Welfare rights: Cuts to contributory ESA

Stand by for some worried clients in the next few weeks. The Department for Work and Pensions is writing to 100,000 people telling them that from April 2012, they might lose their right to benefit.

These are clients on contributory employment and support allowance (C-ESA) who have been placed in the work-related activity group – those deemed to have some future prospect of work. The reason for the letter is that the Welfare Reform Bill includes a clause that limits ESA for that group to just 12 months.

This could have a catastrophic effect on many long-term claimants, especially those with mental health difficulties.

People on incapacity benefit will not be affected. But, as they transfer to ESA through the three-year “migration” project, the 12-month clock will start ticking on the date they transfer to C-ESA if allocated to the work-related activity group. Those in the ESA support group (people deemed unable to work) will not be affected by the limit while they are in that group.

The impact of the time limit will be particularly felt by those who have a working partner or who have savings. This is because the only option for many C-ESA claimants who remain ill after 12 months of claiming will be to claim the income-related version of ESA, which is worth the same. That means-test, like all others, has a capital limit of £16,000 and takes into account a partner’s wages and savings.

For example, Manjit fell ill in January 2011. He has a national insurance record, so he claimed C-ESA in July 2011 and was deemed capable of work-related activity. Manjit’s wife earns £18,000 a year. Under the plans, Manjit would lose his right to C-ESA in July 2012 and not be eligible for income-related ESA because of his wife’s wages.

The legislation takes effect from April 2012, but time spent on C-ESA before then will count towards the 12-month limit. This means that some people will lose benefit immediately; others will have up to 51 weeks’ “grace”. Time spent on incapacity benefit or income support will not count towards the 12 months.

To take another case, Diana lives alone and has no savings. She has been unemployed for a number of years due to mental health problems. However, her earlier NI record means she receives C-ESA, and she has been placed in the work-related activity group. When her C-ESA stops, in April 2012, she should qualify for income-related ESA. But her anxiety levels might rise when she reads in the warning letter: “People who have already received contributory ESA for 12 months or more will have their benefit stopped as soon as the change is introduced.” The fact that it then says “you may be entitled to income-related ESA” will be of little comfort.

Gary Vaux is head of money advice at Hertfordshire Council

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This article is published in the 6 October 2011 edition of Community Care under the headline “Anxiety levels to rise among losers in benefits shake-up”