welfare reform and the new government paul treloar november 2015

Welfare reform and the new governmentPAUL TRELOARNOVEMBER 2015

Programme

• Previous reforms and state of play• Welfare Reform and Work Bill• Localism and devolution• Questions throughout

Where have we come from?

• Universal credit launched 2013• Replacing:– Income support– Income-based jobseeker’s allowance– Income-related employment and support

allowance– Housing benefit– Child and Working Tax Credits

Key features

• Make work pay• Make system simple• Reduce administration/fraud and error• Increase fairness• Digital by default• Real-time information

Universal credit numbers

• 141,000 people were on the universal credit caseload as at 8 October 2015

• 45,827 (or 32.5 per cent) were in employment• 95,177 (or 67.5 per cent) were not in employment• Originally conceived that by April 2014, no new

claims for “legacy” benefits• Various aspects already introduced separately

UC Gateway 1• In order to claim UC in a national expansion area, a claimant must :

– be aged between 18 years and 60 years and six months;– be single;– be a British citizen who has resided in the UK for two years without

leaving for a continuous period of four weeks or more;– possess a national insurance number and bank account (including a

credit union account);– have no more than £6,000 capital;– declare that s/he does not expect to earn more than £338 in the

month after the claim is made.

UC Gateway 2Additionally, a claimant must not:• be pregnant nor have been pregnant in the 15 weeks prior to making a UC

claim;• be in possession of (or be waiting for) a ‘statement of fitness for work’;• have been found to have a limited capability for work, unless this decision has

subsequently been overturned;• be entitled to employment and support allowance (ESA), JSA, income support

(IS), incapacity benefit, disability living allowance, severe disablement allowance or personal independence payment (PIP);

• be waiting for a decision concerning ESA, JSA, IS, housing benefit or tax credits;

• be appealing a decision concerning entitlement to ESA, JSA or IS;

UC Gateway 3Additionally, a claimant must not:• have children, be an adopter or a foster parent or be liable to pay child support

maintenance;• be a carer for a disabled person (other than as a voluntary or paid employee);• be self-employed or intend to become self employed in the month after the UC claim

is made;• be a student or intend to become a student in the month after the UC claim is made;• be a person with an appointee, deputy or receiver acting on her/his behalf;• be a company director or member of a limited liability partnership;• be homeless;• own her/his home (or part of it);• live in supported accommodation;• live with a member of the armed forces (including the reserves and those away on

military duty).

Work incentives?

• Work allowances (or income disregards) are/were key aspect of making work pay

• Originally set between £794 and £111 per month, depending on circumstances

• From April 2016, only two - £397 and £192• For people without children, no work allowance i.e.

whole earnings taken into account, subject to taper (65% or 75%???)

Payment problems?

• 7 waiting days at start of UC claim• 4 week assessed income period• 7 day period to calculate and make first payment• Therefore, at least 42 days before receive first UC

payment• Can receive advance payment up to 4 days before

first payday• Monthly in arrears thereafter

Next stage of UC roll-out

• UC gateway in 509 Jobcentres/274 local authorities (out of 714 JC’s/407 LA’s) currently

• From May 2016, 5 new Jobcentre Plus areas a month will accept new UC claims for all households, as part of full digital service

• From 2017, this is intended to increase to 50 Jobcentre areas a month

• National migration starts in 2018• Full national UC service by 2020/2021???

Increased conditionality 1

• Sanctions regime ramped up October 2012• Total number of adverse JSA sanction decisions

since is 1,824,777:• 1,036,031 were low level sanctions;• 628,469 were intermediate level sanctions;• 158,775 were high level sanctions; and• 1,501 were sanctions where the level was not

applicable/not recorded.


• Low level sanctions - 412,153 were a first sanction, 106,515 a second sanction and 88,632 a third sanction or more;

• Intermediate level sanctions - 339,371 were a first disallowance, 77,022 a second disallowance and 34,730 a third disallowance or more; and

• High level sanctions - 132,363 were a first sanction, 8,584 a second sanction and 2,549 a third sanction or more.


• 433,492 decisions were reviewed - in 245,660 cases, decision was overturned;

• 67,732 decisions underwent a mandatory reconsideration - in 20,154 cases, decision was overturned; and

• 43,350 were appealed - in 9,532 cases, decision was overturned.

Increased conditionality 5• Total number of adverse ESA sanction decisions was 70,452:

– 11,238 applied for failure to attend a mandatory interview; and– 59,219 applied for failure to participate in work related activity.

• 49,269 decisions were reviewed - in 21,831 cases the decision was overturned;

• 2,109 decisions underwent a mandatory reconsideration - in 1,288 cases the decision was overturned; and

• 568 decisions were appealed - in 185 cases the decision was overturned.

Hardship payments 1

• Where someone is sanctioned, they can apply for hardship payment

• JSA – “vulnerable group” – day 1• Otherwise – after 14 days• Payment reduced by 40% or 20% if children

Hardship payments 2

• ESA – all claimants treated as “vulnerable”• Therefore, payments from day 1• 60% of standard allowance plus any

additional components e.g. work-related activity component

Hardship payments 3

Mandatory reconsideration 1

• Introduced from October 2013 for DWP benefits and• From April 2014 for HMRC tax credits• Require claimants to undergo review of initial

decision before appeal• Fewer appeals against DWP decisions received by

HMCTS in April-June 2014 (30 per cent lower than last quarter, 86 per cent lower than the same period in previous year).

Mandatory reconsideration 2

Personal Independence Payment• Replacing Disability Living Allowance for working age adults• 49 per cent of new claims for personal independence

payment (PIP) are successful• For reassessment DLA claims (normal rules) 76 per

cent successful - excluding withdrawn claims• At the end of July 2015, 111,500 PIP claims were

reassessment claims from DLA - 21 per cent of the total PIP caseload

• Medical assessments by Atos and Capita

Work Capability Assessments

• Current backlog of ~600,000 cases• Atos withdrew from WCA contract in February 2015• Maximus took over responsibility from March 2015• New rules preventing payment on reclaims where

previously assessed as fit for work• Employment and support allowance claimant count

remains broadly the same

Benefit cap 1

• Currently £26,000 p/a or £500 p/w for couples and lone parents

• For single people, cap is £18,200 p/a or £350 p/w• 23,400 households had their housing benefit

capped in August 2015• Since introduction in April 2013, 66,900

households had housing benefit capped

Benefit cap 2

• DWP highlights that 23,400 households in August 2015 is an increase of 4 per cent since May 2015

• 60 per cent had between one and four children and 34 per cent had five or more children;

• 64 per cent constituted a single parent with child dependants; and

• 83 per cent were capped by £100 or less per week

“Bedroom tax” and council tax support

• 14% cut in Housing Benefit (HB) for 1 spare room• 25% cut in HB for 2 or more spare rooms• 380,000 families been affected by “Bedroom Tax” (2.3

million families by council tax support cuts) • 270,000 families affected by both • 70% affected by Bedroom Tax seen council tax support cut• 11% affected by council tax support cuts also been affected

by Bedroom Tax• Only 4% households have moved

Discretionary Housing Payments (DHP)

• DHP funding increased in 2013/14 to assist with impact of welfare reforms to £180m

• Overall funding for 2015/16 is £125 million• Comprises of four separate areas of support: – Core funding (£15m) – Local Housing Allowance (LHA) (£25m)– Removal of the Spare Room Subsidy (RSRS) (£60m) – benefit cap (£25m)

• July budget announced £800m over next five years to help claimants to “adjust” to reforms

New government, new welfare reforms

• Conservative manifesto on welfare pledged to:– Cut working-age social security spending by £12bn– Cap overall welfare spending over the course of the next parliament– Freeze value of working age benefits for two years from April 2016– Deliver universal credit reform of most existing welfare benefits– Lower the household benefits cap from £26,000 to £23,000– Reduce benefits for drug-addicted or obese claimants who refuse

medical treatment– Return-to-work support for unemployed claimants who are mentally ill

Welfare Reform and Work Bill 2015

• Currently in House of Lords• Introduces proposals for government to report on

(clauses 1-3):– Progress towards full employment– Apprenticeship targets– Troubled Families programme• Descriptions• Measuring progress


• Child Poverty Act 2010 to be renamed Social Mobility Act 2010 (clauses 5,6) and all references to child poverty excised

• SMA 2012 has targets related to:– Number of children in workless households– Long-term workless households– Educational attainment of disadvantaged children

• With other targets related to absolute/relative low income, persistent poverty etc repealed


• Benefit cap to be reduced from April 2016? (clauses 7,8)• In Greater London, benefit cap will be:– £23,000 (couples, lone parents) £3k/11% cut– £15,410 (single people) £2,790/15% cut

• Everywhere else, benefit cap will be:– £20,000 (couple, lone parents) £6k/23% cut– £13,400 (single people) £4.8k/26% cut

• SoS can vary cap up or down in future


• Benefit and tax credit rates frozen for four years from April 2016 (clauses 9,10)

• 4.8% real cut (IFS)• Reduces spending by £4b by 2020• 13 million families lose £260 a year on average (7.4 million

in work, losing £280 a year on average)• Comes on top of 3 years of 1% nominal increases from

April 2013• Total real cut of 8% between 2013 and 2020


• Family element of Child Tax Credit (CTC) abolished from April 2017 (clause 11)

• Individual elements for children restricted to maximum of two children born after April 2017 for CTC

• Similar rules for Universal Credit but date of birth doesn’t matter i.e. whether born before or after April 2017 (clause 12)


• Work-related activity component of Employment and Support Allowance (ESA) abolished (clause 13)

• Limited capability for work element of Universal Credit abolished (clause 14)

• Understand this to be introduced from April 2017• Effectively, anyone with limited capability for work

claiming ESA/UC will be paid same amount as if claiming Jobseeker’s Allowance

Welfare Reform and Work Bill 7UC work conditionality (clause 15)

Current rules• Responsible carers for:• 3-4 y/o children – work

preparation only• 2 y/o children – work-

focused interviews only• 1 y/o children – no work-

related requirements

New rules• Responsible carers for:• 3-4 y/o children – all work-

related requirements• 2 y/o children – work-

focused interviews and work preparation activity

• 1 y/o – work-focused interviews


• Mortgage interest payments (clause 16)• Currently paid interest-only payments with key

means-tested benefits at standard interest rate• Claimants of income support, income-based

jobseeker’s allowance, income-related employment and support allowance, pension credit, and universal credit will receive support for mortgages through loans secured against their homes


• Social housing rents (clause 19)• From April 2016, levels of social rents must

be reduced by 1% compared to previous year for next 4 years

• Various exceptions for low cost home ownership accommodation and some shared ownership accommodation

Is that it?

July 2015 Budget measures 1

• Number of other measures announced in July Budget not contained in Bill:

• Cuts to tax credits threshold i.e. amount of income disregarded when calculating entitlement

• Increase in tax credit taper rate from 41 per cent to 48 per cent i.e. how quickly tax credits withdrawn as income rises

• Both measures defeated by recent Lords vote


• Universal credit work allowances reduced/removed

• Social housing income limits – tenants with household incomes of £40,000 and above in London and £30,000 and above elsewhere will be required to “Pay to stay” by paying near-market rents

• Lifetime tenancies to be reviewed


• Automatic housing benefit/support entitlement for young people aged 18-21 y/o will be removed from April 2017

• Exceptions for vulnerable young people, those who cannot live at home with parents, and those who have been working for 6 months or more prior to making a claim, who will be able to receive housing support for up to 6 months whilst they look for work


• From September 2017, free childcare entitlement will be doubled from 15 hours p/w to 30 hours p/w for working parents of 3 and 4 y/o children

• National minimum wage for over 25 y/o rises to £7.20 p/h in April 2016 and £9 p/h by 2020

• Income tax threshold rises to £10,800 from April 2016 and £12,500 by 2020

• High rate income tax threshold rises to £42,385 from April 2016 and £50,000 by 2020

What’s ahead? 1

• Housing benefit backdating cut to 1 month from 6 months from April 2016

• Family element of HB abolished from April 2016• EEA migrant workers denied in-work benefits and tax

credits for first 4 years in the UK?• Difficult to implement without similar restrictions to

UK nationals• Further reforms of ESA???

What’s ahead? 2• To pay for overturned tax credit proposals, IFS highlight possible options for HB:• Abolish HB for under-25s (estimated savings £750m). Under-21s on JSA already

set to lose entitlement. Savings assumes exemptions for families with children.• Reduce maximum HB for all social tenants from 100% to 90% of rent (£1.6bn).

Effectively this is bedroom tax on all tenants. Also, this includes pensioners.• Reduce maximum HB for all tenants from 100% to 90% of rent (£2.5bn). This

savings estimate includes pensioners – they get £6.8bn in housing benefit so exempting them reduces saving by £680m.

• Reduce maximum HB entitlements for social sector tenants to LHA rates (£700m). IFS estimates that 750,000 social tenants have rents higher than the local LHA rate and would lose an average of £1,000 a year each.

• Reduce LHA rates from the 30th to 20th percentile (£400m). This would squeeze the options for tenants on housing benefit even further.

Localism

Localism 1

• Since April 2013, local authorities have been given responsibility for provision of:– Council tax reduction (CTR) schemes– Local welfare assistance schemes (LWAS)

• Evidence emerging that more households needing to contribute to CTR

• Evidence emerging that LWAS are closing/reducing entitlements drastically

Localism 2

• Half a million people summoned to court in 2014 over unpaid council tax

• Almost three million people in England were taken to court by local authorities in 2013-14 because they had not paid council tax.

• This was an increase of more than 25 per cent on the previous tax year

Localism 3

• LWAS funding was to be reduced to £0 for 2015/16 through CSR settlement

• CPAG intervened in judicial review• Government subsequently added £74m to

budget (although suspect this was taken from DHP budget)

• What will be funding for 2016/17 and beyond?

Localism 4

• This year, we have come across:–At least 12 LWAS closed completely– Same number who run “zombie” schemes– Increasing number making access difficult,

through policies/procedures e.g. online claims only, no crisis grants, etc

Rise in foodbank use 1• Trussell Trust says foodbanks gave 506,369 three day emergency food

supplies in April- September compared to 492,641 in same period last year, with 185,218 supplies going to children.

• The Trust say that:– on average, people needed 1.7 foodbank referrals in six month period, or

estimated 298,000 people are likely to have been unique users;– benefit delays and changes remain the biggest cause of foodbank use

accounting for 43 per cent of total referrals (29 per cent benefit delay and 14 per cent benefit changes), a slight reduction on last year’s 44 per cent; and

– low income has risen slightly as a referral cause from 21 per cent to 22 per cent

Rise in foodbank use 2Report found that, while money is tight for many reasons, including bereavement, relationship breakdown, illness or job loss, issues such as sanctions, delays in benefits decisions or payments, or being declared ‘fit for work’ led people to turn to food banks.

Around a third of foodbank users in the sample were waiting for a decision on their benefits.Between 20 and 30% had their household benefits reduced or stopped because of a sanction

Looking ahead

The future???

• Complex system of new, legacy and devolved/localised benefits for remainder of this Parliament at least

• Increased discretion in decisions• Increased homelessness/destitution and demands

on local support services• More pressures on local authorities with less £££’s

to meet demands

Advice and information

• Advice services under huge pressures of:– Reduced funding since legal aid cuts– Increased demand due to reforms

• Challenge of digital by default• Scope for online information, email, and

telephone advice to fill some gaps• But face-to-face provision remains crucial

(Un)-Employment

• Employment rate rising – unemployment rate falling

• Diminution of job security• Rise in zero hour contracts• Rise in part-time work• Cycling in and out of low-paid work

Pensioners

• To date, pensioners largely shielded from any changes, reforms, or cuts

• Triple lock state retirement pension• Various other benefits, e.g winter fuel

payments, free bus passes, free TV license, etc also provided

What next?

welfare reform and the new government paul treloar november 2015

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