1. Welfare Changes from the Summer 2015 Budget Elliott Stephenson Welfare Manager Benefits and Money Action Team

2. Introduction The Summer 2015 Budget announced a raft of Welfare Benefit cuts amongst other plans The Welfare Reform and Work Bill 2015 puts in place many of these changes, including: –New reporting obligations re: employment –Changed criteria for monitoring child poverty –Reduction in social rents 1% year on year –Various welfare benefit cuts Many aspects of the Summer 2015 Budget are not included in this bill and will be introduced by amending regulations: –Minimum wage rises –Other welfare benefit cuts –‘Right to Buy’ and ‘Pay to Stay’

3. Schedule April 2016 –Benefit Cap lowered –Four year freeze of benefit rates –Tax Credit cuts to threshold and taper –Universal Credit cuts to work allowances –Housing Benefit cuts to family premium and backdating –Support for Mortgage Interest cut

4. Schedule April 2017 –Only two children allowed in HB, Tax Credits and UC claims –Family element cut from new CTC and UC claims –ESA and UC WRAG components cut –UC lone parents – work search compulsory from youngest aged 3 –UC Youth Obligation for 18-21 year olds –No housing costs for 18-21 year olds

5. Schedule April 2018 –Mortgage Interest payments changed from a benefit to a loan

6. April 2016: Benefit Cap lowered Currently set at £26k across country Bill to reduce cap to £20k, or £385 per week Will likely be phased in gradually across country In social housing, anyone on HB with 3 children will likely be affected, some even with 2 children In private housing, even smaller families may be affected. At Aragon, we estimate about 200 tenants will be affected Exemptions remain for disability or in-work benefit claimants, as well as ‘grace period’

7. More on the Benefit Cap Originally linked to ‘average earnings’ Now at Secretary of State’s discretion to review at any time Larger families out of work may not be able to afford suitably sized homes Single parents most commonly affected Likely result: more homelessness and child poverty? Solutions: –Claim an exempted benefit –DHP –Find (more) work!

8. April 2016: Four year freeze Most working age benefits will be frozen at current rate for four years Exempted benefits: –Pensioner benefits –Disability benefits, premiums and elements –Statutory payments (e.g. SSP) But those in receipt of exempted benefits will still be affected on their other entitlements Inflation currently nil% But future inflation will impact particularly strongly on benefit claimants

9. April 2016: Tax Credits cuts Threshold: –The threshold above which earnings are taken into account on Working Tax Credits are being cut from £6,420 to £3,850. – A huge cut of 40% Taper: –The percentage income taken into account above the threshold is raised from 41% to 48% Work disincentives?

10. Tax Credits cuts vs minimum wage rise Tax Credits have been cut to allow the minimum wage to rise. However, at least in the short term, workers will likely be worse off. Example: –Lone parent of 2 children working 24 hours at minimum wage (£6.50, or £156 per week) will currently get £9,371.31 per year Tax Credits, or £179.24 per week. –From April 2016 with minimum wage of £7.20 (£172.80 per week), Tax Credits are £7,618.21 or £145.71 per week. –This represents a gain of £16.80 per week in increased minimum wage, but a drop of £33.53 per week Tax Credits. –Overall £16.73 worse off per week, or a 5% drop in income. Note that government claim 4 out of 5 working households will be better off, but this includes all earnings brackets…

11. April 2016: Universal Credit earnings disregards cut Universal Credit aim = make work pay Claimants could keep a large amount of their earnings before Universal Credit is gradually withdrawn, through high work allowances a.k.a. earnings disregards However, from next April, these work allowances are being significantly cut This will arguably reduce work incentives If you have no responsibility for children, the work allowance is NIL If you have children or disabilities, the work allowance is cut to: –£192 if you have Housing Costs –£397 if you do not have Housing Costs

12. Universal Credit work allowances table ClaimantNow: No HC Now: HC2016: No HC 2016: HC SingleNo children£111 £0 SingleChildren£734£263£397£192 SingleLCW£647£192£397£192 CoupleNo children£111 £0 CoupleChildren£536£222£397£192 CoupleLCW£647£192£397£192

13. April 2016: Housing Benefit cuts Family element: –Will not be made available to new claimants or new families –Reduces the amount a family is judged to need to live on before they can afford their rent –Current claimants not affected Backdating: –Currently available for up to 6 months –Will be cut to just 4 weeks

14. April 2016: SMI cuts Support for Mortgage Interest Currently, help starts from week 13 Interest is payable on up to £200,000 From April 2016, the time claimants have to wait for help is being returned to 39 weeks Value of mortgage is remaining the same

15. April 2017: Restriction to number of children you can claim for From 6 th April 2017, the child element will no longer be awarded for third and subsequent children This applies to Universal Credit, Housing Benefit and Child Tax Credits Protection for breaks in claims not more than 6 months Arguably breaks the link between need and entitlement Government wants benefit claimants to make the same budgeting choices when planning a family as higher income households Effectively performs same role as the Benefit Cap – but without the exceptions for disability or employment Introduces a two-tier system that will exist for two decades

16. April 2017: Family element cut from UC and Tax Credits The family element is being cut from new claims for Child Tax Credit Cut for new families only; families started before 6/4/17 will still get the element This is similarly applied to Universal Credit In UC, the family element comes through the first child attracting a higher entitlement Under these rules, the subsequent child rate will become the only child rate This is an annual cut of £545, or £10.48 per week

17. April 2017: Removal of Work Related Activity Component The Work Related Activity Component is being removed from April 2017 ‘Limited Capability for Work’ remains, but no longer provides claimants any extra entitlement Claimants will still only get basic rate (i.e. £73.10 or £114.85 on ESA) while expected to engage in work related activity This applies to ESA and UC Only for new claims; current claimants protected from this change Note that this means an ESA claimant who gets DLA/PIP may have higher entitlement on JSA or IS because of the disability premium

18. April 2017: Work Related Requirements for Lone Parents The expectations on lone parents are being expanded further Youngest aged 1 = work focused interview requirements – currently 1 or 2 Youngest aged 2 = work preparation requirement – currently 3 or 4 Youngest aged 3+ = work search requirement (normal jobseeker) – currently 5+ This applies to UC only; equivalent provisions to Income Support have not been made. In England, free childcare for 3 and 4 year olds is being doubled from September 2017

19. April 2017: Universal Credit – Youth Obligations for 18-21 year olds 18-21 year olds will be restricted to 6 months on Universal Credit During these claims they will have especially intensive job search requirements If they are still claiming after 6 months, to keep benefit claimants will be required to: –Apply for an apprenticeship or traineeship –‘gain work-based skills’ –Go on a Mandatory Work Placement

20. April 2017: Universal Credit – Housing Costs restricted for 18-21 year olds 18-21 year olds will NOT be entitled to help with Housing Costs, unless: –They are estranged from their parents –They worked for at least 6 months prior to claiming (in which case they can get Housing Costs for 6 months) –They are parents –Other undefined vulnerabilities – possibly relating to ill health Social landlords will likely have to turn away young housing applicants, unless they can prove they meet the above criteria

21. April 2018: Further changes to SMI Support for Mortgage Interest will no longer be supplied as a benefit, but as a loan Applies to both new and current claims Only applies to interest paid for from April 2018 NOT interest free, interest forecast to be 2.9% initially, and reviewed every six months by Secretary of State This will be a secured loan on the claimant’s home Loan will be repayable when claimant is back in work or sells home Technically this means DWP could repossess home to recoup the loan, although they have said they won’t do this…

22. Discretionary Housing Payments As part of the budget, government has pledged to provide Local Authorities with £800 million over 5 years - £160 million per year Funding over previous years: 2013/14 - £180 million 2014/15 - £165 million 2015/16 - £125 million Therefore, overall DHP is still less well funded than previous years Support for Benefit Cap claimants will still be short

23. Conclusion The Summer 2015 budget introduces a range of cuts across welfare These cuts will make it more difficult for claimants to manage household budget on the entitlements they will have Larger homes will become unaffordable to some benefit claimants Aside from the Welfare cuts discussed, changes for social landlords will restrict the amount of new homes built in this sector. –Pay to stay –Right to buy –Rent cut 1% year on year The cuts will likely increase poverty and indebtedness, which we as advice agencies need to be ready for!