3. Future Changes to the Benefits System
The government made three sets of announcements about
changes to the benefits system.
The Emergency Budget of June 22nd introduced net cuts to
the welfare system of £11bn a year by 2015.
The Comprehensive Spending Review of October 20th
added another £7bn to that.
The Welfare Reform Bill based on the White Paper
Universal Credit: welfare that works published in
November introduces a system which will replace the
current mix of benefits for those of working age.
Other announcements about ESA and replacing DLA
4. Main Benefits Related Budget Measures - 1
Benefits and tax credits to be up-rated by the
consumer price index (CPI)
From 2012 pensioner benefits will rise in line with
earnings. – Triple Guarantee
An annual Child Element Tax Credit increase of
£150 above CPI in 2011-12 and £60 above CPI in
2012-13
Child benefit frozen for the next three years
Withdrawal of Child Tax Credit for higher income
families
Ferret Information Systems 20/03/11
5. Main Benefits Related Budget Measures - 2
Baby element of Child Tax Credit abolished from
2011
Tax Credits taper rises from 39% to 41%
Introducing a £2,500 disregard for households with
a drop in income
Reducing the income disregard for increased income
Over-fifties returning to work element abolished
Local Housing Allowance (LHA) caps and
restriction to 4 bedroom rate
Ferret Information Systems 20/03/11
6. Main Benefits Related Budget Measures - 3
LHA to be set at the 30th percentile
CPI linking of LHA
Non-dependant deductions to be increased
Social rented sector limiting rents
HB reduced to 90 per cent of assessed entitlement
after 12 months of receiving JSA
A medical assessment for Disability Living Allowance
from 2013 for new and existing claimants.
Ferret Information Systems 20/03/11
7. Main Benefits Related CSR Measures - 1
Capping benefits at median earnings where no DLA
or WTC
Child Benefit withdrawn from higher rate taxpayers
Tax Credits childcare costs reduced from 80 per cent to 70
per cent
Working Tax Credit hours change for couples
Basic and 30 hour elements of the WTC are being frozen for
three years
Child element being increased by a further £30 in 2011-12
and £50 in 2012-13
Ferret Information Systems 20/03/11
8. Main Benefits Related CSR Measures - 2
Time limiting contributory ESA for those in the Work
Related Activity Group to 1 year
Increasing the age threshold for the Shared Room Rate in
Housing Benefit from 25 to 35
Council Tax Benefit cut by 10 per cent and
localising it
Removing the mobility component of Disability Living
Allowance from people in residential care, except for those
who are self-funding (?)
Ferret Information Systems 20/03/11
9. Main Benefits Related CSR Measures - 3
Freezing the maximum Savings Credit award in Pension
Credit for four years
Extending for a further year the temporary change to the
Support for Mortgage Interest scheme
No announcement has been made about extending
the two year limit of SMI for JSA claimants which
first affected people in January 2011.
Making permanent the temporary increases to Cold
Weather Payments
Ferret Information Systems 20/03/11
10. Main Benefits Related CSR Measures - 4
Reiterated their promise to uprate the basic State Pension
by a triple guarantee of earnings, prices, or 2.5 per cent,
whichever is highest
Speed up the pace of State Pension Age equalisation for
women from April 2016 so that Women‟s State Pension Age
reaches 65 in November 2018.
The State Pension Age will then increase to 66 for both
men and women from December 2018 to April 2020.
Ferret Information Systems 20/03/11
11. Main Benefits Related CSR Measures - 5
Educational Maintenance Allowance is to be “replaced” by
“locally managed discretionary funds” to target support
Social Housing Landlords will be able to set rents between
social and market levels for new tenants. They will also be
able to offer fixed-term tenancies rather than agreements
for life.
Ferret Information Systems 20/03/11
13. Welfare Reform Bill
The NEW SIMPLE SYSTEM which will start, in parallel,
from 2013 (subject to HMRC getting their IT to work)
The needs and income rules will be very much like
today’s benefits BUT the calculation & taper will be
very different
No clear division between unemployment and
employment.
The amount of earnings which people are allowed to keep
before it affects their benefits – will be abolished for single
people but made much larger for some other groups. It will
however be reduced sharply for those who need help with
their housing costs
14. Welfare Reform Bill- 2
Help with mortgage interest for home owners will
be available to all instead of, with the current
system, being limited to those ‘not in full-time
work’. (But Govt. trying to do a deal with lenders)
Total amounts of benefit, for those not in receipt of DLA,
war widows or receiving Working Tax Credit, will be
limited to the median level of earnings of working families
– about £500 for families, £350 for single people.
Self-employed people will be assumed to have a minimum
level of earnings.
15. Welfare Reform Bill- 3
Transitional protection will make sure that nobody
getting benefits will move onto a lower amount when
transferring to Universal Credit
The old and new systems will run in parallel for some
years from 2013
One standard deduction rate of 65%
Housing support for tenants and Council Tax Benefit
will become much more localised and variable from
place to place. Councils will be able to operate their
own CTB rules, with constraints (?)
25. PIP
Personal Independence Payment to replace DLA in
2013 / 2014
Consultation closed on 14 February 2011.
Working age only but considering pensioners and
children
26. PIP - 2
For Personal Independence Payment there are no
automatic entitlements, other than the special rules for
people who are terminally ill. Instead, each case will be
looked at individually, considering the impact of the
impairment or health condition, rather than basing the
decision on the health condition or impairment itself.
The new assessment will focus on an individual‟s ability to
carry out a range of key activities necessary to everyday life.
Information will be collected from the individual, as well as
healthcare and other professionals who work with and
support them.
27. PIP - 3
Personal Independence Payment should take greater
account of aids and adaptations. Mobility, for
example, may be assessed using a wheelchair.
Periodically review all awards. Individuals will still
be responsible for reporting changes that occur
between reviews and there will be penalties if an
individual knowingly fails to report a change that
would have resulted in a reduction in benefit.
28. PIP - 4
Government will consider how the benefit interacts
with other forms of support, for example adult social
care, and explore whether it is possible to share
information at the assessment stage and eliminate
areas of overlap.
29. Basis of examples - 1
Assessments start with the April 2011 values, rules and
rates and progress from those.
Values used are based on starting figures and then adjusted
in 3 ways:
Earnings, other incomes, tax bands etc. use current values.
Benefits which are to be up-rated by CPI in future have
their current values reduced by the cumulative year by year
difference between RPI and CPI
Benefits, and elements of benefits, which have been frozen
have their current values reduced by the cumulative RPI.
Ferret Information Systems 20/03/11
30. Basis of examples - 2
This, crudely, allows comparison of the real future values of
income with starting values.
The CPI and RPI forecast figures used are those produced
by the Office for Budget Responsibility.
Universal Credit assessment has been modelled by using
the figures in the White Paper with current values for items
not mentioned
Ferret Information Systems 20/03/11
31. Steady State Employment - Tenant 2 children
The examples mainly use a couple with two children
They are both aged 45 and have 2 children aged 8 and 10. They do not
have any childcare costs and make no pension contributions.
They pay rent of £86.54 per week which is exactly the Local Housing
Allowance (LHA) for their home (the figure is chosen to match the
mortgage interest payable in the examples for home owners)
They pay council tax of £1250 per annum
In example 1, we look at a „steady-state‟ situation where one member of
a couple works 35 hours a week for annual earnings of £10,000,
£20,000, £30,000, £40,000 and £50,000.
Ferret Information Systems 20/03/11
32. Example 1 – Couple 2 Kids Rent
Net Weekly
Gross Earnings Income Current UC Current UC
2011 2012 2013 2014 2014 2015 2015
£10,000.00 £430.01 £420.97 £414.58 £409.27 £406.24 £402.88 £400.46
£20,000.00 £438.45 £432.22 £427.62 £422.96 £443.64 £417.34 £437.79
£30,000.00 £483.88 £484.14 £479.54 £474.88 £489.41 £469.27 £483.56
£40,000.00 £612.69 £601.06 £599.98 £598.87 £598.87 £597.61 £597.61
£50,000.00 £718.49 £717.34 £684.79 £684.79 £684.79 £684.79 £684.79
Ferret Information Systems 20/03/11
33. Example 1 – Couple 4 Kids Rent
Net Weekly
Gross Earnings Income Current UC Current UC
2011 2012 2013 2014 2014 2015 2015
£10,000.00 £577.51 £567.42 £558.17 £550.51 £536.78 £541.19 £528.29
£20,000.00 £585.30 £575.21 £566.99 £559.33 £573.21 £550.01 £564.72
£30,000.00 £608.95 £611.77 £605.10 £598.31 £616.09 £590.05 £607.59
£40,000.00 £660.88 £663.69 £657.02 £650.23 £661.86 £641.97 £653.36
£50,000.00 £745.29 £743.23 £684.79 £684.79 £684.79 £684.79 £684.79
Note the larger effect of the loss of Child Benefit for
the highest earner.
Ferret Information Systems 20/03/11
34. Steady State Unemployment - Owner 2 children
2011 2012 2013 2014 2014 2015 2015
Unemployed £342.25 £343.85 £337.62 £333.86 £333.86 £329.09 £329.09
Ferret Information Systems 20/03/11
35. Steady State Unemployment - Tenant 2 Children
2011 2012 2013 2014 2014 2015 2015
Unemployed £358.98 £353.79 £346.45 £341.59 £341.59 £335.74 £335.74
Ferret Information Systems 20/03/11