – Under-occupation
New rules governing the size of properties for which payments are made to working
age claimants in the social rented sector (widely known as the ‘bedroom tax’)
Increases in the deductions from Housing Benefit, Council Tax Benefit and other
income-based benefits to reflect the contribution that non-dependant household
members are expected to make towards the household’s housing costs
Household benefit cap
New ceiling on total payments per household, applying to the sum of a wide range of
benefits for working age claimants
Council Tax Benefit
Reductions in entitlement of working age claimants arising from 10 per cent reduction
in total payments to local authorities
Disability Living Allowance
Replacement of DLA by Personal Independence Payments (PIP), including more
stringent and frequent medical tests, as the basis for financial support to help offset
the additional costs faced by individuals with disabilities
Replacement of Incapacity Benefit and related benefits by Employment and Support
Allowance (ESA), with more stringent medical tests, greater conditionality and time-
limiting of non-means tested entitlement for all but the most severely ill or disabled
Three-year freeze, and withdrawal of benefit from households including a higher
Reductions in payment rates and eligibility for Child Tax Credit and Working Families
Tax Credit, paid to lower and middle income households
1 per cent up-rating
Reduction in annual up-rating of value of most working-age benefits
A fuller description of each of these reforms, including the timing of implementation and the
expected savings to the Exchequer, is contained in the appendix to the report.
The vast majority of these welfare reforms have been initiated by the present Coalition
government in Westminster, notably but not exclusively through the Welfare Reform Act
2012. Some of the incapacity benefit reforms, however, are Labour measures that pre-date
the 2010 general election but are only now taking full effect. They have been included here,
alongside the Coalition’s reforms, to provide a comprehensive view of the impact of the
reforms that are currently underway.
The figures the report presents show the impact when the reforms have come into full effect.
This is important because some of the reforms, particularly those affecting incapacity and
disability benefits, are being implemented in stages over a number of years. In most cases,
the figures show the expected impact in the 2014-15 financial year2.
A close observer of the list of reforms will note a number of apparent omissions. The most
significant of these is Universal Credit, which is scheduled to replace just about all means-
tested working age benefits and is arguably the single biggest reform of all. There are three
reasons for omitting Universal Credit:
• Universal Credit is best understood as a repackaging of existing benefits. It
introduces for the first time a consistent benefit withdrawal rate, intended to ensure
that claimants are always financially better off in work, but the rules governing
eligibility are essentially carried over from the existing benefits it replaces.
• Unlike the other welfare reforms covered here, Universal Credit is not expected to
result in a net reduction in benefit entitlement. At the level of the individual or
household there will winners and losers but on balance Universal Credit is expected
to result in slightly higher expenditure, particularly as transitional relief will be
available to existing claimants transferring across.
• Most of the impact of Universal Credit will be felt well beyond 2015. Its introduction
begins in 2013 only in a small number of pilot areas and only for new claimants. The
full impact is unlikely before 2018.
Additionally, without local-level household data, which is not available, it is extremely difficult
to model the local impact of Universal Credit. That said, it should be noted that the intention
to pay the housing element of Universal Credit to tenants, rather than direct to landlords, is a
major cause of concern in the social housing sector.
Two further omissions are worth noting:
2 The exceptions are the DLA reforms, which will not impact fully until 2017-18, and the wider
application of means testing to ESA and the 1 per cent up-rating, both of which do not impact fully
• Income Support for lone parents. The qualifying age of the youngest child has been
reduced from under 7 to under 5. The effect is to transfer the lone parent from
Income Support to Jobseeker’s Allowance at the same payment rate.
• RPI to CPI for benefits up-rating. This was introduced from 2011-12 but is really part
of a much wider accounting reform, including for example all public service pensions.
When fully implemented, the welfare reforms covered in this report are expected to save the
UK Treasury almost £19bn a year.
Measuring the impacts
The data sources and methods underpinning the estimates are set out in full in the appendix
to the report.
The government has in most cases not produced estimates of the local impact of the
reforms. It does however publish a range of statistics that allow the local impact to be
estimated. This information includes:
• HM Treasury estimates of the overall financial saving arising from each element of
the reforms, published in the Budget or in the government’s Autumn Statement. The
estimates in the report are fully consistent with these Treasury figures3.
• The Impact Assessment and (where available) Equality Impact Assessment that
government departments publish for each element of the reforms4
• Benefit claimant numbers and expenditure, by local authority, published by DWP and
• Additional official statistics – for example on median earnings by local authority to
help calibrate the impact of the withdrawal of Child Benefit
• DWP evidence from pilot schemes, in the context of the incapacity benefit reforms
As far as possible, for each benefit the figures presented in the report take account of the
overall financial saving to the UK Exchequer, the distribution of benefit claimants between
local authorities, and the extent to which claimants in each local authority are likely to be
affected by the reforms.
3 The estimates of the impact of the reforms to incapacity benefits, DLA and Council Tax Benefit are
subject to further detailed adjustment – see appendix.
4 Following official practice in the Impact Assessments, the estimates in the present report make no
allowance for the small share of the financial impact falling on Northern Ireland. The effect is to
slightly overstate the impact on other parts of Great Britain, bearing in mind that Northern Ireland
accounts for 3 per cent of the UK population.
In comparing the impact on different areas, the report looks in particular at the financial loss
per adult of working age5. A focus on adults of working age (16-64) is appropriate because
the welfare reforms impact almost exclusively on this group. By contrast, benefit claimants
of pensionable age are essentially unaffected6.
Some of the welfare reforms focus on households – the reforms to Housing Benefit for
example. Others – the reforms to incapacity benefits for example – are about the
entitlement of individuals. Additionally, several of the reforms are likely to impact
simultaneously on the same households and/or individuals. It is possible to estimate how
many people are affected by each element of the reforms, and how much they lose. The
financial losses can be added together but to avoid counting the same people twice the
number of households/individuals affected cannot be summed to an overall total.
Finally, in estimating the impact of the welfare reforms the report holds all other factors
constant. What this means in practice is that it makes no assumptions about the growth of
the economy or about future levels of employment and unemployment.
UK ministers take the view that the welfare reforms will increase the financial incentives to
take up employment and because more people will look for work more people will find work.
This assumes, of course, that extra labour supply leads to extra labour demand from
employers. Whether labour markets really do work in this way, especially at times of
recession or low growth, or in places where the local economy is relatively weak, is a moot
point and one that many economists would contest. Some individuals will undoubtedly find
work to compensate for the loss of benefit income but whether the overall level of
employment will be any higher as a result is questionable. More often than not, they will
simply fill vacancies that would have gone to other jobseekers. So the figures in this report
do not assume that loss of income from benefits will wholly or in part be replaced by
additional income from employment.
The impact of the reforms
Overall national impact
Table 1 shows the estimated impact of the welfare reforms across Great Britain as a whole.
As noted earlier, when the reforms have come into full effect it is estimated that they will
reduce spending by almost £19bn a year. This represents around £470 a year for every
adult of working age in the country.
The individual welfare reforms vary greatly in the scale of their impact, in the number of
individuals or households affected, and in the intensity of the financial loss imposed on those
5 In Scotland’s case, where only a limited range of 2011 Census data has so far been published, the
working age population figures for each authority are an estimate based on the overall population
from the 2011 Census and the age distribution of the population in 2010 from the mid-year population
estimates. In the rest of Britain the figures are all taken from the 2011 Census.
6 The main exceptions are a small minority (around 5%) of Housing Benefit recipients in the private
rented sector, affected by the reforms to Local Housing Allowance, and a small number of adults of
pensionable age who receive Child Benefit.
Table 1: Overall impact of welfare reforms by 2014/15
Average loss per
working age adult
1 per cent uprating(3)
Housing Benefit: LHA
Disability Living Allowance(1)(2)
Housing Benefit: ‘bedroom tax’
Council Tax Benefit
Household benefit cap
Total n.a. 18,870 n.a. n.a. 470
(1) Individuals affected; all other data refers to households
(2) By 2017/18
(3) By 2015/16
Source: Sheffield Hallam estimates based on official data
affected. A great deal of media coverage has focussed on, for example, the ‘bedroom tax’
and the overall household benefit cap. In fact, the biggest financial impact comes from the
reform of incapacity benefits – an estimated reduction in spending of more than £4.3bn a
year. Changes to Tax Credits and the 1 per cent up-rating of most working-age benefits,
taking effect from April 2013, also account for substantial sums - £3.6bn and £3.4bn
Child Benefit changes affect the largest number of households – some 7.6m. This is
because the three-year freeze in Child Benefit rates up to April 2014 (instead of up-rating
with inflation) impacts on all recipients.
The household benefit cap, by contrast, impacts on many fewer households – an estimated
56,000 – but the average financial loss for each of these households is relatively large.
Sickness and disability claimants can also expect to be hit hard. The individuals adversely
affected by the incapacity benefit reforms can expect to lose an average of £3,500 a year,
and those losing out as a result of the changeover from Disability Living Allowance to
Personal Independence Payments by an average of £3,000 a year. Often these will be the
same individuals: most DLA claimants of working age are out-of-work on incapacity benefits
and in both cases the groups most exposed to benefit reductions are those with less severe
disabilities or health problems.
The same individuals may also find that they encounter reductions in Housing Benefit
entitlement. The overall reductions in Housing Benefit are estimated to be more than £1.6bn
for those in the private rented sector (affected by LHA reforms), £490m for those in the
social rented sector (affected by the ‘bedroom tax’) and £340m by higher deductions for non-
dependants (which mostly impact on Housing Benefit). The losses for the households
affected – often £1,000 a year – are large.
The changes to Council Tax Benefit hit large numbers of households – approaching 2.5m,
though none in Scotland or Wales (where the devolved administrations have chosen not to
pass on the reductions). The average financial loss per household – and estimated £140 a
year – is more modest than the other benefit cuts, though still likely to be hard to find in
Impact by local authority
Figure 1 shows the overall impact of the welfare reforms by local authority district. The
measure used here is the financial loss per adult of working age so the data measures the
intensity of the financial impact in each area.
The overall impact of the welfare reforms presents a complex picture, not least because
different reforms impact on places in different ways. Nevertheless, the map shows clear
patterns that will be readily recognisable to anyone with a solid understanding of the
geography of Britain. Three types of area are hit hardest:
Figure 1: Overall financial loss arising from welfare reform by 2014/15(1), by local authority
(1)Except DLA by 2017/18, incapacity benefits and 1% uprating by 2015/16
Source: Sheffield Hallam estimates based on official data
£ per working age adult p.a.
450 to 550
350 to 450
0 to 350
• The older industrial areas of England, Scotland and Wales. These include
substantial parts of North West and North East England, the South Wales Valleys
and the Glasgow area in Scotland. Older industrial areas account for the largest
proportion of the worst-hit places.
• A number of seaside towns. These include Blackpool, Torbay, Hastings, Great
Yarmouth and Thanet (which includes Margate). Not all seaside resorts are badly hit
but this group – which includes several of the least prosperous – matches the impact
on older industrial areas.
• Some London boroughs. These include not just those that have traditionally been
identified as ‘deprived’ (eg Hackney) but also boroughs such as Westminster and
At the other end of the spectrum, a substantial part of southern England outside London is
much less acutely affected by the welfare reforms. A number of rural areas in northern
England, including most of North Yorkshire and parts of Cumbria, plus the Aberdeen area in
Scotland, also escape relatively lightly.
The worst affected places
To underline the disparities, Table 2 lists the 50 local authority districts worst affected by the
reforms, measured on a per capita basis, and contrasts this with the 20 least affected.
At the very top of the list comes Blackpool, the famous seaside resort in North West
England, where the average loss per working age adult is estimated to be £914 a year.
Blackpool tops the list for a number of reasons. It has a high proportion of adults of working
age out-of-work on benefits, including one of the highest incapacity claimant rates in the
country. But unlike most of older industrial Britain, which shares the high rates out-of-work
on benefits, Blackpool has a particularly high proportion of households (including out-of-work
households) living in the private-rented sector, who are badly exposed to the reductions in
the Local Housing Allowance element of Housing Benefit. It is also worth noting that
Blackpool borough itself (to which the figures refer) is something of an ‘inner urban area’
within a larger built-up area that also includes Lytham St Anne’s and Fleetwood.
Westminster, at number two on the list, is the glaring exception to the general rule that the
poorest parts of Britain are hit hardest. But there are special factors at work. One is the
possibility that the 2011 Census population figures, used here, significantly under-estimate
the local population, as Westminster City Council has claimed7, in which case the benefit
losses in this table are being spread across too few people and the true figure could be £100
per head lower. But also the extremely high rents in Westminster mean that, more than
anywhere else in Britain, the Housing Benefit reforms and the household benefit cap lead to
7 The problem lies with possible under-recording by the Census in areas where there is a highly
transient population and difficulty in contacting households. Westminster is likely to be the extreme
case in this regard.
Table 2: Overall impact of welfare reforms by 2014/15(1), by local authority
TOP 50 DISTRICTS
4. Merthyr Tydfil
9. Blaenau Gwent
10. Neath Port Talbot
14. Barking and Dagenham
17. Blackburn with Darwen
20. Rhondda, Cynon, Taf
29. St. Helens
32. Kingston upon Hull
35. South Tyneside
37. Redcar and Cleveland
BOTTOM 20 DISTRICTS
City of London
(1) Except DLA by 2017/18, incapacity benefits and 1% up-rating by 2015/16
Source: Sheffield Hallam estimates based on official data
very large financial losses here. The impact of the other welfare reforms on Westminster is
far more modest.
Beyond Blackpool and Westminster, more than two-thirds of the 50 local authority districts
worst affected by the reforms could be described as ‘older industrial areas’ – places like
Knowsley (near Liverpool), Liverpool itself, Middlesbrough, Hartlepool, Stoke, Burnley,
Glasgow and a succession of Welsh Valleys (Merthyr Tydfil, Blaenau Gwent, Neath Port
Talbot, Rhondda Cynon Taf, Caerphilly).
In all these older industrial areas the incapacity benefit reforms, in particular, hit very hard
indeed. The reforms to Disability Living Allowance, which often affect the same people, also
hit hard here. Incapacity claimant rates in older industrial Britain are far in excess of those in
more prosperous parts of the country, not least because of the difficulty that men and
women with health problems or disabilities face in finding work in these difficult local labour
markets. More generally, the higher reliance on benefits and tax credits in older industrial
Britain means that the failure to up-rate with inflation and the reductions to tax credits have a
greater impact here.
The City of London emerges as the least affected part of the country, but the City has a very
small population and should perhaps be discounted. The other places least affected by the
welfare reforms, beginning with Hart district (in Hampshire) and followed by Cambridge and
Wokingham (in Berkshire) are exclusively in the south and east of England outside London.
At the extremes, loss per working age adult in the worst affected districts is approaching
double the national average (£470 a year). Conversely, the loss in the least affected districts
is around half the national average. Or to express the same figures in a different way, there
is a four-fold difference in the impact of the welfare reforms between the most and least
Largest absolute losses
Table 3 looks at the same information but from a different angle. It lists the 20 districts
where the absolute scale of the financial loss is greatest. This list is inevitably dominated by
placed with a large population.
Birmingham (pop. 1,073,000) – Britain’s largest local authority by some margin – somewhat
inevitably tops this list with a financial loss of nearly £420m a year, but this is also in part
because its per capita loss (an estimated £607 per working age adult) is well ahead of the
national average. Glasgow (pop. 593,000) comes second with a loss of nearly £270m a
Beyond the largest cities, County Durham (pop. 513,000), which covers an extensive and
often deprived former mining area, loses nearly £190m a year in benefit income. Cornwall
(pop. 532,000), which has the lowest GDP per head of all English sub-regions, loses £170m
a year. The worst affected London borough is Brent (pop. 311,000), which loses just short of
£150m a year.