The future of welfare reform

1
The future of welfare reform

• Stephen McKay
• University of Birmingham
• s.d.mckay_at_bham.ac.uk
• twitter.com/socialpolicy
• www.benefits.org.uk

2
Changes in benefit levels under New Labour
Couple with two children aged under 11 Income Support If CPI uprating
April 1997 121.75
April 2009 230.47 150.39
Single person aged 18-24 Income Support If CPI uprating
April 1997 38.90
April 2009 50.95 48.05
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Strongly agree there should be higher benefits
for the poor (GB), 1987-2007
4
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

5
2010 budget changes saving 11bn in 2014/5

• Indexation by CPI (5.8 bn)
• 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)

6
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)
• 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

7
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 Committees report
  recommends that the Government should not go
  ahead with the package of amendments proposed.

8
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

9
Universal Credit key changes I

• Integrated benefit in place of Income Support,
  income-based Jobseekers 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)

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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

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Earnings disregards

• Max disregards and floors (reduced by 1.5 times
  housing costs)
• Increase if children present

Maximum Floor
Single person 0 0
Couple 2 ch 161 25
LP 1 ch 148 40
Disabled person 135 40
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(No Transcript)
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Effect on marginal deduction rates
Now (millions) Universal Credit
Up to 60 0.9 0.8
60-70 0.2 0.4
70-80 1.7 2.0
80-90 0.4 0.0
Over 90 0.1 ..

Over 60 2.4 2.4
Over 70 2.2 2.0
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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.

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The future?

• Role of contributory benefits and other
  non-means-tested benefits outside UC
• Contributory Jobseekers 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?

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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)