Universal Credit and Welfare Reform Impact on Households. Hugh Stickland Chief Economist, Citizens

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2 Universal Credit and Welfare Reform Impact on Households Hugh Stickland Chief Economist, Citizens

3 What we are covering today Welfare Reforms What has happened so far and what is happening next Universal Credit From concept to reality? Wider Economic Trends Impact on Households and how they might respond Considerations for the Credit Industry

4 Welfare Reform what does it mean to you?

5 The benefits affected Welfare Reform What has happened so far? The stated aims of the welfare reform agenda have been: reducing poverty, making the system fairer, and making work pay Working Tax Credit Housing Benefit Council Tax Benefit Out-of-work Benefits (JSA) Disability Benefits (IB, ESA, DLA, PIP) Child Benefit Child Tax Credit Community Care grants and Crisis Loans Universal Credit The types of changes Re-assessments (WCA) Changes to conditionality Eligibility changes Migrations (DLA to PIP) Hours changes Caps Delivery changes (localisation and privatisation) Uprating Time-limiting Fraud and error strategy Straight cuts and withdrawals

6 Welfare Reform What s the Impact Housing Benefit Reforms Child Benefit freeze and 50k+ reform Under occupancy charge (bedroom tax) DLA - PIP ESA(c) time limits Tax Credit reforms Household Cap ( 26k) Uprating by CPI and then 1% Council Tax localised and 10% cut

7 Welfare Reform What s the Impact Housing Benefit Reforms 1.8bn DLA PIP 1.4bn Bedroom Tax 0.5 bn Child Benefit freeze and 60k+ reform 3.6bn Uprating by CPI and then 1% ~ 8.5bn Household Cap 0.2bn Council Tax localisation and cut 0.4bn ESA(c) time limits 1.6bn Tax Credit Reforms 5.2bn

8 Welfare Reform What is coming next? Benefit Freeze - 4bn Tax Credit changes in threshold and taper and removal of family element - 4.5bn Reduction in Benefit Cap 20k national/ 23k London - 0.5bn Limit to 2 children for new tax credit and UC - 1.4bn Align rate for ESA WRAG to JSA - 0.6bn Support for Mortgage Interest as a loan - 0.2bn High income social tenants paying market rents - 0.2bn Reduce social sector rents by 1% for 4 years bn Conditionality for parents when child is 3yo bn Restricting Housing Benefit for s bn

9 Welfare Reform What is coming next? The National Living Wage Higher personal allowance

10 And Currently rolling out across the country to cover the UK by end 2015 Started with simple cases (single people, childless couples) Moved onto families with children During 2016 all new claims will go to Universal Credit During 2016 and 2017 existing claimants will be transferred to UC (although 700,000 harder cases will remain) In total 8 million households, 19 million people will be affected

11 Universal Credit Simple Jobseeker s Allowance Employment Support Allowance Income Support Working Tax Credit Child Tax Credit Housing Benefit Transparent & Rewards Work

12 Universal Credit Paid monthly in arrears Application and management online Paid on a household basis not individual To one nominated individual Housing elements paid direct to individual Rather than direct to landlord

13 Starting with the most simple cases One in ten new starters are coming to Citizens Advice If demand were to stay the same: 900,000 clients will need support by 2020 Sources: Citizens Advice management information up to ; most recent DWP Universal Credit roll-out experimental statistics

14 Impact so far HMT

15 Impact so far LSE

16 Impact so far IFS

17 Impact so far 470 Average per year per adult lost across population 1,615 Average per year per household claiming benefit in 2015/16* 1,925 Average per year per household claiming benefit lost in London Impacts of reforms are likely to be most strongly felt in areas with the highest dependence on benefit

18 Impacts on Households

19 Impacts on Households

20 Impacts on Households

21 Impacts on Households

22 Wider Economic Trends Interest Rates 18 Bank of England base rate

23 Wider Economic Trends Interest Rates

24 Wider Economic Trends Interest Rates

25 Impact on Households and their response Absolute Priorities Top Priorities High Priorities Range of Other Priorities

26 Impact on Households Debt issues at Citizens Advice 22 Payday loan debts 06 Rent arrears - LAs or ALMOs 10 Mag. Cts. - fines & comp. ord. arrears 02 Mortgage & secured loan arrears 07 Rent arrears - housing associations 50 Bankruptcy 15 Catalogue & mail order debts 05 Telephone & broadband debts 12 Bank & building society overdrafts 16 Water supply & sewerage debts 04 Fuel debts 99 Other 49 Debt Relief Order 14 Unsecured personal loan debts 13 Credit, store & charge card debts 09 Council tax arrears 2014/ / /13 0.0% 5.0% 10.0% 15.0%

27 Implications for Creditors Many households will have lower incomes, and be facing higher bills and rents Still likely to be another few years of complexity before majority are on UC Some will have additional needs around budgeting and financial capability Nature of debt is changing from consumer credit to household bills Debt collection may prove to be harder

28 Some thoughts and recommendations Be positive about welfare many of your staff will be affected by the changes. Keep up to date, get training for customer facing staff. Re-visit vulnerability policies and practices Early engagement intelligent use of data Use of trusted intermediaries and advice givers Consistency in approach but flexibility in solution, 8 million different circumstances

29 Any