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.
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