Implications of the Universal Credit on prospective learners

1. Universal Credit
Welfare Reform 2015

2. Rationale for Change
‘The current system of benefits provides targeted support to
meet specific needs, but the net effect is a complex array of
benefits which interact in complicated ways, creating perverse
incentives and penalties, confusion and administrative cost. This
has the effect of preventing many in our society from seeing
work as the best route out of poverty. It also increases the risk of
error and the opportunities for fraud. Welfare dependency has
become a significant problem in Britain with a huge social and
economic cost.”
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3. Proposed Principles of Welfare
Reform• ensure that people can see that the clear rewards from taking all types of work outweigh the
risks;
• further incentivise and encourage households and families to move into work and to increase the
amount of work they do, by improving the rewards from work at low earnings, and helping them
keep more of their earnings as they work harder;
• increase fairness between different groups of benefit recipients and between recipients and the
taxpayer;
• continue to support those most in need and reduce the numbers of workless households and
children in poverty and ensure that interactions with other systems of support for basic needs are
considered;
• promote responsibility and positive behaviour, doing more to reward saving, strengthening the
family and, in tandem with improving incentives, reinforcing conditionality;
• automate processes and maximise self service, to reduce the scope for fraud, error and
overpayments. This could include a responsive and immediate service that saves the taxpayer
significant amounts of money and ensures compliance costs for employers, at worst, no worse
than under the current system;
• And ensure that the benefits and Tax Credits system is affordable in the short and longer term.
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4. Universal Credit
Objectives
• Tackle complexity of the system
• Incentivise work
• Reduce worklessness and act as
a route out of poverty
• Protect most vulnerable
• Fairness to those claiming and
to tax payer
• Prepare client for work
whenever possible
• Promote take up of benefits
• Reduced fraud, overpayments
and administration costs
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5. Which Clients are likely to be
Affected?
• 2.7 million households(mostly
those who are workless) will see
no change in income.
• Some will gain (2.8 million
households).
• Some will lose (2 million
households) but there will be
transitional protection to ensure
no immediate cash losers. The
value of this transitional
protection will not be uprated
over time though so will gradually
be eroded.
• 80% of those who gain will be
in the bottom 2/5 of income
distribution.
• ‘will lift around 900,000
individuals out of poverty’.
• Disabled claimants and lone
parents have a much higher
earnings disregards under
Universal Credit.
• However disabled people are
likely to lose out through the
lack of a severe disability
premium equivalent and the
inability to be classed(and
paid) as both a cater and
having limited capability for
work at the same time.
DWP Universal Credit Impact Assessment October 2011
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6. Applicants
Basic Conditions*
These apply for single people and couples.
• to be 18 or over
• to be under state pension credit age
• to be in Great Britain
• to not be in education
• to have accepted a claimant commitment
* Section 4 Welfare Reform Act 2012
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7. Applicants
Both members of a couple need to meet these basic conditions
unless*-
If one member of the couple:
• is over State Pension Credit age or in full-time education then
they are to be treated as though they were a standard couple
for Universal Credit purposes;
• is under 18 or treated as not resident in Great Britain then
that ‘ineligible adult’ is to be ignored for the purposes of
calculating the Universal Credit Maximum Amount - although
their capital, income and earnings shall still be taken into
account;
or
• fails to sign a Claimant Commitment then subject to a ‘cooling
off period’ the couple will not be entitled
*Reg 3-5 SOCIAL SECURITY The Universal Credit Regulations 2013
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8. Under 18 Applicants
Some age 16 and 17 year olds will still qualify*-
• those with dependent children - lone parents or couples sick or
disabled young people who have satisfied the Work Capability
Assessment or are waiting to be assessed with medical evidence
• those who are caring for a severely disabled person
• young women who are pregnant between 11 weeks before and 15
weeks after the expected date of confinement
• young people who are without parental support(either has no
parent, estranged from parents, serious risk to mental or physical
health or risk of significant harm if the person lived with their
parent(s), parents can’t support because of physical/mental
impairment, in prison or is prohibited from entering Great Britain).
*Reg 8 SOCIAL SECURITY The Universal Credit Regulations 2013
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9. UC and Education
Exceptions to the requirement not to be receiving education*-
• the person is undertaking a full-time course of study or training which is
not a course of advanced education, is under the age of 21, or is 21 and
reached that age whilst undertaking the course, and is without parental
support.
• the person is entitled to attendance allowance, disability living
allowance or personal independence payment and has limited capability
for work.
• the person is responsible for a child or a qualifying young person.
• the person is a single person and a foster parent with whom a child is
placed
• the person is a member of a couple, both of whom are receiving
education and the other member is responsible for a child or qualifying
young person, or a foster parent with whom a child is placed; or the
person—(i) has reached the qualifying age for state pension credit, and
(ii) is a member of a couple the other member of which has not reached
that age.
*Reg 14 SOCIAL SECURITY The Universal Credit Regulations 2013
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10. Assessment Period
Earnings are to be assessed over a monthly period.
• Generally changes to the Maximum Universal Credit take place from the
beginning of the assessment period. For example, a change in rent liability, a
child being born/leaving will apply for the whole period even if the change takes
places near the end of the period.
• The ‘Income’ for the period is the actual income gained in the assessment
period.
• PAYE will be expected to gather wage figures so these can be monitored
automatically.
• UC paid monthly in arrears.
Some exceptions-
• Any changes of circumstance that lead to an increase in the maximum Universal
Credit need to be declared(online/ in writing/ by telephone) before the end of
the assessment period (otherwise they won’t be counted until the next month
after the period).
• A decrease or increase in other benefits affecting the total amount of Universal
Credit, for example Job Seekers Allowance(contribution based) ceasing to be
paid - this will always apply from the start of the assessment period.
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11. Entitlement
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12. Universal Credit Elements
Childcare
• 70% of childcare costs to a maximum after this taper is applied
of £532(one child) and £910(2+ children).
Premiums and equivalents Elements
the intention is to simplify, for example-
• A claimant will not be able to claim both the disability and
carer element
• The support element will increase much more to eventually
around £77.30 to align rates paid for disabled children and
adults
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13. Housing Element
Housing Costs for those Renting
Similar to eligible rent rules under housing benefit.
Housing Costs for Owner Occupiers
Similar to eligible rent rules under income support but no housing costs will be included if client has any
earned income.
Housing Costs Changes
There are a number of changes aimed at simplifying some of the more complex elements of the current
schemes and improving work incentives;
• flat-rate deductions will be applied in respect of non-dependants living in the claimant’s household.
No such deductions will be made in owner—occupier cases;
• no rooms will be allocated for boarders or lodgers in calculating the appropriate size of
accommodation for renters, but income from boarders and lodgers will be disregarded;
• the housing costs element can continue in payment for those expected to remain in prison for up to
6 months. This replaces the Housing Benefit rules which relate to 3 month absences for prisoners;
• owner-occupiers will continue to serve a waiting period before support for mortgage costs is
provided, but, unlike the current arrangements, claimants will re-serve this waiting period where
there is a break in their award.
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14. Earning Disregard*
* Disregards are currently under review for next financial year.
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15. Income Tariff
• Same rules as per other means tested benefits i.e. upper
capital limit of £16,000. No Universal Credit is payable if
capital is above the limit.
• Lower capital limit of £6,000: Between the two, tariff income
is calculated as £4.35(per month) per £250 above the lower
earnings limit.
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16. Income-Earnings and Disregards
65% of earnings are taken into account after income tax, national insurance,
100% of pension contributions and earnings disregards. SSP, SMP, SPP,
additional SPP and statutory adoption pay, to be counted as earnings.
The highest disregard(work allowances) out of the following will apply-
• single people and couples without children;
• lone parents with one or more children;
• couples with one or more children; and
• disabled singles or couples
• There is a lower set of disregards if someone has housing costs included.
• Under the current system on Income Support the earnings disregard for a
lone parent is £20 a week. Any earnings over that are deducted pound for
pound.
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17. Unearned Income
Unearned income is taken into account in full. This is specified as most earnings and replacement benefits such as,
• Contribution-based jobseeker’s allowance,
• Contributory employment and support allowance,
• Carer’s allowance,
• Bereavement allowance,
• Widowed mother’s allowance,
• Widowed parent’s allowance, widow’s pension,
• Maternity allowance,
• Industrial injuries benefit, excluding any increase for constant attendance needed and for exceptionally severe disablement
• Retirement pension income,
• Foreign benefits,
• Spousal maintenance,
• Student income,
• Training allowances,
• The maintenance element of sports award,
• Cash in lieu of concessionary coal,
• Income from an annuity, other than retirement pension income (unless disregarded),
• Income from a trust (unless disregarded),
• Income that is treated as the yield from a claimant’s capital,
• Capital treated as income
Those benefits not taken into account are,
Disability Living Allowance, Attendance Allowance, Child Benefit and Winter Fuel Allowance.
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18. How it Works – An Example
John age 35 single, renting from the council £433.18 per month, no income.
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19. How it Works
John then gets a job paying £520 per month after tax, NI and pension contributions.
His Universal Credit earnings threshold is £111.00 per month.
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20. Permitted Work and the LCW
Element
This term disappears under Universal Credit. The question is- as a client who is sick
starts to work, at what point does the LCW get taken away?
The following rates come into effect on October 201 4(weekly):
• Age21+, £6.5O an hour x16= £104
However there are exceptions when the LCW element is not removed automatically,
• the client is entitled to Attendance Allowance, Disability Living Allowance or
Personal Independence Payment(although the DWP could then decide to
reapply the WCA)
or
• the client has already been assessed as having limited capability for work
(although the DWP could then decide to reapply the WCA)
or
• the client is ‘treated’ as having as having LCW or LCWA for example undergoing
cancer treatment or is terminally ill.
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21. Benefit Cap
The benefit cap is a restriction on the total amount of Benefit a non-working household can
receive to broadly the level of the average earned income of working households, after tax and
national insurance contributions have been deducted.
UC and Benefit Cap
UC is similar to that used with Housing Benefit from April 2013 but with monthly amounts. The
differences are that clients with mortgages could now be caught by the Cap.
The cap is
• £2167 per month for joint claimants/lone parents
or
• a single claimant or £1517 per month for a single claimant.
The benefits that make up this total benefit income cap are-
• Bereavement Allowance, Carers Allowance, Child Benefit, Employment and Support
Allowance, Guardian’s Allowance, Jobseeker’s Allowance, Maternity Allowance, Universal
Credit, Widowed Mother’s Allowance, Widowed Patent’s Allowance, Widow’s Pension.
Note all other benefits do not count including council tax benefit (or the discretionary scheme)
or the childcare element of Universal Credit.
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22. Alternative Payment
Arrangements
For some claimants who genuinely cannot manage the standard
monthly payment and where there is a risk of financial harm to the
claimant or their family.
This might include,
• Paying housing costs (rent) directly to landlords.
• Making more frequent than monthly payments.
• Splitting payment of an award between partners.
This can be triggered if business knowledge, the claimant, their
representative, their caseworker, and/or their landlord as a result of
the build up of rent arrears. To safeguard the claimant’s home, a
landlord can notify Universal Credit asking for the housing cost
element to be paid direct to them when a rent arrears ‘trigger’ has
been reached.
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23. Alternative Payment Arrangements
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24. Proposed Sanctions Structure
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