§ Baroness Hollis of Heigham
Under the proposals in the Welfare Reform and Pensions Bill, people disabled before the age of 20 (or 25 in some cases) will in future be able to receive Incapacity Benefit, at a long-term rate more than £26 a week higher than the rate of Severe Disablement Allowance. The cost of extending Incapacity Benefit to this group is estimated at £180 million in the long-term.
Incapacity Benefit is taxable, whereas Severe Disablement Allowance is not, but the available data on Severe Disablement Allowance recipients aged under 25 suggests that the great majority have no income other than benefits. Since the relevant rate of Incapacity Benefit is less than the single person's allowance, most young people who become entitled to Incapacity Benefit in future will not be liable to pay tax. The tax revenue from this measure would therefore be minimal; less than £100,000 per year in the short term. There are insufficient data to support a long-term estimate.