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
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 familiesFerret Information Systems 20/03/11
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 rateFerret Information Systems 20/03/11
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
Main Benefits Related CSR Measures - 1 Capping benefits at median earnings where no DLA or WTC Child Benefit withdrawn from higher rate taxpayers Tax Credits childcare costs reduced from 80 per cent to 70 per cent Working Tax Credit hours change for couples Basic and 30 hour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 2012-13Ferret Information Systems 20/03/11
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
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 PaymentsFerret Information Systems 20/03/11
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
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
Combined Budget & CSR SavingsFerret Information Systems 20/03/11
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
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.
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 (?)
PIP Personal Independence Payment to replace DLA in 2013 / 2014 Consultation closed on 14 February 2011. Working age only but considering pensioners and children
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.
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.
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.
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
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 mentionedFerret Information Systems 20/03/11
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
Example 1 – Couple 2 Kids Rent Net WeeklyGross 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 £684.79Ferret Information Systems 20/03/11
Example 1 – Couple 4 Kids Rent Net WeeklyGross 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
Steady State Unemployment - Owner 2 children 2011 2012 2013 2014 2014 2015 2015Unemployed £342.25 £343.85 £337.62 £333.86 £333.86 £329.09 £329.09Ferret Information Systems 20/03/11
Steady State Unemployment - Tenant 2 Children 2011 2012 2013 2014 2014 2015 2015Unemployed £358.98 £353.79 £346.45 £341.59 £341.59 £335.74 £335.74Ferret Information Systems 20/03/11