Universal Credit: The Facts

Universal Credit is being launched in October 2013, alongside a plan to introduce a cap, or ceiling, on the total amount of benefit that can be claimed so that workless households should no longer receive more in benefits than the average earnings of working households, or ‘than what they could reasonably expect to earn from working’. A ‘household’ is defined as ‘an individual, their partner, and any children they are responsible for and who live with them’.

The level of the ceiling is:

  • £500 per week for couples (with or without children) and lone parents
  • £350 per week for single adults.

These were chosen as representing around the median earned income after tax and NI for working families, and are calculated by adding together all the included benefits (see below) that the members of the household are entitled to. It does not include non-dependants.

You won’t be affected by the cap if:

  • you are working and earning more than £430/month
  • you, your partner or any children you are responsible for and who live with you are entitled to Working Tax Credit (you do not have to be actually in receipt of it)
  • You are in receipt of:
    • Attendance Allowance
    • the support component of ESA
    • War Widow/Widower’s Pension
    • Disability Living Allowance (DLA) or its replacement Personal Independence Allowance (PIP)
    • Industrial Injuries Benefits
    • Armed Forces Compensation Scheme payments
    • War Pension Scheme payments (includes War Widow’s/Widower’s Pension and War Disablement Pension)

Also, some benefits won’t be included when calculating the cap. These are:

  • Bereavement payment
  • Council Tax Benefit or the replacement localised support for Council Tax
  • Discretionary Housing Payments
  • Social Fund Payments – all one off payments:
  • Budgeting Loans
  • Cold Weather Payments
  • Community Care Grants
  • Crisis Loans
  • Funeral Payments
  • Sure Start Maternity Grants
  • Pension Credit
  • Residency order payments
  • Statutory Adoption Pay – Paid by employers.
  • Statutory Maternity Pay – Paid by employers.
  • Statutory Paternity Pay – Paid by employers.
  • Statutory Sick Pay – Paid by employers.
  • Winter Fuel Payment
  • Industrial Injuries
  • Equivalent payments made to armed forces “to offer special treatment in order to recognise their sacrifices”
  • When Universal Credit is introduced the childcare element will be excluded from the cap

However, the following benefits will be taken in to account until Universal Credit is introduced (when the cap will be applied to that):

  • Bereavement Allowance/ Widowed Parent’s/Mother’s Allowance
  • Carer’s Allowance
  • Child Benefit
  • Child Tax Credit
  • Employment and Support Allowance (ESA) (contribution-based and income-related) except where the Support Component has been awarded
  • Guardian’s Allowance
  • Housing Benefit
  • Incapacity Benefit
  • Income Support
  • Jobseeker’s Allowance (contribution-based and income-based)
  • Maternity Allowance
  • Severe Disablement Allowance (SDA)
  • Widow’s Pension

Some councils have already begun to introduce the cap. and until universal credit comes in it will be applied by reducing housing benefit for the household. If there is not enough housing benefit to cover the reduction, other benefits will not be reduced.

The Government has done an ‘impact assessment’, looking at how Universal Credit will affect people across the country. They say:

  • it will affect about 56,000 households in 2013/14 (rising to 58 thousand in 2014/15), including 190,000 children and 80 thousand adults. (NB. the Guardian article linked to above suggests this may have been revised to 67,000)
  • 49% of affected households will be in greater London
  • these households will lose an average of £93 a week:
    • 45% will lose up to £50 a week (in 2013-14)
    • 26% will lose between £50 and £100
    •  12% will lose between £100 and £150 a week
    • 17% will lose more than £150 a week
  • savings of about £275 million ‘to the taxpayer’ in each of the first and second full years (£275 million and £265 million at 2012/13 prices), although the costs of implementing and enforcing the cap are not included in the assessment
  • larger families, those in higher rental areas (e.g. london), and more expensive special accommodation will be disproportionately affected

Those affected will have to choose between:

  • working enough hours to qualify for WTC
  • reducing non-rent expenditure
  • reducing rent expenditure either in situ or by moving

… although the figures in the assessment assume that none of these will happen.

The paper claims there will be NO impact on social, health and well-being or human rights

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