Welfare reform and the prosperity gap

Bus stop with poster about benefit changes

Will the welfare reforms widen or narrow the gap between rich and poor communities in the UK? According to new research published by Sheffield Hallam University on Thursday, cuts to benefit payments will "widen the gaps in prosperity".

The Department of Work and Pensions, however, argues the changes will benefit poorer regions because they "help people back into work - which will benefit the economy more than simply abandoning them to claim benefits year after year."

Here, laid bare, is a fundamental question for the future well-being of the UK. If Iain Duncan-Smith is able to squeeze billions from the welfare bill by getting people into jobs, then he will have achieved what politicians of all hues have failed to do in decades. Deprived post-industrial towns and cities will bloom again.

But the concern is that the welfare reforms will actually take far more money out of fragile poor economies than rich ones, making old industrial areas even less attractive to investors and entrepreneurs. There won't be the jobs for claimants to get into.

The Sheffield Hallam research assesses the geographical consequence of welfare reforms by comparing claimant caseloads in local authorities and factoring in the DWP's own impact assessments. It calculates that, by 2015, a whopping £19bn will be taken out of working-age benefits each year - but the effects are far from even.

Ranking the overall impact in terms of the effect upon the average working-age adult in each place, the town hardest hit is Blackpool, where the annual loss per adult is calculated at £914. One really has to hope new jobs do come because this is a place with pockets of truly shocking deprivation. Over a quarter of the town receives working-age benefits.

PDF download Sheffield Hallam research[5.35 MB]

One of the authorities affected least by the welfare reforms is Hart in Hampshire - a community which enjoys precisely zero wards designated as deprived. Here the average working-age adult will lose £241, according to the Sheffield Hallam study, just over a quarter of the impact felt in Blackpool.

10 local authorities most affected by welfare reforms

Loss for each working-age adult a year

  • Blackpool, north-west England: £914
  • Westminster, London: £821
  • Knowsley, north-west England: £797
  • Merthyr Tydfil, Wales: £722
  • Middlesbrough, north-east England: £717
  • Hartlepool, north-east England: £712
  • Torbay, south-west England: £704
  • Liverpool, north-west England: £702
  • Blaenau Gwent, Wales: £698
  • Neath Port Talbot, Wales: £696

Source: Sheffield Hallam University

10 local authorities least affected by welfare reforms

Loss for each working-age adult a year

  • Chiltern, south-east England: £266
  • South Bucks, south-east England: £264
  • Guildford, south-east England: £263
  • South Northamptonshire, East Midlands: 261
  • South Oxfordshire, south-east England: £258
  • Rutland, East Midlands: £258
  • Wokingham, south-east England: £251
  • Cambridge, east England: £247
  • Hart, south-east England: £241
  • City of London £177

Source: Sheffield Hallam University

In London, the contrast is stark. In the City of London, the loss per head is said to be just £177, while in neighbouring Westminster it is £821 - mostly down to the loss of housing benefit. The cap on housing benefit will cost the average Westminster adult £387 a year, while the under-occupancy charge - or bedroom tax - sees a further loss of £64.

Since the data looks at the effect on ALL working-age adults regardless of whether they receive benefits, the financial impact on individual claimants is even greater.

Changes to incapacity benefit hit hardest in south Wales and the west of Scotland.

Local authorities most affected by incapacity benefit reform

Loss for each working-age adult a year

  • Merthyr Tydfil, Wales: £264
  • Blaenau Gwent, Wales: £256
  • Neath Port Talbot, Wales: £256
  • Knowsley, north-west England: £242
  • Rhondda, Cynon, Taff, Wales: £234
  • Glasgow City, Scotland: £226
  • Caerphilly, Wales: £224
  • Inverclyde, Scotland: £219
  • Blackpool, north-west England: £217
  • Barrow-in-Furness, north-west England: £212

Source: Sheffield Hallam University

It is, of course, no surprise that changes to welfare affect those places where more people are claiming benefits. But according to one of the authors of the Sheffield Hallam research, Steve Fothergill, there are worrying economic and social consequences.

"A key effect of the welfare reforms will be to widen the gaps in prosperity between the best and the worst local economies across Britain. Our figures also show that the coalition government is presiding over national welfare reforms that will impact principally on individuals and communities outside its own political heartlands."

The counter argument is that it is precisely those communities which have become most reliant on benefits that can profit most from reforms designed to ensure people are always better off in work than on welfare.

The Department of Work and Pensions said this: "Around nine out of 10 working households will be better off by on average almost £300 a year as a result of changes to the tax and welfare system this month. Raising the personal allowance to £10,000 will have lifted 2.7m people out of income tax since 2010.

"These changes are essential to keep the benefits bill sustainable, so that we can continue to support people when they need it most across the UK."

The local and regional impact of welfare reform is of more than academic interest. If the government is right, deprived communities will experience a renaissance. If the researchers in Sheffield are right, the cuts to benefits will see the poorest communities in Britain suffer further decline.

Mark Easton Article written by Mark Easton Mark Easton Home editor

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  • rate this

    Comment number 300.

    299. purple

    lying? I may have overstated that I'm not bitter about my losses.

    Overcharging is a profiteering technique primarily of utility and service companies - not all companies. This is due to the product (such as water) having no intrinsic growth potential and therefore, hiking the price is the only way to ensure growth year-on-year. That's why I don't invest in those companies.

  • rate this

    Comment number 299.

    297. empty1969 ~ erm, you are lying.

    The money used to build businesses is borrowed from banks.
    You probably hold shares.
    Sell when your iq reaches 28.

    If you are making money, it comes from other people by over charging. The technique is value added. Simple question ~ what is profit? It is capital. Please refer to Pareto, the source and cause of WWll. Hunters and the herd.

  • rate this

    Comment number 298.

    Interesting to note the US just discovered its imported rice full of lead. Lead at toxic levels.

    Quite possibly the trade from which 293. news_monitor makes his living in the margins. Explain it akl to Sam and no wonder you are cherperio.

    Toodle pip.


  • rate this

    Comment number 297.


    Knocking shareholders? Companies use the capital raised from shares to build their businesses. I risked my money for shares in UK Coal and HMV (amongst others) and have made losses in the £1000's. I'm not bitter about this, it's the risk of share dealing. What annoys me is when people complain when shareholders like me make money from the risks we've taken.

  • rate this

    Comment number 296.

    290.Outside the Marginals
    "I am suggesting the employment deserts are a permanent drain"

    If you write people off, they will meet your expectations!


    Then go out and do something about it!! Have faith in yourself, and in your forgetful/muddled/tired friends.

    Gloom and dependency are your biggest enemies - not a lack of welfare benefits.

  • rate this

    Comment number 295.

    "I was made redundant before Xmas. Luckily I can support my family"

    You are very lucky indeed, but try saving anything when you're on minimum wage supporting a family and my wife [see comment 292].

  • rate this

    Comment number 294.

    Those who run this country seem to think it someone elses fault that there are not enough well paid jobs to go around.

    Of course it is. It is their shareholders fault, isn't it.

    Now, who be those shareholders?
    Don't blush.

    But the real truth is that those trusted with the welfare of this nations people are hampsters. Interesting to note the US just discovered its imported rice full of lead.

  • rate this

    Comment number 293.

    At 93: EC1 12th April 2013 - 14:31

    I am part of a group that want London to be a separate state from the rest of the UK.

    And I am part of a much bigger group, not located in London, that wishes for the same! You lot can keep your noise, dirt, hustle and manic life-style to yourselves; the rest of us actually know that Life does not rotate around the metropolis!

  • rate this

    Comment number 292.

    I am all for getting people off benefits and into work. However, there is one tiny flaw in the government's plans. THERE ARE NO JOBS OUT THERE. Who would employ a person who forgets things, gets things muddled and is easily confused, needs to rest frequently, needs to go to the toilet every hour, and on a bad day cannot function at all?

  • rate this

    Comment number 291.

    Seems that the north in particular have spent the last 30 years sulking. If you've got no job to go on strike from, sit and moan, blame Maggie Thatcher and claim benefits rather than develop new businesses and industry. This is not the legacy of Maggie, it's the remanants of the Labour and Union mentality of expecting the state to support you whether or not it's cost effective.

  • rate this

    Comment number 290.

    283. Giles - Why treat these people like they're children who need to be pathetically, eternally grateful for subsidies from other people's successful labour?

    I am suggesting the employment deserts (try visiting one) are a permanent drain. They don't want to be - people want/need to work. Do you want to do something or forever "subsidise them"?

    I repeat "shut the North"? Or what - do nothing?

  • rate this

    Comment number 289.

    "I was made redundant before Xmas. Luckily I can support my family"

    No, not "luckily"! You chose to manage the risks that life creates, rather than assuming that someone else would always be there to bail you out.

    It's a shame that so many other people would happily take advantage of your hard work and sensible planning, to pay for their right to fags, Sky TV, fake tans etc.

  • rate this

    Comment number 288.

    The correct conclusion, deduction, if you will, is thst 1 in 5 think they are special where rules so allow them to be. In fact it is very few fewer than 20%. It is for examplrpe the 2% who own all US wealth. Greed is a very serious and hugely damaging social illness, best cured with straight jacket.

    How many expensive top of tbh range sports cars is rational?
    Explain what is wrong with normal.

  • rate this

    Comment number 287.

    283. Giles ~ It goes back to 1066 and the Saxons, Vikings and Romans before that.

    Some sound econo ic observation http://en.wikipedia.org/wiki/Pareto_principle

    One for all, the other way around is rubbish.

  • rate this

    Comment number 286.

    I was made redundant before Xmas. Luckily I can support my family for over a year on my savings without claiming jobseekers allowance. It seems there's a growing number of people in this country who see working or saving as a mugs game and expect to have the taxpayer pay for their existence. I'm so pleased that this government is clamping down on this and saying hard luck if you don't like it.

  • rate this

    Comment number 285.

    Make every MP's salary a multiple of the average wage in their own constituency..say X3 max....with no MP able to earn more than the same multiple of the national average whatever their constituency...... Sit back and see what happens.....

  • Comment number 284.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this

    Comment number 283.

    281.Outside the Marginals
    "If you take the work away you need an alternative to dependency - or evacuate the North"

    Why treat these people like they're children who need to be pathetically, eternally grateful for subsidies from other people's successful labour?

    Why do you think that someone (the Tories, the Toffs?) has taken work from them?

    They must make stuff that people want to buy!

  • rate this

    Comment number 282.

    I would hope sincerely that all profits from coverage of Margarets state inagural, are given to food banks. I think that truly fitting. I suppose Murdoch is back, rubbing shoulders.

  • rate this

    Comment number 281.

    274. Giles
    "During Thatcher's time I was forced, on pain of prison, to subsidise strangers working in:
    Steelworks at Consett
    Shipyards on Wear
    Railway works at Shildon
    Pits all over t'county
    ... Like they should at least pretend to be grateful to me."

    If you take the work away you need an alternative to dependency - or evacuate the North. Doing nothing costs the precious South - for ever.


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