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 Couple with two children aged under 11 Income SupportIf CPI uprating April 1997£121.75 April 2009£230.47£150.39 Single person aged 18- 24 Income SupportIf CPI uprating April 1997£38.90 April 2009£50.95£48.05

3. Strongly agree 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 30 th percentile; reduced by 10% if JSA for 12months+ Freeze on Child Benefit (£1bn) DLA new 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 30 th 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 MaximumFloor Single person00 Couple + 2 ch£161£25 LP + 1 ch£148£40 Disabled person£135£40

13. Effect on marginal deduction rates Now (millions)Universal Credit Up to 60%0.90.8 60-70%0.20.4 70-80%1.72.0 80-90%0.40.0 Over 90%0.1.. Over 60%2.4 Over 70%2.22.0

14. 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.

15. 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?

16. 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)