The Coalition government have announced plans for a radical shake up of the State welfare system. Will you be affected?
The changes set out in the Welfare Reform Bill are designed to 'make work pay' and encourage anyone that is physically able to work to do so.
The finer details and practicalities still need to be ironed out, but the aim is to make every household that works better off than those who rely solely on benefits. However, support for vulnerable individuals will still be readily available for those who need it.
The reforms will be officially introduced in 2013 and then rolled out over the course of 4 years.
Here are the changes that you need to know about:
1. Universal Credit
Perhaps the most drastic change is the creation of a Universal Credit. This will replace the current multi-benefit system and merge entitlements like jobseeker's allowance, income support, tax credits and housing benefit into a single benefit payment.
This should not only make it easier for people to check their entitlements and claim the right amount in benefit payments, but also cut down on fraud and reduce the number of errors that occur.
It's expected that Universal Credit will replace the current benefit system by October 2013 although the transition to a unified system is expected to take place over 4 years.
2.Capped payments
From 2013 a household maximum will be applied to benefit payments. This will be equivalent to the average annual wage (approximately £26,000) and equates to a maximum of £500/week for couples and single parents, and £350/week for single person households.
It's important to note, however, that this cap will exclude entitlements that encourage people to work, such as in-work and return-to-work credits, and also non-cash benefits like free school meals.
3. Penalties
A penalty on benefit payments for up to 3 years will be applied if individuals repeatedly refuse work offered to them. A 3 month penalty will be applied on the first offence but this will be extended to 3 years if job opportunities are turned down 3 or more times.
Similarly, from 2012, £50 fines will be given to those who provide incorrect information on their benefit claims form. While fines of up to £300 will be levied upon individuals who fail to notify HMRC about changes to their circumstances that could affect the amount of tax credits they receive.
4. Personal Independence Payment
This will replace Disability Living Allowance, a benefit that's paid to help people cope with the additional cost of being disabled, and only be available to individuals who suffer from a long-term health problem or disability.
Payment will also be subject to more frequent and objective assessments to ensure that only those that genuinely need this benefit will receive it.
5. Housing Benefit
On 1st April, 2013, measures designed to cut social housing costs will be introduced. From this date the allocation of social housing, and amount of housing benefit paid, will be based on household size.
Individuals living in properties deemed too large for their needs will be given the option to either move to a smaller property or make up the short-fall between rental costs and their housing benefit.
Restrictions on the amount of rent that can be paid for social housing will also be introduced. This will be capped at a limit that covers the cheapest 30% of properties within a given area.
6. Employment Support Allowance
A 12 month limit on payments of contributory Employment Support Allowance, a benefit paid to those who are unable to work due to illness or incapacity, will take effect from April 2013. If individuals are unfit to return to work after this time they will be moved on to income-related Employment Support Allowance. However, if they are deemed fit to work they will be encouraged to find employment and payment of ESA will be stopped.
7. Child Support
From November 2012 the child support system will be overhauled to place less emphasis on State-funded mitigation and greater responsibility on couples to make their own child maintenance arrangements.
Advice on drawing up family-based child maintenance arrangements will be available to separating parents. However, couples that are unable to come to an arrangement independently will be able to call upon the State for intervention.
8. Fraud Prevention
A new fraud investigation service will be created specifically to investigate benefit and tax credit fraud.
Tougher penalties will also be introduced as a deterrent. Those found to be fraudulently claiming benefits will lose their entitlement for up to 3 years depending on the severity. They will also be fined a minimum of £350, or 50% of the amount fraudulently claimed (up to a maximum of £2,000) if it's greater than this.
A copy of the Welfare Reform Bill 2011 can be found on the DWP's website.
