Welfare Reform for Children and families

Sam Royston, Poverty and Early Years Policy Adviser, The Children’s Society, December 2011

Key recent welfare changes for children and families

• Changes to Local Housing Allowance • Cuts to Maternity Benefits • Frozen Child Benefit • Additional support through the Child element of Child Tax Credit (!) • Changes in Benefit Uprating from RPI to CPI (and LHA to be uprated with CPI rather than local rents)

Changes to Local Housing Allowance

• LHA maximum local rates to be based on 30 local rents, rather than 50 th th percentile of percentile of local rents. • (estimated to cost nearly 800,000 households an average of £9 per week) • Cap maximum rates of LHA payable at £250 for a one bedroom property, £290 for a two bedroom property, £340 for a three bedroom property, and £400 for a four bedroom property • (estimated to cost around 20,000 households an average of £74 per week.)

Changes to Maternity Benefits

• Health In Pregnancy grant (worth £190) abolished • Sure Start Maternity Grant (worth £500 per child) cut back to apply to first child only • Baby element of Child Tax Credit abolished (worth an additional £545 to families with a child under 1) • Child Trust Fund (which provided a £500 nest egg for children in low income families) abolished • Toddler element of Child Tax Credit not to be implemented • For the poorest families, these entitlements are worth up to £1735 over pregnancy and the first year of a child’s life.

Overhauling the Welfare System: Children and families and the WRB

- The Welfare Reform Bill radically overhauls key components of the welfare system supporting children and families.

- Key aspects of the Bill include: - The Universal Credit - A “Benefit Cap” - Uprating of Local Housing Allowance with CPI - Localisation of the Social Fund - The Bill is currently in the House of Lords, it is expected to be passed into law in early 2012.

Universal Credit – disabled children

• Support for children with disabilities are to be substantially cut under Universal Credit, through replacement of the disability element of child tax credit with a “disability addition” for a child.

• The money is being moved into a substantial increase in the support component of ESA for disabled adults.

• Changes could cost disabled children up to around £1400 per year.

• This could amount to substantially more than £22,000 over the childhood of a disabled child, (for a family with two disabled children this loss could be more than £44,000.) • The Government estimates that 100,000 children could be affected by this change.

Universal Credit – Young Carers

• The Severe Disability Premium currently gives additional support to disabled adults with no other adult to care for them. This additional support helps to cover the additional costs of living with a disability but no carer. • The Government is abolishing the Severe Disability Premium through the introduction of the Universal Credit. • This will cost families with a young carer up to £55.30 per week (£2876 per year). This cut could be equivalent to 20% of household income after housing costs.

• In addition the Enhanced Disability Premium is also being abolished, in total this means that families with a young carer looking after a disabled parent could lose up to £69.50 per week - more than £3500 per year.

Universal Credit – Childcare costs

• UC childcare element will cover 70% of childcare costs up to £175 per week for one child and £300 for two or more children. • availability of support with childcare costs to be extended to parents working under 16 hours per week.

• However, many households can currently receive up to 95.5% of CCCs covered through the benefits and tax credit system, as a result of HB/CTB disregard. They will see help reduced to 70%

Free School Meals

• Eligibility criteria for FSM (and other passported benefits) will need to be revised as a result of abolition of key current passporting benefits under UC.

• Potential introduction of an income threshold for FSM over which entitlement would be lost – creating a “benefit cliff edge” • This benefit cliff edge is created because FSM has a significant cash value - worth an average of around £367 per child - for a family with three children this is equivalent to £1100 • As such a family could be left significantly worse off as a result of earning more.

Benefit Cap

• Government plans to cap benefits for out of work families at median weekly wages for working households (£500 pw approx). • 50,000 households will be affected. The average loss resulting from the cap will be around £93 per week of household income, and 7,500 households will lose more than £150 per week. • Analysis reveals that children are disproportionately affected by these proposals. 210, 000 children will be affected by the cap, compared to 70,000 adults.

• This means that 75% of those affected are children, making them nine times more likely than adults to be affected. Only one in 556 adults are affected, and one in 64 children stand to lose out DWP Household Benefit.

• 80,000 children could be made homeless as a result of the cap.

•

Conclusion – the overall impact of welfare reform measures on children

Earlier this year the IFS predicted Child Poverty to rise by 800,000 by 2020.

• Without the introduction of the Universal Credit this would be considerably worse.

• The Government admit that measures taken in the Autumn statement (the withdrawal of the additional £110 investment in CTC and WTC freezes) will increase Children in poverty by 100,000.

• Some groups of children likely to be particularly affected. For example, the Benefit Cap and LHA cuts are likely to have particularly severe consequences on big families and those in private rental housing.