the impact of universal credit phil agulnik 4th october 2012 as presented
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Impact of Universal Credit
Dr Phil Agulnik
Entitledto
4th October 2012
• An economist specialising in social security • Before Entitledto I worked for DWP and
other central govt. departments• Entitledto supply a free public benefits
calculator performing over 2 million calculations a year
• We provide a range of benefit calculators for local authorities, including self-service, adviser, and under occupation calculators
• Entitledto are an IRRV strategic partner
I am…
What the Government says about Universal Credit“Universal Credit is the Government’s key reform to tackle the two key problems of poor work incentives; and complexity. It will enable the system to help people to move into and progress in work, while supporting the most vulnerable. It will be simple to understand and administer and it will protect both the welfare of those most in need and the public purse”
The scope of Universal Credit In scope Income-based Jobseeker’s Allowance Income-related Employment and Support Allowance Income Support (including Support for Mortgage Interest) Child Tax Credit Working Tax Credit Housing Benefit
Out of scope Council Tax support Disability Living Allowance Contributory Benefits State pension Child Benefit Pension Credit Carer’s Allowance
Structure of Universal Credit
The Means Test
Step 1 - Calculate Maximum Amount
Step 2 - Assess Capital, Unearned Income and Earned Income
Step 3 - Taper reduces Maximum Amount
- apply disregards - 65p in the £ taper on earned income - £ for £ taper on unearned income
Step 4 - Adjustments - sanctions - benefits cap - transitional protection (for some)
Maximum AmountStandard Amount for single/couple plus• Child Element• Disabled Child Additions
• Childcare Element • Carer Element • Limited Capability for Work or Limited
Capability for Work-Related Activity Element
• Housing ElementRent restriction through under-occupation
rulesRent restriction through LHA rulesMortgage interest restrictions (or loan?)Non-dependant deduction(s)No housing element for supported/exempt
accommodation
Income and capitalEmployed earnings - actual income during assessment period - real time earnings from HMRC
Self-employed earnings - self-reported income during assessment period - minimum income floor
Unearned income - prescribed in regulations - not prescribed = not treated as income- generally same income types disregarded as now, except for full disregard of war pension income
All above calculated as a monthly figure
Capital - no change for benefits, big change for tax credits
Assessing earnings – Real Time Information
Unearned IncomePrescribed income (taken into account) includes:
(a) Retirement pension (b) The following benefits:
(i) contribution-based jobseeker’s allowance; (ii) employment and support allowance; (iii) carer’s allowance; (iv) bereavement allowance; (v) widowed mother’s allowance; (vi) widowed parent’s allowance; (vii) widow’s pension; (viii) maternity allowance; (ix) foreign benefits
(c) Spousal maintenance (d) Student income (e) Etc etc
Earnings disregards (may change)
Tax Credits
Housing Benefit
Universal Credit max disregard
Universal Credit min disregard
Universal Credit max disregard
Universal Credit min disregard
Single £6,420 £260 £700 £700 £0 £0
Couple £6,420 £520 £3,000 £1,920 £3,000 £520
Lone parent
£6,420 £1,560 £9,000 £2780 (extra £260 for child 2+)
£7,700 £2080 (extra £260 for child 2+)
Couple with children
£6,420 £520 £7,250 £2440 (extra £260 for child 2+)
£5,700 £1040 (extra £260 for child 2+)
Disabled, single or couple
£6,420 £1,040 £7,000 £2,080 £7,000 £2,080
Current system Final system Original proposal
Plus 100% of pension contributions disregarded!
Transitional ProtectionThree kinds of claim for UC:1. New claim, e.g. when someone
loses their job and claims benefit2. Change of circumstance (natural
migration), e.g. when an extra child is born
3. Managed migration, when DWP initiates the transfer onto UC
DWP’s claim that “no one will be worse off!” only applies to managed migration!
Transitional protection for this group means cash amount can not go down
Some affected groups...
Disabled Adults
• Current Disability Premiums will be replaced with just two elements:limited capability for work limited capability for work related activity
• Entitlement based on the Work Capability Assessment, rather than DLA/PIP assessment
• Limited Capability for Work element likely to be the same level as ESA WRAG component
• Limited Capability for Work Related Activity element is likely to be higher than ESA Support component, but lower than Severe Disability Premium (SDP). Big winners and losers!
Disabled Adults – other changes• No equivalent of Permitted Earnings
• Higher earned income disregard, but no equivalent of WTC disability element
• Carer Element not paid in addition to Limited Capability Elements – one or the other
Loss of SDP – Citizens Advice example
Disabled Children
• Two rates of disabled child additionsHigher rate when child awarded highest rate of DLA
(care) or is registered blindLower rate when child awarded other rates of either
component of DLA (mobility or care)
• Figures proposed to date suggest that higher rate may be same or more than current Child Tax Credit severe disability element
• But lower rate same as WRAG component, worth half of current Child Tax Credit disability element of £57 per week
• Note: DLA/PIP assessment used for children
The Self-Employed
Minimum Income FloorIntended as alternative to work conditionality
for self-employedCalculated as 35 hours times minimum wageExemption during start-up period
Start-up PeriodWithin 12 months of starting self employmentUp to 12 months exemption from MIFOnce in every 5 years
Duty to report income each monthNo carry forward from previous monthPermitted reductionsFlat rate deductions for mileage/use of home
Couples where one person over Pension Credit age
• Under UC the age of the youngest person in a couple will determine whether they claim Pension Credit or UC
• As well as existing gap in benefit rates, working age also have under occupation rules, work conditionality etc
• As with examples above, massive difference in income between a ‘natural’ transition onto UC and managed migration
DWP estimates of winners and losers (Impact Assessment Oct
2011)
Timetable…
Oct ‘13Apr ‘13 Oct ‘14 Oct ‘15 Oct ‘16 Oct ‘17
Pilot New claims from out of work customersApr ‘14Feb ‘11
Design & build
New claims from in work customers
Natural transitions due to change of circs
Managed transitions
Legacy load
JSA, ESA, IS, HB, WTC, CTC
8m6m4.5m2.5m
UC load
Implementation Timescale
Pathfinders and LA led Pilots• Pathfinders in Oldham, Tameside,
Warrington and Wigan start April 2013. Live UC claims from new JSA claimants
• Pilots to test aspects of delivery (online, monthly payment, rent to claimant not landlord) from now....
Bath and North East Somerset CouncilBirmingham CC Caerphilly County BCDumfries and Galloway CouncilLB LewishamMelton and Rushcliffe BC as partnership
Newport CCNorth Dorset DCNorth Lanarkshire CouncilOxford CCWest Dunbartonshire CouncilWest Lindsey DC
Conclusion: Winners and Losers • One year to go! But draft UC regs not
complete and further draft regs this month. Entitlement rates and disregards in December (presumably)
• Modelling winners and losers at the moment requires guess work as to rates and rules
• Winners have an incentive to transfer to UC via a change of circumstance. In line with policy intention to encourage 1-16 hours work
• Losers have an incentive to be part of managed migration and get transitional protection
Conclusion: Impact on LAs • Difficult to estimate run down in HB caseload
due to switching incentive for UC winners
• Council Tax Support schemes re-designed from April 2014 to align rules (e.g. on self-employed)
• Council Tax Support schemes may need to split working age claimants into those claiming UC and those not
• April 2013 changes mean a big cohort of losers. In contrast UC losers are protected
• ‘Can’t pay’ rather than ‘won’t pay’ may be biggest problem for new Council Tax Support schemes
My contact details:
Email: phil@entitledto.co.ukPhone: 07816 638590Web: www.counciltaxsupport.comOr
www.solutions.entitledto.co.uk
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