New 2012 version of Benefits After The Bill

Happy new year.  Blwyddyn Newydd Dda.

I’ve now updated my welfare reform paper, which you can download here.
It’s up to date (for a very brief while, I’m sure) and includes the details which emerged during the Lords’ Committee and early Report Stages.

Amongst other changes it now has:
A Council Tax Benefit reduction of 16% for working age people while pensioners continue on current rules. Benefit changes for older people are in a separate paper so there are no examples in this document.
Some initial consideration of the consultation; Support for Mortgage Interest – Informal call for evidence, December 2011, DWP. This paper includes some modelling of the loss of equity caused by the proposal to reclaim mortgage interest support payments.
It includes the WTC and CTC freezes announced in the Autumn Statement

It also corrects some errors in previous version including the mortgage support exclusion table for a single parent not a couple being included.

There are large consequential changes caused by the benefits cap being limited to the maximum of HB in the current scheme.

I can now start talking about Universal Credit coming ‘next year’.

I’d appreciate any comments on this; it is meant to be a blog for discussion.

Government Defeated in Lords’ vote

Government proposals to introduce a cut in HB for tenants of social landlords, for those with more bedrooms than they are assessed as needing, were defeated during the Report Stage of the Welfare Reform Bill today.

Autumn Statement and older people

While it will take a little time to amend the FFBM and rerun the examples in the paper, it’s worth making a few points about older people and the announcements.

Pension Credit Guarantee basic amounts are tied to earnings by the Pensions Act which is how they escape / avoid the CPI link. At the moment earnings increases are lower than CPI but the OBR background papers that came out yesterday are predicting that they will pass CPI in 2014 on.

In our Future Benefits Model (FFBM) the result of this is, that in current values and using the OBR RPI and earnings forecasts, the basic PC Guarantee figures look like this:

2011           2012          2013           2014         2015
£137.35     £132.41     £137.08    £139.27    £139.27
£209.70    £202.15    £209.28   £212.64    £212.64

The SRP figure is ‘protected’ by the triple guarantee which increases the basic pension by the highest of:

CPI
Earnings
2.5%

(The RPI guarantee was for 2011 only)

The highest is CPI so it is increased by £5.30 (should be £5.3066)

The interesting presentational trick to me is that the government is trumpeting the increase in the threshold for Savings Credit as a good thing. It is in fact a reduction in benefit, and the maximum is still frozen.

Childcare not included in benefits cap

Speaking in yesterday’s Lords Grand Committee session looking at the benefits cap, Lord Freud, the minister, said that childcare support would be excluded from the cap.

In an exchange with Lord Mackenzie he said

The noble Lord, Lord McKenzie, asked about childcare-specifically whether those working a small number of hours will be eligible for support for childcare costs through the universal credit. I confirm that support for childcare through the universal credit will not be affected by the cap.

Lord McKenzie of Luton: Could the noble Lord clarify whether he is saying that it will not be included in the total of benefits that is judged against the cap, or whether it cannot be withdrawn from that component of the benefit?

Lord Freud: It is the former. It may be helpful if I explain now that we feel that the best way to support these households is to exempt them completely from the impacts of the cap, rather than attempt, as these amendments do, to alter its design to accommodate their particular circumstances. For the groups to whom the cap applies, this measure creates a very strong incentive to work.

This seems to imply that families where childcare support is in payment will be exempted from the cap. As the government has said that it is extending availability of childcare to those working at all this seems a very welcome move.

There is however a presumption, in my mind, that, for couples, childcare support will, as now, be available only where both members of a couple are in work, or one in work and the other incapacitated.

Does this mean that where a couple with one working below the work limit (whatever that will be) would otherwise be hit by the cap, an hours work for the partner and an hours childcare would allow them to escape it? If neither work then will an hours work each satisfy the rule? If so, there may be an interesting structure of support and employment that could be created to achieve the result. Similarly will a single parent just need to work for one hour with childcare to escape the cap?

Benefits After The Bill – New version

I’ve just completed a new version of this paper. It’s completely remodelled following the changes that have been announced recently, including:

Earnings disregard increases in Universal Credit – which have a substantial effect.
Childcare in Universal Credit
and other changes.

It looks at the complex and surprising relationship between housing costs and earnings in UC in some detail.

It can be downloaded here

Lords’ Grand Committee stages

The committee is due to complete its stages on the 28th November (the day before the Chancellor makes his autumn statement).

The sections to be covered on each day will be:

the Social Fund issues on 10 November;
the PIP on 14 and 16 November;
the benefit cap on 21 November;
fraud and error on 23 November; and
child maintenance and changes to the Child Poverty Commission on the last day, 28 November.

Pension Credit to be capital limited.

During yesterday’s Grand Committee stage in the Lords of the Welfare Reform Bill, Lord Freud confirmed that, following the introduction of the Housing Credit into Pension Credit, Pension Credit will have a capital cut-off. This will apply to the benefit as a whole, not just the housing credit, and may, apparently, replace tariff income for the benefit. It will be set at a higher level than for working age claimants.

Changes, changes, changes…

All sorts of things ’emerging’ now. Lord Freud answered a question during the Lords’ committee stage yesterday to say that support for mortgage interest (SMI) will not be paid to those in full time work. The two year limit will also continue for those not in work. A lot of the seamlessness of design there for those working variable hours. There was no detail about the decision factor; 16 hours or 24 times minimum wage? The Impact Assessment talks about the conditionality hours; 35 for a single person, and a minimum wage figure for lone parents with young children. Still a simple system then.

There was a reference by Lord Freud to ‘the illustrative draft regulations that we have sent out in recent weeks show that help will continue for homeowners as now’. Has anyone seen these draft regulations? (got a copy – thanks)

The new version of the UC impact statement includes alterations to the earnings disregard amounts and rules, because the original figures assumed Council tax Benefit as part of UC, including the introduction of an earnings disregard for single people.

As the disregards will still be reduced to take account of the housing help being received, there will be a really complex better-off calculation when SMI stops, because of work or even perhaps the two years period, when the SMI income drop is compared with the increase in earnings disregards and, potentially, a decrease in non-dependant deductions. For some people with small mortgages that may be beneficial (will people be penalised for not telling the department about a mortgage when they claim because the one and a half times SMI penalty costs them more than it helps?).

We’re told there will be two adult disability elements but also that there will now two disabled child elements as well.

I’ve obviously got a fair bit of work to do on the Future Benefits Model so, for the meantime, treat the figures in the current version of the paper as being pretty useless. Sorry about that.

ps. One change in the latest version of the impact statement is that ‘premia’ has been replaced by ‘premiums’. Another classicist civil servant sent into exile?

Childcare decision

The government, after successful lobbying by many individuals and organisations, has decided to extend the current tax credit support limits of 70% of a maximum £175 for one child and £300 for 2 or more children to those working less than 16 hours a week.

This will put an extra £300m into the childcare pot for Universal Credit.

It’s a considerable improvement over the previous options that had been put forward for consideration although there will be some disappointment that they have not restored the previous 80% maximum.

One question, that strikes me, is that the press release says The additional £300 million has been secured from the investment package that has been allocated to fund the Universal Credit. and I wonder what may have been cut to free up the money?

Lords’ Second Reading

Took place yesterday.

Not much of substance but a lot of concern about the benefits cap and PIP.

You can read it all here