It’s finally here - Welfare Reform Act 2012 Receives Royal Assent
Following agreement by both Houses on the text of the Bill it received Royal Assent on 8 March. The Bill is now an Act of Parliament (law). The Welfare Reform Act received Royal Assent on 8th March 2012. The Act introduces a new Universal Credit which will replace most existing benefits and limits the total amount of benefit a person can claim. It also introduces a new size criteria or ‘bedroom tax’ in the social rented sector. The welfare reforms impact on the way tenants receive benefit, in many cases, removing the option of having benefits paid direct to landlords.
The Act legislates for the biggest change to the welfare system for over 60 years. It introduces a wide range of reforms that will deliver the commitment made in the Coalition Agreement and the Queen’s Speech to make the benefits and tax credits systems fairer and simpler by:
• creating the right incentives to get more people into work by ensuring work always pays
• protecting the most vulnerable in our society
• delivering fairness to those claiming benefit and to the taxpayer.
The Bill provides for the introduction of a 'Universal Credit' to replace a range of existing means-tested benefits and tax credits for people of working age, starting from 2013. The Bill follows the November 2010 White Paper, 'Universal Credit: welfare that works', which set out the Coalition Government’s proposals for reforming welfare to improve work incentives, simplify the benefits system and tackle administrative complexity.
Besides introducing Universal Credit and related measures, the Bill makes other significant changes to the benefits system.
The main elements of the Act
The main elements of the Act are:
• the introduction of Universal Credit to provide a single streamlined benefit that will ensure work always pays
• a stronger approach to reducing fraud and error with tougher penalties for the most serious offences
• a new claimant commitment showing clearly what is expected of claimants while giving protection to those with the greatest needs
• driving out abuse of the Social Fund system by giving greater power to local authorities
• changes to support a new system of child support which puts the interest of the child first.
• amends the forthcoming statutory child maintenance scheme
• introduces Personal Independence Payments to replace the current Disability Living Allowance
• restricts Housing Benefit entitlement for social housing tenants whose accommodation is larger than they need
• up-rates Local Housing Allowance rates by the Consumer Price Index
• limits the payment of contributory Employment and Support Allowance to a 12-month period
• caps the total amount of benefit that can be claimed.
The Government plan to merge ‘means-tested’ benefits including Housing Benefit, Income Support and Job Seekers Allowance into new single benefit – The Universal Credit. Universal Credit will be paid monthly in arrears as a single payment to the household. The Government want social housing tenants to receive their money in their hand rather than opting to have their benefit paid direct to their landlord, in the hope this will ease the transition into work by replicating a monthly salary. The Universal Credit will start from October 2013 for new claimants. Existing claimants will then be migrated across to the new benefit between 2013 and 2017.
The cap will be set at the average (median) net earnings for a working household, currently projected to be £500 per week (£26k per annum) for lone parents and couples with or without children, and £350 per week for single people without children. These limits will be set in regulations. The cap will not include one-off payments, non-cash benefits and passported benefits, such as free school meals, nor will it include Council Tax Benefit. The childcare element of Universal Credit will also be excluded. The Department for Work and Pensions estimates that affected households will lose an average of £83 a week – nearly £4,500 per year - with 17% of those affected losing more than £150 a week.
Households will be exempt from the cap if a member of the household is claiming Disability Living Allowance (DLA) or the Personal Independence Payment (PIP), Attendance Allowance, Constant Attendance Allowance, Working Tax Credit or the support component of Employment Support Allowance. However, this exemption does not apply if it is a non-dependent member of the household who is in receipt of DLA or Attendance Allowance, for example if parents are caring for an adult disabled child. War widows and widowers will also be exempt.
The cap will be administered through the new Universal Credit system. Prior to the introduction of Universal Credit, it will be administered by Local Authorities through Housing Benefit payments.
There will be three delivery phases:
• Phase 1 – from April 2012, Jobcentre Plus and Local Authorities will provide support to households claiming out-of-work benefits that will be impacted by the Benefit cap in April 2013.
• Phase 2 – from April 2013 the cap will be introduced for new and existing claimants via a deduction from Housing Benefit. A central team will be set up within Jobcentre Plus to advise Local Authorities who will apply the cap.
• Phase 3 – from October 2013, new claims to Universal Credit will be subject to the cap. Existing cap claimants will migrate over to Universal Credit between October 2013 and 2017.
Bedroom Tax / Under-occupation
The Welfare Reform Act gives the Government the power to introduce a new size criteria for housing benefit claims in the social rented sector. Meaning any working age household considered to be under-occupying their home will lose part of their housing benefit from April 2013. Specifics on this are vague at present but more details will be set out in regulations, that are expected to be published in May.
The size criteria in the social rented sector will restrict housing benefit to allow for one bedroom for each person or couple living as part of the household, with the following exceptions:
• Children under 16 of same gender expected to share
• Children under 10 expected to share regardless of gender
• Disabled tenant or partner who needs non resident overnight carer will be allowed an extra room.
Any household deemed to have more bedrooms than they require, as defined by the criteria, will lose a proportion of their housing benefit.
Examples of households who could be affected by the measure include:
• Separated parents who share the care of their children and who may have been allocated an extra bedroom to reflect this. Benefit rules mean that there must be a designated ‘main carer’ for children, who receives the extra benefit
• Couples who use their ‘spare’ bedroom when recovering from an illness or operation
• Foster carers because foster children are not counted as part of the household for benefit purposes
• Parents whose children visit but are not part of the household
• Families with disabled children
• Disabled people including people living in adapted or specially designed properties.
The cut will be a fixed percentage of the Housing Benefit-eligible rent. This will be set initially at a 14% cut for one extra bedroom and a 25% cut for two or more extra bedrooms. Therefore the higher the rent the higher the amount of money will be deducted from Housing Benefit each week. The same percentage cut will be applied to the new ‘affordable’ rents, set at up-to-80% of the market rate. The Government has said those with one ‘spare’ bedroom will lose on average £12 per week (£624 per year) and those with two or more ‘spare’ bedrooms will lose on average £22 per week (£1,144 per year). Overall, those affected will lose on average just over £14 per week, or £738 per year.
The Government has said it will set out more details regarding the size criteria in regulations, expected to be published in May 2012. Several outstanding questions will need to be addressed, including:
• How will a bedroom be defined?
• Who will be responsible for determining whether a bedroom is of suitable size for sharing by, for example, teenagers of the same sex?
• How will the intended exemptions for supported and sheltered housing be guaranteed?
• What grace periods will be offered to claimants after a member of the household dies, or to those who have lost a job?
• What will be the arrangements for temporary absences for respite care, rehabilitation, hospital or residential care, imprisonment or university?
• What will the promised review into the impact of the size criteria involve, and when will it report?
You can find further information on The Welfare Reform Act 2012 from the HQN (Housing quality Network) report here: http://www.hqnetwork.co.uk/scripts/get_normal?file=8669