Welfare Reform - What you need to know

Changes to welfare reform

The Welfare Reform Act was passed by Parliament in early 2012 and is set to completely change the way in which welfare benefits, including Housing Benefit, is paid.  This document aims to advise you about how the changes could affect you if you are currently claiming housing or other benefits. 

The situation is continually changing and, at the time of writing, the full effect of the reforms are still not yet fully known.  We understand that this is a difficult and challenging time for many tenants. If you are currently claiming benefits it is important that you are aware of and understand the government’s reforms and how they could affect you.

The Government’s review of the welfare benefits system is part of its plans to reduce the current national spending deficit by simplifying the system and ensuring that people are always better off in work than they would be on benefits.

The main changes which will affect tenants claiming benefits are:

• The change from Incapacity Benefit / Income Support for ill health or disability to Employment and Allowance
• Tax credits
• Non-Dependent deductions
• Under-occupation
• Capping
• Disability Living Allowance – Personal Independence payment
• Universal Credit

Universal Credit

Universal Credit will be paid to working age claimants and will include an amount for rent and eligible service charges, previously paid as Housing Benefit.

Other than for vulnerable tenants, the government intends to scrap working age tenants’ rights to have their housing costs paid directly to their landlord and Universal Credit will be paid directly to the tenant. Payments will be made monthly in arrears, which means you would receive your Universal Credit at the end of the month that you have claimed it.

Current System

There are a variety of benefits that people currently claim such as:

• Income support
• ESA and JSA  
• Child Tax Credit
• Working Tax Credit

Future Plans 

In the future all claimants will recieve one one payment 'Universal Credit'  which will include your rent and eligble service charges.  The universal credit  

• Paid direct to you
• Paid monthly in arrears
• Need to apply online
• Paid into a bank account

What you can do:

• Make sure you have a bank/Credit Union account and set up a direct debit for your rent to come out on the same day as your benefits go in
• Fill out an income & expenditure form to help manage your money more efficiently
• Take care of priority bills first, such as your rent and utilities.

How might this affect you?

The changes for Manchester, Tameside, Wigan & Leigh come into force from April 2013.  The rest will commence from October 2013.  Instead of your rent coming to your landlord directly from the local authority, once you move onto Universal Credit you will receive money for your rent and eligible service charges included in your overall benefit.  The Department for Work and Pensions is writing to everyone that will be affected.

You will need to ensure that you have a bank/credit union account and have a reliable method such as direct debit so that when you receive your universal credit payment you can pay your rent on time and not go into arrears. You will also need to budget for the rest of your outgoings and costs on a monthly basis. 

The government expects that in the future you will make your claim for Universal Credit online, which we understand may be difficult for tenants that do not have access to a computer. We will continue to monitor progress and will update you with further advice on how we are working to get more tenants online in a future issue of our 'In House' newsletter.

Under-Occupation

From April 2013, the government will restrict the amount of Housing Benefit payable to working age tenants if their property is larger than they require.

The Department for Work and Pensions estimates that this proposal will affect 670,000 Housing Benefits claimants nationally – this is approximately 32% of working age Housing Benefit claimants living in the social sector. At the moment, we understand working age to be people who are not yet entitled to claim Pension Credit – it is a changing date depending on when you become of pensionable age. The government intends to use the same size criteria to determine under-occupation that is used for Housing Benefit claimants who rent from private landlords.  In April 2013 the Pension Credit age will be 61 years and 6 months.

What is a 'Spare' Bedroom?

Under the new rules if you have more bedrooms than the Government says you need, you will lose part of your housing benefit. The new rules mean you will be allocated one bedroom for:

• each adult couple
• any other person aged 16 or over
• two children of the same sex under the age of 16
• two children under the age of 10 regardless of their sex
• any other child
• a carer (who does not normally live with you) if you or your partner need overnight care.

It does not matter how the ‘spare’ bedroom is used, the new rules will apply even if:

• you and your partner need to sleep apart because of a medical condition
• the main residence of your children is another address, but you have a spare room for when they stay with you.

What does this mean to you?

The government has set the reductions at 14% in Housing Benefit for one ‘spare’ bedroom and 25% for two ‘spare’ bedrooms.

Could this be you?

Mr and Mrs Smith live in a two-bedroom flat costing £70 per week in rent. At the moment housing benefit covers the full cost of their rent. Under the new rules they will have one spare bedroom. Their housing benefit will be reduced by 14% of their rent (14% of £70 = £9.80) Their housing benefit will be reduced by £9.80 to £60.20 per week. They will have to pay £9.80 per week towards their rent.

Capping

From April 2013, the benefits cap would reduce the total amount of welfare benefits a household can receive.

The amount of benefit will be restricted to the level of the average earned income after tax for working households – estimated to be £26,000 per year. The government has said that the total amount of benefit will be restricted to £500 per week (£2,166 per month) for couples and lone parent households, and £350 per week (£1,516 per month) for single adults. Capping will not apply to households that include someone who is receiving Disability Living Allowance or Working Tax Credit, or to people getting War Widows’ Pensions. This change will also not affect people who have reached pension credit age. The benefits cap will work by reducing Housing Benefit for those households whose benefit income is more than the cap.

Who will it affect?

The cap is most likely to affect households living in expensive areas and larger households, in particular those with four or more children. It could mean a reduction in Housing Benefit of between £12 and £70 per week, although some households could face bigger reductions. This means that households affected by the cap will need to decide how they are going to make up the shortfall. If they are unable to, it could result in them having to move to alternative accommodation which may not be available.

Non-dependent deductions

A non-dependent is someone who is aged 18 or over, who normally lives with you and is not your partner.

This could be an adult son, daughter, friend, elderly parent/s or any other relative. Until April 2011, there had been a 10 year freeze on the level of non-dependent deductions but since April 2011, the government is increasing these over a three year period to eventually bring them in line with the levels they would have been had they not been frozen. This means that non-dependent deductions will increase steeply between April 2011 and April 2013. The amount of the deduction is set by central government and is based on the gross income of the non-dependent you have living with you.

This is the amount that you need them to pay towards the rent as the tenant of your home and it is your responsibility to make sure that this is paid. For example, if you have a nondependent living with you who is working and earns £394 per week or more you will have up to £80.00 deducted from your benefits from April 2012. The current NDD for someone who is not working is £11.45 and is set to rise again in 2013 and 2014.

If you are in receipt of Attendance Allowance or any care rate of Disability Living Allowance, you should not have a non-dependant deduction. If you think you are being charged incorrectly please contact us, and we will help to sort this out. 

Disability Living Allowance (DLA) - Personal Independence Payment

Between 2013 and 2016 everyone aged 16 to 64 receiving DLA will be re-assessed to see whether they will be entitled to the new Personal Independence payment. People entitled to Personal Independence Payment will have their claims transferred over and their DLA will stop. 

Those not found to be entitled to Personal Independence Payment will be informed and their Disability Living Allowance will stop and likely to be transfered to Job Seekers Allowance. 

There are no current plans to replace Disability Living Allowance with Personal Independence Payment for children under 16 and people over 65 who are already receiving Disability Living Allowance.  

These changes will be trialled in the North of England from April 2013 so tenants in receipt of DLA will receive a letter from the Department for Work and Pensions in the near future for assessment.

Incapacity benefit / Income Support for illness or disability

Since April 2011, a national exercise has been underway to reassess everyone claiming Incapacity Benefit and move them onto either Employment and Support Allowance (ESA) or Job Seekers Allowance (JSA).

This is affecting all tenancies managed within the Adactus Group Structure where tenants are currently claiming Incapacity Benefit, Income Support for illness, disability or Severe Disablement Allowance. People moved onto Employment and Support Allowance who are considered to be seriously ill or severely disabled will be put in the ‘support’ group and receive a higher level of benefit. 

They do not have to take part in any work focused activity as a condition of receiving benefit. Everyone else who is moved onto ESA is placed in the ‘work-related activity group’ as a condition of receiving this benefit. They will need to attend work focused interviews. People who have been found fit for work are invited to claim JSA. In recent pilots 31% of claimants were placed in the ESA support group, 39% of claimants were moved to the ESA work-related activity group and 30% of people were found fit to work and invited to claim JSA.

Anyone who disagrees with their decision can appeal. If you find yourself in this situation you will need a sick note from your doctor and Employment and Support Allowance will be reinstated, but only at the basic rate until the appeal is heard. 

If you are in receipt of Contributory Employment Support Allowance, and are placed in the ‘Work related activity group’ the benefit will end 365 days after your claim is made. ESA will only continue to be paid after 365 days to those who are placed into the ‘Support’ group. If you have been placed in the ‘Work related activity group’ and think this decision is wrong you will need to appeal the decision within 4 weeks.

Tax Credits

Several changes have already been made to the claiming and assessment rules for Child and Working Tax Credits, with more changes planned in 2012, 2013 and 2014. From April 2012 the following changes will take effect:

Working Tax Credit – For couples with children

The rules on hours of work will change:

• If one member of the family is working, they will need to work at least 24 hours per week or more 
• If both members of the family are working, they will need to work at least 24 hours between them, with one of them working at least 16 hours
• If they are unable to do this, Working Tax Credit entitlement will end (Child Tax Credit will continue).

Couples who work between 16-24 hours a week who get the disabled worker element, may remain entitled to Working Tax Credit.

50+ element of Working Tax Credit to end

Working Tax Credit will no longer be available to people aged over 50 returning to work for 16 hours or more after being on benefits for six months or longer. They will need to work at least 30 hours per week and the extra allowance already paid to people over 50 working 30 hours will stop.

Working Tax Credits – Couples and lone parents

Claimants with no children or disabilities will see no increase in their awards and those with children or disabilities will not see as much of an increase as expected, as Working Tax Credit is not going to be uprated in line with other benefits.

Backdating and drops in income of less than £2,500 – Child and Working Tax Credit

Changes of circumstance need to be reported immediately as backdated requests are being reduced from three months to one month. Drops in income of up to £2,500 per annum will be ignored and if the drop is more than this then the first £2,500 will be ignored.

How we can help and support you

If you think any of the government’s proposed changes are going to affect you, contact us and ask to speak to the Adactus Housing Group Income Team who will be able to talk you through the changes and offer you practical advice and support on how to manage your income and what steps you can take. We will also regularly update this information with the latest information on welfare reform.

Useful Contacts

In addition to the support services that Adactus offers to help you manage your rent and your income, there are a number of other organisations that can help you if you need advice and support: 

Citizens Advice 
www.citizensadvice.org.uk - Find your local bureau online or in the telephone book

Consumer Credit Counselling Service
www.cccs.co.uk - free online debt counselling, budgeting and advice.  
Helpline: 0800 138 1111

Direct Gov
www.direct.gov.uk - Information on managing money and debt

Turn 2 Us
www.turn2us.org.uk - benefits calculator and details of grant giving charities

'Entitledto' for Tenants
www.entitledtofortenants.co.uk - bedroom tax calculator

Department of Work & Pensions
www.dwp.gov.uk
Helpline: 0800 138 1111

Pay Plan
www.payplan.com - Free Debt Management Advice
Helpline: 0800 280 2816

Money Advice Trust
www.moneyadvicetrust.org – Charitable debt advice organisation 
Helpline - 020 7489 7796

National Debt Line
www.nationaldebtline.co.uk - Free debt advice
Helpline- 0808 808 4000

Shelter
www.shelter.org.uk - Free housing and debt advice
Helpline - 0808 800 4444