Transcript Document

The future of welfare reform
Stephen McKay
University of Birmingham
[email protected]
twitter.com/socialpolicy
www.benefits.org.uk
Changes in benefit levels under New
Labour
Couple with two
children aged under 11
April 1997
April 2009
Single person aged 1824
April 1997
April 2009
Income Support
If CPI uprating
£121.75
£230.47
£150.39
Income Support
If CPI uprating
£38.90
£50.95
£48.05
Strongly agree there should be higher
benefits for the poor (GB), 1987-2007
Coalition Government
• Cutters and reformers
– Treasury and IDS/CSJ
• Emergency budget 2010 [saving £11bn in 2014/15]
• Comprehensive Spending Review 2010 [£7bn]
• Universal Credit 2010
2010 budget changes –
saving £11bn in 2014/5
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Indexation by CPI (£5.8 bn)
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Note VAT rises in January, and benefits increase by
inflation in September, so no immediate 'compensation'
Changes to Tax Credits (£3bn) – new disregard for income
cuts; restrictions to backdating; removal from higher
incomes; no ‘baby bonus’
Housing Benefit reform (£1.8bn) – caps on levels; changes
for social tenants; move to 30th percentile; reduced by 10%
if JSA for 12months+
Freeze on Child Benefit (£1bn)
DLA new medical tests (£1bn)
An end to ‘asset-based welfare’ (CTF £560m, SG £115m)
Relatively favourable treatment of pensioners, triple lock
and higher Pension Credit (-£1bn)
Comprehensive Spending Review 2010
– saving another £7bn in 2014/5
• Child Benefit removed from higher earners (£2½ bn)
• ESA time limit (12 months) (£2bn)
• WTC: Freeze in the basic and 30 hour elements (£635m);
new couples hours rule (£390m); childcare element
reduced (£385m); PAYE real-time information (£300m)
– But Child Tax Credit increased (-£560m)
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Council Tax Benefit 10% cut (£490m), and localised
Overall benefits cap (£270m)
State Pension Age to be 66 by 2020
EMAs all but eliminated
Cuts to DWP/HMRC admin costs
Housing Benefit
[Latest: 30/11/2010]
• Caps and 30th percentile limit introduced for new
claims in April 2011.
• Existing customers exempt for up to 9 months from the
date their claim is reviewed by their local authority.
(i.e. generally up to January 2012.)
• New discretionary powers for local authorities to make
direct payments to landlords in return for reducing
their rents.
• SSAC (Nov-2010) ‘The Committee’s report recommends
that the Government should not go ahead with the
package of amendments proposed’.
Universal Credit – key structural issues
hampering reform
• The unit of assessment (individual or family)
• Who gets the payment (‘wallet v purse’)
• Period of assessment and payment (and
effects on family budgeting)
• Interactions with contributory and other
benefits and entitlements
Universal Credit – key changes I
• Integrated benefit in place of Income Support, incomebased Jobseeker’s Allowance, income-related
Employment and Support Allowance, Housing Benefit,
Child Tax Credit and Working Tax Credit.
– benefit rates for people not in work will generally be the
same as under the current system
– a basic personal amount with additional amounts for:
disability, caring responsibilities, housing costs, and
children. (? childcare costs ?)
– Households – both to claim in couples
• Earnings disregards – zero for single adults but sizeable
for most other groups (though reduced if on housing
support)
Universal Credit – key changes II
• The same benefit as hours of work vary –
removing most ‘cliff edges’ at 16/24/30 hours. (?
Conditionality ?)
• 65% taper rate (76% incl Tax, NI)
• Self-Employed assumed to earn at least minimum
wage (though who observes the hours?)
• The same capital rules as currently apply to
Income Support
• Two systems from 2013 - ? = a ‘better-off’ issue
Earnings disregards
• Max disregards and floors (reduced by 1.5
times housing costs)
• Increase if children present
Single person
Couple + 2 ch
LP + 1 ch
Disabled person
Maximum
0
£161
£148
£135
Floor
0
£25
£40
£40
Effect on marginal deduction rates
Up to 60%
60-70%
70-80%
80-90%
Over 90%
Now (millions)
0.9
0.2
1.7
0.4
0.1
Universal Credit
0.8
0.4
2.0
0.0
..
Over 60%
Over 70%
2.4
2.2
2.4
2.0
Universal Credit – remaining issues
• Fate of all benefits outside of UC including Carers
Allowance; Child Benefit to be fully means-tested
by 2017? Why not include more?
• Social Fund Crisis Loans + CCGs moved to LAs
[Budgeting Loans, Maternity Grants and Cold
Weather Payments in UC]
• Shared care, only one parent eligible to receive
the child element of Universal Credit.
• Passported benefits, new arrangements.
The future?
• Role of contributory benefits and other nonmeans-tested benefits outside UC:
– “Contributory Jobseeker’s Allowance will continue
in its current form but with the same earnings
rules (such as disregards and tapered withdrawal)
as Universal Credit”
• Many details still unknown = scope to
influence policy development?
Assessment
• Few changes to average deduction rates, a lot
riding on transparency and easier
administration
• Transparency versus existing budgetting
• Tensions in policy (especially Council Tax
Benefit, JSA new HB rule)
• Future for Child Maintenance (C-MEC)