Impact of
Universal Credit
Dr Phil Agulnik
Entitledto
4th October 2012
I am…
• An economist specialising in social security
• Before Entitledto I worked for DWP and other central
govt. departments
• Entitledto supply a free public benefits calculator
performing over 2 million calculations a year
• We provide a range of benefit calculators for local
authorities, including self-service, adviser, and under
occupation calculators
• Entitledto are an IRRV strategic partner
What the Government says
about Universal Credit
“Universal Credit is the Government’s key
reform to tackle the two key problems of
poor work incentives; and complexity. It
will enable the system to help people to
move into and progress in work, while
supporting the most vulnerable. It will be
simple to understand and administer and it
will protect both the welfare of those most
in need and the public purse”
The scope of Universal Credit
In scope
• Income-based Jobseeker’s
Allowance
• Income-related Employment
and Support Allowance
• Income Support (including
Support for Mortgage
Interest)
• Child Tax Credit
• Working Tax Credit
• Housing Benefit
Out of scope
• Council Tax support
• Disability Living Allowance
• Contributory Benefits
• State pension
• Child Benefit
• Pension Credit
• Carer’s Allowance
Structure of
Universal Credit
The Means Test
Step 1 - Calculate Maximum Amount
Step 2 - Assess Capital, Unearned Income
and Earned Income
Step 3 - Taper reduces Maximum Amount
- apply disregards
- 65p in the £ taper on earned income
- £ for £ taper on unearned income
Step 4 - Adjustments
- sanctions
- benefits cap
- transitional protection (for some)
Maximum Amount
Standard Amount for single/couple plus
• Child Element
• Disabled Child Additions
• Childcare Element
• Carer Element
• Limited Capability for Work or Limited
Capability for Work-Related Activity Element
• Housing Element
Rent restriction through under-occupation rules
Rent restriction through LHA rules
Mortgage interest restrictions (or loan?)
Non-dependant deduction(s)
No housing element for supported/exempt
accommodation
Income and capital
Employed earnings
- actual income during assessment period
- real time earnings from HMRC
Self-employed earnings
- self-reported income during assessment period
- minimum income floor
Unearned income
- prescribed in regulations
- not prescribed = not treated as income
- generally same income types disregarded as now, except
for full disregard of war pension income
All above calculated as a monthly figure
Capital - no change for benefits, big change for tax credits
Assessing earnings – Real Time Information
Unearned Income
Prescribed income (taken into account) includes:
(a) Retirement pension
(b) The following benefits:
(i) contribution-based jobseeker’s allowance;
(ii) employment and support allowance;
(iii) carer’s allowance;
(iv) bereavement allowance;
(v) widowed mother’s allowance;
(vi) widowed parent’s allowance;
(vii) widow’s pension;
(viii) maternity allowance;
(ix) foreign benefits
(c) Spousal maintenance
(d) Student income
(e) Etc etc
Earnings disregards (may change)
Current system
Final system
Tax
Housing Universal Universal
Credits Benefit Credit max Credit min
disregard disregard
Original proposal
Universal Universal
Credit
Credit min
max
disregard
disregard
Single
Couple
Lone
parent
£6,420
£6,420
£6,420
£260
£520
£1,560
£700
£3,000
£9,000
£700
£1,920
£2780
(extra £260
for child 2+)
£0
£3,000
£7,700
£0
£520
£2080
(extra £260
for child 2+)
Couple
with
children
£6,420
£520
£7,250
£2440
(extra £260
for child 2+)
£5,700
£1040
(extra £260
for child 2+)
Disabled,
single or
couple
£6,420
£1,040
£7,000
£2,080
£7,000
£2,080
Plus 100% of pension contributions disregarded!
Transitional Protection
Three kinds of claim for UC:
1. New claim, e.g. when someone loses
their job and claims benefit
2. Change of circumstance (natural
migration), e.g. when an extra child is
born
3. Managed migration, when DWP initiates
the transfer onto UC
DWP’s claim that “no one will be worse
off!” only applies to managed migration!
Transitional protection for this group
means cash amount can not go down
Some affected
groups...
Disabled Adults
• Current Disability Premiums will be replaced with
just two elements:
limited capability for work
limited capability for work related activity
• Entitlement based on the Work Capability
Assessment, rather than DLA/PIP assessment
• Limited Capability for Work element likely to be
the same level as ESA WRAG component
• Limited Capability for Work Related Activity
element is likely to be higher than ESA Support
component, but lower than Severe Disability
Premium (SDP). Big winners and losers!
Disabled Adults – other changes
• No equivalent of Permitted Earnings
• Higher earned income disregard, but
no equivalent of WTC disability element
• Carer Element not paid in addition to
Limited Capability Elements – one or
the other
Loss of SDP – Citizens Advice example
Disabled Children
• Two rates of disabled child additions
Higher rate when child awarded highest rate of
DLA (care) or is registered blind
Lower rate when child awarded other rates of
either component of DLA (mobility or care)
• Figures proposed to date suggest that higher
rate may be same or more than current Child
Tax Credit severe disability element
• But lower rate same as WRAG component,
worth half of current Child Tax Credit disability
element of £57 per week
• Note: DLA/PIP assessment used for children
The Self-Employed
Minimum Income Floor
Intended as alternative to work conditionality for selfemployed
Calculated as 35 hours times minimum wage
Exemption during start-up period
Start-up Period
Within 12 months of starting self employment
Up to 12 months exemption from MIF
Once in every 5 years
Duty to report income each month
No carry forward from previous month
Permitted reductions
Flat rate deductions for mileage/use of home
Couples where one person over
Pension Credit age
• Under UC the age of the youngest person in
a couple will determine whether they claim
Pension Credit or UC
• As well as existing gap in benefit rates,
working age also have under occupation rules,
work conditionality etc
• As with examples above, massive difference
in income between a ‘natural’ transition onto
UC and managed migration
DWP estimates of winners and losers
(Impact Assessment Oct 2011)
Timetable…
Implementation Timescale
Feb ‘11
Design
& build
Apr ‘13 Oct ‘13 Apr ‘14
Pilot
Oct ‘14
Oct ‘15
Oct ‘16
Oct ‘17
New claims from out of work customers
New claims from in work customers
Natural transitions due to
change of circs
Managed transitions
2.5m
Legacy load
JSA, ESA, IS, HB, WTC, CTC
4.5m
6m
8m
UC load
Pathfinders and LA led Pilots
• Pathfinders in Oldham, Tameside, Warrington
and Wigan start April 2013. Live UC claims from
new JSA claimants
• Pilots to test aspects of delivery (online, monthly
payment, rent to claimant not landlord) from now....
Bath and North East
Somerset Council
Birmingham CC
Caerphilly County BC
Dumfries and Galloway
Council
LB Lewisham
Melton and Rushcliffe
BC as partnership
Newport CC
North Dorset DC
North Lanarkshire
Council
Oxford CC
West Dunbartonshire
Council
West Lindsey DC
Conclusion: Winners and Losers
• One year to go! But draft UC regs not complete
and further draft regs this month. Entitlement
rates and disregards in December (presumably)
• Modelling winners and losers at the moment
requires guess work as to rates and rules
• Winners have an incentive to transfer to UC via
a change of circumstance. In line with policy
intention to encourage 1-16 hours work
• Losers have an incentive to be part of
managed migration and get transitional
protection
Conclusion: Impact on LAs
• Difficult to estimate run down in HB caseload due to
switching incentive for UC winners
• Council Tax Support schemes re-designed from
April 2014 to align rules (e.g. on self-employed)
• Council Tax Support schemes may need to split
working age claimants into those claiming UC and
those not
• April 2013 changes mean a big cohort of losers. In
contrast UC losers are protected
• ‘Can’t pay’ rather than ‘won’t pay’ may be biggest
problem for new Council Tax Support schemes
My contact details:
Email:
Phone:
Web:
Or
phil@entitledto.co.uk
07816 638590
www.counciltaxsupport.com
www.solutions.entitledto.co.uk