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Wide reforms to Social Care announced in the Budget to reduce spending while protecting the vulnerable 21 February 2012

Minister for Social Care Hon Chris Robertshaw MHK said:

“I commend the Treasury Minister and my other colleagues in the Council of Ministers for achieving what I believe is a Budget which balances difficult competing priorities and provides a good foundation for further changes over the next few years ahead to enable Government to balance its budget while delivering effective, sustainable public services.
I am conscious that I am in the fortunate position that my Department’s budget is rising by 4.9% while those of several other Departments are being reduced. I believe it is vital that all in our community understand why this rise is necessary. The Island’s population is changing such that the demands upon my Department’s services continue to grow far faster than either the Island’s population or our economy. These growing demands are caused by the rising numbers of older people, the disabled, vulnerable families on low incomes and individuals with a mental health condition. My Department estimates its costs will grow by £6m annually to meet these growing demands – IF we do not change our policies. This is simply unaffordable. I am committed to achieving reforms which will address this exceptionally challenging situation. My Department has already delivered savings of £4m in the last 2 years (for example we have removed 21 posts in the last year of which 11 were management posts and 6 were administrative posts to help to protect front-line services) and further savings are planned. However, the scale of the growth in demand for our services is such that only changes to policies can achieve the scale of financial change required. I will take this opportunity to outline my Department’s key policy reforms and the first steps we are taking in this Budget to achieve them.
This Government has set out three clear over-arching priorities: grow the economy; balance Government’s budget; and protect the vulnerable. My Department will be introducing reforms which will help to meet all three priorities. While reforms to reduce expenditure are vital to balance Government’s budget, I am committed to doing so in a manner which continues to protect the vulnerable in our community. As a result, my Department’s four key policy priorities are as follows:
  • Supporting vulnerable children and families – I am passionate that our most vulnerable children and families receive the support they require; when this happens, real harm is prevented and all in our community benefit. My Department is now halfway through a £2m transformation programme to ensure our services achieve high standards of care. I am delighted with the improvements achieved already. The planned independent inspection of children’s services will show to Tynwald and the public the progress we have made.
  • Providing affordable housing to those in real need – past Governments have recognised the need to help people to secure a suitable home, spending over £250m over the last decade on building over 1000 public sector houses and improving hundreds more as well as providing £m’s of assistance to over 1200 first-time buyers. However, this investment has left us with a substantial and growing annual cost burden. Also this help was poorly targeted such that there are many who have received and continue to receive taxpayer support who did not and do not need it. At the same time, there are some people in genuine need of support for whom no housing is currently available, as shown by the growing waiting lists. As a result, the financial burden is unsustainable and the value for money is poor. This is untenable. My Department has undertaken an extensive review of housing policy options. I will bring the resulting report to Tynwald in March and then consult widely on a range of reforms to ensure affordable housing support is available to those in real need at a cost that is affordable to current and future generations. In addition, I will bring forward measures to ensure private landlords are providing an adequate standard of housing to often vulnerable tenants.
  • Providing appropriate care for an ageing population – the number of older people is projected to rise by half over the next 20 years as the baby-boom generation retires. Many older people want to remain in their own homes but need some help to do so. The cost of home care is typically less than 20% of the cost of residential care, so it offers much better value for money. Over the next 3 years, my Department will substantially expand the range of home care services available on the Island; this will both better meet older people’s wishes and help to avoid £m’s of additional future costs for them and the taxpayer. Many of the services provided to vulnerable people are delivered increasingly by organisations from the Island’s third sector (comprising charities and other not-for-profit organisations) as they can often deliver the same or better care at lower cost. This trend will continue. At the same time, I must ensure resources are directed to helping the most vulnerable, so it has been necessary to reduce the grants provided to several third sector organisations who are being notified of the cuts which will take effect from September. I will also bring new legislation before Tynwald to ensure care providers are properly regulated so that the public can be confident of the quality of care they and their family receive.
  • Ensuring social security is directed to those in real need – it is plain to me that we cannot continue with past policies, which in some respects have been very generous and poorly targeted. As a result, the total cost of social security to the taxpayer has risen by 23% in real terms over the last decade and without reform is forecast to continue to grow. Given this context, reforms are now required, including:
    • I believe it is now time to cease universal benefits, which are paid to all regardless of their means. The largest universal benefit is Child Benefit, costing over £19m in the current financial year alone. I cannot defend paying millions of pounds of scarce public resources to the well-off who do not need Child Benefit. Therefore, I will bring forward proposals that will ensure Child Benefit is focused toward those families most in need.
    • I am also committed to ensuring the benefits system gives clear incentives to work to those who are able to do so – this is good for them, our economy and the taxpayer. For example, we will be introducing measures to ensure those in receipt of long-term sickness benefits are regularly assessed to ascertain whether they remain incapable of work, and then we will help those who can undertake some work to do so.
    • My Department will also carefully consider changes to other benefits to ensure they are effectively targeted to those in need then bring reforms before Tynwald for approval.

There are five key reforms to social security in this Budget, all of which are consistent with these priorities and will, subject to Tynwald approval, take effect from April:

  1. Benefits for some unemployed young people (under the age of 25) will be reduced. Currently, young people under the age of 17 on the Island on benefits can receive 120% of the income they would earn working full-time on the minimum wage. Even for those over 18, this figure is over 90%. I am very concerned this can remove their incentive to seek work, leaving them trapped on benefits. The UK has had a policy for many years of providing lower rates of benefit for those under 25 on the grounds that unemployed young people should be encouraged to continue to live with their parents or guardians or share accommodation with others and also in recognition that the wages many can expect to get are lower than more experienced workers. My Department is adopting a similar policy. From April their typical weekly benefits will be reduced by £17.25. This is coupled with our expanded assistance to help them find work in partnership with the Department of Economic Development. This reform will deliver an annual saving of nearly £0.5m.
  2. Child Benefit will be amended to bring it more in line with UK policy. Specifically, a new rate for each second and subsequent child will be introduced of £13.50 per week compared to the rate for each first child of £20.40, which is unchanged. This policy decision is based on the fact that the principal difference in disposable income is between families and couples without children, not between those with one and more than one child; therefore the decision to start a family is often the hardest and so child benefit is being re-structured to recognise this. Child benefit is not and never was intended to cover the full cost of raising children but is simply a contribution toward that cost. Also the enhanced rate of £30.00 per week payable in respect of young people aged 16 to 19 who remain in full-time education is to be abolished; instead they will receive the above rates. It is important to note that families on the lowest incomes (those in receipt of income-related benefits) will see no reduction in overall income as their other benefits will make up the difference. This was a particularly difficult decision but I believe it is a necessary step if we are to ensure support is directed to those in real need and the burden on the taxpayer is to be addressed. This reform will deliver an annual saving of approximately £2.5m.
  3. Income-related benefits (namely Income Support, Employed Person’s Allowance and Income Based Jobseeker’s Allowance) will be uprated by 2.5%. These benefits are typically increased annually in line with domestic prices inflation. However, typically earnings have risen by much less than inflation over the last year. Therefore, I believe it is fair that income-related benefits should rise broadly in line with the earnings of the workers whose taxes fund those benefits. As a result, subject to Tynwald’s approval, income-related benefits will increase from April in line with median earnings (2.5%) rather than prices inflation (which was 5.9% in September 2011 but has fallen sharply since to 3.7% by January). I cannot comment on what the benefits uprating policy will be in future years; we will continue to need to consider how we best protect the vulnerable while balancing Government’s budget.
  4. Disability benefits (Disability Living Allowance and Attendance Allowance) will be frozen. These are universal benefits, which means they are paid regardless of means. As a result, I believe they are poorly targeted and so the rates will not be increased in April. Recipients on low incomes are also eligible for Income Support which is increasing by 2.5% as I have already explained. I believe this is the most effective way to target support to those with a disability who are most in need. My Department will consider further options to focus resources to those most in need in consultation with local third sector groups and others.
  5. Lastly, I am pleased to announce that it is the Department’s intention to increase the weekly rate of the nursing care contribution from £60 to £100 from April. This contribution is payable to people who are resident in nursing homes to help them meet the cost of their nursing care. It has been Government’s desire to raise this contribution since it was introduced in 2008 and I am satisfied it is the right thing to do now to protect the growing number of older people requiring such care. This will be funded by the National Insurance Fund and so will not add to the burden on taxpayers.
In summary, I believe these five reforms to social security announced as part of this year’s Budget are entirely consistent with this Government’s and my Department’s priorities and form a sound basis for further necessary reforms over the next few years.”

Key changes at a glance:

The Department of Social Care is announcing the following reforms to social security with effect from April 2012 that will save taxpayers £3m annually and so play a key role in helping Government to balance its budget. At the same time the reforms ensure the most vulnerable continue to receive the support they need.

Benefits for the under 25s (Jobseeker’s Allowance and Income Support)

  • Subject to Tynwald’s approval, the amount payable to certain single claimants aged between 18 and 24, as well as 16 and 17 year-olds who are responsible for housing costs, will be reduced by £17.25 a week.
  • Couples where one or both members are under 18 will also see their benefits reduced.
  • Despite these reductions, young jobseekers in the Isle of Man will still receive significantly more than their UK counterparts (typically £22.15 a week more for a single claimant).
  • Young persons living in residential care accommodation or board and lodging establishments will not be affected by this measure.
  • These measures will save £0.5m annually.

Child Benefit

  • The weekly rate of Child Benefit payable in respect of second and subsequent children will be reduced from £20.40 to £13.50 from April.
  • The rate of Child Benefit for the first child will remain £20.40 per week.
  • Both rates are 10p per week higher than the comparable UK rates.
  • The policy of a lower rate of child benefit for second and subsequent children mirrors similar reforms introduced in the UK in 1991. This was based on research showing the significant gap in earnings and costs between families and couples choosing not to have children, principally due to the lost earnings of one or both of the parents to enable them to care for the child(ren). Child benefit is intended to acknowledge the additional costs of having children and provide some assistance to families with these costs; it was never intended to fully fund the costs of having children. By having a higher rate for the first child, Government is acknowledging this gap in earnings and costs and targeting support accordingly.
  • The enhanced rate of £30.00 per week payable in respect of young people aged 16 to 19 who remain in full-time education is to be abolished; instead they will be eligible for the two standard rates above. However, those who already receive the enhanced rate will continue to do so until the young person leaves school or reaches the upper age limit (20) for child benefit.
  • People who receive income-related benefits (Income Support, Employed Person’s Allowance and income-based Jobseeker’s Allowance) will not be adversely affected by this measure, as their income-related benefits will be increased to fully offset any reduction in their Child Benefit.
  • These measures will save £2.5m annually.

Uprating of benefits

  • The rates for income-related benefits (Income Support, Employed Person’s Allowance and Income Based Jobseeker’s Allowance) will be increased by 2.5% from April, which is line with median earnings growth on the Island over the last year. Employed Person’s Allowance replaced Family Income Supplement and Disability Working Allowance from 31st January 2012.
  • Disability benefits (Disability Living Allowance and Attendance Allowance) will be frozen.

Nursing Care Contribution

  • The weekly rate of the nursing care contribution will be increased from £60 to £100 from April. This will directly benefit approximately 140 people living in nursing homes on the Island.

Grant Reductions in 2012/13 and 2013/14

  • The Department provides grants totalling over £800,000 annually to over 20 local organisations providing valuable care services to vulnerable people on the Island.
  • 7 organisations are having their grant reduced. The average reduction in 2012/13 is less than £5,000. The total reduction in 2012/13 is less than 5% of the value of all grants.
  • The organisations concerned are being informed over the next week, so out of courtesy to these organisations it is not appropriate to issue further details at this time.
  • The Chair of the Council of Voluntary Organisation Jackie Betteridge acknowledged the valuable support which voluntary organisations continue to receive from the Department and said: “While this announcement is disappointing it was not unexpected that grant support is being reduced.”

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