Some Key Points of the Spending Review

All measures start from the beginning of the financial year unless otherwise stated.


“To provide a fair and affordable platform for the introduction of the Universal Credit the
Spending Review also announces a package of reforms to the existing welfare system which
will deliver net AME savings of £7 billion a year by 2014-15, including by:

•• capping household benefit payments from 2013 at around £500 per week for couple
and lone parent households and around £350 per week for single adult households,
so that no family can receive more in welfare than median after tax earnings for
working households. All Disability Living Allowance claimants, War Widows, and
working families claiming the working tax credits will be exempt from the cap;

•• withdrawing Child Benefit from families with a higher rate taxpayer from January 2013
so that people on lower incomes are not subsidising those who are better off, saving
£2.5 billion a year by 2014-15; and

•• controlling the costs of tax credits by:

•• reducing the percentage of childcare costs that parents can claim through
the childcare element of the Working Tax Credit (WTC) from 80 per cent to its
previous 70 per cent level in April 2011, saving £385 million a year by 2014-15;

•• changing the eligibility rules so that couples with children must work 24 hours a
week between them, with one partner working at least 16 hours a week in order
to qualify for the WTC, saving £390 million a year by 2014-15;

•• freezing the basic and 30 hour elements of the WTC for three years from 2011-
12, saving £625 million a year by 2014-15; and

•• increasing the child element above indexation by a further £30 in 2011-12 and
£50 in 2012-13, in addition to the £150 and £60 increases provided at the June
Budget. This will ensure that the overall outcome of the Spending Review will
have no measurable impact on child poverty in the next two years.c

•• time limiting contributory Employment and Support Allowance for those in the Work
Related Activity Group to one year, to improve work incentives while protecting the
most severely disabled and those with the lowest incomes, saving £2 billion a year by

•• increasing the age threshold for the Shared Room Rate in Housing Benefit from 25
to 35. This will ensure that Housing Benefit rules reflect the housing expectations of
people of a similar age not on benefits, saving £215 million a year by 2014-15;

•• reducing spending on Council Tax Benefits by 10 per cent and localising it, saving
£490 million a year from 2013-14, while protecting the most vulnerable. In addition,
the Government will provide greater flexibilities to local authorities to manage
pressures on council tax from the same date;

•• removing the mobility component of Disability Living Allowance for people in
residential care, where such costs are already met from public funds, saving £135
million a year by 2014-15;

•• freezing the maximum Savings Credit award in Pension Credit for four years, thereby
limiting the spread of means testing up the income distribution and saving £330
million a year by 2014-15;

•• helping homeowners facing difficulties by extending for a further year the temporary
change to the Support for Mortgage Interest scheme, to reduce the waiting period for
new working age claimants to 13 weeks and increase the limit on eligible mortgage
capital to £200,000, both of which were due to expire in January 2011;

•• making permanent the temporary increases to Cold Weather Payments provided in the
past two winters, at a cost of £50 million a year, so that eligible households receive
£25 for each seven day cold spell recorded or forecast where they live;”

**some programmes announced by the previous government but not yet implemented will not be taken forward. This includes free prescriptions for people with long term conditions

2.14 Social care plays a vital role in helping to keep people healthy and independent. It also
supports some of the most vulnerable people in society. The Spending Review therefore makes
available sufficient resources for local authorities so that they do not need to reduce access to
services, and can fund new approaches that improve outcomes for those receiving social care:

•• the current DH grant to local authorities for social care, the Personal Social Services grant,
will increase by £1 billion pounds in real terms by 2014-15. To reduce administrative burdens
and increase flexibility for local authorities, this grant will be merged into local government
formula grant; and

•• the NHS will set aside funding growing to £1 billion by 2014-15 within their settlement to
fund new ways of providing services, including reablement services provided by the NHS.
This will help to break down the long-standing barriers between health and social care,
leading to benefits across the health and social care system.


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