1 Department for Work and Pensions

David Shaw, DWP2 November 2011

Universal Credit

UNCLASSIFIED

2 Department for Work and Pensions

Overview

• Why Universal Credit?

• Scope and design

• Conditionality under Universal Credit

• Sanctions

• Timetable for implementation

3 Department for Work and Pensions

CA only

291,600

IB/SDA/ESAC only 558,200

DLA only 446,400

IS/ESA(ir)/PC only 1,289,500

IB&CA 900

CA&DLA 15,700

IB&CA&DLA 1000

IS&IB&CA&DLA <500

IS&IB&CA <500

IS&CA 187,700IS&CA&DLA

18,100

IS&IB&DLA 316,600

IS&DLA 439,700

IS&IB 72,000

IB&DLA 547,500

BB/WB only90,500

JSA only1,317,300

All other combinations

<500

JSA with another benefit32.400

SOURCE: DWP Information Directorate: Work and Pensions Longitudinal Study, Aug 2010

NOTES: - IB & CA figures only include those who are in receipt of payment. IB credit only and CA beneficiaries who do not receive benefit are excluded. - ESA claims included in IB and IS caseload information

The Case for Change: complexity, affordability, work-incentive

Around 50% of these individuals receive

housing benefit as well (913,100 on HB only)

Total in receipt 5,639,000

BB/WB with another non-JSA benefit

13,500

UNCLASSIFIED

4 Department for Work and Pensions

Universal Credit: Incentive to Work

UNCLASSIFIED

5 Department for Work and Pensions

Universal Credit: Scope

Universal Credit means the following benefits will no longer be needed…

• Income related Jobseeker’s Allowance

• Income related Employment and Support Allowance

• Income Support (including SMI)

• Child Tax Credits

• Working Tax Credits

• Housing Benefit

• Social Fund (budgeting loan elements)

But the following benefits will still be available…

• Disability Living Allowance (will be replaced by PIP in 2013)

• Contributory Benefits (although earnings rules aligned)

• Child Benefit

• Pension Credit (that will include a Housing Credit to support those who rent, the intention is it will broadly replicate Housing Benefit rules & a new additional amount for children in the Guarantee Credit)

• Carers Allowance

• Council Tax Benefit replacement

UNCLASSIFIED

6 Department for Work and Pensions

Universal Credit: Design

0

100

200

300

400

500

0 100 200 300 400 500 600

Gross Earnings

To

tal N

et

Inc

om

e

Total In Pocket Income

Universal Credit

Payment

Universal Credit: lone parent with two children

Disregard

Taper

UNCLASSIFIED

7 Department for Work and Pensions

• The Welfare Reform Bill sets out:

– four types of work-related requirement

– four conditionality groups

• No “partners” - each adult in a household will be placed into a group according to their individual capability and circumstances.

• Recorded in a claimant commitment

Universal Credit: Conditionality framework

No work-related requirements

Work-focused interviews

Work preparation

All work-related requirements

8 Department for Work and Pensions

Universal Credit: Personalisation?

• Greater scope for personalisation / flexibility

– Conditionality does not depend on benefit

– Primary legislation enables discretion

– No “always on” conditions e.g. actively seeking & available for work

– No disentitlement

– No need for prescriptive regulations – what can / can’t be done

9 Department for Work and Pensions

Universal Credit: in-work conditionality

• Previously … conditional out of work benefits, unconditional in-work benefits

• UC removes division – when should conditionality stop?

• In current system at around £70 per week / £3500 per year

• Under Universal Credit reach of conditionality higher:

– Expected hours of work * NMW– Single claimant, max is 35 hours * NMW (£210pw)– Joint claimants, max is 70 hours * NMW (£420pw)

• Enables use of conditionality to drive progression / support retention

• But no obligation to do more – considering carefully the right level and approach

– Effectiveness?– What is reasonable? – Resources?– Pilots?

10 Department for Work and Pensions

Universal Credit: Sanctions

Sanction Applicable to: 1st failure 2nd failure 3rd failure

Higher Level

e.g. leaving employment voluntarily

Claimants subject to all work-related requirements

3 months 6 months 3 years

Medium Level

e.g. failure to undertake all reasonable action to obtain

work

Claimants subject to all work-related requirements

4 weeks 3 months

Lower Level

e.g. failure to undertake particular, specified work

preparation action, failure to participate in a work-focused

interview

Claimants subject to all work-related requirements

Claimants subject to work preparation and work-

focused interview requirements

Open ended until re-engagement followed by

1 week 2 week 4 weeks

Lowest Level

Failure to participate in a work-focused interview

Claimants subject to work-focused interview requirements only

Open ended until re-engagement

11 Department for Work and Pensions

Oct ‘13Apr ‘13 Oct ‘14 Oct ‘15 Oct ‘16 Oct ‘17

Test New claims from out of work customersApr ‘14Feb ‘11

Design & build

New claims from in work customers

“Natural” migrations as a result of changes of circumstances

Managed migrations

Legacy load

JSA, ESA, IS, HB, WTC, CTC

8m6m4.5m2.5m

UC load

When will we deliver Universal Credit?