the coalition government and welfare reform
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The Coalition Government and Welfare reform
Dave SimmondsCentre for Economic & Social
Inclusion
June 2010 Budget reforms Commitment to continuing with plan for
reassessment of all Incapacity Benefit (IB) claimants by 2014
Reforms to Housing Benefit Lone parent obligations for those whose youngest
child is 5 years from Oct 2011 Introduction of a new assessment for Disability Living
Allowance claimants Savings of £11bn per annum
Comprehensive Spending Review 2010
Changes to welfare benefits Savings in 2014-15 (£bn/yr)
Remove Child Benefit from higher rate tax payers 2.5
Limit contributory Employment and Support Allowance (ESA) to 12 months unless severely disabled
2.0
Cut spending on Council Tax Benefit 0.5
Freeze part of Pension Credit 0.3
Benefit cap of £500/wk (£50/wk if single no kids) 0.3
Cut LHA for single people aged 25 - 35 0.2
Cut DLA for people in care homes paid for by state 0.1
Total cuts over CSR including those previously announced in the budget
Over £18bn
Announcements on Housing Benefit
Announcement 1: Local Housing Allowance (LHA) caps: £250 for 1 bed - £400 for 4 bed.– Local impact huge in some areas (over 17,000 households affected in
London?). Boris - an exercise in “social cleansing”? Announcement 2: LHA to be set at 30th percentile rather than
median (50th percentile) Announcement 3: Index linking of LHA to lower inflation
– By 2020 EVERY tenants HB will be too low to cover rent (Chartered Institute of Housing)
Announcement 4: HB award reduced by 10% after 12 months for JSA claimants – withdrawn
Announcement 5: Limiting HB entitlement for single people aged 25 – 35
Poorest 2 3 4 5 6 7 8 9 Richest-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
Income Decile Group
Chan
ge in
net
Inco
me
Assumes councils means-test CTB
more aggressively
Distributional impact of CSR announcements by 2014-15 (source:
IFS)
Incapacity Benefit reform Reassessment of almost 1.5m IB claimants by
2014 = 10,000 assessments per week Claimants will reassessed using ‘Work Capability
Assessment’ (WCA) WCA has been criticised for being inaccurate and
insensitive – 40% success rate for challenged decisions at appeal
Consequences of people being transferred onto the wrong benefit are serious
Overview of WR BillWhat’s in the Bill Housing Benefit Under-occupation of
social housing ESA Disabled Living
Allowance Household benefit cap
Child maintenance Conditionality Sanctions Appeals Social Fund
Universal Credit UC is a much needed and welcome change with a good rationale Dual aims of simplification and increased work incentives Introduced in October 2013 for new claimants and will be paid
monthly using ‘real time’ PAYE system Combines in and out of work means-tested benefits to create
one single application, one single payment, one withdrawal rate (65%), assessed and paid on a household basis
Basic allowance for adults with additions for children, disability, housing costs and caring
New conditionality regime: 4 levels Earnings disregards will encourage “mini-jobs” Government commitment: no existing claimants will
experience a reduction in cash terms following introduction of UC
Universal Credit – key delivery issues
Purse to walletBudgetingInternet useIT system
Welfare Reform Bill - key benefits issues
Passported benefitsChildcareCouncil Tax BenefitHousing (Housing Benefit, social housing)Social FundBenefits cap
Winners and losers Cash protection at the point of transition Official winners and losers Losses occur before UC introduced Official losers:
– Working families– Self employed– Those in areas of high housing costs– Large families– Second earners
All lose out but more in London
-£6,000 -£4,000 -£2,000 £0
Couple - two children - 2 beds - one working
Couple - two children - 3 beds - one working
Couple - three children - 3 beds - one working
Couple - two children - 2 beds - both working
Couple - two children - 3 beds - both working
Couple - three children - 3 beds - both working
Lone parent - two children - 2 Beds
Worse off under Universal Credit (2014) compared with the current system (April 2011) if working full-time on minimum
wage, annual (£)London National
Impact on claimants Good intent being undermined by benefits cuts More uncertainty, fear and confusion?– Lower income– Changing entitlements and re-assessments– New conditionality and increased sanctions
Increased incentive to work Many critical pieces are still unclear and work
incentives may be undermined by childcare, passported benefits, etc
Greater need for independent advice and support
Role of local partners Scrutiny: monitoring impact of reforms
and performance of Work Programme and Jobcentre Plus
Aligning local provision: local projects, childcare, health, housing, skills, advice
Information and advice: jobs, skills, welfare and money advice
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