Employment and Support Allowance

Employment and Support Allowance (ESA) is the UK welfare benefit designed to give financial support to people having difficulty finding employment because of a long-term illness or disability. ESA was also designed to shift recipients off the benefit and back into work once they had recovered from their illness or had retrained.

ESA was introduced in 2008 for fresh claims to replace three older benefits: Incapacity Benefit; Income Support paid because of an illness or disability; and Severe Disablement Allowance. From October 2008, these three older benefits were no longer available to new claimants, although people already on them were unaffected at first.

Between 2011 and 2014, most of the people who had been on Incapacity Benefit or Income Support since before October 2008 lost their entitlement to their "legacy" benefit: established recipients were assessed for a second time using a new test with more stringent criteria - the Work Capability Assessment - to see whether they qualified for ESA instead. The belief in Whitehall was that a million of these people - 40% of the entire caseload - were not disabled enough to qualify for ESA or otherwise could return to work within two years after receiving back-to-work training.

New Labour designed ESA and the Conservative-Liberal Democrat coalition expanded its scope. All three parties expected ESA to save billions of pounds each year from the social security budget. However, despite the attempts at major welfare reform that have taken place since 2008, the total number of people on out-of-work sickness benefits has remained much the same: about 2.5 million, and not one penny has been saved from the out-of-work sickness and disability benefit budget.

The scale of the allowance

The basic weekly allowance plus additional components from April 2016 is given below (the basic amount is lower for claimants under 25):

	paid in weeks 2*-13	paid from week 14
Basic allowance	£73.10	£73.10
Work-related activity component **	———	£29.05
Support component **	———	£36.20

* No money is paid for the first week ** only one component is payable

In addition, an enhanced disability premium of £15.75 a week may be paid to people receiving the support component of income-related ESA. In some circumstances, an additional severe disability premium of £61.85 a week may be paid.

From April 2017, the work-related activity component will no longer be available for new claims (or for reclaims, if more than 12 weeks has elapsed since the last period of receipt of ESA).

Who can claim?

An individual can put in a claim for ESA if they satisfy all of these conditions:

• They have a fit-note (previously known as a 'sick-note')
• They are over the age of sixteen
• They have not reached State Pension age
• They live in the United Kingdom

They will not be paid ESA if they are entitled to Statutory Sick Pay (this usually means 'if they have a job', but there are exceptions) and it is not possible to receive ESA at the same time as the other main out-of-work benefits i.e. Jobseekers Allowance - received by 635,000 people - or Income Support, given nowadays mainly to 437,000 lone parents. Universal Credit, which is received by 197,000 people nationally, can in some circumstances be paid in addition to ESA.

ESA can be either contributory or income-related. If claimants have paid enough National Insurance they can claim contributory ESA for up to one year if they get the work-related activity component, or indefinitely if they get the support component. Income-related ESA is for people who have not paid enough National Insurance and is subject to a means test and certain other conditions (although the amount paid as contributions-based ESA can also be affected by financial circumstances). Income-related ESA is not time-limited.

Income-related ESA is not usually subject to Income Tax, but contribution-based ESA is. If a spouse or partner is also receiving out-of-work benefits, this might affect entitlement.

The claims process

Someone wanting to claim ESA will need a medical certificate, i.e. a sick-note, signed by their GP to say that they are not fully fit for work. The new claimant must then contact the Department for Work and Pensions (DWP), usually by phone, who will log their claim and usually post them a questionnaire to complete (except in rare circumstances where a full assessment isn't required, such as when a doctor has officially certified the claimant as being likely to die within six months). The completed form must then be sent in the envelope provided to the Health Assessment Advisory Service - the trading name of the assessment provider, Maximus.

Once a person has submitted a claim for ESA, they will normally be paid 'assessment rate' ESA at the same rate they would be paid if they were on Jobseekers Allowance - except for the first week, in which nothing is paid as the DWP considers it "self covered". At some point in this 'assessment phase' - in theory, after thirteen weeks, but, since 2013, very much longer - a Work Capability Assessment will normally be carried out to determine whether the claimant: a) is disabled enough to qualify for a higher rate of ESA or b) does not, in fact, qualify for ESA at all. Each assessment usually takes about an hour and a half and costs the DWP around £190.

The ESA50 claim form, together with any other information sent with it by the claimant, will first be read by a qualified healthcare professional employed by the outsourcing firm, who will then decide on whether a face-to-face medical assessment is necessary: some people with severe disabilities can be granted ESA based solely on the documents supplied, if that is clear from the paperwork. For this reason, Maximus encourages new claimants to send as much relevant information as possible and give a detailed description of their disability when filling in the claim form.

Assessing capability for work

Main article: Work Capability Assessment

The Department for Work and Pensions (DWP) contracted Atos to perform the core medical assessment - the Work Capability Assessment (WCA) - when it introduced the new benefit in 2008. Maximus took over the contract - worth £170million a year to the US firm - from Atos in March 2015. The WCA's performance in 2010, 2011 and 2012 was reviewed by Professor Malcolm Harrington and in 2013 and 2014 by Dr Paul Litchfield.

The assessment is often described as consisting of two separate assessments. In practice, if they have a face-to-face assessment, an individual claimant will experience only one assessment on the day (the decision-making is done afterwards). The two stages are:

• The 'limited capability for work' assessment, which determines whether the claimant is entitled to ESA at all.
• The 'limited capability for work-related activity' assessment, which tells the DWP whether somebody who has passed the first stage of the test is able to take part in 'work-related activity'. It also influences the rate of ESA paid to the claimant.

There are two groups of successful ESA claimants: the Work-Related Activity Group and the Support Group.

ESA terminology

ESA is often loosely described as being for people who are 'unfit for work', while the official term 'limited capability for work' is not clear in its meaning. In fact, people on ESA can and do take suitable jobs when the opportunity arises, without their impairment necessarily having improved - on paper, relatively few people receiving ESA are incapable of any work whatsoever.

People in the Support Group tend to have the more severe impairments, they are classed as having 'limited capability for work' and they are not required to prepare for work. The Work-Related Activity Group contains people who also have 'limited capability for work' because of their poor health, but they are required to participate in pre-employment coaching because they are deemed likely to work in the future - specifically, within two years.

Fundamentally, ESA is for people facing significant extra barriers to work. All jobseekers face some barriers to work, such as a lack of experience or childcare commitments. The extra barriers, as far as ESA is concerned, are those imposed by a disability or a long-term health condition. In this context, 'significant' refers to the threshold for eligibility, which was determined when ESA was designed (although it has been modified subsequently in legal rulings). For example, an inability to grasp a small object between finger and thumb is deemed to be significant.

Limited capability for work

At their WCA, an ESA claimant must be found to have 'limited capability for work' in order to qualify. The testing process gauges the claimant’s ability to perform up to 17 activities; these activities are set out on the ESA claim form. For each activity, a claimant can score 15, 9, 6 or 0 points: the more severe their disability, the more points they will score. Points are scored by having physical impairments, mental ones or a mixture of the two (if they are likely to significantly affect the claimant's ability to work). In order to be entitled to ESA, a person will need to score at least 15 points in total.

Other factors, such as some aspects of pregnancy, are also considered by the assessor, who will be a nurse, doctor, physiotherapist or occupational therapist; these factors do not operate on a points system but might nevertheless qualify the claimant for ESA.

Limited capability for work-related activity

This is about trying to decide whether a successful claimant of ESA is fully capable of taking part in interviews and pre-employment training, or whether their ability to do so is limited to a significant degree.

If someone who is found to be entitled to ESA is found not to have 'limited capability for work-related activity', they will have to take part in pre-employment training and will receive the work-related activity component of ESA.

If the claimant is found to have 'limited capability for work-related activity', they will be entitled to the support component of ESA after 13 weeks and will not have to undertake work-related activity or have work-focused interviews. Someone will go into this category - the Support Group - because they have one or more severe functional disabilities (such as being unable to move 50 metres by themselves) or if certain other conditions apply, such as where the 'risk' criteria apply.

A DWP official makes the final decision on entitlement, based on all the available evidence.

Success rates of claims

Recent data on the success rates of new ESA claims show that after their assessment, 62% of people are now declared 'unfit for work' and go into the Support Group; another 13% are also found to be 'unfit for work' but are deemed able to take part in work-related activity; while 25% are found to be ineligible for ESA. Outcomes after reassessments are even better, from a claimant's point of view.

How ESA and its eligibility test developed

Conservatives 1992-1997

The first medical test for sickness benefit entitlement was brought in by John Major's government in 1995 when Incapacity Benefit was introduced to try and cap the rising number of people on these benefits. The All Work Test was carried out by doctors working for the government and it set out to assess a claimant's ability to cope with a range of occupations, not just their old trade.

New Labour 1997-2001

In May 1997, Frank Field MP was made Minister for Welfare Reform. He published a Green Paper. The Guardian said it sought tighter controls on Incapacity Benefit claimants as a way to get more people back to work. He was quoted as saying about out-of-work benefits: "If the system pays people more on Incapacity Benefit, it's human nature to claim the higher amount. We have to remove that incentive".

After 2000, some Incapacity Benefit recipients underwent a new test - the Personal Capability Assessment - to establish whether their condition had improved: if it had, benefit payments could be withdrawn; otherwise, a Capability Report was drawn up by the examining doctor and used by Job Centre staff to plan ways to boost recipients' employability, in the hope of returning them to work. Nevertheless, the Incapacity Benefit caseload continued to rise.

New Labour 2001-2005

In 2001, on the first full day of New Labour's second term in office, the Department of Social Security was amalgamated with the Department for Employment to form the Department for Work and Pensions. Shortly afterwards, ESA was conceived: it would replace Incapacity Benefit and would not just cap the total number of people on sickness benefits but actively reduce it.

The objective was to be achieved in four ways:

1. ESA would be harder to get in the first place, because its eligibility test would be tougher
2. Successful claimants with mid-range disabilities would be expected to prepare for a return to suitable work within two years
3. All new ESA recipients would be reassessed at appropriate intervals in the expectation that the health of many would improve
4. Once the new testing process had bedded in, there would be a mammoth re-evaluation of the claims of more than two million long-term recipients, in the belief that as many as 40% were able to work

The tough new eligibility test - the Work Capability Assessment - would play a crucial role in cutting the number of recipients, if things went according to plan.

However, while ESA was still at the planning stage, the caseload peaked in 2004. Since then, the background trend has been gradually downwards. The likely reasons for this switch in trajectory were: World War Two 'baby boomers' had begun to reach State Pension age; men suffering from industrial diseases, such as asbestosis and silicosis, caused by working in mines, shipyards and other hazardous environments, were dying prematurely; eligibility criteria had become steadily stricter; and the economy was at that time creating more jobs.

New Labour 2005-2010

This term of office was notable for the high turnover of Welfare Secretaries:

1. David Blunkett - 6 months in post
2. John Hutton - 20 months in post
3. Peter Hain - 7 months in post
4. James Purnell - 16 months in post
5. Yvette Cooper - 11 months in post

A key event was Tony Blair's appointment of David Freud, a former vice-chairman of investment banking at UBS, to advise the government on how to reform out-of-work benefits. Freud would become the minister responsible for welfare reform in 2010.

In January 2006 - before the 'Freud report' was commissioned in December 2006 - John Hutton, the Work and Pensions Secretary, was looking forward to the number of people receiving sickness benefits falling by one million in the course of a decade once ESA was introduced, thereby saving £7billion a year.

On 3 May 2007, the Welfare Reform Act received royal assent and a week later Blair announced his decision to leave Downing Street. In October 2008, when Gordon Brown was Prime Minister and James Purnell was Secretary of State for Work and Pensions, ESA was born. Reformers were disappointed to find, however, that with the advent of the new benefit and its supposedly-tougher eligibility test, the total number of people on sickness and incapacity benefits actually went up, largely as a result of the financial crisis of 2008 and the consequent rise in background unemployment. In 2009, plans were made to tighten the eligibility criteria still further.

The Labour Party manifesto, drafted by Ed Miliband and published before the general election in 2010, declared that if Labour won:

"More people with disabilities and health conditions will be helped to move into work from Incapacity Benefit and Employment and Support Allowance, as we extend the use of our tough-but-fair work capability test. This will help to reduce the benefit bill by £1.5 billion over the next four years. We will reassess the Incapacity Benefit claims of 1.5 million people by 2014, as we move those able to work into jobs."

Coalition 2010-15

In early 2011, with a Conservative-led government, an even more stringent test and the Incapacity Benefit reassessment programme underway, the caseload's falling trend resumed until the middle of 2013, at which point expectations were confounded once more when, despite an expanding economy, the caseload began to grow again after fresh guidance had to be issued to ESA assessors on how to judge fitness for work.

By 2015, the picture was clear: in the absence of the huge fall in recipients prophesied by the architects of ESA, and in spite of the broadly downward natural long-term trend, the total caseload was little different from when ESA was introduced.

As a reflection of this failure of ESA to achieve its goal of shifting large numbers of people off benefits and into work, the cost to the Exchequer of out-of-work sickness benefits did not fall at all after ESA was introduced: the annual cost is now predicted to rise to £14 billion or more in the course of 2016, largely because more people than anticipated have gone into the Support Group - particularly since the second half of 2013.

The future of ESA

In January 2016, the Conservative Welfare Secretary, Iain Duncan Smith, announced that ESA was "fundamentally flawed" and declared that a brand new policy, which would get nearly all ESA recipients back to work, would be unveiled within weeks. A hint of what that policy might be was given in a detailed report on ESA published the following month by Reform, the right-of-centre think-tank:

• Effectively, ESA would be abolished: the amount of money paid each week to the claimant would be reduced to the level of Jobseekers Allowance
• The resultant savings would be ploughed back into the Personal Independence Payment to balance the drop in ESA
• The WCA might be replaced by another assessment that set out to identify any barriers to work faced by the claimant, but which would play no role in determining eligibility to benefits
• As a way to 'nudge' claimants towards overcoming those barriers, extra money might be made available to fund a tailored programme of rehabilitation - although participation in this could be made a requirement of continued receipt of the benefit.

In March, Duncan Smith unexpectedly resigned after a clash with the Chancellor of the Exchequer, George Osborne, over cuts to the Personal Independence Payment - the disability payment that Reform had suggested should be topped up to offset the proposed cuts to ESA. Duncan Smith's replacement quickly declared that there would be no new welfare policies, other than those set out in the Conservative Party manifesto of 2015, in the current parliamentary term.