On 22 June 2010 the new coalition Government has introduced an emergency Budget. DA recognises the need to take action to handle the nation’s finances. There are some areas to welcome in the Budget, including reconnecting the basic state pension to earnings and additional support for some disabled people who require overnight care at home through some housing benefit changes.
Overall, however, DA believes that the Budget and other announcements from the new Government will place significantly higher numbers of disabled people at risk of poverty.
Many disabled people and their families require routine support from national and local government. Disabled people are disproportionately represented in people receiving direct support from central government in the form of benefits as well as local authority support from social services for example.
Disabled people are twice as likely to live in poverty with a third of disabled people living in poverty across the life course. Disability benefits help families meet additional costs (for equipment, higher bills or accessible transport for instance).
The emergency Budget and previous Government announcements have sparked fears over the future of some support.
Key issues from the emergency Budget
Numbers in brackets below refer to paragraph numbers in the Budget report.
The text in italics is DA commentary.
Disability Benefits
The Government will reform disability living allowance (DLA) and introduce an ‘objective medical assessment’ for all claimants from 2013-14 (1.103). Find out more.
DA is very concerned that a new medical assessment may contradict the Conservative manifesto commitment to ‘protect’ DLA and is being introduced despite the failures of the medical assessment for claiming other benefits. The new assessment for DLA may be unnecessary (as medical assessments form part of the existing system) and could be extremely expensive, distracting vital resources from providing disabled people with essential financial support. DA is also concerned that the assessment may be used to restrict eligibility to DLA, despite previous evidence suggesting DLA should reach more disabled people than currently accessing this key disability benefit.
Benefit uprating
From April 2011, the Consumer Prices Index (CPI) will be used for the indexation of all benefits, tax credits and public service pensions (2.32). See DWP press release – Statement on moving to CPI as the measure of price inflation
- 12 July 2010
Children
From January 2011, the Health in Pregnancy Grant will be abolished (2.45).
From April 2011, payment of a Sure Start maternity grant will be
restricted to the first child only (or children where the first is a multiple birth) (2.46).
The rates of child benefit for the first and subsequent children will be frozen for three years from April 2011 (2.47).
The Government will reduce and then stop Government contributions to Child Trust Funds (2.48). Children born after December 2010 will not be eligible for a Child Trust Fund.
From October 2011, lone parents whose youngest child is aged 5 or above will be eligible for jobseekers allowance rather than income support. Existing customers will be transferred from income support to jobseekers allowance from April 2012 (2.59). Note: The DWP impact assessment which accompanies the Welfare Reform Bill 2011 states that this change will take place from January 2012.
Housing costs
Housing benefit
From April 2011, housing benefit claimants with a disability and a non-resident carer will be entitled to funding for an extra bedroom (2.55).
From April 2011, local housing allowance rates (LHA) will be capped at £250 per week for a one bedroom property, £290 per week for a two bedroom property, £340 per week for a three bedroom property and £400 per week for four bedrooms or more (2.56). Note: It has been reported that existing housing benefit claimants will not have their LHA capped until January 2012 - see http://www.bbc.co.uk/news/uk-11858781.
From October 2011, local housing allowance rates will be set at the 30th percentile of local rents (2.50). Note: It has been reported that this will not apply to existing housing benefit claimants until January 2012 - see http://www.bbc.co.uk/news/uk-11858781.
Deductions for non-dependents will be uprated in April 2011 on the basis of prices. This will reverse the freeze in these rates since 2001-02 (2.51).
The Government contribution to discretionary housing payments will be increased by £10 million in 2011-12 and £40 million in each year from 2012-13 (2.57).
From 2013-14, local housing allowance rates will be uprated in line with CPI (2.52).
From April 2013, housing entitlements for working age people in the social sector will reflect family size (2.53).
From April 2013, housing benefit awards will be reduced to 90% of the initial award after 12 months for claimants receiving jobseekers allowance (2.54).
Support for Mortgage Interest payments
From October 2010, the standard interest rate used to calculate Support for Mortgage Interest payments will be set at a level equal to the Bank of England’s published monthly Average Mortgage Rate. The standard interest rate can be found in the first tab of Table G.1.4 under the heading “CFM”, column “HSDE” on the Bank of England website). The initial starting rate will be the rate published in August 2010 and will only change when the Bank of England publishes an average rate that differs from the standard rate by 0.5% or more.
For more information see SI 2010/1811.
In its Equality Impact Assessment on the change the DWP estimates -
“By setting the standard interest rate at the Bank of England published average mortgage rate (3.67% in April 2010), we estimate that just over half of all support for mortgage interest customers (around 115,000 people) will continue to have their eligible mortgage interest outgoings fully met by their benefit awards. Most customers receiving a shortfall under this arrangement (around 110,000 people) would still have the lion’s share of their eligible housing costs met by support for mortgage interest, creating only a relatively small level of arrears, and based on conversations with the Council of Mortgage Lenders we would expect lenders to demonstrate forbearance in the vast majority of these cases”
In relation to disabled customers.
"Overall there are just over one third of Support for Mortgage Interest customers with a disability; of which most are in receipt of Income Support or State Pension Credit rather than Job Seeker’s Allowance.
The Family Resources Survey has been used to look at the disability status of those in receipt of an income related benefit compared to all households, shown in table 16. Households in receipt of an income related benefit have a higher prevalence of adults who are in receipt of Attendance Allowance or Disability Living Allowance (25%) than the wider population (7%)."
Deductions for non-dependents will be uprated in April 2011 on the basis of prices. This will reverse the freeze in these rates since 2001-02 (2.51).
Older people
From April 2011, the basic state pension will be uprated by a triple guarantee of earnings, prices or 2.5%, whichever is highest. Consumer Price Index (CPI) will be used as the measure of prices in the triple guarantee but the basic State Pension will be uprated by the equivalent of Retail Price Index (RPI) in April 2011 (2.33).
The Government will review the date at which the State Pension Age rises to 66. This will be supported by a call for evidence (2.34).
The Government will consult shortly on how it will quickly phase out the Default Retirement Age from April 2011 (2.35).
DA supports an end to the mandatory retirement age. See Tackling Disability Poverty for further information.
In April 2011, the standard minimum income guarantee in pension
credit will increase by the cash rise in a full basic state pension (2.36).
Tax credits
From April 2011, the second income threshold for the family element of the child tax credit will reduce from £50,000 to £40,000 and from April 2012, the family element of the child tax credit will be withdrawn immediately after the child element (2.37).
From April 2011, the first and second withdrawal rates for tax credits will increase to 41% (2.38).
From April 2011, the baby element will be removed from the child tax credit (2.39).
From April 2012, the 50 plus element will be removed from the working tax credit (2.39).
In April 2011, the child element of the child tax credit will increase by £150 above CPI indexation and in April 2012 it will increase by £60 above indexation (2.40).
The Government will not introduce the £4 supplement in the child tax credit for each child aged one and two from April 2012 (a policy announced in the previous Government’s March 2010 Budget) (2.41).
From April 2011, the level of in-year rises of income that will be disregarded from calculations of tax credit entitlement will decrease from £25,000 to £10,000 and from April 2013, this will be decreased further to £5,000 (2.42).
From April 2012, the period for which a tax credit claim and certain changes of circumstances can be backdated will be reduced from three months to one month (2.43).
From April 2012, a disregard of £2,500 will be introduced in the tax credits system before in-year falls in income affect tax credit entitlement (2.44).
The new Government has also committed to maintaining the previous commitment (from March 2010 Budget) that, from April 2011, people aged over 60 will qualify for working tax credit if they work at least 16 hours a week, rather than 30 as currently (2.121).
VAT
From 4 January 2011, the standard rate of VAT will increase to 20%.
DA believes increasing VAT will harm disabled people disproportionately. Disabled people earn less than other citizens. People on lower incomes spend almost double disposable income on VAT (13.7% compared to 7% for people in the highest tenth income group).
Personal tax
In 2011/12 the Government will increase the personal allowance for people under the age of 65 by £1,000 (to £7,475).
DA welcomes the raising of the income tax threshold which may help some disabled people who earn less overall than other citizens and are more likely to be in low income groups.
Savings
The Government will not introduce the Saving Gateway in July 2010 (2.61).
Bank levy
The Government has announced a levy from 1 January 2011 on banks’ balance sheets (1.63).
DA welcomes a levy on financial transactions. We believe revenue raised should be used to tackle disability poverty.
Charitable payments
The Government will continue to explore with the voluntary sector ways to improve the Gift Aid system and encourage charitable giving (2.103).
Council tax
The Government will work with local authorities to freeze council tax in England in 2011-12 (2.105).
DA hopes that freezes on potential revenue from council tax will not result in cuts to local welfare and social service support for disabled people.
Other announcements
Previously announced commitments from the new Government include:
an end to access to Independent Living Fund support
cuts to programmes to help people find work
restricted eligibility for in work support like tax credits.
DA believes that the Budget and other measures together risk a significant assault on support for disabled people who are being hit fastest, hardest and will suffer longest from the impact of the new Government’s reaction to the nations’ finances.
“The Government must tackle the budget deficit, but Disability Alliance is deeply concerned that ‘tough action’ has not been spread evenly across government or society. Instead, today’s cuts will be felt by our most disadvantaged citizens who are not responsible for the banking crisis but will now suffer its harshest consequences.”
DA also supports a ‘fairness impact test’ on Budget measures and hopes to see a full breakdown of which groups will experience the severest impact of measures (like increasing VAT) to ensure disabled people are not being disproportionately affected by Budget and other announcements.
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