uk summer budget briefing event pdfs/budget...learn with us. improve with us. influence with us | 14...

Learn with us. Improve with us. Influence with us | www.cih.org

UK Summer Budget Briefing Sam Lister, Policy & Practice Officer, CIH

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Content

• Budget summary savings and previous reforms

• HB caseload and UC roll out

• The individual measures (ex-cap)

• The cap and modelling the changes

• Devolution

• Any questions


Budget summary & UC reform


Budget welfare cuts

Description April 2016

£ million

April 2017

£ million

New and existing awards

Freeze working age benefits and LHA for 4 years £90 £940

Reduce benefit cap to £20,000 £100 £310

Reduce TC threshold TC and UC work allowance £2880 £3060

Increase TC taper rate to 48% £1475 £1035

Limit backdating in HB to 4 weeks £10 *

New claims only

Limit child element in TC /UC to 2 children £315

Remove family element/ premium in TC/UC/HB £220 £410

End HB for most out-of-work 18-21 year olds £25 £35

Abolish WRA component in ESA £55


Current & UC compared

£0.00

£100.00

£200.00

£300.00

£400.00

£500.00

£600.00

Weekly

net

earn

ing

s &

ben

efi

ts (

ex C

TR

)

Gross weekly pay (£)

Earnings plusbasic benefits(excluding CTRS)HB/WTC/CTC

Earnings plusbasic benefits(excluding CTRS)UC

Couple, two children, one earner, rent £75.00, council tax £23.00

Before July 2015 Budget changes


General observations

• Designed not result in direct losses

New claims and failure to uprate

Existing awards much less harder hit

No attempt at external policy justification

Target large families

• Mainly non-housing cost income

• Applies to in-work and out-of-work families

• Work does not pay as much but gap between existing benefits and UC is maintained


General observations

• Some of the smallest savings are likely to cause the biggest disruption

End help with housing costs for 18-21 year olds

Benefit cap

• Mainly losses to household income rather than direct help with rent

• Potential losses to household income far greater than bedroom tax


The individual measures


End UC HCE for 18-21s

• New claims of UC or UC HCE from April 2017

• Does not affect those with children or in work

• Grace period if recent work

• Exempt if vulnerable (SAR rules?)

• 3660 social tenants

• 1030 private sector tenants


4 year benefits freeze

• April 2016

• No April uprating for 4 years

• JSA, ESA, IS, CTC, WTC personal allowances and child benefit affected

• Private rented LHA rates also frozen in HB

• Estimated from OBR forecasts (single 25+)

Year 1 and 2: £0.20 and £0.95 per week

Year 3 and 4: £2.00 and £3.55 per week


Limit child element to two

• Limit child element in CTC/UC to two

• Equivalent allowances in HB affected

• Child born after 5/4/17 or new claims

• Transitional protection if existing award with an interruption of 6 months or less

• Lose 53.46 for each other child in TC

• If on partial HB lose also up to £8.74 per child


Abolish the family element

• End family element in CTC /UC

• Family premium in HB abolished

• Child born after 5/4/17 or new claims CTC/UC

• HB new born or new claims from April 2016

• April 2016:

Up to £11.34 from partial HB

• April 2017:

£10.48 from CTC and up to £4.52 in HB

£6.81 from UC


TC taper from 41% to 48%

• April 2016

• All claims not on maximum TC

• Helps keep UC ahead of TC

• For partial HB marginal tax rate

Rises from 86% to 88% (HB/CTC)

Rises from 94% to 95% (HB/CTC/CTR)


TC /UC work allowances

• April 2016 for all TC/UC claims

• No further cash loss if migrated onto UC

• TC tapers away after £74 instead of £123

Loss rises to £23.72 then further 7% for each £1

• UC work allowances

Childless non disabled reduced to zero

All other households reduced to £25.61

• Existing UC allowance worth up to £25.61 if work part-time, £16.65 if full time


The cap and modelling


Couple no children

Couple one earner, rent £75.00

July 2015 Budget changes

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

HB and tax credits 2015

UC 2015


UC 2017


Couple two children

Couple, two children, one earner, rent £75.00


£0.00

£100.00

£200.00

£300.00

£400.00

£500.00

£600.00

£700.00

£800.00

£0

.00

£3

0.0

0

£6

0.0

0

£9

0.0

0

£1

20

.00

£1

50

.00

£1

80

.00

£2

10

.00

£2

40

.00

£2

70

.00

£3

00

.00

£3

30

.00

£3

60

.00

£3

90

.00

£4

20

.00

£4

50

.00

£4

80

.00

£5

10

.00

£5

40

.00

£5

70

.00

£6

00

.00

£6

30

.00

£6

60

.00

£6

90

.00

£7

20

.00

£7

50

.00

£7

80

.00

£8

10

.00

£8

40

.00

HB and Tax credits 2015

UC 2015


UC 2017


Couple 2 children

Couple, two children, one earner, rent £75.00,


-£10.00

£0.00

£10.00

£20.00

£30.00

£40.00

£50.00

£60.00

£70.00

£0

.00

£3

0.0

0

£6

0.0

0

£9

0.0

0

£1

20

.00

£1

50

.00

£1

80

.00

£2

10

.00

£2

40

.00

£2

70

.00

£3

00

.00

£3

30

.00

£3

60

.00

£3

90

.00

£4

20

.00

£4

50

.00

£4

80

.00

£5

10

.00

£5

40

.00

£5

70

.00

£6

00

.00

£6

30

.00

£6

60

.00

£6

90

.00

Couple two children, 2015 to 2017 compared

Net loss HB (2015/2017)

Net loss UC (2015/2017)


Couples

Couple, one earner, rent £75.00


-£5.00

£0.00

£5.00

£10.00

£15.00

£20.00

£25.00

Couple 2015 and 2017 compared

Net loss HB (2015/2017)

Net loss UC (2015/2017)


Benefit Cap

• Start April 2016 phased

• Single: from £350 to £258 per week

• Couple/lone parent: £500 to £385 per week

• More affected in current system because benefit income is higher (TC/HB cuts are mainly new claims only)

• Housing 3 child family in PRS becomes difficult

• Scottish concession on UC payment?


The cap 2017

73.10

114.85 114.85 114.85 114.85 114.85

20.70 34.40 48.10 61.80 53.46

106.92 106.92

106.92

184.59

269.76

195.60

128.44 114.74 101.04

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

Single Couple Couple + 1 Couple + 2 Couple + 3 Couple + 4

£ p

er

wee

k

JSA Child Benefit Child Credits Maximum Housing Costs


PRS cap 2017 system

£0

£10

£20

£30

£40

£50

£60

£70

£80

£90

2 bed Couple 2 child

2 bed Lone parent 2 child






PRS effect of cap 2015 system

0

20

40

60

80

100

120

140

160








Other measures

• Seven UC waiting days (3 August 2015)

• HB backdating limited to 4 weeks (April 2016)

• SMI limit maintained at £200,000 (April 2016)

• SMI becomes a loan (April 2018)

• UC lone parent work conditionality minimum child age 3 years (April 2017)

• ESA work related activity paid at JSA rate in new claims ESA/UC. Loss £29.05 (April 2017)


Devolution


Scotland Bill powers?

• UC payment powers

Frequency

Single household payment

Payment of HCE to landlord as standard

• Power to vary UC HCE calculation

• Power to vary DLA, PIP, AA

• Power to top up reserved benefits

• Support for unemployed

• Regulated social fund


Scottish income tax

• Existing UK bands reduced by 10p

• Scottish IT applied to all Scottish tax payers in main UK bands

• Block grant reduced proportionately

• Changes to UK bands affect Scottish revenues

• Higher proportion of Scottish tax payers in income bands up to £50k

• Lower proportion in income bands £50k and above


Budget: Scotland 2012

Expenditure: Scotland £ million

Social security 17,770

Retirement pensions 6,783

Child benefit 920

Tax credits 2,275

Housing benefit 1,789

DLA & AA 1,939

Incapacity /ESA 1,123

Health 8,862

Education 7,807

Fire, police 1,300

Housing 300

Public sector pensions 5,437

Rest of Scottish block 10,071

Rest of AME 226

Defence, foreign etc. 4,320

Total Scotland 56,093


Conclusions


Conclusions

• Cuts mainly to non-housing costs but to money in householders pocket

• Make 2010 cuts look minor by comparison

• Some of the smallest cuts are the most damaging

• Undermine tax credits so that UC stays ahead

• Devolution powers are unlikely to fill the gap

• Devolved taxation is double edged sword


Any questions?

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