19 May 2011
Below are details of the various cuts and changes to the benefits system which we believe are most likely to affect our members and which the coalition intends to introduce – or has introduced - between October 2010 and 2014
Please check back regularly as we will be updating this page as new information becomes available.
Incapacity benefit. Pilot trial of transfer of IB claimants to ESA begins in Burnley and Aberdeen areas involving1,700 claimants.
Effect: the DWP estimate that 23% of IB claimants will fail the work capability assessment and will not be eligible for ESA.
Mortgage interest payments. Rate of mortgage interest support reduced from 6.08% to Bank of England average, currently 3.67%.
Effect: many claimants of income support, jobseekers allowance, employment and support allowance and pension credit now face a shortfall in their mortgage interest payments, meaning they must either meet the difference out of their benefits or face losing their home.
VAT. Not a benefit at all, but on 4 January 2011, the standard rate of VAT will rise to 20%.
Effect: the cost of many staple items will increase, affecting people on low incomes disproportionately and meaning benefits do not stretch as far.
Employment and support allowance. A new harsher work capability assessment introduced on 28 March.
Effect: the DWP estimate that the number of people being found fit for work will increase by 5% and the number being placed in the support group will increase by 0.5%.
Incapacity benefit. Transfer of IB claimants to ESA begins. Due for completion in March 2014.
Effect: the DWP estimate that 23% of incapacity benefit claimants will fail the work capability assessment and will not be eligible for ESA.
Disability living allowance. Higher rate mobility component will be payable to people with a severe visual impairment.
Effect: The DWP say that it will allow around 22,000 blind people to claim higher rate mobility.
Local housing allowance. Maximum weekly allowance payable limited to:
£250 for a 1 bed property
£290 for a 2 bed property
£340 for a 3 bed property
£400 for a 4 bed property
Maximum property size limited to four bedrooms instead of five. Up to £15 a week that claimants could keep if their rent was lower than LHA is scrapped.
Effect: many private sector tenants, especially in London, are likely to face a shortfall between the amount of their benefit and the rent they have to pay. Claimants with large families are also likely to suffer.
Local housing allowance. Rents will be based on the cheapest 30% of properties in an area, rather than the cheapest 50%.
Effect: many private sector tenants are likely to face a shortfall between the amount of their benefit and the rent they have to pay.
Various benefits. Benefits such as disability living allowance that have until now been uprated based on increases in the retail price index will be uprated in line with the less generous consumer price index.
Effect: benefits will increase by less each year and claimants incomes will fall further and further behind those of the rest of the population.
Crisis loans. No longer available for items such as cookers and beds.
Cut in living expenses rate from 75% to 60% of individual's benefit level and cap of 3 living expenses loans in any 12 month period.
Effect: more people may turn to 'payday' type loans with very high rates of interest.
Jobseeker's Allowance. Mandatory work activity (MWA) introduced. Aimed at JSA claimants who “have little recent experience of employment. This group has little or no understanding of what behaviours are required to obtain and keep work.”
Claimants forced onto MWA will have to work for a maximum of 30 hours a week for four weeks. There is no limit to the number of times a claimant can be forced to participate in the scheme.
Effect: this may affect some sick and disabled claimants who fail to qualify for ESA.
Various benefits. The Work Programme replaces all other initiatives for moving cliamnats into work. Run mostly by the private sector, providers will be paid up to £14,000 to move claimants into work.
Effect: long-term incapacity benefit claimants will be targeted by providers as being the most lucrative prospects. Others, such as young people, will be much less attractive.
Local housing allowance. Single room restriction for under 25s, which means that their LHA is restricted to the rent payable for a bedsit, is extended to claimants aged under 35.
Effect: more claimants will have to make up the shortfall for their rent from other benefits or move into smaller properties.
Employment and support allowance. Contribution-based ESA will be time-limited to one year for claimants in the work-related activity group. This will apply with immediate effect on those who have already been in receipt of contribution-based ESA for 12 months or more. Youth ESA abolished for new claims and time-limited to one year for existing claimants.
Effect: people in receipt of contribution-based ESA who are not in the support group and who have savings or a partner who works may no longer be able to receive ESA or JSA.
Local housing allowance. The shared room rate will apply to single people aged under 35 years old, rather than 25 years old. Under this rule claimants cannot get more than the rate for a room in a shared house rather than the rate for a one bed flat.
Effect. Private rented tenants under 35 years old will be more likely to face a shortfall between the amount of their benefit and the rent they have to pay.
Housing benefit. HB for working age tenants will be limited to the size of property a claimant’s household requires.
Effect: Social housing tenants who are judged to have too many rooms, perhaps because their partner has died or left or their children have left home, will have their housing benefit reduced or they will have to move to a smaller property. There is likely to be a shortage of such smaller properties in the social housing sector.
SOMETIME IN 2013
Benefit cap. The maximum amount a household can receive in benefits will be limited to the average take-home pay for working households, estimated to be £500 a week in 2013. The cap will apply to combined income from:
The main income replacement benefits (Jobseeker’s Allowance, Income Support, Employment Support Allowance);
Other means-tested benefits (including Housing Benefit and Council Tax Benefit);
Child Benefit and Child Tax Credit;
Other benefits (including Carer’s Allowance and Industrial Injuries Disablement Benefit).
The cap will not apply to claimants of DLA, working tax credit or war widows benefit.
Effect: this is most likely to affect larger households with high housing costs.
Council tax benefit. CTB schemes to be devised and run by local authorities with central government contributing 10% less.
Effect: there may be cuts in the amount of CTB and cuts in services.
Social fund. Community care grants and crisis loans to be scrapped, local authorities to provide their own schemes. Budgeting loans to be replaced by advance payments prior to ordinary benefits being paid.
Effect: less support for vulnerable people, more claimants turning to 'payday' type loans.
Disability living allowance. DLA to be replaced by personal independence payment (PIP). All existing working age DLA claimants will be reassessed for eligibilty for PIP. PIP will have:
- two components: a daily living component and a mobility component;
- two rates for each component, instead of the current three components for the care rate;
- a six month qualifying period instead of the current three months;
- an end to indefinite awards;
- points-based criteria for eligibility, based on the work capability assessment model now being used for employment and support allowance.
- face-to-face medical assessments for the majority of applicants.
Effect: the intention is to reduce the number of DLA claimants by at least one fifth.
Various working age benefits.
Universal credit will replace:
Employment and support allowance
Working tax credit
Child tax credit
Initially this will only apply to the long-term unemployed, but the intention is to move all claimants of the above benefits onto universal credit over the course of two parliaments.
Effect: there are not yet enough details to know who might be better off and who will be worse off under the new system.