2015 Summer Budget & Autumn Statement Welfare Reform Changes
This table provides a summary of the changes, headlines and the estimated impacts on Milton Keynes, its claimants and other stakeholders on a change by change basis.
Parliamentary notes can be viewed at;
· Summer Budget 2015 http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7251 and
· 2015 Spending Review and Autumn Statement http://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7290
Explanatory notes for the Welfare Reform and Work bill can be viewed at http://www.publications.parliament.uk/pa/bills/cbill/2015-2016/0051/en/16051en01.htm
Explanatory notes for the Housing and Planning Bill can be viewed at http://www.publications.parliament.uk/pa/bills/lbill/2015-2016/0087/en/16087en01.htm
Summary & Index
1. / No increase in working age benefits / April 2016
2. / LHA rate freeze / April 2016
3. / Housing benefit backdating will be restricted to a maximum of 1 month / April 2016
4. / Lowering the cap on the total amount of benefits an out of work family can receive / 2016 (no date)
5. / Reforms to Tax Credits* and Universal Credit, which will reduce the amount a household can earn before their earnings affect the amount of tax credits and Universal Credit payable *Updated / April 2016
6. / Welfare support provided to families will be limited to two children / April 2017
7. / The family element in tax credits and the equivalent first child premium in Universal Credit and HB will not be available on new claims / May 2016
8. / Removal of entitlement to the housing element of Universal Credit from young people aged 18-21 / April 2017
9. / New claimants of Employment and Support Allowance (ESA) who are placed in the Work-Related Activity Group will receive the same rate as those claiming Jobseeker’s Allowance / April 2017
10. / The total Discretionary Housing Payment fund will be increased by £800 million over the next 5 years to protect the most vulnerable housing benefit claimants. / April 2016
11. / Reduce the rents in social housing in England by 1% a year for 4 years. / 2016
12. / Pay to stay, will be introduced for social housing tenants / April 2017
13. / Lifetime tenancies in social housing will be reviewed. / Not known
14. / 18 – 21 year olds on UC, will be subject to a “Youth Obligation” / April 2017
15. / Free childcare entitlement will be doubled from 15 hours to 30 hours a week for working parents of 3 and 4 year olds / Sept 2017
16. / Parents where the youngest child is aged 3, including lone parents, will be expected to look for work if they want to claim Universal Credit. / April 2016
17. / New living wage / April 2016
18. / The Support for Mortgage Interest (SMI) scheme will be converted into a loan / April 2018
19. / Cap the amount of rent that Housing Benefit will cover in the social sector to the relevant Local Housing Allowance / April 2018
20. / Limit Housing Benefit and Pension Credit payments to 4 weeks for claimants who are outside Great Britain / April 2016
21. / Changes to the funding given to LAs for temporary accommodation / April 2017
/ Proposal / Timescales / Headlines / Estimated impact on Benefit claimants / Estimated impact on Milton Keynes / Other stakeholders who may be impacted / Autumn statement update /
1. / No increase in working age benefits / Between 2016/17 to 2019/20 / The rates of certain working-age benefits, certain elements of tax credits and Child Benefit will be frozen at their 2015/16 levels for 4 years
The freeze will not apply to disability benefits, benefits specifically for pensioners and Statutory Payments, such as Statutory Sick Pay. / · No cash losers as a result of this policy. However, the notional loss to household income will be £3.5bn in real terms in 2019/20.
· Without any behavioural change, such as moving into work, around 30% of households are affected with an average notional difference of around -£6 a week in 2019/20. The majority of working-age households in receipt of state support will be affected by this policy. The greatest impact will be on the households towards the bottom of the income distribution.
http://www.parliament.uk/documents/impact-assessments/IA15-006C.pdf / 33,000 households are likely to be affected in MK, of which 21,273 are employed.
Possible behavioural effects of the policy are initially expected to be low.
Inflation is forecast to be low for the first two years of the freeze. If employment levels in MK are maintained or improve, this will go some way towards mitigating the net effect.
However for those who do not move into work or increase their level of earnings, in cases where there is a shortfall between benefit and liability, less disposable income could contribute to an increase in rent and council tax arrears. / Increased demand on LWP/DHP and DCTR. Increased demand on stakeholder services / No change
2. / LHA rate freeze / 2016 -2020 / Local Housing Allowance rates (used to calculate Housing Benefit and the Housing Element of Universal Credit) will be frozen for 4 years. / The 4 year freeze comes in the wake of a 2 year restriction on increases to 1%. This has already had an impact of the availability of private rentals to benefit recipients as the gap between HB payable and rent charged has increased.
The DCLG report that the end of a private tenancy is now the single leading cause of homelessness.
Shelter has concluded that this will result in more than 300,000 low-income families in England facing a shortfall
http://england.shelter.org.uk/__data/assets/pdf_file/0003/1197309/2015_10_20_The_impact_of_freezing_LHA_method_note.pdf / 5,690 households in MK are likely to be affected with an average notional loss of at least £1,300 a year per household by 2019/2020.
https://www.gov.uk/government/statistics/private-rental-market-statistics-may-2015
Fewer affordable private rental properties available to benefit recipients in the area. Claimants will increasingly be unable to resolve their housing need themselves leading to a rise in cases presenting as homeless. / Increased pressure on social housing.
Private landlords less likely to take on benefit recipients as tenant as able to achieve higher rental returns elsewhere. / No change
3. / Housing benefit backdating will be restricted to a maximum of 1 month / April 2016 / Currently HB can be backdated for up to 6 months, where a claimant had good cause for not claiming earlier. This change reduces backdating to 1 month.
SI/1857/2015 / Brings HB in line with Universal Credit.
Although the sums and volumes are not high, it could increase the risk of eviction in vulnerable cases, who are the most likely to need benefit to be backdated. / Based on 2014/15 awards made, this change will affect approximately 100 cases with a total value of around £43,000 broken down between tenancy types as follows;
· Council tenants 17 cases; value £8,685
· Housing Association 39 cases; value £13,190
· Private Tenants 44 cases value; £21,125 / Income of Housing Associations and private landlords. / No change
4. / Lowering the cap on the total amount of benefits an out of work family can receive / Autumn 2016. September -October?
Possibly to be phased in. / Reducing to £20,000 a year / £384 a week, for couples & families (previously £26,000 a year/ £500 a week)
Reducing to £13,400 a year / £257 a week (from £18,400 a year / £350 a week)
A cap of £20,000 is equivalent to typical pre-tax earnings of around £25,000.
In London, the Benefit cap will be £23,000 a year. / In a static environment an estimated total 120,000 households could be affected in 2016/17, 90,000 of them additional over the current policy. Those who do not become exempt by moving into work will have their benefits reduced by an average of around £63 per week (median £50) in 2017/18 leading to a Treasury saving from these households of £95m in 2016/17 and £300m in 2017/18 (cash terms).
http://www.parliament.uk/documents/impact-assessments/IA15-006.pdf / Estimate that initially a total of 415 households could be affected (including currently capped households). The maximum loss would be a further £115.00 a week. Average loss £69.00.
Increase in;
· DHP applications
· Homeless applications
· Placements of homeless benefit families in MK
Behavioural responses could include;
· Moving into work
· Migration to MK of households from high rental areas, such as London, which would put pressure on housing stocks.
· As Universal Credit is rolled out to families (not before January 2017 in MK), the impact will be greater as the cap will apply to their total benefit income rather than just Housing Benefit (as now). / DWP.
Greater call on;
· Money advice services.
· NEP
· Foodbanks
· B B
Difficulties in rent collection for all landlord types.
Harder for benefit families to secure tenancies due to establishing affordability.
Child care issues as extended families are split up geographically / January update – carers to be made exempt
5. / Reforms to Tax Credits and Universal Credit, which will reduce the amount a household can earn before their earnings affect the amount of tax credits and Universal Credit payable / 11 April 2016 / In tax credits the income threshold will be reduced from £6,420 to £3,850. Above this level, the tax credit will be reduced by £0.48 for every £1 earned (instead of £0.41 as now). The work allowances in Universal Credit will be reduced to £4,764 for those without housing costs £2,304 for those with housing costs, and removed altogether for non-disabled claimants without children. Above this level, the taper reduction remains at £0.65 for every £1 earned. / Impact on ability to take low paid work.
The government has said that much of the impact will be offset by an increase in the national minimum wage (NMW).
However, the Institute for Fiscal Studies (IFS) has identified that the increase in the NMW will only offset around 26% of the losses due to proposed tax credit and benefit changes. It also shows that, for those in the lowest household income distribution group, the compensation will be as low as 7%.
The Resolution Foundation analysis for The Work and Pension Committee, estimates that around 700,000, or 22%, would be better off by an average of £700 a year in real terms by 2020–21. The remaining 2.5 million, or 78%, would be worse off by an average of £1500 a year by 2020–21.
http://www.publications.parliament.uk/pa/cm201516/cmselect/cmworpen/548/548.pdf
The Chancellor has announced that measures in his Autumn Statement on 25 November will lessen the impact on families during the transition. / 19,500 households will gradually be affected as UC rolls out.
Estimate of average weekly WTC reduction for HB/CTR claimants in MK earning over £3,850 is £21.50 (2,600 households).
As Tax credit income reduces, Housing Benefit and Council Tax reduction entitlement will increase, with a corresponding financial impact on MKC.
£1 reduction in tax credits income will result in £0.20 increase in cost of CTR scheme.
£1 decrease in income will result in a £0.65 increase in HB, of which 100% can be reclaimed from the DWP by the LA in subsidy.
2600 CTR cases are earning more than £3,850 a year and receiving WTC.
Increase in the cost of CTR to the authority of £58,000 a year. / Food bank has stated that they “are concerned that more working families will not be able to make ends meet and that we could see a substantial rise in foodbank use." / The change will no longer affect tax credits but has not been rescinded in respect of Universal Credit. However the amount by which a tax credit claimant’s income can increase in-year compared to their previous year’s income before their award is adjusted (the income rise disregard) will be reduced to £2,500 as announced at Summer Budget.
6. / Welfare support provided to families will be limited to two children / From April 2017 / Welfare support provided to families will be limited to two children so that subsequent children born after April 2017 will not be eligible for further support. This will apply to Child Tax Credits, Housing Benefit and Universal Credit where a new claim is made from April 2017 / Once the policy is fully rolled out, approximately 3.7million households will have a lower rate of payment than would otherwise have been the case.
However, as the change only takes effect when a new claim is made, no one will see an immediate fall in the benefits they are currently receiving as a result of these changes.
http://www.parliament.uk/documents/impact-assessments/IA15-006E.pdf / 25,900 households affected.
Gradual increase in the cost of the Council Tax Reduction Scheme to the authority. Awards made to people who are not currently receiving the maximum award by reason of their income will increase as a consequence of the lower income levels. The effect will be mitigated by the shift of people onto UC, where the calculation of CTR is linked to the calculation of UC. / LA Finance – Cost of CTRS
7. / The family element in tax credits and the equivalent first child premium in Universal Credit (UC) and HB will not be available on new claims / From April 2017.
In Housing Benefit (HB) cases the withdrawal will start in May 2016. / The family element in tax credits and the equivalent first child premium in Universal Credit will not be available on new claims and for those starting a family from April 2017. In Housing Benefit cases the withdrawal will start in April 2016.