This piece first appeared in Saga Magazine in April 2013
The text here may not be identical to the published text  

The great social security shake-up

Benefit cuts bite

 

Major cuts in a wide range of social security benefits start this month. Many of them only affect people below women’s state pension age – around 61½ at the moment. But some affect older people too.

Benefit rises in April
The state pension will rise by two different rates in April. The basic pension will increase by 2.5% which puts up the full pension from £107.45 to £110.15 a week. The additional pension called SERPS or State Second Pension as well as Graduated Retirement Benefit will increase by 2.2% in line with the Consumer Prices Index in September 2012.

People who get pension credit will get lower increases. Overall their total income from state pension and pension credit will rise by at most 1.9% and in some cases by as little as 1%. The Government is slowly cutting back on pension credit as part of its plans to reform the state pension. So rises are expected to be below inflation over future years.

Many other benefits will rise by 2.2%, in line with CPI inflation. But benefits for working age people will be increased by just 1% as part of a cost cutting exercise which will save £500 million in 2013/14. Generally disability benefits will rise by 2.2% but some benefits paid to those who cannot work due to health problems, including most parts of the Employment and Support Allowance, will rise by just 1%. Tax credits will also rise by 1%. but the annual rise in income which must be reported will be cut from £10,000 to £5000 a year.

Disability Living Allowance changes to PIP
Disability living allowance, which began in 1992, is being phased out for those aged 16-64 and replaced by a Personal Independence Payment or PIP. This will be paid at the same care and mobility rates as DLA for care and mobility for the more severely disabled but the lowest care component of DLA of which is £21 a week will not be paid under PIP. There are also concerns that the test for entitlement to PIP will be stricter than that used for DLA. PIP will apply to new claims in some areas from April 2013 and to all new claims from June 2013. Those already on DLA will be reassessed over the next three years, but not before October 2015 for those with an indefinite DLA entitlement to DLA. On reassessment Some may not qualify at all for the new benefit and others will get less than they do now. About half a million fewer people will qualify for PIP by 2015/16. The Government estimates it will save pay out £2.25 billion less over the three year transition period. Campaigners are concerned many disabled people will no longer be able to work if they lose help with the extra costs of disability or assistance with travel costs. And CarersUK says claims that 10,000 fewer people will be entitled to Carer’s Allowance to care for them.

DLA for those under 16 and aged 65 or more will continue as will Attendance Allowance, a similar benefit claimed by disabled for people aged 65 or more, will continue in its present form. The rates rise by 2.2% in April.

Bedroom tax
The so-called ‘bedroom tax’ is in fact a deduction from housing benefit for council or housing association tenants who are deemed to have too many bedrooms. It does not apply to private sector tenants. And it does not apply to a tenant who is older than women’s state pension age – currently about 61½. It does not apply to couples if the tenant or their partner is over that age. Anyone who reaches women’s state pension age after 1 April will no longer be subject to the deduction.

The rules in future allow one bedroom for a single adult over 16 or a couple plus one bedroom for a child under 16. Two brothers or sisters will be expected to share a bedroom until they reach 16 and a brother and sister will be expected to share until their tenth birthday. If an overnight carer is needed every night for a disabled person then a room is allowed for the carer. Otherwise no account will be taken of the need for extra rooms by those who are disabled, either for equipment or privacy. Couples, even if separated, will be expected to share a room. No room will be allowed for a foster child. The deduction will apply from 1 April.

The idea is that Families with a spare bedroom deemed to be under-occupying their property will be encouraged to move into smaller homes releasing larger accommodation for those with bigger families. But the deduction will apply even if no smaller accommodation is available. It will also apply to people who were allocated their larger accommodation by the local council. No penalty will be imposed for a room which becomes surplus when someone dies for 12 months after the death. If someone moves out then their room will be counted as spare after three months. The under-occupancy deduction will save slightly more than £500 million a year in 2013/14 and 2014/15.

If a household has one spare room then there will be a deduction of 14% from the rent eligible for housing benefit and a deduction of 25% if there are two or more spare rooms. The effect will be that 40,000 lose all their housing benefit and 620,000 lose an average of £15 a week. Almost two thirds of those affected will be disabled or have a disabled partner. have a disabled person in the household.

People who will be badly affected can apply for help to the local council’s discretionary housing fund which is being increased by £30 million. Foster parents and disabled people are expected to be the main groups helped.

These changes apply in England, Scotland, and Wales and similar changes are expected in Northern Ireland, though perhaps slightly later than April 2013.

Private sector tenants face further restrictions from April on the rent that will be met by housing benefit in 2013/14 and future years. They already face size restrictions on the homes they can occupy.

Council tax support
Council tax benefit which reduces the council tax paid by around 5 million low income households is to be scrapped from 1 April 2013. In its place will be a system of local council tax support. The new system will cost £400 million less and that means cuts in help for many. However, people in Scotland and Wales are, for now, being protected against the changes and should not see any reduction in the help they get with their council tax in 2013/14. In England each of the 326 councils has set its own rules. All of them must protect the benefits paid to those over women’s state pension age – currently around 61½. So the full impact of the funding cut will fall on working age people who will generally get less help with their council tax. Some councils are keeping the rules the same and finding the extra money from other budgets. But most are imposing a minimum contribution even on people who currently get all their council tax paid. A variety of other ways of saving money will apply in many areas.

Anyone in hardship can apply to the council for a Discretionary Housing Payment to help them. But this fund is going to be badly stretched.

The changes do not affect the 25% discount for someone living alone nor the discount for some disabled people which moves them down one council tax band.

Local authorities in England and Wales will also take over crisis and budgeting loans for people on means-tested benefits. In Scotland the Scottish Welfare Fund will be responsible for them. Similar changes are planned in Northern Ireland.

Universal credit
Another major change in benefits for working age people will begin in October. Six benefits including income support, housing benefit, tax credits and the income related jobseeker’s allowance and employment and support allowance will be replaced by Universal Credit. The change will be phased in and we will look into it in more detail in a later issue of Saga Magazine.

 


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