Impact of welfare reform

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What is happening to welfare?
national policy - local impacts
13 March 2013
What’s happening to welfare?
• The objectives of welfare reform
• The national reform programme
• The local impact
• The tenant impact
• The sickness and disability impact
• The family impact
• Our local response
The objectives for welfare reform:
financial and structural
• Financial: Set out in the Emergency Budget 2010: cut £18
billion from the welfare budget
• Confirmed in the Budget statement 2012: cut a further £3.7
billion from the welfare budget
• Structural: Set out in government White Paper: Welfare for
21st Century
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Target people of working age
Simplify the system
Make work pay
Reduce fraud
The national reform programme:
first 3 years
• Work Capability Assessments for everyone on sickness
benefits; contribution-based ESA limited to 52 weeks
• All benefits and tax credits up-rated by Consumer Prices
Index ‘til 2013 (a lower index than the RPI, previously used)
• Child Benefit frozen for three years to 2013
• Cuts to in-work tax credits
• Local Housing Allowance for private tenants capped
• Local Housing Allowance up-rated by CPI not market rent
• 27% hike in housing benefit non-dependant deductions
• Etc.
The national reform programme: from 2013
• ‘Bedroom tax’ for social housing tenants – 14% or 25% of
base rent cut from Housing Benefit
• General out of work benefit cap: £350 / £500 a week limit on
benefit income
• Abolition of council tax benefit – transfer to local
authorities with 10% cut
• Abolition of social fund crisis loans and community care
grants – transfer funds to local authorities
• Abolition of disability living allowance – introduction of
Personal Independence Payment with target to cut
spending by 20%
• Benefits, tax credits and LHA caps up-rated by 1%, not CPI
The local impact
• Financial: Islington’s share of £21.7 billion cut is about £45
to £65 million
• £3.6 million available locally to mitigate the impact
• Structural: The benefit cuts target specific groups in the
working age population:
– Tenants on housing benefit (all tenures)
– People sickness and disability benefits
– Families with children – in or out of work
The national reform programme: tenant impact
• A total of 7 reforms cut benefits for tenants
•
Private tenants
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•
Local Housing Allowance: caps based on size criteria
LHA: market rent capped at bottom third of rental market
LHA: abolition of £15 bonus paid to tenants in low rent properties
LHA: single room rent restriction extended to age 35
LHA: uprated by Consumer Prices Index, not market rent
LHA: uprated by 1% from 2014, not CPI
Social housing tenants
– ‘Bedroom tax’ – under-occupation restriction based on size criteria
•
All tenants
– Non-dependent deductions increased by 27%
The tenant impact: LHA cap for private tenants
• 3,250 private tenants covered by LHA caps in Islington
(86% lone parents)
• 1,316 (40%) LHA households exceed the cap
• Average loss of benefit is £45.71 a week
• Range is between £34 and £1000 a week
The tenant impact: LHA cap case study
• Lone parent on income support with two children (3 and 1)
living in a two bedroom private flat: rent £350 a week
• LHA cap for a her is £290 – £60 cut in HB
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–
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IS for mother:
Child Tax Credit:
Child Benefit:
Total family income
£71.00
£113.63
£33.70
£218.33
• Family income after housing costs: £158.33 (£7.54 per
person per day)
• Council tax to pay from April 2013: £1.71
The tenant impact: ‘bedroom tax’ for social
housing tenants
• Size criteria that apply to private tenants will be applied to
social housing tenants under pension credit age
• 2100 council tenants affected – unknown number in other
social housing sector
• If under-occupying by one room – will have to meet 14% of
base rent before housing benefit
• If under-occupying by more than one room – will have to
meet 25% of base rent before housing benefit
The tenant impact: ‘bedroom tax’ case study
• Lone parent on income support with two children (3 and 1)
living in a three bedroom NewLon flat: rent £193.70 a week
• Service charge is £6.17; 14% cut to rent for HB = £26.25 cut
in HB
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IS for mother:
Child Tax Credit:
Child Benefit:
Total family income
£71.00
£113.63
£33.70
£218.33
• Family income after rent: £185.41 (£8.83 per person per
day)
• Council tax to pay from April 2013: £1.71
The national reform programme: sickness and
disability impact
• Three reforms cut benefits for sick and disabled people
•
Sickness benefits
– Work Capability Assessments for all who claim sickness benefits
– Contribution-based Employment and Support Allowance time limited
to 52 weeks
•
Disability
– Abolition of Disability Living Allowance for people aged 16 to 64 –
replaced by Personal Independence payments
The sickness and disability impact: work
capability assessments and DLA
• Sickness benefits
•
12,500 Islington residents claim long-term sickness benefits (8%
of working age population)
•
Nearly, 8000 Islington residents will have a WCA to assess them
for Employment & Support Allowance by 2014
– 2950 (37%) expected to be found fit for work – required to claim
Jobseeker’s Allowance with average loss of benefit £35 a week
•
•
Disability Living Allowance
Nearly 8000 working age adults getting DLA in Islington
– 1600 to 2300 may lose benefit when claiming Personal Independence
Payment
– Potential loss of benefit between £20.55 to £234.85 a week
The sickness and disability impact: case
studies
• Work Capability Assessment
•
Single man age 38 claiming Incapacity Benefit and income
support of £101.35 a week.
•
Work Capability Assessment finds him fit for work. Required to
claim Jobseeker’s Allowance of £71.00 a week – loss of £30.35.
If challenging the decision, can claim Employment and Support
Allowance pending the appeal – will be paid at £71 a week- loss of
£30.35 a week.
•
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•
Disability Living Allowance
Single man age 38 claiming Employment & Support Allowance of
£157.35 and DLA of £58.85. Total income = £216.20
•
Notified that DLA will stop. Claim for Personal Independence
Payment turned down. Loses DLA and ESA severe disability
premium. Total income = £99.15. Loss of £117.05 a week.
The national reform programme: family impact
• A total of 17 reforms cut benefits for families
•
Families with young children
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Sure Start maternity grant for 1st child only
Health in Pregnancy Grant abolished
Child Tax Credit baby element abolished
Child benefit frozen for three years
Working families
– Multiple cuts to in-work tax credits
– Childcare element of Working Tax Credit cut by 10%
– Working Tax Credit: excludes couples working under 24 hours
•
Workless Families
– General benefit cap of £500 a week
The family impact: general benefit cap for
workless families
• From (about) September 2013: most households on out of
work benefits capped at £500 a week (couples) or £350 a
week (single)
• DWP have identified 888 Islington households above the
cap
– 600 households lose more than £30 a week
– 728 households with1853 children
– Of the 728 households with children:
– 112 households are ‘troubled families’ (373 children)
• Cap does not apply to households getting DLA, certain
sickness benefits, war pensions etc.
The family impact: general benefit cap case
study
• Lone parent on income support with three children (3, 2 and
1) living in a two bedroom private flat: rent £350 a week
• LHA cap for her is £340 – £10 cut in HB
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IS for mother:
Child Tax Credit:
Child Benefit:
Housing Benefit
Total benefit income
£71.00
£165.27
£47.10
£340.00
£623.37
• General cap for her is £500; excess = £123.37
• Family income after rent: £150.00 (£5.36 per person per
day)
• Council tax to pay from April 2013: £1.89 a week
The family impact: general benefit cap and
employment
Lone parent with
three children
Income before
cap
Income after cap
Income if working
Income Support
£71.00
£71.00
£0.00
Child Tax Credit
£165.27
£165.27
£165.27
Working Tax Credit
£0.00
£0.00
£74.34
Housing Benefit
£340.00
£216.63
£306.89
Child Benefit
£47.10
£47.10
£47.10
Net earnings
£0.00
£0.00
£0.00
Total income
£645.67
£500
£742.52
Per person per day
£9.76
£5.36
£13.22
Weekly Council
Tax from April 2013
£1.89
£1.89
£1.89
The family impact: ready reckoner
Family
Type
No. of
children
JSA/IS
Child
Benefit
Child Tax
Credit
Maximum
housing
costs
Lone
parent
5
£71.00
£73.90
£268.45
£86.65
“
6
£71.00
£87.30
£320.04
£21.66
“
7
£71.00
£100.70
£371.63
£0.50
Couple
4
£111.45
£60.50
£216.86
£111.19
“
5
£111.45
£73.90
£268.45
£46.20
“
6
£111.45
£87.30
£320.04
£0.50
Welfare reform and child poverty
•
2010: Islington’s child poverty rate was 41.4%
– Second highest in UK after Tower Hamlets
– 15,745 children below poverty line
– 13,545 in workless households
•
Most projections of child poverty rates have been based on assumption
that benefits offer a safety net and rise with inflation
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Welfare reforms mean that the features of poverty will change
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Cuts, caps and 1% up-rating of benefits forces a re-assessment of those projections
Destitution will be a reality for larger families in high rent areas
2013: Government consults on changing measures for child poverty
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Income just one element in ‘multi-dimensional’ child poverty measure
Our local response
• Identify the cumulative impact of the reforms at
household level
• Use new data sharing flexibilities to target
households for support
• Work in partnership with JCP to offer households
advice on benefit rights, housing options and
access to employment and training
• Develop outreach advice and work with tenants’
groups to prepare local people for the changes
• Mitigate hardship and prevent escalation of need
arising from welfare benefit cuts
Contact
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Martin Baillie
020 7527 8620
07527 236217
[email protected]
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Income Maximisation Service
020 7527 8600
0800 731 8081 (freephone)
[email protected]
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