The UK government continues to resist calls to means-test disability benefits for older people, despite concern in some quarters that money is going to better-off people who don’t need it at the expense of those who do.
This resistance is surprising in view of rising costs, the large budget deficit, frequent protests about intergenerational inequity and the current government’s apparent willingness to be radical. The older population makes up the largest proportion of disability claimants, which would suggest that there could be room for reform and savings to be made. So is there good reason for this resistance, or is it just politics?
Britain’s system of public support for older people with disabilities has two elements: there is a national system of cash disability benefits administered by the Department of Work and Pensions and a Local Authority-administered system of social care.
Disability benefits for older people consist of two main benefits: Attendance Allowance (AA) which can be claimed from the age of 65 and Disability Living Allowance (DLA) which must be claimed before reaching 65 but can be continued past that age. Both are intended to help with the extra living costs faced by disabled people. AA has two possible rates: £55.10 or £82.30 per week, in 2015. DLA payments range from £21.80 to £139.75. And unlike benefits for social care, neither are means tested.
That may be because evidence suggests disability benefits are surprisingly well targeted, despite the absence of a means test. Together with Ruth Hancock and Marcello Morciano of the University of East Anglia, I’ve looked at the pattern of receipt of these benefits and simulated what it might look like under a different system.
We found that, although not means tested, AA and DLA payments to older people do end up being targeted at people on lower incomes. That’s because people on low incomes are more likely to have severe disability. And, because of their greater need, they are more likely to make a claim.
That’s not to say the system is functioning perfectly. Money may not be going to people who don’t need it – but those who need it aren’t necessarily getting it. Fewer than half (47%) of the 20% of older people with the highest levels of disability report receiving either AA or DLA. The extent to which the current disability benefits system misses out some of those most in need far outweighs the amount of disability benefits spending on older people whose disability costs do not push them below the poverty line.
To work out who needs the most support, we need some idea of the additional personal costs associated with disability, such as adapting homes, getting help from carers and arranging transport. We used large-scale survey data to estimate average disability costs – and they are high, particularly for the most severely disabled. It seems the cost of being disabled considerably exceeds the average value of public support received.
To show that means-testing isn’t necessary, we’ve looked at a hypothetical disability benefit system (costing the same as the current system overall) with no means testing, but with payments tailored more closely to the severity of disability.
In assessing the outcome, we are particularly concerned with reducing poverty, but it is important to adjust the poverty line to take account of the additional costs that disabled people face. It’s also important to think how best to measure poverty.
The simplest method is just to count the number of people below the poverty line (the “poverty headcount”), but this ignores how far people fall below the poverty line. Disability costs can be so high that there is a risk of very severe poverty. A better way of measuring poverty is to give more weight in the count to people who fall a long way below the poverty line (this is our “depth of poverty” measure).
The current benefit system is very good at controlling the number of people below the poverty line, but not very good at preventing very severe poverty.
Almost any plausible reform (including our alternative system) that stays within the current spending total tends to leave unchanged, or even increase slightly, the number of people below the poverty line.
But there is scope for improvement in terms of the depth of poverty, especially if take-up can be increased among the most disabled older people (compare the solid curves). Means-testing turns out to be unnecessary to achieve better targeting on people in deep poverty – and it could prove to be a barrier to achieving higher take-up.
Even when we remove means testing completely, the better alignment of benefit amounts to disability costs, and higher take-up among the most disabled in our hypothetical alternative system means that the number of people in very severe poverty could be much lower than in the current system.
So our advice to Osborne would be this – you’re probably right not to means test this kind of benefit but if you want to help older disabled people who are deep in poverty, think more about how much it actually costs to live with a disability when deciding how much everyone gets.