Moving into work: benefits, tax credits and universal credit

Mark Willis, Child Poverty Action Group in Scotland

Deven Ghelani, Policy in Practice

Integration and alignment: benefits and work

• In the middle of a huge change to the social security system - support for people in or out of work

• Effect of moving into work currently depends on circumstances, working hours, income and postcode

• Disabled people, lone parents and families with children facing numerous changes and risk of poverty

• Will universal credit solve problems, or create new ones?

Moving into work: staying on income support (IS) or jobseeker’s allowance (JSA)

• IS: lone parents with child under 5, carers

• JSA: available for and actively seeking work

• Working under 16 hours a week (or partner working under 24 hours a week)

• Low wages can be topped up by IS or JSA

• Better off by £5 a week (£10 a week for couple, £20 a week for lone parent)

Moving into work: staying on employment and support allowance (ESA)

• Disabled/long-term health condition

• Permitted work: under 16 hours a week and earning less than £115.50 a week

• Better off by full amount of earnings

• 52 week limit for work-related activity group – set to be abolished

• Unlimited period for support group/ supported work

Moving into work: claiming working tax credit (WTC)

• Working at least 16 hours a week if lone parent, disabled worker, or aged 60+

• Working at least 24 hours a week for a couple with children

• Working at least 30 hours a week for others aged 25+• Initial award based on previous tax year income• Basic element £1,960 a year, couple/lone parent £2,010,

30 hour element £810, disabled worker £2,970• Reduced by 41% of gross income over £6,420

Moving into work: claiming universal credit (Gateway areas)

• Single jobseekers without children

• Stay on UC if circumstances change

• No work allowances unless have children or limited capability for work

• Award reduced by 65% of net earnings

• 6 week wait before first payment

Moving into work: claiming universal credit (full service areas)

• All other new claimants (eventually) – currently only East Lothian and Inverness

• Work allowance for people with children or limited capability for work:– £192 a month if housing costs included in award– £397 a month if no housing costs

• Award reduced by 65% of net earnings above work allowance

UC FULL SERVICE AREAS (SCOTLAND)28 March

2016

East Lothian Council Musselburgh Job Centre

29 June

2016

Highland Council Inverness Job Centre

November

2016

Inverclyde Council,

East Dunbartonshire

Council

Port Glasgow Job Centre,

Greenock Job Centre

Kirkintilloch Job Centre

March

2017

Midlothian Council Dalkeith Job Centre,

Penicuik Job Centre

UC: In-work conditionality

• Expected to show that looking for and available more work, up to 35 x minimum wage a week

• Currently on a trial basis – must be notified if chosen to take part (random)

• Otherwise, conditionality only applies if earning less than £78.10 a week (= JSA + £5)

• Sanctions only as a ‘last resort’

Moving into work: help with childcare costs

• Housing benefit: 100% disregard of childcare costs from earnings

• Working tax credit: 70% of childcare costs included

• Universal credit: 85% of childcare costs included

• Tax-free childcare (from early 2017): 20% of childcare costs paid – but cannot be entitled to tax credits or universal credit at the same time

Moving into work: self-employment

• New Enterprise Allowance available through DWP• Weekly allowance paid for up to 26 weeks (up to a

total of £1,274)• Loan to help with start-up costs• Working tax credit: organised and regular, on a

commercial basis, with a view to making a profit• Universal credit: ‘minimum income floor’ applied

after first year = assumed earnings (NLW x hours)

Moving into work: skills

• Full-time students – excluded from most benefits unless disabled or responsible for child

• Part-time students – expected to give up or rearrange course to look for work

• Volunteers – expected to give up or rearrange voluntary work to take up paid work

• Training – in some cases, may be worse off or at risk of sanctions

Discussion

• How confident are you about the support available to people moving into work?

• What do you think is the impact of these and other welfare reforms on individuals?

• Are you ready for universal credit? Is universal credit ready?

• How far are we from achieving an integrated, aligned system?

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