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17 February 2011
This Government White Paper sets out the Coalition Government’s plans to introduce legislation to reform the welfare system by creating a new universal credit. Universal credit will radically simplify the system and also aims to make work pay and combat worklessness and poverty. The White Paper outlines:
Universal credit is an integrated working-age credit that will provide a basic allowance with additional elements for children, disability, housing and caring. It will support people both in and out of work, replacing working tax credit, child tax credit, housing benefit, income support, income-based jobseeker’s allowance and income-related employment and support allowance. No-one will experience a reduction in the benefit they receive as a result of the introduction of universal credit.
Universal credit does not include contributory jobseeker’s allowance, contributory employment and support allowance. disability living allowance, child benefit, bereavement benefits, statutory sick pay, statutory maternity pay, maternity allowance and industrial injuries disablement.
The amount of universal credit will depend on the level of income and other family circumstances. There will be a basic personal amount (similar to the current jobseeker’s allowance) with additional amounts for disability, caring responsibilities, housing costs and children.
Once someone is in work, as earnings rise, universal credit will be withdrawn at a constant rate of around 65 pence for each pound of net earnings.
There will be higher earnings disregards for selected groups. A couple with children will get a higher disregard than a similar couple without children. There will also be a higher disregard for disabled people. These disregards will be reduced to reflect the amount of support being provided for rent or mortgage interest support.
There will be lower rates for younger people. The Government will consider the scope to simplify the current rules under which lower rates apply to some but not all those under the age of 25.
The Government is considering what extra support may be needed for disabled people in the universal credit, over and above the additional components mentioned above and the benefits available elsewhere in the system. The Government will also consider the structure of support for disabled people as it looks at the structure for disabled adults.
The Government intends to provide support for carers and improve their opportunities to maintain links with the world of work. It is carefully considering whether changes to carer’s allowance will be necessary to take account of the introduction of universal credit and provide clearer, more effective support for carers.
An appropriate amount will be added to the universal credit award to help meet the cost of rent and mortgage interest. For those who rent their accommodation, this amount will be similar to the support currently provided through housing benefit. The intention is that this support for rent, currently delivered by Local Authorities, will over several years be replaced by universal credit.
Local authorities will be given a greater say in decisions on helping people on low incomes pay their council tax alongside a 10 per cent reduction in council tax benefit expenditure from 2013-14. The introduction of universal credit provides the opportunity to sweep away some of the centrally imposed complexities of council tax benefit that make it difficult for people to understand. The Department for Communities and Local Government and the Department for Work and Pensions will work closely together with local government and the devolved administrations to develop detailed proposals.
The new system provides an opportunity to improve and simplify the way childcare support is offered but the Government wants to ensure that it remains fair, affordable and targeted to those most in need. It would welcome views from key stakeholders and will work with them to establish how support for childcare could best be delivered as part of, or alongside, universal credit.
The Government plans to make some changes to pension credit to provide support for rent together with the help available for other housing costs and add a further element to provide income-related help for pensioners with dependent children. Pensioners who choose to extend their working lives may be allowed to opt to claim universal credit instead.
Elements of the social fund that can be automated will be paid through the universal credit system with discretionary elements, such as community care grants and crisis loans, being devolved to local authorities.
The current benefit dependent thresholds for access to a range of passported benefits such as free school meals and health benefits will no longer exist and will be replaced with an income or earnings-related system that gradually withdraws entitlements to prevent all passported benefits being withdrawn at the same time..
Universal credit, aims to get people back into work and there will conditionality requirements set according to individual capability and circumstance. There will be four broad conditionality groups:
When introduced, universal credit will initially apply to new claims. It will be phased in for existing benefit and tax credit recipients. The Government intends introducing a Welfare Reform Bill in January 2011.
Disability Alliance (DA) welcomes simplification of the benefits system (through the universal credit) and genuine efforts to support disabled people into work.
However, Neil Coyle, Disability Alliance Director of Policy, says:
“we have significant concerns that many disabled people will be affected by the harsher elements of reform, including experiencing benefit cuts, reduced support to find work, enforced work and even being cut from out of work benefits altogether."
You can view our full response in the link to our press release below.
The Welfare Reform Bill was introduced in the House of Commons on 16 February 2011. It has now received Royal Assent.
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