The government has unveiled its welfare reform bill. What could the introduction of the universal credit mean?

Font size

0
0
0
0

The government says the main aim of its welfare reform bill is to make sure that work always pays. It also wants to simplify the current complex system of benefits. The changes include a single universal credit payment and a cap on the amount that single parent households can claim. However, earlier plans to reduce the amount of housing benefit that someone could claim if they’ve been out of work for a year or more have been abandoned.

The main points of the bill
At the moment, we only know the broad brush outline of what the bill could involve and we may not receive some of the detail for some months to come. The Welfare Reform bill covers a range of areas:

– The introduction of a universal credit. This will be phased in from the autumn of 2013. It may be paid to a single person or to a couple.

SAVVY TIP: Universal credit will be withdrawn at a rate of 65 pence in the pound once you start work. You can read the original proposals on universal credit as outlined last November. The universal credit will be made up of different elements: a standard allowance, an amount that you’re entitled to if you look after a child or young person, an amount to pay for housing costs and an amount for ‘other needs’ (such as disability).

– Universal credit will be available to people aged between 18 and the state pension age (currently 65 for men and rising from 60 to 65 for women), who are not in education and who have accepted the ‘claimant commitment’.

SAVVY TIP: The claimant commitment will set out in clear terms what’s expected of the claimant and what they have to do in order to continue to receive the benefit.

– Childcare costs. We still don’t know how much help parents will receive with the cost of childcare from the universal credit. Help with childcare costs through tax credits is already being reduced from 80% of costs up to a maximum amount to 70%, from April 2011.

– Lone parents with children aged five and over would have to seek work. Currently, lone parents on benefits have to look for work if they have children aged seven or over. From 2012 this age threshold would fall to five.

– Reform of disability living allowance. Disability living allowance will be replaced by a benefit called a ‘personal independence payment’.

SAVVY TIP: The government said it wanted to reduce spending on DLA by 20%. You can read the government’s own impact assessment of DLA cuts. According to the charity Disability Alliance, the cuts in the Welfare Reform bill amount to £2.1 billion — double the expected amount. It reckons around half a million people will not receive disability living allowance in the future.

– Disability Living Allowance reform includes the ending of the right to receive the personal independence payment (PIP) at retirement age. At the moment, if you apply for DLA before you reach state pension age you can continue to receive it after you’ve retired, although once you reach state pension age you have to apply for a different benefit called Attendance Allowance.

SAVVY TIP: Under the Welfare Reform bill people on the PIP would have to be reassessed when they reached retirement age to see if they qualified for Attendance Allowance. You can read more about what the government has been proposing in its consultation about DLA on the disability alliance website.

– Reform child maintenance. The government is currently consulting on reforming child maintenance but has included proposals in the welfare reform bill. This will mean that parents who want to get child support and who can’t reach agreement directly with their ex partner will have to pay an upfront cost and an ongoing fee (upfront costs will be up to £100). According to the BBC, ongoing fees could be 12-15% for parents receiving child support and up to 20% for those paying it.

SAVVY TIP: The single parents’ organisation Gingerbread says it is very concerned that the government has included these proposals in the welfare reform bill when they are supposed to be consulting on the issue.

SavvyWoman email newsletters: If you found this information useful why not sign up now to receive free fortnightly email newsletters with money saving tips and help? You can sign up at the top of any page on the website and your details won’t be passed to any other company for marketing purposes.

SAVVY HELP: Why not ask Savvywoman’s panel of experts a question about your finances by clicking here? The answer will be displayed on the website but your surname will never be used.