- What does Welfare Reform entail? How will customers be affected?
- Universal Credit
- Bedroom Restrictions (Under Occupancy)
- Household Benefit Cap
- Exceptions to the Benefit Cap
- Transitional protection (‘Grace Period’)
- Council Tax Support
- Where to get more information
Welfare Reform is part of the Government’s strategy to overhaul the benefit system, combining a number of benefits into one benefit known as Universal Credit with an over-riding ambition to make benefits simpler, whilst encouraging people claiming benefits back into work.
This is a brief overview of the changes that have been implemented as part of the Government’s welfare reform proposals.
In the main these changes were all part of the Government’s Welfare Reform Act which received Royal Assent on the 8 March 2012.
It introduced a wide range of reforms aimed at delivering the commitment made in the Coalition Agreement and the Queen’s Speech to make the benefits and tax credits systems fairer and simpler.
Universal Credit is a new single payment for people who are looking for work or on a low income.
Universal Credit (UC) started to be introduced in stages for new claimants from October 2013. At this time, claimant’s eligibility to claim Universal Credit depended on where they live and their personal circumstances. The Department of Work and Pensions plan to make Universal Credit available in every part of Great Britain during 2016/20. New claims to the relevant existing benefits being replaced by Universal Credit will then close down, with the vast majority of claimants moving onto Universal Credit between 2016 and 2020.
Universal Credit (UC) started for new claimants from October 2013. All new benefit claimants will be able to claim Universal Credit in Corby from March 2017 if they are entitled to the benefit.
UC replaces a number of income related benefits and Housing Benefit with one single monthly payment and there is also a requirement that UC will be paid into a bank account.
The Benefits it will replace are:
- Income-based Jobseeker’s Allowance
- Income-related Employment and Support Allowance
- Income Support
- Working Tax Credit
- Child Tax Credit
- Housing Benefit
Council Tax Support is not included in Universal Credit.
How often will UC be paid?
Recipients will be paid monthly.
How will UC be paid?
UC will be paid into a bank account.
What if a customer does not have a bank account?
UC will be paid into a bank account, so if the customer does not already have one, they must open one as soon as possible.
Most banks and building societies offer a basic account, but they could consider a credit union as they offer help to people who cannot access the normal banking services.
The customer could also consider a bank offering ’Jam jar’ accounts which are designed to help people on low incomes, or who have poor financial management skills - but there may be possible charges for the service
Will rent be paid separately?
Initially in the case of existing claims but not after any changes are made to the claim and not for new claims – UC will then include the rent element in the one payment, so customers will have to budget accordingly and ensure that they take responsibility for paying their rent.
Referred to by the media as 'bedroom tax' it is also known as Social Sector Size Criteria
From April 2013 changes to Housing Benefit payments have affected customers, with the exception of pensioners, who have more bedrooms than the Department for Work & Pensions have decided they need they need.
Rules apply to people living in Council or Housing Association homes which are used to assess how many bedrooms each household needs.
Customers are only able to claim Housing Benefit for the number of bedrooms that the Department for Work & Pensions says that they need for their household.
If they have 1 bedroom more than they need, their Housing Benefit entitlement will be reduced by 14% and by 25% for 2 or more excess bedrooms
- Children of both genders under 10 are expected to share a bedroom.
- Children of the same gender under 16 are expected to share a bedroom.
- Each adult or couple would have their own bedroom.
- Only one parent can have the room allowance for the child, even where they share access to the child.
- No extra rooms will be allowed for when someone visits - this includes where a child comes to stay with a parent that they do not normally live with.
- No extra rooms will be allowed for medical reasons, for example where a couple need separate rooms because one of them is ill or recovering from an operation.
The measure only affects claimants of working age - those below the Pension Credit age. The Pension Credit was 61 at the time the changes came into effect in April 2013, and will rise in line with the women's state pension age until equalisation with men is achieved in 2018.
Different gender children - girls and boys under 10 are expected to share a bedroom.
This means a family in a 3 bedroom house with a boy aged 8 and a girl aged 6 would be assessed as needing a 2 bedroom property, so the claimants would receive 14% less Housing Benefit.
Children of the same gender are expected to share a bedroom up to the age of 16 years. This means that if the customer has 2 girls, aged 2 and 15, they are expected to share a bedroom.
So if the customer has a 3 bedroom property, again the claimants would receive 14% less Housing Benefit.
A couple or single person will see their housing benefit reduced by 14% for one bedroom more than they need and 25% for 2 bedrooms or more.
If the customer is not the main carer of their children they will not qualify for an extra bedroom unless they pay 14% of their housing benefit lost entitlement to keep the extra room.
If Housing Benefit is reduced, what do customers need to do?
Customers will need to fund the difference between the Benefit they are given and the rent they need to pay if they want to stay in their existing home or risk the consequences of incurring rent arrears.
A Discretionary Housing Payment can be considered, but this can only be awarded if an application is made and the relevant criteria fulfilled.
The Welfare Reform Act gives the Government the power to cap the total amount of benefit which a single person or couple is entitled to. The cap was first introduced in July 2013 and has now changed from November 2016 and new thresholds apply.
How will it be calculated?
The Benefit Cap will be set at the average net earnings for a working household.
From November 2016 the benefit cap is set at £384.62 per week (£20,000 per annum) for lone parents and couples with or without children, and £257.69 per week (£13,400 per annum) for single people without children.
Different figures apply to the London area.
Prior to the introduction of Universal Credit (from October 2013 to 2020), the Benefit Cap will apply to the combined income a household receives.
Benefits included in the cap are:
•Employment Support Allowance
•Child Tax Credit
•Widowed Parents Allowance.
The Regulations provide for certain groups who will be exempt from the Benefit Cap rules;
Depending on what specific income or benefits the customer receives.
These exemptions are listed as being:
- Entitlement to Working Tax Credit;
- Receipt of Disability Living Allowance;
- Personal Independence Payment;
- Attendance Allowance;
- Industrial Injuries Benefits (and equivalent payments made as part of a war disablement pension or the Armed Forces Compensation Scheme);
- The Support Component of Employment and Support Allowance;
- War Widows and Widowers.
- Receiving Carers Allowance or equivalent
- Receiving Guardian's Allowance
Some transitional protection will be available to new and existing claimants who have been in work but who have lost their job. This protection is known as the ‘grace period’, and lasts for 39 weeks (9 months), during which the cap will not be applied.
This grace period only operates however for those who have been in work continuously for the previous 12 months and who have lost their job through ‘no fault of their own;’
If a grace period is applicable it will remain in place irrespective of any reportable change of circumstances made by the claimant during the 39 weeks.
The grace period will apply equally to those whose job finishes before or after the introduction of the cap.
For example, in the case of somebody who finishes work in February 2013, prior to the cap's introduction in April 2013, the cap would not apply until 39 weeks later in November 2013.
The grace period begins on the day after the last day for which payment was received and will run consecutively.
The qualifying conditions for the grace period are that as claimant or partner they must have been:
- In work for at least 50 weeks out of 52 weeks prior to the last day for which payment was received. A claimant will be allowed to have claimed an out of work benefit in these two weeks;
- In the last employment in this period, work in the last full week was for at least 16 hours per week at the point employment ended and;
- During the period(s) of employment you or your partner were not entitled to Income Support, Jobseeker’s Allowance or Employment and Support Allowance.
The qualifying conditions for the grace period can be met by either member of a couple but this must be done so independently not cumulatively.
As of 31 March 2013, the national Council Tax Benefit scheme was abolished and replaced with a Local Council Tax Support scheme, also known as Council Tax Reduction.
From 1 April 2013 it was no longer a benefit but is a locally administered payment towards a person’s Council Tax liability.
Nevertheless, the scheme means that all working age claimants receive less Council Tax Support than they would have received under Council Tax Benefit.
Summary of the Corby Borough Council Scheme
•91.5% maximum award unless claimant of pension age or in receipt of War
•No Second Adult Rebate unless claimant of pension age.
Unlike some authorities Corby Borough Council has maintained its Council Tax Support Scheme at 91.5%.
We are not able to calculate the exact changes for everyone as these will depend on each customer’s personal circumstances
Examples of Council Tax Support Awards depending on the circumstances of the claimant.
1 – Unemployed Single Person aged 28
|Renting a 1 bedroom flat from a private landlord.|
|Receives Job Seekers Allowance||£72.40
|Receives Local Housing allowance||£57.00
|Council Tax liability - Band A||£13.40
|Council Tax Support||£12.26|
2 – Employed Single Person aged 28
|Renting a 1 bedroom flat from a private landlord
|Receives earning part-time wages||£100.96|
|Receives Local Housing allowance||£38.44|
|Council Tax liability - Band A||£13.40|
|Council Tax Support||£ 6.55|
3 - Unemployed Single Parent with 2 Children
|Renting a 3 bedroom house from a private landlord|
|Receives Income Support||£ 72.40 and Tax Credits|
|Receives Local Housing Allowance||£103.85|
|Council Tax liability – Band C||£17.87|
|Council Tax Support||£16.35|
4 – Employed Single Parent with 2 Children
|Renting a 3 bedroom house from a private landlord, one child is disabled and there are childcare costs in school term time|
|Receives Earnings||£1236.68 and Tax Credits £214.99|
|Receives Local Housing Allowance||£103.27|
|Council Tax liability – Band C||£17.87|
|Council Tax Support||£10.48|
5 – Unemployed Couple with 2 Children
|Renting a 3 bedroom house from a private landlord|
|Receives Job Seekers Allowance||£113.70 and Tax Credits|
|Receives Local Housing Allowance||£122.36|
|Council Tax liability – Band C||£23.82|
|Council Tax Support||£21.80|
6 – Employed Couple with 1 Children
|Renting a 2 bedroom house from a private landlord|
|Receives Earnings of||£140.95 and Tax Credits £104.93|
|Receives Local Housing Allowance||£ 86.15|
|Council Tax liability – Band C||£ 23.82|
|Council Tax Support||£17.54|
In addition to the benefit changes, there have also been changes to Council Tax exemptions and discounts, although these are unlikely to affect benefit recipients.
With effect from 1 April 2013 the following will apply:
•Class A exemptions abolished (properties requiring major works)
•Class C exemptions abolished (properties which are unoccupied and unfurnished)
•50% levy to be imposed on properties empty for over 2 years
•Second homes discount abolished
Universal Credit, ‘Bedroom Tax’, Benefit Cap
- Department for Work & Pensions https://www.gov.uk/government/policies/simplifying-the-welfare-system-and-making-sure-work-pays/supporting-pages/introducing-universal-credit
- Gov.uk https://www.gov.uk/benefit-cap
- Turn2us http://www.turn2us.org.uk/
- Step Change Debt Charity http://www.stepchange.org/
- Citizens Advice http://www.citizensadvice.org.uk/
Telephone Jobcentre Plus on: 0800 055 6688
Telephone Government Info Line on: 0845 605 7064
Council Tax and Council Tax Support Scheme