Under the Welfare Reform Act 2012, passed by the government earlier this year, Disability Living Allowance (DLA) for disabled people of working age is due to be replaced by Personal Independence Payments (PIPs) with a net result of a 20% reduction by 2015 in the DLA budget – it is worth pointing out at this point that the fraud rate for DLA is estimated by the Department of Works and Pensions to be less than 0.5%.
Last month a report called Reversing Recovery: The hidden economic costs of welfare reform was published looking at the switch from DLA to PIPs and the associated reduction in funding. The report comes to some very interesting conclusions.
The changes to DLA include an official estimate of a 27% reduction in working age disabled people eligible for the Motability car scheme – which is a scheme which allows disabled people and carers to lease a car, powered wheelchair or scooter through their DLA mobility allowance.
This reduction in the Motability scheme, in terms of its impact on the car industry, is huge. Aproximately 300,000, roughly 10%, UK car sales a year will be lost as a result. The report states that this will cause the loss 3,583 jobs, £79 million of tax receipts and a £342 million contribution to GDP.
But bigger than the impact on the car industry, says the report, will be the impact on the people who use the Motability scheme. The 280,000 disabled people who will lose access to the Motability scheme includes many who depend on it in order to be able to travel to work and keep down jobs. Without it, they will be forced to give up work and will also stop paying income tax as a result – another loss to the treasury.
In fact, the report quotes Oxford Economics which says:
The Motability [car] scheme is estimated to enable 12,500 customers and informal carers to get a job, 56,100 to keep a job and in total this is worth £1.2 billion in gross wages per year.
The report estimates that, excluding the lost tax revenue, the cuts to the Motability scheme will cost £324 million in GDP due to users of the scheme being unable to remain in work.
All of this put together does tend to raise some serious questions about how much money the government’s much-vaunted welfare reforms will really save. With the hidden costs of the cuts to the Motability scheme already accounting for half a billion pounds worth, at least, of extra costs, it seems quite likely that the money the treasury saves due to the welfare reforms will be significantly less than expected.
And that’s without even considering the human cost of 280,000 disabled people, the equivalent of the population of Sunderland, potentially being left trapped in their own homes and deprived of the independence that most of us are lucky enough to take for granted.
* George Potter is a member of the Liberal Democrats and blogs at the Potter Blogger. He is a member of Liberal Youth and drafted the motion on ESA at autumn conference 2011