Income and employment: welfare reform

 Since 2013, NHS Health Scotland, and now Public Health Scotland, has been monitoring the health impact of welfare reform in Scotland. 

Improving Lives? is the fourth in a series of research reports. It describes changes to the UK and Scottish Social Security system, and monitors trends in health, income and employment relevant to these policies in Scotland to 2021/22. At a population-level in Scotland, key findings were:  

• Many health indicators stalled or worsened. These including a range of mental health indicators, heart disease, violent crime and health inequalities.   

• Some economic indicators improved: female employment, involuntary part-time and temporary employment and wages for the lowest earners.  

• But many other economic indicators stalled or worsened. These included: financial insecurity, working-age and child poverty, male employment, out-of-work benefits and sickness-related inactivity.   

PHS also undertook a systematic review of quantitative, peer-reviewed studies published between 2010 and 2024 (out for peer review). Key findings of the review were that  

• Most studies showed worsening mental health, two showed mixed effects and one showed no effect.  

• Three studies showed welfare reform worsening mortality derived health. 

• No evidence that welfare reform improved physical or general health. 

While the studies were generally of good quality, their design meant there was a high level of uncertainty around these findings. 

It will be important to monitor this going forward.  The National Institute for Health Research has funded a large research project evaluating the mental health impacts of Universal Credit . 

Developments since 2022

The UK Government announced additional payments to low-income working-age adults claiming key out of work benefits to help with the cost of living. This included an additional £650 to those on means-tested benefits and those on disability benefits an extra £150. Richardson et al. (2023) found that the UK Government response to the cost of living mitigated against the impact of the cost of living, but were insufficient to offset anticipated increased mortality, especially in the most deprived areas.

However, as noted in the policy context page, the government has resumed its policy of deducting money from low-income households because of historic over-payments (including Tax Credits). It has also resumed sanctioning of Universal Credit (UC) claimants in large numbers and plans to extend in-work conditionality to part-time workers working less than 15 hours a week. Combined with the benefit cap and two-child limit, these design features of Universal Credit continue to post risks to health in Scotland. 

It will be important to monitor this going forward.  The National Institute for Health Research has funded a large research project evaluating the mental health impacts of Universal Credit.  The project began in April 2021 and is expected to be complete by 2025.