The Coalition Government and Welfare reform

Dave SimmondsCentre for Economic & Social

Inclusion

June 2010 Budget reforms Commitment to continuing with plan for

reassessment of all Incapacity Benefit (IB) claimants by 2014

Reforms to Housing Benefit Lone parent obligations for those whose youngest

child is 5 years from Oct 2011 Introduction of a new assessment for Disability Living

Allowance claimants Savings of £11bn per annum

Comprehensive Spending Review 2010

Changes to welfare benefits Savings in 2014-15 (£bn/yr)

Remove Child Benefit from higher rate tax payers 2.5

Limit contributory Employment and Support Allowance (ESA) to 12 months unless severely disabled

2.0

Cut spending on Council Tax Benefit 0.5

Freeze part of Pension Credit 0.3

Benefit cap of £500/wk (£50/wk if single no kids) 0.3

Cut LHA for single people aged 25 - 35 0.2

Cut DLA for people in care homes paid for by state 0.1

Total cuts over CSR including those previously announced in the budget

Over £18bn

Announcements on Housing Benefit

Announcement 1: Local Housing Allowance (LHA) caps: £250 for 1 bed - £400 for 4 bed.– Local impact huge in some areas (over 17,000 households affected in

London?). Boris - an exercise in “social cleansing”? Announcement 2: LHA to be set at 30th percentile rather than

median (50th percentile) Announcement 3: Index linking of LHA to lower inflation

– By 2020 EVERY tenants HB will be too low to cover rent (Chartered Institute of Housing)

Announcement 4: HB award reduced by 10% after 12 months for JSA claimants – withdrawn

Announcement 5: Limiting HB entitlement for single people aged 25 – 35

Poorest 2 3 4 5 6 7 8 9 Richest-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

Income Decile Group

Chan

ge in

net

Inco

me

Assumes councils means-test CTB

more aggressively

Distributional impact of CSR announcements by 2014-15 (source:

IFS)

Incapacity Benefit reform Reassessment of almost 1.5m IB claimants by

2014 = 10,000 assessments per week Claimants will reassessed using ‘Work Capability

Assessment’ (WCA) WCA has been criticised for being inaccurate and

insensitive – 40% success rate for challenged decisions at appeal

Consequences of people being transferred onto the wrong benefit are serious

Overview of WR BillWhat’s in the Bill Housing Benefit Under-occupation of

social housing ESA Disabled Living

Allowance Household benefit cap

Child maintenance Conditionality Sanctions Appeals Social Fund

Universal Credit UC is a much needed and welcome change with a good rationale Dual aims of simplification and increased work incentives Introduced in October 2013 for new claimants and will be paid

monthly using ‘real time’ PAYE system Combines in and out of work means-tested benefits to create

one single application, one single payment, one withdrawal rate (65%), assessed and paid on a household basis

Basic allowance for adults with additions for children, disability, housing costs and caring

New conditionality regime: 4 levels Earnings disregards will encourage “mini-jobs” Government commitment: no existing claimants will

experience a reduction in cash terms following introduction of UC

Universal Credit – key delivery issues

Purse to walletBudgetingInternet useIT system

Welfare Reform Bill - key benefits issues

Passported benefitsChildcareCouncil Tax BenefitHousing (Housing Benefit, social housing)Social FundBenefits cap

Winners and losers Cash protection at the point of transition Official winners and losers Losses occur before UC introduced Official losers:

– Working families– Self employed– Those in areas of high housing costs– Large families– Second earners

All lose out but more in London

-£6,000 -£4,000 -£2,000 £0

Couple - two children - 2 beds - one working

Couple - two children - 3 beds - one working

Couple - three children - 3 beds - one working

Couple - two children - 2 beds - both working

Couple - two children - 3 beds - both working

Couple - three children - 3 beds - both working

Lone parent - two children - 2 Beds

Worse off under Universal Credit (2014) compared with the current system (April 2011) if working full-time on minimum

wage, annual (£)London National

Impact on claimants Good intent being undermined by benefits cuts More uncertainty, fear and confusion?– Lower income– Changing entitlements and re-assessments– New conditionality and increased sanctions

Increased incentive to work Many critical pieces are still unclear and work

incentives may be undermined by childcare, passported benefits, etc

Greater need for independent advice and support

Role of local partners Scrutiny: monitoring impact of reforms

and performance of Work Programme and Jobcentre Plus

Aligning local provision: local projects, childcare, health, housing, skills, advice

Information and advice: jobs, skills, welfare and money advice