Welfare Reforms 2011 onwards – road map to changes

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Update 11 June 2013

DWP has produced a toolkit of communications materials to help tell the DWP Reform Story. The toolkit explains the context behind the reforms and provides an overview of all the changes that DWP will be delivering over the next few years.

It provides you with the headline information you need across all of our policy areas, examining what is changing, why changes are happening and when they are coming into force. To support this top line information DWP has produced more detailed packs such as the Personal Independence Payment toolkit and the Universal Credit toolkit for partner organisations, both of which are available online.

The reform communications toolkit will be continuously updated to ensure it is always accurate. A new version will be uploaded on the DWP website every month.

The toolkit is comprised of four parts and the amount and type of detail presented can be selected as appropriate:

  1. A reform narrative setting out DWP’s vision;
  2. A brief overview of the joined up reform story. This high level document lists the changes the reforms will bring and is intended for use at conferences and events;
  3. A presentation version of the above overview, with less text and detailed speaker’s notes, for use when the information is being delivered face to face;
  4. A more detailed reform breakdown going through the reforms in greater depth. It has been designed to be delivered in sections which can be removed or combined in different ways depending on the target audience.

DWP welcomes continued feedback on the toolkit, so please contact Corporate.Stakeholders@dwp.gsi.gov.uk if you have any questions or comments.”

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Added: 21 March 2011
(Note: 11 June 2013. The following section, while current back in 2011, may now be somewhat out of date).

The next few years will see profound changes to the welfare system in the UK.  Those of you dealing with casework in particular will need to keep abreast of what’s changing and when.

Commons Library specialist Steven Kennedy’s recent (16 March 2011) talk gave a ‘road map’ through these changes and he has kindly allowed us to reproduce the contents of his Power Point presentation below.  There are lots of useful links, not only to Library Research Papers and Standard Notes, but also to information and briefings supplied by organisations which have expertise in this field.

Clearly this particular landscape is going to continue to change so, while we are happy to be able to offer this information as currently correct, you will need to keep an eye on how it all develops.

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Introduction

The next few years will see profound changes to the welfare system in the UK.  To a large extent, the changes proposed are aimed at making expenditure savings, but the Government has also set in train quite radical reforms which will change the whole landscape of welfare provision – in particular, the Universal Credit.  Successive Governments have presented their welfare reforms as the “biggest shake-up since Beveridge”, but with the current Government’s programme of reforms, the claim may well be justified.

 

2.  Welfare reform update

•         What’s happening?

•         When were changes first announced?

•         When do the different measures come into force?

•         Who is likely to be affected, and how?

The sheer scale and breadth of changes planned is mind-boggling.  To help make sense of what is happening, it is helpful to disentangle the different elements.

 

3.  Origins of the changes

•         Continuing implementation of Labour’s reforms (e.g. reassessment of incapacity benefit claimants)

•         Measures announced in the June 2010 Budget or October Spending Review (e.g. move to CPI indexation of benefits)

•         Measures in the current Welfare Reform Bill (e.g. Universal Credit, Personal Independence Payment)

Broadly speaking, changes stem from three main sources: Labour’s reforms which were not fully implemented by the time of the General Election; measures announced by the current Government in the June 2010 budget and October 2010 Comprehensive Spending Review; and measures in the current Welfare Reform Bill (although some of these were previously trailed in the Budget or CSR).

 

4.  The main changes

•         Reassessment of IB claimants (previous Government)

•         Time-limiting of contributory ESA (CSR and WRB)

•         Change to CPI indexation of benefits (Budget)

•         DLA reform (Budget and WRB)

•         Child Benefit freeze for three years (Budget)

•         Child Benefit clawback from higher rate taxpayers (CSR)

•         Council Tax Benefit – 10% reduction and localisation (CSR)

•         Housing Benefit changes (Budget, CSR and WRB)

•         Tax credit changes (Budget and CSR)

•         Universal Credit (WRB)

•         Localisation of the Social Fund (WRB)

The main changes are listed above.  Other changes – still important, but in relation to these reforms, of lesser immediate impact (financially at least) – include the abolition of the ESA youth rules, abolition of the Child Trust Fund, Health in Pregnancy Grant and Sure Start Maternity for second and subsequent children, the household benefit cap, and the extension of JSA lone parents with a youngest child aged 5-6.

 

5.  Budget and CSR changes to result in savings of £18 billion a year by 2014-15, of which:

•         £5.8 billion due to switch to CPI indexation

•         £3.6 billion from Child Benefit freeze and clawback from higher rate taxpayers

•         £2.6 billion from tax credit changes

•         £1.9 billion  from Housing Benefit reforms

•         £1.2 billion from DLA reform

•         £1.2 billion from time-limiting contributory ESA

None of the changes listed in the previous section have begun to kick in in earnest yet.  When they do, there will be significant expenditure savings.  By 2014-15, the measures announced in the Budget and CSR are expected to yield savings of £18 billion a year.  As the list above shows, the switch to CPI indexation of benefits results in the greatest saving – almost a third of the £18 billion total.  This measure – which compared to other changes has received relatively little attention – is in the long term potentially the most significant change of all.

 

6.  Impact on two groups

•         Sick and disabled people

•         Families with children

There are two groups likely to be particularly affected by changes that have been announced: sick and disabled people; and families with children.  I now go on to look at how these groups will be affected.

 

7. 

For sick and disabled people, the most significant development in the short to medium term is the reassessment of 1.5 million existing incapacity benefit claimants, which is due to start next month and will take three years.  This, coupled with the measure (in the Welfare Reform Bill) to time limit contributory ESA for people in the Work Related Activity Group to 12 months, could have profound implications for sick and disabled claimants.  Significant numbers may lose benefit altogether, before other reforms such as the Personal Independence Payment and the Universal Credit are introduced.  The PIP will be introduced for new claims from April 2013, with existing DLA claimants being reassessed for the new benefit afterwards (precise timetable to be clarified).  UC is scheduled to be introduced for new claims starting from October 2013, with existing benefit and tax credit claimants being “migrated” to UC between April 2014 and October 2017.

 

8.  Sick and disabled people

•         Reassessment of 1.5 million of the remaining incapacity benefit claimants due to start nationally from next month

•         Controversy surrounding the Work Capability Assessment – reassessment to start before recommendations of Harrington review implemented

•         Trials in Burnley and Aberdeen found 30% fit for work, 31% placed in ESA Support Group, and 39% in ESA WRAG

•         Suggests 450,000 will be found fit for work, and 580,000 placed in Work-Related Activity Group

•         Government expects 700,000 to be affected by the ESA time limit by 2015-16, of whom 60% will be fully or partially compensated by income-related ESA

The reassessment of the remaining IB claimants is likely to be hugely controversial.  Controversy already surrounds the “Work Capability Assessment”, and while the Government has accepted recommendations for reform of the test, including those put forward by Professor Harrington in his independent review last year, it is proceeding with the national reassessment before these have been fully implemented.  Trials so far suggest that around 450,000 could be found “fit for work”, with a further 580,000 placed in the ESA Work Related Activity Group (and, if they transfer to contributory ESA, caught by the 12 month time limit).

 

9.  The Personal Independence Payment

•         To replace DLA for people of working age from 2013-14

•         “Daily living” and “mobility” components, each with two rates

•         “Fairer, objective assessment” but 20% cut in expenditure

•         No automatic entitlement (other than terminal illness), and six month rather than three month “qualifying period”

•         All awards to be subject to periodic review

•         Undertaking by Government to review “overlap” between mobility component and support provided for people in care homes

The Personal Independence Payment is due to replace DLA for people of working age from 2013 (initially for new claimants, with existing DLA claimants being migrated to the new benefit afterwards – timetable still to be confirmed).  PIP will, like DLA, be non-means-tested, and will also have a mobility component but instead of a care component it will have a “daily living” component.  Provisions in the Welfare Reform Bill but details of the benefit – including the new “fairer, objective assessment” – will be in regulations.  The Government has however set a target of 20% expenditure savings, so some will lose out.  Welfare rights groups have criticised this as an arbitrary target and are concerned that disabled people with lower needs but still facing extra costs may lose support completely – precisely those DLA was originally aimed at.

The Government has said it will review the extent of “overlaps” in regard to mobility support for people in care homes, as part of its plans for the PIP.  Welfare rights and disability groups have campaigned vigorously on this.

For further background see:

·         Library RP 11/23, Welfare Reform Bill: reform of disability benefits, Housing Benefit, and other measures and

·         SN/SP/5869, Disability Living Allowance reform and

·         SN/SP/5841, DLA mobility component for people in care homes

 

10.

As with sick and disabled people, families with children will be affected by Budget and CSR measures over the next three years, before Universal Credit is introduced.  It is important to note that analyses of long-term winners and losers from Universal Credit in the Government’s Impact Assessment published alongside the Welfare Reform Bill compare the situation after UC with the system just before UC is introduced, not with the current tax and benefit system.  In reality, many families will be affected significantly by cuts before UC is introduced.

 

11.  Families with children

•         Families facing major benefit and tax credit changes before introduction of Universal Credit

•         Lowest income families may be compensated by increases in per child CTC rates and tax allowances, but middle and higher income families will lose out due to freeze in WTC elements and tighter eligibility rules, reductions in second CTC income threshold, increases in withdrawal rates, and reduced help with childcare costs

•         Losses for some families compounded by Child Benefit clawback

•         Impact of the Housing Benefit changes and the benefit cap?

The lowest income families may benefit from the above inflation increases in the per child element of Child Tax Credit announced in the Budget and CSR, but higher and middle income families – including some families on relatively modest incomes – are likely to lose out as a result of other measures in the tax credits package.  Many families currently getting only the family element of CTC will lose tax credits completely.  For families with a higher rate taxpayer, there is also the Child Benefit clawback from January 2013.  It seems likely therefore that concerns about the “squeezed middle” will intensify.

 

12.  Universal Credit

•         Replaces existing means-tested benefits and tax credits for people of working age, including IS, income-based JSA, income-related ESA, HB, CTC and WTC

•         Basic allowance for adults plus additions for children, disability, housing costs, caring

•         Assessed and paid on household basis

•         Reduced by 65 pence for each pound of net earnings, after applying a disregard

•         Employees’ payments adjusted automatically using “real time” PAYE data

•         Four levels of “conditionality”

The Universal Credit is the most revolutionary element of the Government’s welfare reforms.

 

13.  Government’s objectives for welfare reform welcomed but…

•         Concern over lack of detail on key elements

•         Taper rate of 65% (76% after tax) low enough to make work pay?

•         How is help with childcare costs to be provided?

•         How will the new localised CTB fit in?

•         What about the self-employed?

•         Will UC penalise those with savings?

•         Payment issues – frequency, recipient, “firewalling”

•         Transitional protection

•         Passported benefits

The objectives of a simpler, more transparent system, easier for claimants to understand and with clearer incentives to work command widespread support, but there is concern about the lack of detail on key issues such as how help with childcare costs is to be provided, how the new “localised” Council Tax Benefit will fit in with Universal Credit, and how entitlement to passported benefits is to be determined. Some argue that the Government should not proceed with such important welfare reforms until these and other issues are resolved. Others argue that, with so many unanswered questions, it is difficult to say whether the proposals will in fact achieve the stated policy aims of simplifying the system and making work pay, and determine exactly who, in the long term, will be “winners” and “losers” from Universal Credit. There are also doubts about whether a taper rate of 65% – significantly less generous than previous suggestions – would provide sufficient incentive to work. Some would like the Government to commit to a review of the taper, with the long term aim of reducing it.

Concerns have also been voiced about more detailed aspects, including savings rules, how self-employment income will be determined, the frequency of payments, who within a family should receive the benefit, and the risks associated with providing support for families in a single payment. It has been suggested that payments of UC should be “firewalled” into different components so that if payment of one component stopped, other elements would continue to be paid.

For further details see:

·         RP 11/24, Welfare Reform Bill: Universal Credit provisions and

·         standard note SN/SP/5782, Welfare reform and the Universal Credit

 

14.  Introducing Universal Credit

•         Involves bringing together 19 million individual claims affecting 8 million households

•         Total expenditure on means-tested working-age benefits and tax credits currently around £50 billion a year

•         Crucially dependent on successful introduction of real time PAYE system and associated IT

•         Tight timescale – to be introduced for new claims from October 2013, with migration of existing claims between April 2014 and October 2017

Introducing UC will be a huge and complex undertaking, and the Government has set itself a very tight timescale. UC depends crucially on the successful introduction of new IT systems – including the proposed “real time” PAYE system – in time for the planned roll-out in October 2013. Welfare rights groups believe that the Government should only implement Universal Credit when the supporting systems have been built, tested and proved fit for purpose.

 

15.  Localising the Social Fund

•         Welfare Reform Bill abolishes discretionary Social Fund as it currently stands

•         Budgeting Loans and “alignment” Crisis Loans to be replaced by “payments on account” – nationally-administered advance of benefit facility

•         Community Care Grants and other CLs abolished

•         Funding to be transferred to local authorities in England and devolved administrations for them to provide locally administered assistance, from April 2013

•         LAs in England to use existing powers to make payments

•         Funding not ring-fenced

•         Concerns about a “postcode lottery”

Alongside UC, the Government proposes to transfer responsibility for Social Fund Crisis Loans and Community Care Grants to local authorities in England and to the devolved administrations in Scotland and Wales. Concerns have been voiced about a possible “postcode lottery” following localisation of assistance, particularly in light of the Government’s announcement that funding will not be “ring-fenced” for this purpose.

Further details are given in RP 11/24, Welfare Reform Bill: Universal Credit provisions

 

16.  Library briefings (these are all available on the public Parliament website)

·         RP 11/23, Welfare Reform Bill: reform of disability benefits, Housing Benefit, and other measures

·         RP 11/24, Welfare Reform Bill: Universal Credit provisions

 

·         SN/SP/5782, Welfare reform and the Universal Credit

·         SN/SP/5853, Time-limiting contributory ESA

·         SN/SP/5869, Disability Living Allowance reform

·         SN/SP/5841, DLA mobility component for people in care homes

·         SN/SP/5638, Housing Benefit: implications of the June 2010 Budget and October 2010 Spending Review

·         SN/SP/5732, Child Benefit for higher rate taxpayers

·         SN/SP/5830, The Work Capability Assessment for ESA

 

17.  Further information

 

 

 

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