Good morning, 

My most recent bulletin commented on the Chancellor’s budget, and, in particular, the Treasury’s early release, covering the headline changes. The full Budget Report, which provides the detail, is now available, and can be found here.

One of the most significant points to note is at 1.140. It confirms the reported 1% reduction in annual rents only applies to social landlord accommodation in England. 

To assist you further, I’ve detailed below, extracts from the report, highlighting the key welfare changes. I have also created a link below to Policy & Practice’s very helpful analysis of how cumulative changes to the Minimum Wage; Income Tax allowances; Tax Credit, Universal Credit and Housing Benefit “Work Allowances” and Income Tapers will combine to seriously disadvantage many of your lowest income households. The IFS analysis reached identical conclusions and was quite dismissive of the government’s “cornerstone policy” claim; budget changes will “ensure work pays”!

Policy in Practice analysis – 

The anticipated drop in net income for millions of “working households” already struggling financially, will heighten demands for welfare benefits and money advice & assistance. Income Management staff will also discover a much higher proportion of tenants will require to, at the very least, make a contribution to their rent as “housing support” diminishes, creating the likelihood of rent arrears, increased collection costs and cash flow problems.

The Government’s announcement of an extra £800M being invested in Discretionary Housing Payments, over 5 years, whilst welcome will only scrape the surface of the likely demand for financial assistance. You’ll recall, one of my recent bulletins—cut-in-dhp-funding-2015-16 highlighted the fact 2015/16’s budget was cut by 25%!  

Summary of changes 

Freeze Working Age benefits 

1.137 Since the financial crisis began in 2008, average earnings have risen by 11%, whereas most benefits, such as Jobseeker’s Allowance, have risen by 21%. To ensure that it always pays to work, and that earnings growth overtakes the growth in benefits, the government will legislate to freeze working-age benefits, including tax credits and the Local Housing Allowances, for 4 years from 2016-17 to 2019-20. This is forecast to save £4 billion a year by 2019-20. 

1.138 Statutory payments, including Maternity Allowance, Maternity Pay, Paternity Pay and Statutory Sick Pay will continue to be indexed by CPI. Disability benefits will also continue to be indexed by CPI, including Personal Independence Payment, Attendance Allowance, Disability Living Allowance and Employment and Support Allowance (Support Group). 

1.139 The government will continue to protect benefits which are specifically for pensioners. The ‘triple lock’ on the State Pension will be maintained; and other benefits for pensioners including the Winter Fuel Allowance and free TV licences for over 75s will be protected in this Parliament. Pensioners have paid into the system throughout their working lives, and are the group least able to increase their income in response to welfare reform. 

Social Landlords ENGLAND 

1.140 Alongside the freeze in working-age benefits, the government will reduce rents in social housing in England by 1% a year for 4 years, requiring Housing Associations and Local Authorities to deliver efficiency savings, making better use of the £13 billion annual subsidy they receive from the taxpayer. Rents in the social sector increased by 20% over the 3 years from 2010-11. This will allow social landlords to play their part in reducing the welfare bill. This will mean a 12% reduction in average rents by 2020-21 compared to current forecasts. Making Tax Credits and Universal Credit fairer. 

Working Tax & Universal Credit 

1.144 From April 2016, the government will reduce the level of earnings at which a household’s tax credits and Universal Credit award starts to be withdrawn for every extra pound earned. In tax credits, this point (known as the income threshold) will be reduced from £6,420 to £3,850. The equivalents in Universal Credit (work allowances) will be reduced to £4,764 for those without housing costs, £2,304 for those with housing costs, and removed altogether for non-disabled claimants without children. In other words, single people won’t be able to keep 1p before the 65% taper is applied to every £1 earned! The government will also increase the rate at which a person’s or household’s tax credit award is reduced as they progress in work, by increasing the taper rate in tax credits from 41% to 48%.  

1.146 The Budget will therefore limit support provided to families through tax credits to 2 children, so that any subsequent children born after April 2017 will not be eligible for further support. An equivalent change will be made in Housing Benefit to ensure consistency between both benefits. This will also apply in Universal Credit to families who make a new claim from April 2017. 

Family Element 

1.147 In addition, those starting a family after April 2017 will no longer be eligible for the Family Element in tax credits. The equivalent in Universal Credit, known as the first child premium, will also not be available for new claims after April 2017. In Housing Benefit, the family premium will be withdrawn for new claims from April 2016, to ensure fairness between those who receive Housing Benefit and those who do not. 

1.148 Child Benefit will continue to be paid at the same level for all children. The existing entitlement of families who remain in receipt of tax credits and Universal Credit will be unaffected by the reforms to limit support to 2 children and the abolition of the family premium. This will mean that those who already have larger families and have made plans on the basis of the current system will not lose out. 

1.152 Given the success of the household benefit cap in encouraging households to look for work, the government will lower the cap on the total amount of benefits an out of work family can receive, from £26,000 to £20,000, except in London where higher rents will be recognised through a £23,000 cap.

Increased DHP funding. 

1.153 To help ensure Local Authorities are able to protect the most vulnerable housing benefit claimants, the government will provide £800 million of funding for Discretionary Housing Payments over the next 5 years. 

1.154 The government believes that those on higher incomes should not be subsidised through social rents. Therefore, social housing tenants with household incomes of £40,000 and above in London, and £30,000 and above in the rest of England, will be required Summer Budget 2015 to “Pay to Stay”, by paying a market or near market rent for their accommodation. This will ensure they pay a fair level of rent, or make way for those whose need is greater. Local Authorities will repay the rent subsidy that they recover from high income tenants to the Exchequer, contributing to deficit reduction. Housing Associations will be able to use the rent subsidy that they recover to reinvest in new housing. This could raise up to hundreds of millions of pounds in additional rental income for Housing Associations. The government will consult and set out the detail of this reform in due course. 

1.155 The government will review the use of lifetime tenancies in social housing to limit their use and ensure that households are offered tenancies that match their needs, and ensure the best use is made of the social housing stock. 

Bill Irvine

UC Advice & Advocacy