1) Summary of Universal Credit and associated changes to other benefits.
- An integrated benefit for people in or out of work.
- New claims for Universal Credit will start from October 2013. Existing benefits claimants will be transferred between April 2014 and October 2017. There will be no cash loss at the point of transfer onto Universal Credit for existing benefits claimants.
- Claims will be made on the basis of households rather than individuals and both members of a couple will be required to claim Universal Credit. Claims and changes of circumstances will be made online.
- It replaces Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, Housing Benefit, Child Tax Credit and Working Tax Credit.
- It will not replace Contributory Jobseeker’s Allowance and contributory Employment and Support Allowance, Disability Living Allowance, Child Benefit,bereavement benefits, Statutory Sick Pay, Statutory Maternity Pay, Maternity Allowance and Industrial Injuries Disablement Benefit.
- Contributory Employment and Support Allowance will continue, with administration and earnings rules aligned with Universal Credit. However, for those in the assessment phase and those assessed as being in the Work Related Activity Group their contributory Employment and Support Allowance will now be time-limited to a maximum of one year. After this time, qualifying recipients may be able to receive Universal Credit instead. The Government also intends to simplify the support for people aged under 25 who have been unable to pay the normal amount of National Insurance contributions as a result of their disability or health condition.
- Disability Living Allowance will be reformed to “ensure that severely disabled people can participate more widely in society”.
- The Government is considering whether changes to Carer’s Allowance will be necessary.
- 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.
- Elements of the Social Fund that can be automated, such as budgeting loans, will become part of Universal Credit. More discretionary elements, such as community care grants and crisis loans, will be devolved to Local Authorities.
- The current benefit dependent thresholds for access to a range of passported benefits (for example, free school meals and health benefits) will no longer exist. They 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.
- There will be a single taper to withdraw support as earnings rise and a new approach to earnings disregards. The taper is the rate at which benefit is reduced to take account of earnings.
- As earnings rise Universal Credit will be withdrawn at a constant rate of around 65 pence for each pound of net earnings. Selected groups eg disabled people will have higher earnings disregards. This means they can earn more before the Universal Credit will start to be withdrawn.
Proposed maximum earnings disregards:
- couple: £3,000 plus £2,700 per household for a child (regardless of number of children)
- one parent: £5,000 plus £2,700 per household for a child
- disabled people: £7,000 per household if a recipient or either partner in a couple is disabled
The amount to be disregarded will be reduced to reflect support people receive for rent or mortgage interest support. The reduction for housing costs goes as far as a ‘disregard floor’. The annual amounts modelled are:
- couple: £520 per household plus £520 for the first child, £260 for each of the second and third children
- lone parent: £1,560 per household plus £520 for the first child, £260 for each of the second and third children
- disabled people: £2,080
The Universal Credit will consist of a basic personal amount with additional amounts for:
The model used by ESA will continue to be used for Universal Credit, with sick and disabled people placed in different groups depending on their ability to work. Claimants will be assessed using the Work Capability Assessment.
The Government is still working on proposals for carers. They intend as part of these reforms to “provide support for carers and improve their opportunities to maintain links with the world of work”. Carers will continue to be eligible for National Insurance credits.
An appropriate amount will be added to the Universal Credit award to help meet the cost of rent and mortgage interest. Support in the private sector will be paid to cover the lowest third of market rents. Changes may be considered to the current approach to calculating help with mortgage costs.
The Universal Credit will include fixed amounts for children’s living costs based on current Children’s Tax Credits. The Government is still examining options for childcare costs for those in work only. If parents are separated, only one will receive the child element of Universal Credit.
The Government will consider the structure of support for disabled children in the Universal Credit as they look at the structure for disabled adults.
There will be four conditionality groups in the Universal Credit
- full conditionality – jobseekers This will be the default option for recipients including lone parents and couples with older children. Recipients in this group will be subject to the same requirements to actively seek work and to be available for work as they would under Jobseeker’s Allowance.
- work preparation – Recipients will be in this group if they are disabled or have a health condition which means they have limited capability for work at the current time. They will be expected to take reasonable steps to prepare for work.
- keeping in touch with the labour market – Recipients will be in this group if they are a lone parent or lead carer in a couple with a child over one but below age five. They will be expected to attend periodic interviews to discuss their plans for returning to the labour market.
- no conditionality – Recipients will be in this group if they are: disabled or have a serious health condition which prevents them working and preparing for work; a lone parent or lead carer in a couple with a child younger than one; or have intensive and regular caring responsibilities. People receiving Universal Credit but earning above the relevant threshold would also not be subject to conditionality.
3) Conditionality under CURRENT benefits system and Universal Credit
Conditionally changes will be made in the existing benefits system and will be carried forward under Universal Credit, with adjustments as necessary.
Some groups will find their conditionality increases ie they will need to do more in order to keep their benefits
- Financial support will remain unconditional for those the Government does not expect to work or to prepare for work.
- The Government will introduce Mandatory Work Activity so that some recipients will be required to take part in full-time work activity for four weeks.
- Employment and Support Allowance recipients who are capable of doing so may be required to take part in work-related activity to help them prepare to move into work.
- lone parents whose youngest child has reached the age of five will need to actively seek work unless they are disabled or have
a health condition which prevents them working, or are a carer
- couples with children whose youngest child has reached the age of five, and where neither partner is disabled or has a health condition which prevents them working or is a carer, will need to make a joint claim to Jobseeker’s Allowance, requiring both partners to actively seek work.
- Every Income Support, Jobseeker’s Allowance and Employment and Support Allowance recipient will be required to have a claimant commitment. A new sanctions structure will apply across Jobseeker’s Allowance, Employment and Support Allowance, and Income Support.
4) Sanctions under CURRENT benefits system and Universal Credit
The current proposals for financial sanctions are:
- “Failure to meet a requirement to prepare for work (applicable to jobseekers and those in the Employment and Support Allowance Work-Related Activity Group) will lead to 100 per cent of payments ceasing until the recipient re-complies with requirements and for a fixed period after re-compliance (fixed period sanctions start at one week, rising to two, then four weeks with each subsequent failure to comply).
- Failure to actively seek employment or be available for work will lead to payment ceasing for four weeks for a first failure and up to three months for a second.
- The most serious failures that apply only to jobseekers will lead to Jobseeker’s Allowance payment ceasing for a fixed period of at least three months (longer for repeat offences). Actions that could trigger this level of penalty include failure to accept a reasonable job offer, failure to apply for a job or failure to attend Mandatory Work Activity.
- Some types of recipient, such as lone parents with young children, are only required to attend work-focused interviews and their failure to attend is more often due to challenging circumstances than wilful evasion of the rules. Therefore, we are improving our methods of ensuring lone parents know about and are able to comply with their responsibilities. However, we will impose a financial sanction where necessary that is broadly in line with current arrangements.”
- Hardship payments will be available to benefit recipients in need who receive a sanction. However the Government is discussing making these in the form of a loan. The Government “also wants to consider ways of ensuring that those who persistently fail to meet the requirements imposed upon them cannot rely on these alternative sources of support for the entire duration of their sanction.”
- Where advisers believe a jobseeker will benefit from experiencing the habits and routines of working life, they will have the power to refer the recipient to Mandatory Work Activity for upto four weeks. If a recipient fails without good cause to attend or complete the placement, then a significant financial sanction will be imposed.
Proposed sanctions for those in the Work Related Activity Group of Employment and Support Allowance.
- Attend an appointment.
- Attend Employment related programme.
- Attend Work Focussed Interview.
- Carry out Work Related Activity.
- 100% of ESA removed. Open ended until reengagement occurs, and then for a fixed period, 1, 2, then 4 weeks.
- Advisors retain ability not to impose sanction where good cause exists.
Proposed sanctions for those only required to attend work focussed interviews: Income Support and ESA claimants who are lone parents with a child aged between 1 and 5.
- Attend Work Focussed Interview.
- 1st Failure: 20% of the lone parent personal allowance withdrawn. Open ended until reengagement.
- 2nd and subsequent Failure: additional 20% removed, capped at 40% total until reengagement.
This information is a summary of the Universal Credit White Paper published on 11/11/10 by the DWP. The full paper contains much more detail and is wider ranging than this summary.