welfare reform

Welfare ReformWelfare Reform

Clive Buckman, LBTH BenefitsClive Buckman, LBTH Benefits

Contents (1)Contents (1)► An overview of the welfare reform An overview of the welfare reform

programme, as it affects people currently programme, as it affects people currently claiming HB/CTB, and the transfer to claiming HB/CTB, and the transfer to Universal Credit (UC) and Pension Credit Universal Credit (UC) and Pension Credit (PC). (PC).

► The changes to LHA in April 2011, The changes to LHA in April 2011, including LHA caps, 30th percentile LHA including LHA caps, 30th percentile LHA rates, extra rooms for non-resident rates, extra rooms for non-resident carers and Transitional Protection. carers and Transitional Protection.

► The inflationary increases in ND The inflationary increases in ND Deductions in April 2011, 2012 and 2013 Deductions in April 2011, 2012 and 2013

► The extension of Single Room Rate The extension of Single Room Rate restriction for single 25-35s from January restriction for single 25-35s from January 2012. This will include exceptions and 2012. This will include exceptions and Transitional Protection Transitional Protection

Contents (2)Contents (2)

► Increased DHP budget Increased DHP budget ► The changes in safeguard procedure. The changes in safeguard procedure. ► The abolition of CTB in April 2013 and its The abolition of CTB in April 2013 and its

replacement replacement ► The introduction of under occupation charges The introduction of under occupation charges

for RSL tenants from April 2013 for RSL tenants from April 2013 ► The total welfare benefit cap from April 2013 The total welfare benefit cap from April 2013 ► Uprating of LHA in line with CPI from April Uprating of LHA in line with CPI from April

2013 2013 ► The migration of claims to UC and PC October The migration of claims to UC and PC October

2014 to 20172014 to 2017

Other Changes not CoveredOther Changes not Covered

► Reductions to Tax Credits and child care Reductions to Tax Credits and child care support with Child Tax Credit and other support with Child Tax Credit and other benefitsbenefits

► Migration of Incapacity Benefit to ESAMigration of Incapacity Benefit to ESA► Introduction of Personal Independence Introduction of Personal Independence

Payments (PIP)Payments (PIP)► Changes to Support for Mortgage InterestChanges to Support for Mortgage Interest► Transfer of adult DLA claims to PIPTransfer of adult DLA claims to PIP► Please see LASA rightsnet site Please see LASA rightsnet site

www.rightsnet.org.ukwww.rightsnet.org.uk for further information for further information on these areas on these areas

Drivers for ReformDrivers for Reform

► Cost Cost – £74 billion on working age benefits in – £74 billion on working age benefits in 2009/10. Cost has risen by 25% on the last 2009/10. Cost has risen by 25% on the last 15 years15 years

► SimplicitySimplicity – Over 30 benefits administered – Over 30 benefits administered by various organisations. Difficult for by various organisations. Difficult for claimants to understand and prone to fraud claimants to understand and prone to fraud and error. £3.5 billion spent on admin p.a.and error. £3.5 billion spent on admin p.a.

► Fairness.Fairness. – Commitment to ensure people – Commitment to ensure people are better off in work. are better off in work.

►Work incentivesWork incentives – – Current system is seen as Current system is seen as too punitive to people who start too punitive to people who start work/increase their earningswork/increase their earnings

Reform ProgrammeReform Programme

► 7 year staged programme 2011-2017.7 year staged programme 2011-2017.► Abolish several current strands of BenefitAbolish several current strands of Benefit► Replace them with a single unified Benefit – Replace them with a single unified Benefit –

Universal Credit (UC).Universal Credit (UC).► UC to include IS/ESA(IR), JSA(IB), Tax Credits UC to include IS/ESA(IR), JSA(IB), Tax Credits

and Housing Benefit.and Housing Benefit.► UC to be administered by a single UC to be administered by a single

organisation – DWP.organisation – DWP.► UC normally paid by monthly payment to UC normally paid by monthly payment to

claimantclaimant

Staged ReformStaged ReformHighlightsHighlights

1.1.► April 2011April 2011

LHA Caps and 30LHA Caps and 30thth percentile rate. percentile rate.Ending of £15.00 LHA top-up for claimants Ending of £15.00 LHA top-up for claimants whose rent is below LHA rate.whose rent is below LHA rate.Increase in non dep Charges, (1st Increase in non dep Charges, (1st Stage).Stage).

► January 2012January 2012Shared Room Rate extended 25-34 year Shared Room Rate extended 25-34 year

olds.olds.► April 2012April 2012

Increase in non dep charges, (2Increase in non dep charges, (2ndnd stage) stage) ..

Stage Reform HighlightsStage Reform Highlights22

► April 2013April 2013Increase in non dep charges, (3Increase in non dep charges, (3rdrd stage) stage)Size criteria applied to HB for social sector tenantsSize criteria applied to HB for social sector tenantsTotal welfare cap (£500 pw for families, £350 pw single claimants).Total welfare cap (£500 pw for families, £350 pw single claimants).Council Tax Benefit abolished & replace by local scheme. (10% cut Council Tax Benefit abolished & replace by local scheme. (10% cut in Gov’t funding )in Gov’t funding )LHA uprated in line with CPI.LHA uprated in line with CPI.Abolition of part of Social Fund and replacement with LA welfare Abolition of part of Social Fund and replacement with LA welfare assistanceassistance

► October 2013October 2013New claims and existing claims who move in and out of work New claims and existing claims who move in and out of work migrate in to Universal Credit .migrate in to Universal Credit .

► April 2014April 2014New claims from pensioners paid housing credit element of Pension New claims from pensioners paid housing credit element of Pension CreditCredit

► October 2017October 2017 – All remaining HB claims migrate to Universal – All remaining HB claims migrate to Universal CreditCredit

Non Dependant deductionsNon Dependant deductions

►Deductions are made from HB/CTB in respect Deductions are made from HB/CTB in respect of adults (other than the claimant’s partner), of adults (other than the claimant’s partner), who live in the Household.who live in the Household.

► Separate deductions are made in respect of Separate deductions are made in respect of both HB and CTBboth HB and CTB

► The amount of deduction depend on the non-The amount of deduction depend on the non-dep’s income/circumstances (and sometimes dep’s income/circumstances (and sometimes the claimant’s and their partner’s).the claimant’s and their partner’s).

►Deductions were frozen at 2001/2002 levels Deductions were frozen at 2001/2002 levels prior to April 2011.prior to April 2011.

► Inflationary increase phased in over next 3 Inflationary increase phased in over next 3 years years

Non Dep Deductions HBNon Dep Deductions HB

Non-dependant Circumstances Non-dependant Circumstances April 2001 – April 2001 – March 2011 March 2011

April 2011 – April 2011 – March 2012March 2012

Aged 25 or over and on Income Support/Jobseekers Allowance (Income Aged 25 or over and on Income Support/Jobseekers Allowance (Income Based), or Assessment phase ESA. Aged 18 or over and not in any of the Based), or Assessment phase ESA. Aged 18 or over and not in any of the other categoriesother categories

7.407.40 9.409.40

In receipt of main phase Employment Support Allowance (Income Related)In receipt of main phase Employment Support Allowance (Income Related) 7.407.40 9.409.40

Under 18, in receipt of Pension Credit, Full Time Students or PrisonersUnder 18, in receipt of Pension Credit, Full Time Students or Prisoners NilNil NilNil

Aged 18-25 and in receipt of assessment phase ESA(IR), aged under 25 Aged 18-25 and in receipt of assessment phase ESA(IR), aged under 25 and on income support and on income support

NilNil NilNil

Aged 18 or over and in remunerative workAged 18 or over and in remunerative work

- gross income less than £122.00- gross income less than £122.00 7.407.40 9.409.40

- gross income not less than £122.00 but less than £180.00 - gross income not less than £122.00 but less than £180.00 17.0017.00 21.5521.55

- gross income not less than £180.00 but less than £234.00- gross income not less than £180.00 but less than £234.00 23.3523.35 29.6029.60



- gross income not less than £387.00- gross income not less than £387.00 47.7547.75 60.6060.60

Non Dep Deductions CTBNon Dep Deductions CTBNon-dependants CircumstancesNon-dependants Circumstances April 2001 – March April 2001 – March

20112011April 2011 – March April 2011 – March

20122012

In receipt of state Pension Credit or in receipt of In receipt of state Pension Credit or in receipt of Income Support, Jobseekers Allowance (Income Income Support, Jobseekers Allowance (Income based), or Employment Support Allowance ( Income based), or Employment Support Allowance ( Income Related) full-time students and prisoners. An Related) full-time students and prisoners. An education leaver under 20. Severely mentally education leaver under 20. Severely mentally impaired.impaired.

NilNil NilNil

Aged 18 or over and in working 16 hours or more per Aged 18 or over and in working 16 hours or more per weekweek

-gross income greater than £387.00-gross income greater than £387.00 6.956.95 8.608.60

-gross income not less than £310.00 but less than -gross income not less than £310.00 but less than £387.00£387.00

5.805.80 7.207.20

-gross income not less than £180.00 but less an -gross income not less than £180.00 but less an £310.00£310.00

4.604.60 5.705.70

-gross income less than £180.00-gross income less than £180.00 2.302.30 2.852.85

Others aged 18 or overOthers aged 18 or over 2.302.30 2.852.85

LHA CAPSLHA CAPS

► Affects tenants who rent from private landlords.Affects tenants who rent from private landlords.►Maximum HB is based on the LHA rate for Maximum HB is based on the LHA rate for

accommodation which meets the household accommodation which meets the household size requirement.size requirement.

► Prior to April 2011 LHA was based on median, Prior to April 2011 LHA was based on median, (50th percentile) of rents charged in the area.(50th percentile) of rents charged in the area.

► From April 2011 LHA based on lower of 30From April 2011 LHA based on lower of 30thth percentile of rents or national cap.percentile of rents or national cap.

► In LBTH national cap applies for some In LBTH national cap applies for some households. households.

LHA Caps 2LHA Caps 2

Accommodation size Accommodation size LHA March LHA March 20112011

Latest LHALatest LHADecember December

20112011(Post (Post

Reform)Reform)

Difference Difference No. current HB No. current HB claims above claims above

LHA caps/30th LHA caps/30th percentile percentile

Shared Shared £101.58 £101.58 £92.31£92.31 -£9.27-£9.27 858858

1 Bed 1 Bed £250.00 £250.00 £240.00£240.00 -£10.00-£10.00 893893

2 Bed 2 Bed £310.00 £310.00 £290.00£290.00 -£20.00-£20.00 967967

3 Bed 3 Bed £365.00 £365.00 £340.00£340.00 -£25.00-£25.00 264264

4 Bed 4 Bed £465.00 £465.00 £400.00£400.00 -£65.00-£65.00 5555

5 Bed 5 Bed £573.46 £573.46 £400.00£400.00 -£173.46-£173.46

Total: current claims above new LHA levelsTotal: current claims above new LHA levels 3,0373,037

Total - all live LHA claims Total - all live LHA claims 3,9273,927

% above LHA caps/30th percentile% above LHA caps/30th percentileEstimated annual loss of HBEstimated annual loss of HB

77%77%£4 Million £4 Million

AppApp

Transitional ProtectionTransitional Protection

► New Claims affected from 1 April 2011.New Claims affected from 1 April 2011.► Tenants who change address or whose household Tenants who change address or whose household

composition changes will be affected from the week composition changes will be affected from the week following the date of change.following the date of change.

► Tenants who claimed prior to April 2011 who do not Tenants who claimed prior to April 2011 who do not move and whose household size doesn’t change will move and whose household size doesn’t change will be protected at the pre April LHA rate until 9 be protected at the pre April LHA rate until 9 months following anniversary of their claim.months following anniversary of their claim.

► For claimants in receipt of LHA top up of up to For claimants in receipt of LHA top up of up to £15.00 this ends on next anniversary of claim after £15.00 this ends on next anniversary of claim after 01/04/1101/04/11

► Maximum protection period – December 2012Maximum protection period – December 2012

End of LHA Top Up PaymentsEnd of LHA Top Up Payments

► Prior to 91/04/11 LHA claimants whose rent Prior to 91/04/11 LHA claimants whose rent was lower than their LHA entitlement were was lower than their LHA entitlement were entitled to LHA up to the LHA level, except entitled to LHA up to the LHA level, except that the maximum rent on which their LHA that the maximum rent on which their LHA was based could not be more than £15.00 was based could not be more than £15.00 per week above their rent.per week above their rent.

► New claimants from 01/04/11 do not get this New claimants from 01/04/11 do not get this top-up.top-up.

► Existing claimants’ top up will end on the first Existing claimants’ top up will end on the first anniversary of their claim from 01/04/11 anniversary of their claim from 01/04/11

Extra Room Rate for some Extra Room Rate for some claimants with disabilitiesclaimants with disabilities

1.1. Private tenants and their partners who get Private tenants and their partners who get attendance allowance or DLA (CC) at the attendance allowance or DLA (CC) at the higher or middle rate (or would be entitled if higher or middle rate (or would be entitled if they claimed)they claimed)

2.2. Have a named non-resident carer who Have a named non-resident carer who regularly stays over night to help with careregularly stays over night to help with care

3.3. Have an extra room in their home for the Have an extra room in their home for the carer.carer.

► The above are entitled to LHA for an extra The above are entitled to LHA for an extra room from 1room from 1stst April 2011. (maximum 4 April 2011. (maximum 4 bedroom rate) bedroom rate)

Extension of Shared Extension of Shared Accommodation Rate Accommodation Rate

► Currently single tenants aged under 25, who live Currently single tenants aged under 25, who live alone and claim Housing Benefit, have the rent on alone and claim Housing Benefit, have the rent on which housing benefit is paid restricted to the Shared which housing benefit is paid restricted to the Shared Accommodation RateAccommodation Rate

► This provision will be extended to single claimants This provision will be extended to single claimants aged under 35 from 01 Jan 2012.aged under 35 from 01 Jan 2012.

► New claimants who claim on or after 01 Jan 2012 will New claimants who claim on or after 01 Jan 2012 will be affected immediately.be affected immediately.

► Those who claimed prior to 01 Jan 2012 will have Those who claimed prior to 01 Jan 2012 will have transitional protection related to their anniversary transitional protection related to their anniversary datedate

► Currently SAR-£92.31 pw, One Bed Rate-£240.00 pw.Currently SAR-£92.31 pw, One Bed Rate-£240.00 pw.► 400 claims will be affected. The total benefit loss will 400 claims will be affected. The total benefit loss will

be about £2,000,000be about £2,000,000

Transitional ProtectionTransitional Protection

►25 – 35s claiming continuously since 25 – 35s claiming continuously since before April 2008 will have their rent before April 2008 will have their rent referred at SRR at next annual referral referred at SRR at next annual referral after 01/01/12after 01/01/12

►25-35s claiming LHA before 01/04/11 25-35s claiming LHA before 01/04/11 will be protected up to their next will be protected up to their next anniversary date plus 9 monthsanniversary date plus 9 months

►Claimants who first claimed 01/04/11 to Claimants who first claimed 01/04/11 to 31/12/11 will be protected up until the 31/12/11 will be protected up until the anniversary of their claim anniversary of their claim

ExceptionsExceptions

► Single people under 35 who get DLA(CC) at Single people under 35 who get DLA(CC) at higher or middle rate and do not have a higher or middle rate and do not have a carer who gets ICAcarer who gets ICA

► 25 – 35s who previously lived in a hostel for 25 – 35s who previously lived in a hostel for the homeless for at least 13 weeks and were the homeless for at least 13 weeks and were rehabilitated to their current home from rehabilitated to their current home from therethere

► 25-35s subject to a current multi-agency 25-35s subject to a current multi-agency management order and the Criminal Justice management order and the Criminal Justice Act.Act.

Discretionary Housing Discretionary Housing PaymentsPayments

► So a to help mitigate the affects of cuts in So a to help mitigate the affects of cuts in Housing Benefit and Council Tax Benefit LAs Housing Benefit and Council Tax Benefit LAs have been allocated extra funds for DHPhave been allocated extra funds for DHP

► For the 2011/12 tax year Tower Hamlets For the 2011/12 tax year Tower Hamlets have an extra £85k awardedhave an extra £85k awarded

► As DHP is budget limited and a high level of As DHP is budget limited and a high level of demand is expected, especially from demand is expected, especially from January 2012, it will only be available for January 2012, it will only be available for claimants in very exceptional hardship or for claimants in very exceptional hardship or for short periods.short periods.

Which claimants will get Which claimants will get DHP? DHP?

► Each DHP claim will be looked at individuallyEach DHP claim will be looked at individually► Consideration will be taken of disablement Consideration will be taken of disablement

needs, needs of carers of the disabled and needs, needs of carers of the disabled and of children and many other factors.of children and many other factors.

► Claimants who will benefit from short term Claimants who will benefit from short term provision of DHP, such as single LHA provision of DHP, such as single LHA claimants under 35 who are pregnant.claimants under 35 who are pregnant.

►DHP can not be awarded when there is no DHP can not be awarded when there is no entitlement to HB or CTB or for periods with entitlement to HB or CTB or for periods with no HB entitlement (e.g. deposits or rent in no HB entitlement (e.g. deposits or rent in advance). advance).

Payment of LHA to LandlordsPayment of LHA to Landlords

►LHA is normally paid to claimantsLHA is normally paid to claimants►Since LHA was introduced payments Since LHA was introduced payments

are made to Landlords when claimants are made to Landlords when claimants are in 8 wks rent arrears, or are unable are in 8 wks rent arrears, or are unable or unlikely to pay their rentor unlikely to pay their rent

►From April 2011 LHA can be paid to From April 2011 LHA can be paid to landlord if landlord agrees to reduce landlord if landlord agrees to reduce rent to affordable level on this conditionrent to affordable level on this condition

Second Stage of inflationary ND Second Stage of inflationary ND deduction increasededuction increase

►Effective from April 2012Effective from April 2012►A further inflationary increase of A further inflationary increase of

approximately 25% with apply in approximately 25% with apply in respect of both HB and CTBrespect of both HB and CTB

Size Criteria for Social Rented Size Criteria for Social Rented Sector Sector

►Effective from April 2013. Only working Effective from April 2013. Only working age families are affected.age families are affected.

►LHA Size criteria applied to social LHA Size criteria applied to social housing.housing.

►HB reduced for claimants who under HB reduced for claimants who under occupy.occupy.

►There will be a percentage deduction of There will be a percentage deduction of HB. This is expected to be about 15% for HB. This is expected to be about 15% for under-occupying by 1 room and an extra under-occupying by 1 room and an extra 10% for each subsequent room10% for each subsequent room

Total Welfare capTotal Welfare cap

► Affective from April 2013Affective from April 2013► Total welfare cap for Working age claimants Total welfare cap for Working age claimants

£500 pw for Families, £350 PW for single £500 pw for Families, £350 PW for single claimants.claimants.

► War widows and some DLA claimants will be War widows and some DLA claimants will be exempt from the total welfare capexempt from the total welfare cap

► Includes IS, JSA, ESA, Tax Credits, HB and Includes IS, JSA, ESA, Tax Credits, HB and child benefitchild benefit

► People most affected will be families and People most affected will be families and those living in areas where rents are high.those living in areas where rents are high.

► The benefit cut first will be Housing BenefitThe benefit cut first will be Housing Benefit

Impact of welfare cap for large Impact of welfare cap for large familiesfamilies

The maximum claimants in working age workless The maximum claimants in working age workless households will be able to receive in housing households will be able to receive in housing benefits once the cap is introduced will be benefits once the cap is introduced will be (assuming current benefit rates) as follows:(assuming current benefit rates) as follows:

Two ParentsTwo Parents One ParentOne Parent No. of ChildrenNo. of Children

£251.99£251.99 £290.44£290.44 22

£189.66£189.66 £228.11£228.11 33

£127.33£127.33 £165.78£165.78 44

£65.00£65.00 £103.45£103.45 55

£2.67£2.67 £41.12£41.12 66

Council Tax Benefit AbolishedCouncil Tax Benefit Abolished

► Replaced by local scheme – April 2013.Replaced by local scheme – April 2013.►Will provide work incentivesWill provide work incentives► Pensioners will remain entitled to same Pensioners will remain entitled to same

support as in CTB schemesupport as in CTB scheme► LAS need to consider:LAS need to consider:

DesignDesign ITIT AdministrationAdministration Funding (Only 90% of current CTB funding will be Funding (Only 90% of current CTB funding will be

available from central Gov’t). available from central Gov’t).

LHA Annual Increase from April LHA Annual Increase from April 2013 2013

►LHA uprated by Consumer Price Index, LHA uprated by Consumer Price Index, (CPI).(CPI).

►CPI doesn’t include Housing Costs.CPI doesn’t include Housing Costs.►Move way from principle whereby level Move way from principle whereby level

of rent predicates maximum HB.of rent predicates maximum HB.►Disproportionately affects areas where Disproportionately affects areas where

rents are high. rents are high. ►Paves the way for central Paves the way for central

administration of HB (i.e. UC/PC).administration of HB (i.e. UC/PC).

Universal Credit phased InUniversal Credit phased In

► Phased in between Oct 2013 and Oct 2017.Phased in between Oct 2013 and Oct 2017.► Oct 2013 – New claims, out of borough change of Oct 2013 – New claims, out of borough change of

address and any HB claimant who moves out of work address and any HB claimant who moves out of work will move onto UC.will move onto UC.

► Will DWP have the IT and administrative systems in Will DWP have the IT and administrative systems in place by Oct 2013?place by Oct 2013?

► Will UC include Housing Costs during phase-in Will UC include Housing Costs during phase-in period?period?

► April 2014 New claims from pensioners go to Pension April 2014 New claims from pensioners go to Pension Credit. HB claimants moving into work claim UC.Credit. HB claimants moving into work claim UC.

► April 2015 to Oct. 2017 – All existing claimants will April 2015 to Oct. 2017 – All existing claimants will transfer to UC/PC. All claims in LA area transferred transfer to UC/PC. All claims in LA area transferred together. together.

Aims of Universal CreditAims of Universal CreditRevisited (1)Revisited (1)

COSTCOST► Social upheaval, homelessnessSocial upheaval, homelessness► Affordable Rents – These are new RSL Affordable Rents – These are new RSL

tenancies at 80% of market rent.tenancies at 80% of market rent.

Increases the cost of welfare bill. Increases the cost of welfare bill.

brings social rents into line with LHAbrings social rents into line with LHA

The Total Welfare cap will make them The Total Welfare cap will make them unaffordable for workless working age unaffordable for workless working age families families

Aims of Universal CreditAims of Universal CreditRevisited (2) Revisited (2)

SIMPLICITYSIMPLICITY►Current complicated assessment Current complicated assessment

criteria retained.criteria retained.►Remains difficult for claimants to Remains difficult for claimants to

determine how changes will affect determine how changes will affect entitlemententitlement

►Limited local service provision.Limited local service provision.► IT systems – Build and testing IT systems – Build and testing

Aims of Universal CreditAims of Universal CreditRevisited (3).Revisited (3).

FAIRNESSFAIRNESS►LHA Caps - Only 12% of accommodation in LHA Caps - Only 12% of accommodation in

LBTH available at LHA levels.LBTH available at LHA levels.►Affordable Rents could make social housing Affordable Rents could make social housing

unaffordable for benefit recipients.unaffordable for benefit recipients.►Caps penalise large and extended families.Caps penalise large and extended families.►Renders HB “unfit for purpose”. Renders HB “unfit for purpose”. ►20,000 LA jobs at risk20,000 LA jobs at risk

Aims of Universal CreditAims of Universal CreditRevisited (4).Revisited (4).WORK INCENTIVESWORK INCENTIVES

Increased taper eroded by:Increased taper eroded by:► LHA Caps which mean HB will not always be LHA Caps which mean HB will not always be

based on the rent charged.based on the rent charged.► Childcare element reduced by 10%.Childcare element reduced by 10%.Incentive to work further eroded byIncentive to work further eroded by► Economic recession + fewer available jobsEconomic recession + fewer available jobs► LHA caps encourage claimants to move from LHA caps encourage claimants to move from

areas where jobs are more abundant.areas where jobs are more abundant.►Help with CTax being outside UC.Help with CTax being outside UC.

welfare reform

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