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The future of welfare reform

The future of welfare reform. Stephen McKay University of Birmingham s.d.mckay@bham.ac.uk twitter.com/ socialpolicy www.benefits.org.uk. Changes in benefit levels under New Labour. Strongly agree there should be higher benefits for the poor (GB), 1987-2007. Coalition Government.

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The future of welfare reform

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  1. The future of welfare reform Stephen McKay University of Birmingham s.d.mckay@bham.ac.uk twitter.com/socialpolicy www.benefits.org.uk

  2. Changes in benefit levels under New Labour

  3. Stronglyagree there should be higher benefits for the poor (GB), 1987-2007

  4. Coalition Government • Cutters and reformers • Treasury and IDS/CSJ • Emergency budget 2010 [saving £11bn in 2014/15] • Comprehensive Spending Review 2010 [£7bn] • Universal Credit 2010

  5. 2010 budget changes – saving £11bn in 2014/5 • Indexation by CPI (£5.8 bn) • Note VAT rises in January, and benefits increase by inflation in September, so no immediate 'compensation' • Changes to Tax Credits (£3bn) – new disregard for income cuts; restrictions to backdating; removal from higher incomes; no ‘baby bonus’ • Housing Benefit reform (£1.8bn) – caps on levels; changes for social tenants; move to 30th percentile; reduced by 10% if JSA for 12months+ • Freeze on Child Benefit (£1bn) • DLAnew medical tests (£1bn) • An end to ‘asset-based welfare’ (CTF £560m, SG £115m) • Relatively favourable treatment of pensioners, triple lock and higher Pension Credit (-£1bn)

  6. Comprehensive Spending Review 2010 – saving another £7bn in 2014/5 • Child Benefit removed from higher earners (£2½ bn) • ESA time limit (12 months) (£2bn) • WTC: Freeze in the basic and 30 hour elements (£635m); new couples hours rule (£390m); childcare element reduced (£385m); PAYE real-time information (£300m) • But Child Tax Credit increased (-£560m) • Council Tax Benefit 10% cut (£490m), and localised • Overall benefits cap (£270m) • State Pension Age to be 66 by 2020 • EMAs all but eliminated • Cuts to DWP/HMRC admin costs

  7. Housing Benefit [Latest: 30/11/2010] • Caps and 30th percentile limit introduced for new claims in April 2011. • Existing customers exempt for up to 9 months from the date their claim is reviewed by their local authority. (i.e. generally up to January 2012.) • New discretionary powers for local authorities to make direct payments to landlords in return for reducing their rents. • SSAC (Nov-2010) ‘The Committee’s report recommends that the Government should not go ahead with the package of amendments proposed’.

  8. Universal Credit – key structural issues hampering reform • The unit of assessment (individual or family) • Who gets the payment (‘wallet v purse’) • Period of assessment and payment (and effects on family budgeting) • Interactions with contributory and other benefits and entitlements

  9. Universal Credit – key changes I • Integrated benefit in place of Income Support, income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, Housing Benefit, Child Tax Credit and Working Tax Credit. • benefit rates for people not in work will generally be the same as under the current system • a basic personal amount with additional amounts for: disability, caring responsibilities, housing costs, and children. (? childcare costs ?) • Households – both to claim in couples • Earnings disregards – zero for single adults but sizeable for most other groups (though reduced if on housing support)

  10. Universal Credit – key changes II • The same benefit as hours of work vary – removing most ‘cliff edges’ at 16/24/30 hours. (? Conditionality ?) • 65% taper rate (76% incl Tax, NI) • Self-Employed assumed to earn at least minimum wage (though who observes the hours?) • The same capital rules as currently apply to Income Support • Two systems from 2013 - ? = a ‘better-off’ issue

  11. Earnings disregards • Max disregards and floors (reduced by 1.5 times housing costs) • Increase if children present

  12. Effect on marginal deduction rates

  13. Universal Credit – remaining issues • Fate of all benefits outside of UC including Carers Allowance; Child Benefit to be fully means-tested by 2017? Why not include more? • Social Fund Crisis Loans + CCGs moved to LAs [Budgeting Loans, Maternity Grants and Cold Weather Payments in UC] • Shared care, only one parent eligible to receive the child element of Universal Credit. • Passported benefits, new arrangements.

  14. The future? • Role of contributory benefits and other non-means-tested benefits outside UC: • “Contributory Jobseeker’s Allowance will continue in its current form but with the same earnings rules (such as disregards and tapered withdrawal) as Universal Credit” • Many details still unknown = scope to influence policy development?

  15. Assessment • Few changes to average deduction rates, a lot riding on transparency and easier administration • Transparency versus existing budgetting • Tensions in policy (especially Council Tax Benefit, JSA new HB rule) • Future for Child Maintenance (C-MEC)

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