Sweeping changes to welfare benefit entitlement
Posted by Denise Bodri on 12th July 2012
The Welfare Reform Act 2012
Hailed as the most fundamental reform in 60 years, the Welfare Reform Act received Royal Assent in March 2012. This new act will lead to far-reaching changes to welfare benefit entitlements and affect the amount of benefit received by claimants. The main elements of the Act are:
- the introduction of universal credit to provide a single streamlined benefit that hopes to ensure that work always pays
- a stronger approach to reducing fraud and error with tougher penalties for the most serious offences
- a new claimant commitment which aims to show what is expected of claimants and protect those with the greatest needs
- tackling abuse of the Social Fund system by giving greater power to local authorities
- changes to support a new system of child support which aims to put the interest of the child first
- introduces personal independence payments to replace the current disability living allowance
- restricts housing benefit entitlement for social housing tenants whose accommodation is larger than they need
- up-rates local housing allowance rates by the Consumer Price Index
- limits the payment of contributory employment and support allowance to a 12-month period
- caps the total amount of benefit that can be claimed
Looking at some key changes in more detail:
1. Universal Credit
This is an integrated working-age benefit. Depending on the claimant’s circumstances, the universal credit will:
- include a standard allowance (to cover basic living costs) along with additional elements for responsibility for children or young persons, housing costs and other defined needs.
- be paid to people both in and out of work, replacing working tax credit, child tax credit, housing benefit, income support, income-based job seekers allowance and income-related employment and support allowance.
- provide support for people between 18 (or younger in certain cases) and the qualifying age for state pension credit.
The aim of universal credit is to smooth the transition into work by reducing the support a person receives at a consistent rate as their earnings increase. The financial support provided by universal credit will be underpinned by responsibilities which claimants may be required to meet. The level of those requirements will depend on the claimant’s particular circumstances. Universal credit will be phased in between 2013 and 2017.
2. Benefit Cap
Regardless of the number of children in a family or the average rent in the claimant’s area, the cap will:
- be set at the average (median) net earnings for a working household, currently projected to be £500 per week (£26k per annum) for lone parents and couples with or without children, and £350 per week for single people without children.
- not include one-off payments, non-cash benefits and “passported” benefits (such as free school meals) nor will it include Council Tax Benefit and the childcare element of universal credit.
Households will be exempt from the cap if:
- a member of the household is claiming disability living allowance (DLA) or the personal independence payment, attendance allowance, constant attendance allowance, working tax credit or the support component of employment support allowance. However, this exemption does not apply if it is a non-dependent member of the household who is in receipt of DLA or attendance allowance; for example if parents are caring for an adult disabled child.
- a member of the household is a war widow or widower.
The cap will be administered through the new universal credit system. Prior to the introduction of universal credit, it will be administered by Local Authorities through housing benefit payments. The new system will be phased in from April 2013 to 2017.
3. Personal Independence Payments (PIP)
The current DLA will be replaced by the PIP. Although there will still be a mobility component and a daily living component, it is believed that the criteria for qualifying for the benefit will be stricter. From April 2013 onwards all new and existing DLA claimants will be required to undergo a medical assessment to help determine their entitlement. Currently this will not apply to children under 16 or people over 65. It is expected that people in receipt of DLA of working age will be transferred to PIP by 2016.
4. Housing Benefit
In April 2013 a cap will be introduced on the amount of housing benefit that can be paid to tenants in social housing if they are of working age and ‘under-occupy’ their home. For example, a single disabled person living in a two bedroom council or housing association property will only receive housing benefit for a one bedroom property, unless they need a non-resident overnight carer.
Housing benefit will become part of the new universal credit (see above) and people who already receive housing benefit will be transferred to universal credit between 2013 and 2017.
5. Council Tax Benefit
From April 2013 council tax benefit will be replaced by local schemes devised by district councils. The Government has indicated that older people should receive the same level of support that they currently receive, so it is expected that any reduction in assistance available in the future is most likely to be focussed on people of working age.