Millionaire’s government will make paupers of us all

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I can’t say for sure that you saw it here first, but I’ll state it plainly: The government’s below-inflation benefits increase, coupled with the changes it is already bringing in, will break Britain’s economy altogether.

Companies up and down the UK will go out of business and nobody will take over from them. The cuts mean £40 billion will be removed from the economy this year – and, with no coherent plan to invest in jobs and growth, this means trouble for everyone. Even the fat cats who think they’re insulated.

I have covered the evidence in my previous few articles. The fact is that the working poor and those on benefits underpin the British economy. Without them, it cannot function. They spend most, if not all, of the money they receive, rather than seeding it away in banks or foreign tax havens, like the big businesspeople the government of millionaires has done so little to curb.

But benefits and wages are being cut, in real terms. Many people will find it hard to hold onto their homes because of the bedroom tax, cuts in housing benefit to meet the demands of the benefits cap, and increases in tax bills because Council Tax Benefit is to stop. Those buildings will remain empty because people will not be able to afford the cost of moving in. We will have legions of homeless people shuffling through one ghost town after another.

Malnourishment will increase. The average cost of groceries has risen by 17 per cent in the last two and a half years. No wonder our children have rickets.

So sickness and disability will increase – but those claiming disability benefits are among the most persecuted in this country, with the last recorded figure showing an average of 73 deaths every week in this part of society.

All because greedy private employers don’t want to pay their workforce enough money to cover their outgoings.

Sickening, isn’t it? People whose incomes have risen by more than 800 per cent over the past 30 years begrudge the 27 per cent rise their workers have had in the same time, and want to push those wages down still further.

That is why the Benefits Uprating Bill is going through Parliament. That is why Iain Duncan Smith is pushing through his punitive changes to the social security system – to create insecurity. Because people who fear that their jobs might be taken by somebody else are less likely to ask for a raise.

That is why our nearly-1,000-year-old civilisation is about to land on its arse.

If you think I’m overstating matters, think again. The UK economy contracted by 0.3 per cent in the last three months of 2012, according to the National Institute of Economic and Social Research (NIESR). And the figures relating to the government’s changes were reeled out during the debate on the Benefits Uprating Bill by the following MPs.

“We have to ask ourselves whether we want to continue to support a situation in which private employers in particular do not want to pay a living wage to the staff that they employ in order to make profits,” said Ian Mearns.

“Since this Government took office, the cost of the average weekly shopping basket has risen by 17 per cent.” (Michael McCann)

“People on low incomes tend to spend locally and to spend all their money. The Welsh economy is overwhelmingly made up of small businesses… Working tax credit reductions will suck demand out of local economies and make matters even more difficult for small businesses struggling to survive in the recession.” (Hywel Williams)

“It is estimated—the IMF is the source — that these benefit cuts will contribute to a £40 billion reduction in the country’s output when we desperately need the opposite to happen.” (Steve McCabe)

“The Treasury confirmed that the working tax credit lost in 2013-14 by people who are working full time on the minimum wage, due to the Government’s freezes and the increase in the earnings taper, will be £475 for a single person with no children and £660 for a couple with one child. Contrary to the assertions made in Parliament, the amount of working tax credit lost by families with one earner on the minimum wage will be greater than their saving of £420 in 2013-14 from the increase in the personal tax allowance.” (Yvonne Fovargue)

“The more people there are taking cuts to their tax credits and take-home pay, the fewer people there are spending in local economies. In an area such as mine, where there is a high proportion of small businesses that employ many people from the local area, that is devastating.” (Lisa Nandy)

“The policy is not only unfair but economically inept. As many have pointed out, people on the lowest incomes spend their money in local economies, and the last thing that we need is a further contraction in demand in local economies.” (Nic Dakin)

And Julie Hilling said: “The IMF has already warned the Government that their annual cut of £24 billion to benefits and tax credits will reduce economic output by up to £40 billion. Not only are they heartless; they are incompetent too.

“The way to get down the benefits bill is to get people into decently-paid work. By already having a double-dip recession and heading for a triple dip, the Government have demonstrated that we cannot cut our way out of a recession — we have to grow our way out.

“Punishing the poor and bringing them to desperation will not grow the economy; it will simply make it worse.”

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Is the public prepared for the benefits battering of 2013?

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This is what ‘money’ looks like. Enjoy the sight because you’ll probably be seeing increasingly less of it in reality from now on.

I haven’t seen anything in the press lately – local or national – about the many changes to social security benefits (the Tories call them ‘welfare’, which seems a good reason for me not to) that will come into effect this year.

That’s a mistake. People need to know what will happen and when – otherwise some of the UK’s most vulnerable, who find it very hard to adapt when their circumstances change, will get into trouble.

So what follows is an attempt to provide a brief overview. It won’t cover everything but should hopefully function as a prompt for people to follow up.

Needless to say, the most vulnerable in society will be affected by these changes – many of them in a fundamental way.

Putting a cap on benefits

The Coalition government’s benefit cap will come into effect from April. The expected level is £500 per week for couples and lone parents – equivalent to £26,000 per year (net); and £350 per week for single adults.

Across the UK, 56,000 households will be affected by the benefits cap. Job Centres have already notified those who will be affected.

Money will be removed from benefits until they come down to the £26,000 cap – starting with Housing Benefit. Of course, anyone under 35 will already be receiving only the shared accommodation rate of HB.

Many benefits are included in the cap, but Council Tax Benefit and its successor, the Council Tax Reduction Scheme will not be. DLA claimants are exempt, and also Working Tax Credit recipients – but both these benefits are being replaced this year.

In my home county of Powys, it is believed that 23 households will be affected by the benefits cap. Nine are private; 14 are social sector tenancies. All have children and/or some form of disability.

The bedroom tax

The under-occupation penalty comes into effect, for people in social housing (not including pensioners) from April, and means those with one spare bedroom will lose 14 per cent of their housing benefit; those with two bedrooms going spare will lost 25 per cent of their HB.

In Powys we have 8,300 social landlord properties; 900 are under-occupied by one bedroom, 300 by two bedrooms. The total annual loss of housing benefit will be £800,000.

People will have to move home because of the bedroom tax. That will have an impact – not just on individuals, but on education, if a child has to move away from a school where they have friends to a new area. It’s not about downsizing to another property in the same village. You may be looking at a considerable move, out of the family circle, taking children from one school to another. The impact is likely to be significant.

From DLA to PIP

Disability Living Allowance will be replaced by the new Personal Independence Payment in a gradual process, starting in April. There are similarities – PIP maintains links to passported benefits where possible, and there are special rules for claimants who are terminally ill. The differences are that claimants must still have their problem nine months after they apply; and there will be planned interventions and an early reconsideration process.

It is currently believed that people receiving the low-rate care component of DLA are unlikely to receive PIP at all.

There is no PIP claim form available from the usual sources. Claims are to be made by telephone on an 0800 number, when claimants will be asked general questions – including their bank details. Then a form will be posted to the claimant. It will be individually-addressed and bar-coded with the claimant’s details.

For those with fluctuating conditions, the form will provide an opportunity to explain them.

Claimants can have help completing the form, and reports from health professionals such as occupational therapists and doctors may be added to it.

The form will go to a health professional working for the company Capita (in Wales; other parts of the UK have our old sparring partners Atos). They may decide a claimant’s entitlement straight away, but most will be asked to attend a face-to-face interview. It is possible that this company may carry out home visits if the need presents itself.

Attendance with a friend, relative, partner, health professional or similar is encouraged.

All evidence will be reviewed and a report will be sent to the Department for Work and Pensions to make a decision.

The health professional will not make any recommendations at all – a DWP case manager will review the evidence and make a decision.

If a claim is disallowed or reduced, they will phone on three separate dates, at three separate times, to explain the decision. There are concerns that claimants with particular issues such as mental health problems might not understand.

Finally, as part of an ongoing process, questions and replies about PIP will be posted on the Frequently Asked Questions (FAQ) page of the DWP’s PIP website.

From April 2013, new claims for PIP will be taking in the northeast and parts of northwest England; it won’t affect Wales until June.

From October 2013, claimants on fixed period awards that are coming up for renewal will be reassessed, along with young people coming up to age 16, and indefinite awards with a change of circumstances. Nobody else will be reassessed until October 2015.

Council Tax Reduction Scheme

The UK government is planning to save more than £500 million by issuing only 90 per cent of the cash to local authorities that it would normally provide for Council Tax Benefit. It is up to councils in England, and the Welsh, Scottish and Northern Irish Parliaments, to devise for themselves ways of making up the shortfall.

In Scotland, the Scottish Parliament is finding money within its own funds to plug the gap. Councils in England have come up with their own systems – some asking people who have never paid council tax before to contribute up to 40 per cent of the normal bill.

The Welsh Government has decided to introduce a nationwide format, in order to prevent ‘postcode lotteries’ where people in one area are worse-off than those who live across the street, but in another local authority’s jurisdiction.

The new scheme will be means-tested and the ceiling for the maximum entitlement will be decided by the administering authorities; in Wales it will be 90 per cent of the council tax bill. This means support for all claimant groups will be reduced, including those on passported benefits such as Employment and Support Allowance. If you are on ESA you will be expected to pay at least 10 per cent of your council tax from now on.

There is no requirement in Wales to protect pensioners. The second adult rebate will also be removed.

In England, pensioners will be protected, but this means the maximum entitlement comes down to 84 per cent of the council tax bill or less, meaning residents will have to pay at least 16 per cent. In some counties we already know people will be paying a minimum of 30 per cent.

In Powys, where the 10 per cent maximum applies, this means 10,400 residents will lose, on average, £86 per year. Of these, 7,800 people currently pay nothing, and this means they must find the extra money from whatever other resources are available to them, to pay their council tax. That’s just an average among people affected, by the way. On a Band D property, 10 per cent is £117. Also, in Powys, 74 households get the second adult rebate, averaging £205 per year.

This means the total amount of extra money being taken from households in Powys alone comes to £915,000 in the 2013-14 tax year. That’s nearly £1 million being taken out of the local economy via this change alone.

Councils need to inform all Council Tax Claimants of the change. “I don’t think the message has fully got through – either that the change to a support scheme is coming, or that the scheme in Wales will be different to England,” said Colin Wallbank of the Welsh Local Government Association.

“There will be an impact on community support activities including housing and social services, and the aggregate effect of this and other welfare changes will have an impact on poorer households.”

“There is a risk of increased claimant numbers, and this will put more pressure on local authority budgets.

“Local authorities must consult, and then adopt a scheme. The consultation is on the discretionary aspects, not the main scheme.”

Geoff Petty, chief financial officer of Powys County Council, added: “The funding we get is for the existing caseload and doesn’t accommodate that load increasing. I don’t see the economy improving much overall, and that could mean we are underfunded by up to £500,000.

“That means we are chasing people for very, very small sums of money. Equally, I have a responsibility to chase those sums. If you allow arrears to grow, a small problem becomes bigger. I would want to ensure that, where people do get into arrears, we can give rapid support.”

There will be an impact on family relationships because the Council Tax Reduction Scheme, taken together with the ‘bedroom tax’ on Housing Benefit and reductions in HB rates for people aged under 35, mean that people will be forced to move into properties together. “People are being forced into ‘pressure-cooker’ situations,” as Erika Helps of Rhondda Cynon Taff Citizens Advice Bureau put it.

There will be an impact on mental health and anxiety. Anyone on a reduced income will feel stress but the Council Tax Support Scheme especially adds to this. The question is not, “Will we have to pay?” It is, “How much will we have to pay?”

Universal Credit

More than 30 benefits are being rolled into one – the Universal Credit – starting in October. Mainly, it will replace income-based Jobseeker’s Allowance, income-related Employment and Support Allowance, Income Support, Child Tax Credits, Working Tax Credits and Housing Benefit.

The new benefit’s stated aim is to get people into a ‘working’ state of mind, rather than a ‘dependent on benefits’ ethos. Currently, according to the DWP there is a large risk of fraudulent claims. Since the total amount of fraud in the benefits system is 0.7 per cent, you may wish to take that comment with a pinch of salt.

Claimants will be asked to do everything reasonable to look for work, or – if they are already in part-time employment – to increase their hours of work. As part of their commitment, there are consequences of failing to meet responsibilities – sanctions. There are groups who are not expected to work, including those with limited capability; carers; and lone parents with a child aged less than one year.

There are child elements, limited capability for work elements, and a housing element. Anyone with capital of more than £16,000 will not be entitled to Universal Credit.

Claimants who work part-time will be encouraged to ask employers for more hours of work. It will be part of a new system called ‘Real Time’; currently an employer will send their PAYE statement off at the end of March, but now it will go monthly to HMRC. They will pass it on to the DWP to assess a claimant’s entitlement that month.

This means claims will go through three different computer systems, and much has been said about the difficulties posed to the government by such a plan.

There will be a taper – as earnings increase, the benefit will tail off.

Universal Credit will be paid monthly, in arrears. This will raise budgeting issues and will affect working families as well as non-workers. People on low incomes are, in fact, often very good at managing, but the change to monthly payments means a whole new pattern for paying bills and saving for one-off purchases.

The DWP has made it clear that, at the point of change, there will be no losers financially. There will be transitional protection, unless there is a change of circumstances. However it should be noted that many of the benefits that will become part of Universal Credit are affected by the Benefits Uprating Bill, currently going through Parliament. Below-inflation increases are effectively cuts in benefit and this means that many people will have less money, going into the new benefit, than they might have otherwise expected.

Universal Credit will be “Digital by Default” – available at all times on the Internet, so it doesn’t depend on call centre times; it will aim to be flexible and responsive – continually improved; informative; integrated – joining work and benefits systems; and accessible – designed to meet the needs of a wide range of users within the system.

There are several problems with these claims. The most obvious is: What happens to people who don’t have the Internet?

Access to broadband internet is still an issue in places, and capability to use the internet is just as much an issue. People who might have access to broadband may still need help going through the claiming process.

Some benefits will actually require people to make a re-claim. If people don’t make that re-claim in time, the money they lose won’t be paid back in arrears later.

The aim is that it will start coming into effect from October 2013, when the newly-unemployed will start claiming Universal Credit, and from then on there will be a gradual phasing-out of existing benefit claims.

In spring 2014 it will be expanded to include new claims from people in work and moving current claimants to Universal Credit.

By 2017, the DWP hopes the Universal Credit roll-out will be complete.

Around 7,000 Housing Benefit claimants will migrate to universal credit between 2014-17. They will then be administered by the DWP.

Financial Inclusion: There is concern that many claimants may not be able to budget to support themselves straight away. The DWP says it is looking at targeting those claimants and coaching them. Many don’t have a mainstream bank account and the DWP says it is working with the credit union nationally.

There will be something in place for exceptions – claimants who can’t cope.

And there may be a review of the frequency of payments, but for a limited period only.

Housing: The DWP has promised to test key elements of incorporating housing support into Universal Credit, while protecting the financial position of social landlords.

“We want a welfare system that encourages a return to work as soon as possible. For those in work, we want to encourage progress, with people increasing their earnings and becoming more financially independent. But there are claimants who cannot work and it is important we have a welfare system providing them with the support they need,” said a spokesman at the conference I attended.

The effect upon society

People in social housing are likely to face discrimination because of who they are.

Advice services such as the Citizens Advice Bureau will face a growth in inquiries. Already in 2012 the growth in ESA inquiries in Powys CAB was 119 per cent. Rhondda Cynon Taff CAB saw a 74 per cent increase in council tax benefit inquiries, a 41 per cent increase in housing benefit calls and a whopping 165 per cent growth in inquiries about rent arrears. These figures will ramp up significantly over the next 12 months and beyond.

The need for debt advice and money advice (financial capability skills including budgeting) will increase. Some people will need to be supported.

There will be increased pressure on other voluntary resources, including food banks. The number of these in the UK has more than doubled in the last year, and is likely to increase.

Direct payment of housing benefit will mean that, if a crisis occurs, the temptation will be to use the rent money – but this can lead to a cycle of debt, and then there is a risk of resorting to pay-day lenders.

People will not be able to borrow locally from friends and family, because they will also be feeling the pinch as these welfare cuts bite.

The cumulative impact on child poverty will be huge.

Wider implications

There will be a rise in rent and mortgage arrears.

Less income generally means there will be less money available. That will also affect people owning local businesses – benefit income is spent locally and High Street shops will receive less.

There’s a huge risk that more and more people will access ‘lenders without conscience’. Responsible lenders, such as credit unions, are fantastic places to put money, but the services provided are different, depending on the union. They will see more and more people coming to them. That will impact on their business model and the risks will be greater.

There will be a big impact on social landlords and the housing market – affordable housing will be less available and landlords less able or willing to rent to tenants on benefits.

Private sector rental may become less attractive to landlords if tenants aren’t paying the rent. This will lead to a growth in homelessness. Councils have statutory duties and may see an increasing burden.

Pressure on the appeal system means people waiting longer for the outcome of appeals.

Pressure on public sector resources. Local authorities will bear the brunt of this, at a time when they have received difficult financial settlements.

The fund for Discretionary Housing Payments is increasing. These payments may help people top-up to pay accommodation costs. Given the effects of the reforms, people will also be looking for these payments and in those circumstances, the budget won’t touch the sides of what’s needed.

The rise of food banks and the fall of the Big Society

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Isn’t it a shame that in the season of goodwill, the Prime Minister cannot extend any to those who are worst-off in his bold Big Society?

Instead, all they’ve been given are bad statistics and platitudes.

I’m referring, of course, to his performance in the last Prime Minister’s Questions of 2012, when he was asked to explain why there has been a sixfold increase in the number of food banks in the UK during the last three years – the time since Mr Cameron’s Coalition government took over.

A food bank, for those who don’t know the exact definition, is simply a place where food is contributed and made available to those in need. In the UK, there are currently 13 million people living below the poverty line (according to the Trussell Trust, which is the authority on food banks in this country). These include working people, whose income does not cover their costs; the unemployed, who are finding they do not have enough money to buy food due to the vicious and unwarranted benefit cuts thrust upon them by the Coalition; and of course the homeless, a sector of society that is due to grow exponentially, again due to the many cuts inflicted by the bloodthirsty Conservatives.

As a consequence of the rise in poverty, overseen and orchestrated by Mr Cameron and his lieutenant Iain Duncan Smith in the Department for Work and Pensions, the classic poverty-related diseases of rickets and tuberculosis are on the increase. In 2012, the Conservatives have achieved their aim to revive the Dickensian Christmas.

“The problem is that it is working people who are turning to food banks,” said Ed Miliband at PMQs. “One head teacher of a school rated ‘outstanding’ by Ofsted, Vic Goddard, says that even children with a parent or parents in work are often struggling with the choice of heating their homes, buying their children clothes or buying them food. A report last week from the Children’s Society said that two-thirds of teachers knew of staff providing pupils with food or money to prevent them from going hungry.”

This rings true. There is a reason that working people have been receiving benefits, and it is that they are being paid too little. It is a ridiculous situation, in the seventh largest economy on this planet, but one that has been perpetuated by successive governments – including, I’m sorry to say, Labour – since the 1970s. In contrast, executive pay has shot through the roof. If the minimum wage had risen in line with executive pay – just since it was introduced in 1998 – it would be more than £18 today, three times the actual level of £6.19.

The comedy Prime Minister responded with nothing of substance. He said the most important thing was “to get on top of inflation, and inflation is coming down”. How out-of-touch! It is true that inflation must be controlled, but his comedy chancellor, Gideon George Osborne, has decided that benefits – including those for people in work – will rise by less than the rate of inflation for the next three years, and Cameron himself has indicated that poor economic indicators may see him increase this to six years. The longer this rule stays in place, the further into poverty low-waged working people will go.

“The most important thing is to get more people into work and out of poverty,” said Cameron. This is not the same thing. We have seen that working people in the lowest-paid jobs are being plunged into poverty and forced to the indignity of seeking help from food banks – and remember, those starting in work will be the lowest-paid.

“And we see 600,000 more private sector jobs this year,” added Cameron, failing once again to admit that this figure includes around 200,000 that were already-existing public sector jobs, re-categorised as private in order to boost the Coalition’s statistics.

“We are helping […] families by freezing the council tax,” he said, neglecting to add that he is forcing people with limited cash to – from April – pay at least 10 per cent of it where they would have received council tax benefit before. “And making sure that we help families with the cost of living,” he droned on. This comment is meaningless other than as a complete fabrication. How can he expect to be believed when he is mercilessly forcing them into poverty?

“We have lifted the personal tax allowance and taken two million of the lowest-paid people out of tax altogether,” he said. But they still have to use their own money to make up the huge losses in benefits that are coming. This government gives with one hand but takes with the other.

“Because of the decisions that we made in this Government to increase the child tax credit by £390 ahead of inflation, we have helped those families with their bills and we will continue to do more in the future.” How? Child tax credit will be abolished when Universal Credit is brought in across the UK.

Cameron’s denouement was his declaration that Labour had nothing to offer, “except for the same old something-for-nothing culture that got us in this mess in the first place”. We all know that this is not true. Until the banking crisis, Labour ran a lower deficit than any Conservative government of the previous 30 years. The Conservatives had supported greater deregulation of the banks right up until the crisis hit, meaning that it would have been much worse if they had been in power at the time. And they supported Labour’s actions to solve that crisis – meaning that, if we are in a mess now, the Conservatives should take as much responsibility for it as Labour. They would have done no different.

Possibly the most astonishing moment was when David Cameron said volunteers in food banks were part of his Big Society idea, “to help those in need”. The stated aim of the Big Society was to create a climate that empowers local people and communities, taking power away from politicians and giving it to people. Now, here, Mr Cameron seemed to be saying the opposite – that it is about taking so much away from people that they are forced to rely on charity to survive. It seems, therefore, that the outgoing Archbishop of Canterbury, Dr Rowan Williams, was correct when he labelled it “aspirational waffle designed to conceal a deeply damaging withdrawal of the state from its responsibilities to the most vulnerable.”

His words were, to some extent, echoed by Ed Miliband at PMQs: “I never thought that the big society was about feeding hungry children in Britain. The reality is that in the third year of the Prime Minister’s Government, more children are going hungry and more families are relying on food banks.

“Is it not the clearest indictment of his Government’s values that while lower and middle-income families are being hit, at the same time he is giving an average of a £107,000 tax cut to people earning over £1 million a year?”

And those were the truest words spoken on the subject.