Costs: budgeting for equality

5.1 It is proper that government be concerned with the costs associated with its actions. The terms of reference given to this Commission reflect this concern where we were asked to establish the estimated costs of all recommendations made. A literal interpretation of the terms of reference would require an evaluation of the resource implications of each recommendation. This exercise is not feasible since, as we have noted elsewhere, the required statistical information is not sufficiently detailed. More importantly, however, such an exercise would be inappropriate. While the report contains many recommendations they are in essence the detailed plans which follow from the guiding principles of the Commission's work (1.34). All recommendations can therefore be summarised in one sentence. "People with disabilities must be recognised and treated as having equal status with all other citizens". The question then is whether or not this recommendation is to be accepted. If accepted, costing amounts to budgeting for equality.

5.2 In this chapter we outline the budgeting that will be necessary in order to guarantee equality of status for people with disabilities. It is organised under 7 headings. These are: re-organisation of institutions, income support, education, environment, health, enterprise and culture.

The Economic Case for Equality

5.3 The recommendation that persons with disability be granted equal status with all other citizens is a fundamental question of human rights. A society which respects human rights is richer in a way that cannot be measured on any balance sheet. Respect for such rights, however, is a necessary condition for a society to be classified as wealthy. The decision to pursue equality of status for people with disabilities is not a question of economic calculation. Once taken the decision does have economic consequences. To focus entirely on budgeting issues ignores the economic benefits that will accompany the greater inclusion of people with disabilities in society.

5.4 In chapter 6 we note the relationship between poverty and disability. We demonstrate that persons with disability are more likely to live in poverty under the current policy environment. Achieving equality of status will break this link. It will not mean that poverty will be eliminated for persons with disability since the recommendations of this Commission alone cannot eliminate poverty in our land. However, it should bring about a situation where a person with a disability is no more likely to be poor than any other citizen. This change on its own will mean that we have a fairer society. Since equity is a fundamental element of well-being for society this can be classified as an economic improvement.

5.5 The Commission has recommended that policies to achieve equality of status for people with disabilities should involve affirmative action. The operation of affirmative action in the United States has often been the subject of much controversy. The objective of such a policy is to eliminate negative stereotypes. Does it achieve this end? As with any single policy initiative it cannot be seen as a panacea for all problems. US research (Coate and Loury, American Economic Review, 1993) gives credence to the hopes of advocates of preferential policies and the concern of critics. This work suggests that there needs to be a balance between the coercion involved in affirmative action programmes and the incentives given to the targeted group to improve their status. The recommendations of the Commission address this balance. As a consequence, costs for the State will arise in providing funding to individuals while in many cases the role of the State as legislator and not funder is invoked. Success in achieving equality of status depends on the broad implementation of the Commission's proposals. The cost of equality also depends on such a universal adoption of our proposals. In many cases today's costs in one area are tomorrow's savings as a consequence of the implementation of recommendations in other areas.

5.6 Economic analysis of equality is generally concerned with redistribution. This, of necessity, involves someone losing in order to bring about a gain for someone else. However, the quest for equality of status in this report should not be viewed simply in this light. In many cases this Commission's recommendations will bring about a reduction in market failures and so will increase efficiency resulting in potential gains for all. The reasons for "market failures" are numerous: failure to take account of third party costs; asymmetry of information; ill-defined property rights. In the case of people with disabilities the reason for the failure of markets to provide for their needs is not as obvious as, say, the reason for market failure in the case of pollution. The reason seems to be related to the relative size of this group in the market and a lack of clarity in the definition of property rights.

Re- Organization of Institutions

5.7 The preceding chapters described the re-organization of institutions that the Commission believes is necessary. Additional costs associated with this change should be minimal once full implementation is achieved. The recommendations are designed to reduce unnecessary duplication and improve efficiency in the delivery of services.

Income Support

5.8 In terms of costing, provision for income support is the most visible cost factor arising from the recommendations of the Commission. Budgetary implications follow from the definition of disability and the details of the recommendations.

5.9 Additional expenditure cannot be avoided in this area. Such expenditure is necessary if we are to achieve equality of status for all citizens. When put in the proper perspective the cost is small amounting to less than £15 per annum per citizen. This is a small amount to pay to advance the cause of equality.

5.10 In chapter 6 this Commission notes that the existing system of income support to persons with disability is unnecessarily complex. This complexity on its own acts as a barrier to recipients involving costs of information and application. It can also involve an affront to dignity since payments often have the appearance of charity rather than entitlement. Reforming the system so as to avoid these unfortunate implications will on its own be of benefit to people with disability.

5.11 Statistics for current schemes make it impossible to be precise in costing the Commission's proposals in relation to income support. This occurs for two reasons. Persons with disability are currently included in broader categories of support, the most obvious being the Disability Benefit. The Commission recommends that this benefit be re-named "Sickness Benefit". As such the benefit falls outside the scope of the Commission's work. However, it is the case that persons with disability currently receiving payment under this scheme will transfer to the new unified pension proposed by the Commission. Second it is to be expected that the number of people eligible for payment could increase once we move away from a strictly medical definition of disability.

5.12 The Commission recommends that income support to persons with disability take three forms.

  • A unified Disability Pension.
  • A Costs of Disability Payment.
  • Revised Carers allowances.

5.13 The reasoning behind these recommendations is outlined throughout Chapter 6.

5.14 The Disability Pension is designed to be a compensation for loss of income due to inability to work to full potential. It would replace the main existing schemes which are: invalidity pension, blind pension and Disability Allowance. It would not involve a means test.

5.15 The Commission would like to see the payment levels reflect the recommendations of the Commission on Social Welfare. HoweverJ the costs associated with such an increase relate to broader policy decisions which cannot be attributed to achieving equality of status for persons with disability. Consequently it is appropriate that costing of the Commission's proposal be related to current levels of payment.

5.16 The Commission attempted to assess the numbers who would be eligible for payment of disability pension. It is not possible to make an exact judgement here. However, a figure of 100,000 of working age permanently unable to work appears reasonable.

5.17 There are currently around 40,000 people receiving the Invalidity Pension and a further 30,000 approximately in receipt of the Disability Allowance. The universality of the Disability Pension should therefore see an increase in recipients of approximately 40 per cent.

5.18 The combined cost of the Invalidity Pension and the Disability Allowance now comes to about £260 million per annum. A 40 per cent increase in numbers might be expected to involve an additional cost of £100 million - assuming similarities in the family structure of new relative to existing recipients. However, this neglects to net out those who switch over from disability benefit to the new disability pension. Half of those currently on disability benefit have been in receipt of this payment for more than two years. This amounts to over 20,000 people. Hence the true increase in expenditure on persons permanently unable to work would be less than 10 per cent. The additional cost would therefore be closer to £20 million. It would arise mainly from extending coverage to those in residential centres and from dropping the means test requirements.

5.19 There would also be a cost associated with payment to those who are under-employed. Here estimates are much more difficult. Assuming that 10 per cent of the population can be classified as having a disability (note that this is a rough figure and its limitations are discussed in Appendix A) a further 200,000 people would be eligible for some support under the disability pension.

5.20 A true costing depends on the distribution of recipients with respect to income. There would be full withdrawal for those on the average industrial wage, for instance. Using data on the distribution of income by households it would be expected that up to 50 per cent of those entitled to benefit would have it fully withdrawn because of income levels. This assumes that payments would actually be made to 50 per cent of those entitled to payment.

5.21 Of those who would receive a payment, it is likely that 60 per cent would be below the income threshold for payment of income tax. Recipients were divided into three groups and average withdrawal rates calculated for each group. These rates are: 25 per cent, 50 per cent and 70 per cent. The last group is also subject to tax on their disability pension.

5.22 Given current rates of pension payment the total cost of a disability pension to those able to work would be £110 million annually. This is an upper bound figure. It is to be expected that those able to work would be less likely to be at the lower end of the income distribution than those permanently unable to work. The above estimate involves a sum of £40 million for those at the lower end of the income distribution.

5.23 The broad thrust of the Commission's recommendations, if implemented, would see greater participation by persons with disability in all areas of life. This would obviously include the labour market. Over time increased participation in education and training should lead to a situation where the job market prospects of those with a disability would improve. It is expected that the cost of income support to those able to participate in work would fall over time. It is important then that this increased cost be seen as a transitional measure. Its level will depend on the speed of implementation of the Commission's other recommendations.

5.24 The Costs of Disability payment is designed to facilitate participation. It is not meant to replace all existing free schemes but rather to bring a unified philosophy to such payments as they apply to persons with disability. There is no way that a specific cost can be assigned to such a payment at this stage since it involves individual assessments. Instead the principle must be accepted and reasonable and appropriate budgeting be made on this basis.

5.25 It is also difficult to estimate the cost of the Commission's proposal for Carers Allowances. The elimination of tax allowances would bring about savings which could be applied towards funding the allowance. However, the Commission's intention is that the principle of a Carers Allowance be accepted. Again, as in the case of the Costs of Disability payment, the implementation requires budgeting that is beyond the scope of the Commission's work.

Education

5.26 Recommendations in the area of education are contained in chapters 11 and 20.

5.27 The recommendations in the area of sports and leisure focus on aspects of access and participation. As such they do not give rise to costs additional to those relating to access. The one cost element, relating to library facilities, can be considered as part of the general cost in relation to education.

5.28 The Commission has made a specific recommendation with regard to funding for education. It recommends that a figure of 1% of the existing education budget (i.e. Approximately £20 million at current rates) of additional expenditure be allocated annually to meet the educational needs of students with disabilities.

5.29 It must be stressed that the additional expenditure be seen as an investment. Since greater access to the full range of education services will enable those to more fully achieve their potential, a reduction in dependency should be expected in later life. Therefore today's cost is tomorrow's saving in income support payments.

Health

5.30 In this report health has been considered under three headings: general health issues, sexuality and relationships and special needs of vulnerable people. The central recommendations refer to issues of dignity when in receipt of medical treatment. These have implications more for time and mode of delivery rather than cost.

5.31 Costs arise in three main areas: funding to community services, costs of surgical and medical appliances and the capital costs involved in creating a fund to improve facilities for vulnerable groups.

5.32 The Commission has recommended that additional funding be earmarked over a five year period to address shortfalls in community services. However, the reorganization envisaged in the delivery of services could, if introduced rapidly, reduce this cost. This saving could be set against the costs associated with equipment.

5.33 The capital costs associated with building improvements cannot be precisely determined. However, it is arguable that this is not an additional cost. The Commission has highlighted the needs of vulnerable groups and given voice where none was previously heard. In this respect our recommendation is a call for a re-ordering of building priorities in light of past failures. As such, additional budgeting does not automatically follow.

Access and Environment

5.34 Recommendations under this heading are covered in the chapters on access, transport and mobility, housing and political rights.

5.35 Costs may arise in meeting the recommendations under two broad headings. The first relates to conversion of existing buildings and transport facilities and the adoption of new standards for future facilities. The second arises from payments in respect of travel passes and grants towards building improvements.

5.36 The costs under the first heading will be temporary. To the extent that there are additional costs associated with meeting new standards these will be allocated across the whole population and they will bring benefits to the entire population. A bus more accessible to a person with a disability is more accessible for all. At any rate costs in this area arise because they are an adaption to the way in which things are now built. To the extent that all buildings and transport facilities in the future conform to a new standard it can be argued that scale economies should bring cost reductions in meeting standards. Therefore the main costs arise in adapting existing facilities. The Commission's recommendations recognise the need for a reasonable programme here. As a consequence additional costs should be relatively small.

5.37 It is not possible to put a precise cost on the second broad area. In general the additional cost here will be determined only when account is also taken of the recommended Costs of Disability payment. It is important to avoid double counting of costs.

Enterprise and Employment

5.38 This category refers to the participation of persons with disability in work and training and their utilisation of technology.

5.39 The implementation of affirmative action programmes should not be seen as involving cost but rather as a mechanism for overcoming negative stereotypes.

5.40 Costs will arise in the need to provide increased access to adapted equipment and sheltered workplaces. Costs associated with this should be met in large part from earmarking a share of the funds raised through the employment levy.

5.41 Recommendations on access to mobile phones and interpreters will involve additional costs. Again these costs should be taken together with the measurement of the Costs of Disability payment.

5.42 In many areas of access to technology it is to be expected that private firms will be interested in increasing access to persons with disability since this will in turn increase the market for their products. An innovative approach to increasing access to technology should be adopted whereby government seeks partnership with private firms and thereby minimises its own costs.

Arts Culture and Media

5.43 Cost implications under this heading arise from adaptation of facilities and provision of financial incentives for participation.

5.44 Previous comments on the avoidance of double counting of costs are also relevant here. Adaptation relates to access and again the cost will be broadly borne. To the extent that auditoriums need to be adapted the costs are shared broadly across all users. Bursaries and financial incentives relate in many instances to education broadly defined so that additional costs in this specific area would be small. With regard to putting requirements on the national broadcaster for captioning it could be argued that a portion of the licence fee could be properly earmarked for this purpose. This would result in additional costs being met from advertising revenue and not a claim on the government budget.