April 2013 sees the start of the biggest shake-up of the benefits system for decades. The Government are making the changes to reduce costs and simplify the overall benefits system.
Here are described the key changes and who will be affected.
Benefit cap
From 15th April 2013 the Government will introduce a cap on the total amount of benefit that a working-age person can receive. This cap will be set at the average earnings of a UK working household and is estimated to be £350 per week for a single adult with no children and £500 per week for a couple or lone parent (regardless of the number of children they may have). The result of this cap is that people will only receive the capped amount of benefit even though they may be entitled to more.
It is estimated that that around 50,000 people will be affected by the cap losing an average of £93 per week.
These changes will not be introduced to everyone at once with four London boroughs - Bromley, Croydon, Enfield and Haringey - starting in April and all other local boroughs by September.
The cap will not apply if you qualify for Working Tax Credit or get any of the following benefits:
- Disability Living Allowance
- Personal Independence Payment (from April 2013)
- Attendance Allowance
- Industrial Injuries Benefits
- Employment and Support Allowance, if paid with the support component
- War Widow's or War Widower's Pension
The cap will be deducted from Housing Benefit payments.
Why is the benefit cap being introduced?
The benefit cap has been introduced to make sure that households receiving benefit will not get more in benefit than an average working family receives in pay. These changes are designed to encourage people to look for work and encourage fairness between those in work and those receiving benefits.
Changes to Council Tax Benefit
The current system of Council Tax Benefit (CTB) which is claimed by 5.9 million low income families in the UK is to be abolished in April 2013. Currently the assessment of CTB is carried out by local councils on behalf the Department of Work and Pensions, but the rules are nationally set and applied in the same way across the UK.
From April 2013 local councils will have to devise there own CTB scheme, but funding from the Government will only be 90% of the current budget.
Why are the changes to Council Tax Benefit being made?
The Government believes this new system will:
- give local councils increased financial independence
- establish stronger incentives for council to get people back to work
- simplify the system
- reduce overall costs by £480 million per year
There are concerns that due to differences in the various systems of CTB around the country people will find it difficult to move when seeking employment.
When local councils introduce their new systems of CTB they must ensure that people who have reached Pension Credit qualifying age will get the same level of benefit that they receive under the current CTB scheme.
Personal Independence Payment
The new Personal Independence Payment (PIP) is meant to be simpler to understand, more efficient and targeted at those in most in need to remain independent.
PIP will be paid in two parts:
- daily living component which considers the applicant's ability to carry out a number of activities related to daily living. In 2013 this component will be £53.00 per week. An enhanced rate of £79.15 will be paid to applicant's who are terminally ill and whose death can be reasonably be expected within 6 months.
- mobility component which considers the applicant's ability to move around out of doors independently. In 2013 this component will be £21.00 with the enhanced rate set at £55.25
A new method of assessment will be introduced to take account of the degree of difficulty that a person has around activities of daily living and moving around outdoors. Most awards wil be for a fixed period with the applicant having to reapply when this period expires.
Why has Personal Independence Payment been introduced?
The Government has introduced PIP to better reflect the needs of people with disabilities and the extra costs they may incur. It is envisaged that PIP will result in a reduction of 20% in the cost of disability benefits.
Universal Credit
Universal Credit is a means-tested credit for people of working age, this will replace a number of benefits including Job Seekers Allowance. The structure is intended to be much simpler than that of the current system where separate benefits, which often overlap, are administered by different agencies.
As Universal Credit is not an 'out of work' or 'in work' benefit it should ease the transition into and out of work as people will not need to transfer to different benefits as their circumstances change.
The transition to Universal Credit will take place in three phrases over four years between 2013 and 2017.
