Some Thoughts On DLA Reforms

Published Date
07/03/2012
Author

There are lots of figures being banded about at the moment regarding the Welfare Reform Bill.  As such there are also a lot of misunderstandings, which has led to hysteria on the part of the disabled and non-disabled communities alike.  The fact that the aim of the reform is to cut DLA spending by 20%, for example, has led people to immediately assume that 20% of people which have their benefits removed, just like that.  In fact the interpretation is a lot more subtle.  What the reform actually aims to do is reduce spending in 2015 by 20% compared to what its current projection is (i.e. to reduce the increase in spending year on year, not to cut back on what the current spend rate is).  Facts like these make it very difficult for a lot of people to assess what the real financial impact of the reform will be on the individual.

It’s estimated that the new PIP regulations will cause around half a million people who are currently claiming DLA to be denied PIP following reassessment.  However, Maria Miller and other government spokespeople have repeatedly emphasised that financial support will still be available for those who truly need it.  An admirable sentiment to be sure, but does this add up?  If everyone who needs DLA is still going to get it, then the only people who are refused it should be the people who are receiving it either fraudulently or due to overpayment (generally speaking, their conditions have improved and they are no longer in need of DLA, although currently there is no legal obligation for them to repay it). 

That in mind, I’ve decided to do some sums.  I’ve used figures from two reports from 2011: one from the DWP on the amount of fraud and error that occurs within the DLA framework (http://statistics.dwp.gov.uk/asd/asd2/index.php?page=dlanbr) and one on the number of DLA claimants and the amount claimed year on year (http://83.244.183.180/100pc/dla/ccdate/carepay/a_cawklyamt_r_ccdate_c_carepay.html) which is calculated based on DWP figures for claimants in each component (Mobility and Living).  If I can work out an approximation of how much money is lost to fraudulent claims and overpayments in a year, and compare that with how much the government could expect to save by cutting 500,000 people off from DLA, we might be able to understand a little better whether this is a fair way of doing things.

So, here we go:

As of May 2011, it was estimated that there were 3,202,910 claimants of DLA in the UK.  The average weekly claim is £74.08, which is £3,852.16 per year per person.  So we have a total annual payment of about £12.3bn in DLA.

Now let’s look at overpayment.  Around 0.5% of DLA payments are currently believed to be fraudulent – around £62.5m, give or take.  It’s estimated that a further £730m is overpaid each year.  However, it’s also estimated that about £200m is underpaid, so let’s use a net overpayment of £530m to work this out.  At my reckoning that’s a grand total of £592.5m each year which is overpaid to DLA claimants.

Fair enough.  So how much will be saved by the axing of 500,000 claimants?  At an average claim of £3,852.16 a year, we’re looking at a saving of £1,926,080,000.  That’s £1.93 BILLION.  That’s over THREE times the estimated overpayment.

What does this mean?  Well, let’s bear in mind that I’ve come to this conclusion using an average costing for DLA.  It could be that the 500,000 people whose benefits are cut are actually only claiming the minimum amount of DLA possible per week.  That’s £19.55 a week, for anyone who’s interested.  If that were true, the government would only be saving a paltry £508m by getting rid of them, and that would be more justifiable.  But let’s be realistic about this.  Given that the vast majority of overspending on DLA results from people whose conditions have improved to some extent compared to how they were when they were assessed, how likely is it that all of these individuals were only receiving the bare minimum of benefits?  How likely is it that people claiming fraudulently would have gone to all that effort for a mere £19.55 a week?  Of course I’m only speculating, but it seems pretty unlikely to me that every single person on DLA who’s being overpaid is only on the lowest level of just one of the components.  For these figures to match up, the average claim among those being overpaid would have to be just £22.79 a week, around 30% of the national average.

We can’t know for sure what the case really is.  But if we take this figures at face value there seems to be an irreconcilable difference between the amount the government overpays at the moment to people who purportedly do not need the funding, and the amount that will be recouped as a result of the cuts.  If more than three times the amount going out unnecessarily is saved, it seems infeasible to me that everyone whose benefits are axed when PIP comes in is not deserving of these benefits.  How can every single member of that unfortunate group of 500,000 not be in need of financial support from the PIP when as a whole they represent three times more spending than the total which is currently falsely claimed?

Go check the figures for yourself if you like, but the only conclusion I can draw from this is that around two thirds of people who have their DLA removed following the Welfare Reform Bill are not claiming fraudulently, and are not being overpaid.  They are people whose only non-means-tested disability benefit will be removed without justification.  I’m not going to go into how this is possible now, but if you’re interested take a look at the proposed PIP assessment thresholds, and consider the number of disabilities which might slip through the gaps.

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