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Setting the context: understanding the changes under the new welfare system Joanna Kennedy Chief Executive, Zacchaeus 2000 Trust.

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Presentation on theme: "Setting the context: understanding the changes under the new welfare system Joanna Kennedy Chief Executive, Zacchaeus 2000 Trust."— Presentation transcript:

1 Setting the context: understanding the changes under the new welfare system Joanna Kennedy Chief Executive, Zacchaeus 2000 Trust

2 Changes to Housing Benefit Since April 2011: the basis for setting LHA rates has been reduced from the median to the 30th percentile of local market; the rates have been capped by property size, with a maximum of £400 per week for a four bed or more property. Since April 2013: LHA rates have been uprated by the Consumer Price Index; ‘Bedroom Tax’ was introduced, meaning that Council or Housing Association tenants who are classed as having a spare bedroom(s) have their housing benefit reduced by 14% for 1 bedroom or 25% for 2 or more bedrooms From April 2014: LHA rates will be uprated by a maximum of 1% annually

3 Overall Benefit Cap The Benefit Cap means the maximum amount of benefits that an unemployed or under-employed household can receive is £500pw for a single parent or couple and £350pw for a single person. If the combined total of a claimants benefits is more than £500/£350, the difference will be deducted from their Housing Benefit. The cap has been piloted in Bromley, Croydon, Enfield & Haringey since April 2013. The cap has been rolled out in local authorities with 275 or fewer affected households from 15 July 2013. Local authorities with 275 or more affected households will be capped from 12 August. All affected households will be capped by September 2013.

4 Impact of Benefit cap Source: Answer to parliamentary question by Mark Hoban MP Around 27,600 households in the London region will see their incomes reduced by the operation of the benefit cap. The following table shows the number of households affected and the amount their benefits will be reduced: Reduction in benefit (per week)Number of households Less than £204,300 Between £20 to £39.994,700 Between £40 to £59.993,000 Between £60 to £79.992,600 Between £80 to £99.992,300 Over 10010,800

5 ‘Localisation’ of Council Tax Benefit In April 2013 CTB was abolished and replaced with Local Council Tax Support Schemes for each local authority. This was accompanied by a 10% funding cut. 18% of councils have retained the 2012/13 levels of CTB 71% require all working-age adults to make a minimum payment, regardless of income. Local authorities have a statutory duty to protect pensioners. 11% have made some changes, but these will not affect all CTB recipients. The result is 2.4 million low-income families will pay on average £138 more in council tax a year. 78% of those affected by the changes currently pay no council tax. Councils will have to start collecting, on average, £140 per year out of these households benefits.

6 Abolition of the Social Fund In April 2013 the discretionary social fund was abolished and replaced by ‘local welfare schemes’ in each local authority in England. The budget is 17.3% less than that of 2011/12 and LAs are not under any statutory duty to provide support and the budget is not ring-fenced. Under the new system: There is a 'postcode lottery‘ with considerable variation between Local schemes. Many local schemes have tighter eligibility criteria and cash payments have been replaced with in-kind support or voucher schemes. The majority of local authorities have not put loan schemes in place. There is limited capacity for alternative providers, like credit unions, to fill the gap. Many claimants will be forced to turn to pay-day loans. Research indicates that up to 20% of people refused or given only partial help from the social fund resorted to high interest lenders.

7 Introduction of PIP Over the next 3 years DLA will be replaced by the Personal Independence Payment (PIP) for people of working age. PIP was introduced for new claims in June 2013. Existing DLA claimants will have their claims reassessed from October 2013 if they report a change in their health condition, reach the end of their DLA award, or for reach the age of 16. From 2015 onwards all other DLA claimants will be reassessed for PIP. As a result of tighter eligibility criteria the government expects there will be 607,000 fewer people recieving PIP than would have received DLA if these changes had not taken place.

8 Universal Credit UC will replace most benefits with one monthly single payment. UC will be paid directly to the claimant, and include their housing costs. Many claimants will have to begin paying their rents themselves, rather than having it paid directly to their landlord. There will be exceptions for ‘vulnerable’ claimants, but this will largely be at the discretion of the Jobcentre. A UC pilot started in 1 JCP in April 2013 and this will be expanded to a further 6 in October 2013. There will be no new claims for Housing Benefit or Tax Credits from April 2014, and the government intends for everyone to receive Universal Credit by October 2017.

9 UC: Work Incentives Under UC net income is subject to a 65% taper rate after the disregard. The earnings disregard depends on family type & housing costs This is a lower taper rate than current out-of-work means-tested benefits but a higher taper rate than tax credits. UC only covers up to 70% of childcare cost, less than the 80% provided to WTC claimants prior to April 2011. UC therefore strengthens the work incentives for single individuals to work and for couples to have one person in work but weakens the incentive for both partners to work.

10 UC: Winners & Losers The Institute of Fiscal Studies estimates that there will be 2.5 million winners; 1.4 million losers; and 2.5 million who will not be affected at all. The government will provide transitional protection for current claimants so no one is worse off when they move over to the UC. However this is withdrawn as soon as their circumstances change. Winners Those working under 16 hours a week will benefit from UC’s new taper rate as their net income will now increase with every hour worked. Losers Lone parents & second earners: if they increase their hours they will find the taper rate and/or childcare costs begin to eat away at any additional earnings. Part time workers: new in-work conditionality could create losers if they are sanctioned for not increasing their hours or increase their hours and lose out as a result.

11 What has the impact been so far? It is difficult to measure the impact so far for a number of reasons: Transitional funding meant the LHA caps only came into force for existing claimants last autumn The overall benefit cap and other welfare reforms (1% uprating, Council Tax Benefit, Universal Credit) have only just come into force or have yet to do so. Discretionary Housing Payments have enabled many to stay in where they are but this support is only temporary. We won’t know full impact till DWP publishes more research.

12 Case Study: Family Y Georgina is a single mother, having left a violent and abusive husband, with 3 children. She lives on benefits and relies on the support of local friends and family. Her ex- husband is not contributing in any way. Her housing benefit was cut last year as a result of the LHA caps so she downsized and now lives with her 3 children in a 2 bedroom flat at a rent of £330pw. She currently receives £591.73 a week in benefit payments. Prior to April 2013 this left her with £261.73 after rent, however she now has to pay £4.37 a week in Council Tax. After paying her energy bills she is left with £220 with which to feed and clothe her children and take them to school. From 12 th August she will be subject to the benefit cap meaning her Housing Benefit entitlement of £305.77 will be reduced to £214.04. After she pays her rent and energy costs this will leave her with just £128.63 a week to survive on – an impossible task.

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