Universal Credit and Advisers

Transcription

1 Universal Credit and Advisers GARETH MORGAN FERRET INFORMATION SYSTEMS Do you know this man? There are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns there are things we do not know we don't know. United States Secretary of Defense Donald Rumsfeld Timetable of changes -? Timetable of changes - 2 In the pilot area around Manchester, Universal Credit will be available only to new claims by single jobseekers without children who are either paying rent or who are non-householders. In October 2013, one Jobcentre in each of the seven Benefit Delivery Groups will take similar claims In January 2014 the remaining districts start taking claims In April 2014 all districts will be taking jobseekers claims but including those with mortgages and children. Some people will still claim JSA after this the Tail including those in further education, pregnancies and fixed future events These will still only be new claims. Migration will start later and is still in the early planning stages. Now Stock and Flow (and the Lobster Pot ) Why change it all? What s it For? Government says the two drivers for reform are simplifying the system and improving work incentives The White Paper says poor financial incentives to work are key factors in trapping people on out-of-work benefits UC may help with work incentives but as part of an overall approach? The 2012 Income tax personal allowance increase will be worth 2.42 a week to those earning 115,000 a year but 0.37p to the poorest workers as the increase in net pay reduces their Housing Benefit and Council Tax Benefit. This years increase will mean net earnings will increase by 5.86 for those without benefits but those receiving HB and CTB would see 4.98 of the increase clawed back leaving just 88p. 1

2 Simplifying the System??????????? Universal Credit T H E S I M P L E B E N E F I T Universal Credit High and Low Disregards Childcare Housing Carers Disability & Incapacity Net Earnings Net Earnings after Disregard 65% of Net Earnings After Disregard Income Taken Into Account Tariff Income 65% of Net Earnings After Disregard Earnings disregard Earnings disregard Decrease in benefit costs costs without housing with housing caused by having housing costs in UC Couple With children One or both with limited capability for work Child Element Standard Allowance Needs Maximum Universal Credit Tariff Income Income Taken Into Account Resources Universal Credit Maximum Universal Credit Single With children With limited capability for work Couple 2 children Rent - Current The Effects W H A T D O I G E T? 2

3 Couple 2 children Rent - Current Housing A S I M P L E R B E N E F I T! Housing And Earnings High and Low Disregards Housing is housing is housing. But. In Universal Credit, it s also a work incentive If you have housing costs you will have a lower earnings disregard! Earnings disregard without housing costs Earnings disregard with housing costs Decrease in benefit with housing costs Couple With children One or both with limited capability for work Single With children With limited capability for work A simple sum? Those working people living in others households, parents or staying with friends, will have a complex better off calculation to carry out before taking on their own properties, either rented or mortgaged If the householders they are staying with are in receipt of benefits then there will be an increasing non-dependant deduction applied while they are resident but there may be no earnings disregard reduction Moving into their own property may increase the needs figure in UC but the reduction in disregard will also increase the income side of the calculation. Mortgages T H E S I M P L E B E N E F I T! 3

4 No SMI with Any Earnings Mortgage Interest Recovery SMI is abolished for people with any earnings and there is a complex relationship between the lack of support provided and the effect on earnings disregards. Support for Mortgage Interest Informal call for evidence - December 2011, closed 27 th February Our strategic vision for support for mortgage interest in the future is that it should provide shortterm help to people at a time of personal crisis such as loss of employment or relationship breakdown and incentivise work. Recovery from disabled and older people Impact on shared ownership and HOLD Supported by Council of Mortgage Lenders 100,000 Home - 75,000 mortgage 4.5% interest only Getting on to UC A N D G E T T I N G O F F Real Better-Off Issues Effect of 2 Year Mortgage Support Different rules Non-dependants Earnings and hours Capital - especially for Tax Credits Age 4

5 No Mortgage Support In-Work in UC Forgetting the two year limit for clarity Mortgage Interest 24 / 0 Hours Out of the Lobster Pot Childcare 2 Children - Median Wage Childcare S A M E ( L O W E R ) R U L E S A S C U R R E N T S C H E M E A V A I L A B L E F O R T H O S E I N P A R T - T I M E W O R K 5

6 Childcare 2 Children - Median Wage Childcare 4 Children - Median Wage The Benefits Cap The Benefits Cap Total amounts of benefit, for those not in receipt of DLA, war widows or receiving Working Tax Credit, will be limited to the median level of earnings of working families about 500 for families, 350 for single people. The intention is that the cap should only apply to working age benefits and will not impact on single people or couples who have reached the age to qualify for State Pension Credit. so older people with younger partners will be hit. People who lose their jobs having been in work for the previous twelve months will be exempt from the household benefit cap for a period of nine months Couple Unemployed Tenants by number of children Couple Current Scheme Capping by number of children 6

7 Couple Universal Credit by number of children A Cliff-Edge Cap Gross Earnings / Net Profit Net Earnings - after Income Tax and N.I Benefits & Credits Income Working Tax Credit Child Tax Credit Housing Benefit Council Tax Benefit Income Based JSA Pension Credit Child Benefit Other Income Universal Credit Total Net Income Not capped but benefit in excess of Weekly Benefits Cap Hit? Capped by 500 by: The instant effect of the point at which capping ceases to apply, which in the draft regulations has been set at a week. The two columns in the table show weekly net earnings of 99.22, which is a capped level of earnings, and 99.24, which is not. The earnings levels are below the starting point for National Insurance and normal PAYE tax. The difference of 2p a week gross, generates a net income increase, or loss, of Excess benefit over Weekly Income if capped Actual Weekly Income Bedroom Homes Examples The lowest LHA figure for a 4 bedroom house in Britain is in the BRMA of South Gwynedd and is On 2012 rates of benefit, a single parent with 5 children living in the cheapest LHA level house in Britain would have its Housing Benefit capped by on the 500 limit. ( for Universal Credit in 2013) A couple with 6 children, in the same house, would find a shortfall of on the 500 limit. ( for Universal Credit in 2013) It s not just London Numbers affected??? Guildford 2 children 3 bedrooms Guildford 4 children 3 bedrooms Southern Greater Manchester 4 children 3 bedrooms Council Tax Benefit UC & Council Tax Support L O C A L I S E D Reducing spending on Council Tax Benefit by 10 per cent and localising it, saving 490 million a year from No longer demand led In England, older people protected under national scheme, working age local scheme or a default scheme if Las don t put one in place by April 2013 Estimated cuts of 16% - 19% for working age claimants Council Tax Benefit will be devolved to Scotland and Wales. Welsh standard national scheme, some local flexibility, maximum award 90% of Council Tax bill. NOW 100%! Scottish scheme retains old rules, for at least one year, by putting in 40m extra. 7

8 A Simple View of Council Tax Support & UC A Simple View of Council Tax Support & UC- 2 A=applicable amount;i=assessable income;e=earnings;u=unearned income(inc. tariff income);d=earnings disregard;p=payable Subscript u = Universal Credit Subscript c = Council Tax Rebate Lc = CT liability In England/Wales schemes: Ac = Au i.e. applicable amount is the same as that of UC Ic = Eu + Uu + Pu i.e. assessable income is UC earned income plus UC unearned income plus UC payable. UC payable: Pu = (Au - Uu) x (Eu - Du) where Du is UC earnings disregard applicable. A Simple View of Council Tax Support & UC- 3 A Simple View of Council Tax Support & UC- 4 CTR payable: Pc = Lc x (Ic - Ac) Substituting Ic: = Lc x ((Eu + Uu + Pu) - Au) Substituting Pu: = Lc x (Eu + Uu + (Au - Uu) x (Eu - Du) - Au) = Lc x (Eu x (Eu - Du)) = Lc x (Eu x Eu x Du) = Lc x (0.35 x Eu x Du) = Lc - (0.07 x Eu x Du) i.e. tapered amount in CTR depends only on earnings and the applicable UC earnings disregard! Anyone with earnings over their disregard level will have a CT Support entitlement of Maximum CTS minus 13% of their earnings disregard Plus 7% of their net earnings UC & CTS Duty to Inform LA UC & CTS Duty to Inform LA - 2 "89. (1) Duty to notify changes of circumstances [usual stuff...] (2) Subject to paragraph (3), the duty imposed by paragraph (1) does not extend to notifying changes (a) in the amount of council tax payable to the relevant authority; (b) in the age of the applicant or of any member of the applicant's family; (c) to these Regulations; or (d) in the case of an applicant who has an award of income support, universal credit, an income-based jobseeker's allowance or an incomerelated employment and support allowance, in circumstances which affect the amount of the award but not the amount of council tax reduction to which the applicant is or would be entitled, other than the cessation of that entitlement to income support, universal credit, an income-based jobseeker's allowance or an income-related employment and support allowance." They have just added ', universal credit' into this list here. But the crucial difference is that receipt of the others passports to full eligible CT so there is in effect no means test, and most changes of circumstances are moot provided they don't end receipt of the passporting benefit. Universal Credit is not a passporting benefit - quite the contrary it counts as income for the CTR meanstest. 8

9 UC & CTS Duty to Inform LA - 3 UC & CTS Duty to Inform LA - 4 Omitting the others, that para (d) reads: "(d) in the case of an applicant who has an award of universal credit, in circumstances which affect the amount of the award but not the amount of council tax reduction to which the applicant is or would be entitled, other than the cessation of that entitlement to universal credit." So how exactly is a claimant supposed to determine that a particular change of circumstances may "affect the amount of the (UC) award but not the amount of council tax reduction"?! Also, given the 'Lobster Pot' effect of UC, how does one cease to be entitled to it - as opposed to having zero payable of it in one or more assessment periods? Qualifying Age for Pension Credit Example In an unexpected move the Bill introduced a major change to the starting date of claims by couples to Pension Credit The benefit will not be available to couples until the younger partner reaches the qualifying age instead of, as now, the older The weekly difference between the JSA and the Guarantee Pension Credit couple allowance is The total loss, over the 2.6 years average age difference for married couples, is 14,804 Rupert is 82 years old Wendi is 45 Firm goes broke State Pension of a week, Personal 5.00 Will have to wait until 2035 for Pension Credit No JSA as income too high (by 2.60) Passporting lost? Effect of capital No AIP Younger Partner Universal Credit Impact Impact Assessment in October 2011 states that the number of households with lower entitlements under Universal Credit has increased compared to the previous version. two main reasons - changes to policies related to disability payments and the treatment of mixed age couples 200,000 households would receive over 75 a week less under Universal Credit, and another 200,000 would be 50 to 75 a week worse off. some of the heaviest notional losers for couples without children are in cases where one member is of working age and one is currently eligible for Pension Credit 9

10 Finally A B I T O F A D V E R T I S I N G Future Income Outline Report Universal Universal Universal Old Universal Old Universal Old System Credit Old SystemCredit Old System Credit System Credit System Credit 2013/ / / / / / / / / /2018 Weekly Weekly Weekly Weekly Weekly Weekly Weekly Weekly Weekly Weekly Gross Earnings / Net Profit Net Earnings - after Income Tax and N.I Benefits & Credits Income Working Tax Credit Child Tax Credit Housing Benefit Council Tax Benefit Income Based JSA Pension Credit Child Benefit Other Income Universal Credit Total Net Income ucforward elearning Interesting Times Questions The old system 5 years of confusion Universal Credit and New Pension Credits 10

11 Ferret Y O U L L Q U I C K L Y S E E T H E B E N E F I T 11