New research: The impact of welfare reform on child vulnerability

Findings from our report were featured in The Observer, Sunday 12 May 2019

A new study by Policy in Practice for the Office of the Children’s Commissioner shows a dramatic increase in child vulnerability as a result of welfare reforms.

The research shows that the introduction of Universal Credit, the two child limit to benefits and the Benefit Cap combined has meant that the number of low-income families who are struggling to make ends meet has jumped from 13% to 25%. Further, the cumulative impact of welfare reforms is considerably greater than the impact of each reform in isolation, affecting 48% of households who lose £3,441 on average per year.

Download The impact of welfare reform on child vulnerability report here

Data analysis that evidences the impact of policies on children

Local authority Children’s Services departments typically use two main datasets, the Children in Need Census and the Children Looked After SSDA903 return, to track children in care and those at risk of being in care.

These datasets typically record vulnerable children’s interaction with statutory services but do not systematically hold any information about the family context, or their financial circumstances. This makes it difficult to link information on the relationship between poverty and child vulnerability, and it means local authorities can’t easily identify the children who are at risk of being at risk, making preventative work very difficult.

The benefits datasets held by local authority Revenue and Benefits teams do hold social and economic information on low-income families. Analysis of household level data is the missing link for Directors of Children’s Services who want to prevent vulnerability and design effective early intervention strategies for the 1.2 million children who are at risk of being referred to Children’s Services.

Policy in Practice works with these datasets on an ongoing basis for over thirty councils, helping them to identify and engage households, and track the impact of policy interventions on low-income households. We were asked by the Children’s Commissioner to use this data to assess the impact of Universal Credit and associated welfare reforms will have on children in low-income households.

Research findings

The two core conclusions from this research are as follows.

Firstly, it is possible to model the impact of welfare reforms on low-income families’ level of financial resilience.

Our analysis finds that:

• Universal Credit broadly benefits families with children, with 56% of households better off by £172 per month, though 40% are worse off and lose £181 on average per month
• The five week wait pushes 70% of families from a cash surplus to cash shortfall, and 73% of families with savings would see them completely exhausted at some point during those first five weeks
• The Universal Credit advance increases the number of households who would face a cash shortfall by 63%, from 11.6% under Universal Credit, to 18.9% once the advance payment is deducted from UC awards
• The two child limit will ultimately impact 32.1% of children. The policy is pushing 15.6% of children who are already facing a cash shortfall, further at risk
• The Benefit Cap affects 2.9% of households, who lose £2,832 on average per annum
• The cumulative impact of welfare reforms is considerably greater than the impact of each reform in isolation, affecting 48% of households who lose £3,441 on average per annum

This shows how the impact of complex policy instruments like Universal Credit and other reforms can be broken down into their constituent parts, to reveal their real-terms impacts. For example, our analyses show that many families are eligible for a higher take home income under Universal Credit compared to the legacy system. However, the substantial financial shock posed by the five week wait means that families may be left in worse financial health after migration, as a result of having to dip into savings or to repay a Universal Credit advance payment.

Comparison between take home impact of Universal Credit policy elements

The two child cap penalises children who can’t choose their birth order or the number of siblings their parents are having. Putting children in a position where they are worse off through no fault of their own is morally wrong and risks damaging the life chances of already vulnerable children.
Anne Longfield, Children’s Commissioner for England

Secondly, this analysis is carried out on anonymised data from 128,119 real families. This means that it can be used to intervene with households adversely affected (or likely to be adversely affected) by government reforms.

For example, council staff can use derived measures like financial resilience to proactively identify and support vulnerable children, such as those living in households already facing a cash shortfall who are set to lose out further because of the two child limit.

Many of Policy in Practice’s LIFT Dashboard clients are doing just this, leveraging the vulnerability factors captured through Housing Benefit data to drive early intervention.

LIFT Dashboard view of families in an income shortfall highly affected by welfare reforms

The Children’s Commissioner believes that central and local government should be doing more to use administrative data to better understand the drivers of vulnerability in children, and to proactively use data like this to help families. While this research uses Housing Benefit and Council Tax Support data from nineteen local authorities, Universal Credit for gathers detailed information on national basis on the living standards of over six million low-income families.

• The data be used to identify vulnerable children, including those put at greater risk as a result of government reforms to the benefit system
• Linking this data on a pseudo-anonymised basis to other datasets, such as information on children in care, or those at risk of being in care, can help to identify the drivers of vulnerability
• Longitudinal analysis can help to identify what types of intervention are most effective at preventing vulnerability, or at stopping children from moving into care

The DWP have access to national data on all Universal Credit recipients, and those on legacy benefits. The potential for sharing this data to drive targeted and effective interventions across central and local government, is immense.

It’s possible to identify children who are at risk using administrative data. as shown through this analysis. The government needs to make this information more accessible, so it can be used to help those that most need it.
Deven Ghelani, Director and founder, Policy in Practice

Find out more

• Download The impact of welfare reform on child vulnerability report here
• Download media release here