Welfare Reform

John EdePartnership Manager

CAB Cornwall

Welfare Reform• Where are we now- Health Warning Regulations?• Welfare Reform

– Housing Benefit– Council Tax Benefit– Incapacity Benefit –transfer to ESA April 2014 at

the latest

– DLA – transfer to Personal Independence Payment (PIP)

• Universal Credit – Which benefits it will replace, – How it works– Timetable for its implementation

Leaking Bucket Syndrome

Debt in CornwallSample Size

Average Debt Average Monthly Income

Debt / Income Ratio

Available Income to pay debts

Years to Pay off Debt

Single People 74 £11,645.08 £612.00 19 -£36.95 NEVER

Couples with Children

53 £14,277.16 £1,510.43 9 £0.85 1,303

Lone Parents 52 £10,421.00 £1,115.98 9 £19.25 42

Couples 55 £20,568.99 £1,284.85 16 £71.63 22

Pensioners 50 £23,921.39 £925.08 26 £11.66 168

50+ 113 £21,542.63 £979.84 22 -£14.98 NEVER

Totals 284 £15,793.31 £1,057.35 15

Families on Benefits (55)

• Ave No. Children 2 (27x1, 19x2, 6x3, 3x4, 0x5)• Monthly Total Income Ave £1,200.31 (Debt Income Ratio 7)

• 32 Renting, 1 Mortgage, 22 other arrangements• Ave Total Debt £7,857.55 (Excludes Mortgage)

• Ave Priority Debt £1,197.57• Ave Non Priority Debt £6,659.98• Available income deficit £5.54 each per month. • NEVER years to pay off debt. • Fuel Poverty 27 Transport Poverty 45 Water Poverty 30

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Welfare Reform Act 2012

• The Act sets out in law fundamental changes to the welfare system,

• aimed at improving the benefits system • reduce dependency on welfare, • improve incentives to work, • making work pay• reducing overall spend at a time of economic

instability in the UK • A single working age benefit-

UNIVERSAL CREDIT

Tax Credits Number of couples with children and children benefiting from Working Tax Credit and working between 16 and

24 hours as of December 2011Source: PQ answer 88172, 10 Jan 2012

Note: official data was not available for 30 constituencies, so date fields are left blank in these instances.

Constituency Number of HouseholdsNumber of children in those

households

     

Camborne and Redruth 370 780

North Cornwall 200 465

South East Cornwall 205 390

St Austell and Newquay 350 690

St Ives 295 555

Truro and Falmouth 190 430

     

Totals 1,610 3,310

Key Welfare Reform Changes

• 2010 Budget and spending reviews – key cuts• Universal Credit – major reform • Disability Living Allowance replaced with Personal

Independence Payment• Time limiting of contribution-based ESA• Localisation of support for council tax benefit• Reform of the social fund – ‘localisation’ of crisis

loans & community care grants • Housing Benefit Changes • Total benefit cap

Where the cuts will hit – annual by 2014

• Cuts targeted at working age claimants, and their dependants

• Benefits for pensioners protected

• Change to entitlements under Universal Credit: – 2.7m households no

change; – 2.8m higher; – 2m households

lower

Housing Costs

Households in Cornwall receiving Housing Benefit 42,820

Housing Costs• Local Housing Benefit Cap- mainly affect London & SE

• Non Dependant Deductions- Large increase over next 3 years to make up ground since last increase 10 Yrs ago. Affects tenants for example with parents, grown up children living in the house.

• Local Housing Allowance Rates- changes unwind throughout 2012 for existing claims from private tenants- set at the 30th percentile of local private rent prices, not 50% 1/3 housing affordable to HB claimants. (341 Props to Rent May 12)

• Single room rent restriction for single people extended to people under 35yrs

• Restriction to the number of rooms “needed” in Social Housing (already happens in private rented housing) April 13

• Local Housing Allowance rates- up rated with Consumer Price Index not average market rents

• HB used to apply CAP on total benefits income with exceptions e.g. DLA, WTC

• MORTGAGE INTEREST The end of temporary measures for support for mortgage interest that were designed to help stabilise the owner occupied market during the Credit Crunch (Jan 2013)

Mortgage and Landlord possession claims leading to orders made in England and Wales

by Parliamentary Constituency 2011, Not seasonally adjusted

Constituency Mortgage Landlord

Camborne and Redruth 64 115

North Cornwall 60 70

South East Cornwall 70 50

St Austell and Newquay 85 65

St Ives 45 100

Truro and Falmouth 35 60

Totals 359 460

Universal Credit

• Single benefit for working age people • 42,100 Key working age benefits in Cornwall will

be affected• All means tested benefits replaced by UC• ‘making work pay’ – Taper 35p for every £1

earned • Pathfinders from April 2013• New out of work claimants from October 2013• All new claimants from April 2014• All pre-existing claimants by October 2017

Which Benefits will UC replace

• UC will eventually replace the following means tested benefits AND tax credits– Income Support– Income based Jobseekers Allowance– Income related Employment Support Allowance– Child Tax Credit– Working Tax Credit– Housing Benefit– Budgeting loans (Will be replaced by an

advanced payment on Universal Credit)

Universal Credit: wins

• No more reporting extra income several times & report to one department only

• No more difficulty deciding which benefit to claim • Ability to work any number of hours & gain

financially• BUT..........• No fixed hours rules – positive BUTA challenge for providing easy point from which to

passport to entitlement to other benefits and discounts

Who’s losing: time limiting CB ESA (Contribution-based Employment Support Allowance)

• Contribution-based ESA limited to 12 months for those in the work related activity group

• 300,000 will lose almost £100 a week• Affects claimants with savings or a partner with

income• Destroys the principle that those who have paid

National Insurance Contributions (NICs) will be protected if the become sick

• Undermines the intention to support people with disabilities to live independent lives

UC: losses for disabled people

• Universal Credit – far fewer disabled adults will get extra support

• Those living alone without a carer• People with a disability or health condition in low

paid work• Pensioners with working age partners – could lose

£100 a week or more • Some families with disabled children – equivalent

of child disability element cut in half• Potential rise for ESA support group

Transferred to UC

• Transitional Protection• You will be transferred from your current benefit to

UC at some point• If your UC is less than your current benefit you’ll be

entitled to some extra UC to make up the difference, as long as your circumstances have not changed substantially.

• Its not clear how much extra UC you’ll get under these rules or whether there will be any shortfall

• The government have not yet announced which changes mean they will transfer you from your old benefit to UC without transitional protection.

Maximum UC can be made up of

• A standard allowance for a single person (or Couple)• An amount if you’re responsible for a child or young person • An amount for housing costs, whether Rent or Mortgage• Amounts for other particular needs or circumstances e.g. caring

responsibilities or disability

• An amount for child care costs (if you are working)

Your UC payment is your UC Maximum payment minus:• 65% of your earnings, although the DWP will ignore some types of

earnings and apply an earnings disregard• Types of income other than earnings e.g. occupational pensions• If income less than your Max UC payment you would be entitled to,

you will get UC to top up your income• If income more than your Max UC payment- No UC

Who will UC affect, and When

• From April 2013 UC will apply to new claims in Pathfinder areas. (Tameside, Oldham, Wigan, Warrington)

• UC will be introduced gradually in other areas from October 2013

• DWP will phase out new claims for the benefits and tax credits that UC replaces between Oct 2013 and April 2014

• New claims for Housing Benefit and Tax Credits will be the last to end in April 2014

• If you are already getting a benefit but your circumstances change after UC is introduced e.g. you move into work or have a child you will move onto UC from the date of the change

How will UC be paid

• DWP is likely to pay UC monthly to most claimants

• Pay Claimants or Landlords?• Single Payment per household?• Include Housing Costs (Cap?)• Monthly payments into Bank Accounts• Administered by centralised IT system (still in the

design phase)

• Plan initially 50% claims on Line rising to 80% Claims on Line by 2017

Universal Credit: delivery issues

• ‘Digital by default’ – aim for all universal credit applications to be made online

• Currently only JSA can be claimed online & less than a third do

• Risks and challenges for some claimants• All Universal Credit paid together • Rent no longer paid to landlords• Child related payments no longer to main carer • Paid monthly – instead of several more frequent

payments• Budgeting challenges – potential rent arrears• Exceptions will be available – but to what extent? • Complexity 3 systems in operation till 2017

Personal Independence Payment (PIP)

• DLA replaced by Personal Independence Payment (PIP) from April 2013

• Reform led by 20% cut• Fewer people will be eligible – some people who

need support will no longer qualify• Qualifying period 3 months plus a further 9

months• A lot of lobbying during passage of the Bill• Accuracy of face to face assessments – lessons

from ESA• Passporting – alternative routes to other help will

be needed

Localisation – support for Council Tax Benefit

• Almost 54,500 individuals claim council tax benefit in Cornwall

• Average claim around £16 a week• CTB abolished from April 2013• Local authorities to devise their own system

with 10% reduction in budget • Low income pensioners protected (in

England)• Non – pensioner households – could

experience over 20% cut in support

Localisation – Social Fund Changes

• Existing Community Care Grant and Crisis Loan schemes abolished

• Budgets (not ring-fenced) given to LAs• LAs expected to make local arrangements

to meet need (e.g. benefit uptake campaigns, food-banks, credit unions, furniture schemes)

• Provision for crisis situations unclear

Financial Impacts on Claimants

• Universal Credit – 400,000 will lose over £50 a week in UK

• Housing support– Affordable housing harder to find – Moving or supplementing support from benefit income– Risk of rent arrears & homelessness

• Council Tax – less support risks hardship & debt

• Civil penalties - £50 penalty for error & tough sanctions for insufficient engagement with work – risks for most vulnerable

• Crisis loans & community care grants– No guarantees of help– Currently 3.6m crisis loan applications a year

Financial impacts on Disabled & Pensioner clients

• PIP– 0.5m fewer people will be entitled– Thousands entitled to smaller awards– Impact on other support (e.g. carer's allowance)

• ESA – time limiting– Up to 300,000 lose almost £100 a week

• Pensioners with working age partners – Lose almost £100 a week

Vulnerable Clients

Vulnerable claimants are individuals who are –

– Unable to safeguard their personal welfare or the personal welfare of others (including dependents). They may have difficulties which could affect their welfare and well-being. These difficulties could include comprehending information, interpreting situations, making decisions, giving consent, communicating information or their views or requesting specialist help.

– This may be related to age, health conditions, physical, mental or learning disability (including individuals whose circumstances require an appointee)

• Or Severe financial insecurity or hardship and/or because of their personal circumstances at that time.

– Vulnerable claimants have difficulty coping with demands of the organisations processes including the channels used to access benefits or services and/or meeting the obligations or conditions they are required to meet. Consequently vulnerable claimants will need additional help and support that takes account of their changing circumstances (recognising that people move in and out of vulnerability) to safeguard their welfare and well-being in a co-ordinated way.

Vulnerable Clients

Edge of Poverty

• The work looked at households that are in work but suffering high levels of financial stress and have stated that they are finding it very difficult to cope with their current income (therefore it does not include those already experiencing poverty and deprivation).

• This work identified that 26% of households in Cornwall are at risk of poverty, ranking 21st out of 424 local authorities in the UK –

• this places Cornwall within the top 5% of areas in the UK.

CC Community Intelligence Team

Partnership Working Opportunities & Risks – the opportunities include

reducing the cost of welfare paid and increased employment rate (positive for economy and individuals)

However, the risks are that people come under intense financial pressures.

• Mitigating the affects on vulnerable households • Opportunity to coordinate services locally• Child Poverty, Families, Schools • Preparing vulnerable clients for the changes• Financial Capability, Budgeting, Bank Accounts, Debt

and Benefit Uptake, Cornwall Together Cooperative.• ?????????

Cornwall’s demand for advice CABC 2011-12

Debt 29,293

Benefits 20,752

I mmigration 301

Consumer 840

Employment 4,793

Housing 4,282

Relationship/Family 2,817

Legal 2,750

Other 452

Thank you

• Thank you to the Volunteers and Staff of the CAB in Cornwall.

• www.adviceguide.org.uk• Online help from Citizens Advice