Welfare The Welfare Reform Bill looks set to radically overhaul the way people are paid benefits – David Cameron called it the “the most ambitious, fundamental and radical changes to the welfare system since it began”.

Key elements of the Bill are:

  • The Universal Credit will start to be rolled out in 2013. It aims to simplify the system and make work pay, enforce tougher sanctions and end the top down nature of the system so people received tailored support to get back into work. It will be a single base payment, topped up depending on how many children individuals have; their marital status etc. It will be paid by DWP and capped at around £26K per family.
  • The aim is to incentivize work so that claimants keep at least 35p of every £1 earned – in some situations benefit withdrawal is close to £1.
  • Claimants who receive three reasonable job offers will lose benefits for three years.
  • Disability Living Allowance will be separate to the universal credit and will include regular health checks.

The principles underpinning these reforms – simplifying the benefits system, ensuring it really incentivizes work – are ones that a wide range of research has suggested are important. But, as the IFS has shown, there will be both winners and losers and the debate continues about whether the reforms really will make work pay.

Most of the changes will have implications true at a national level but, from a cities perspective, two challenges stand out. First, there is lower demand for labour in some cities than others. The recent unemployment stats underline this; in Grimsby, 9 young people in every 100 are claiming Jobseekers Allowance, compared to just 1 in every 100 in Cambridge. Second, places reliant on the public sector and with weaker private sectors, like Hastings and Hull, are likely to see rising unemployment as the public sector cuts bite.

In both of these types of cities, it will be much more difficult for residents to find work in the first place.

The reforms of the benefit system will also be accompanied by reductions in welfare payments. We showed in Cities Outlook that these will affect places differently: while residents of Birkenhead face reductions in income of £197 per head by 2014/15, York residents will see a reduction of just £85 per head.

Being aware of how these reforms will affect different cities will be important when policymakers are thinking through and managing the impact of these reforms in the months and years ahead.