Welfare Reform Act 2012
Status: Amended | |
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Text of statute as originally enacted | |
Text of the Welfare Reform Act 2012 as in force today (including any amendments) within the United Kingdom, from legislation.gov.uk. |
The Welfare Reform Act 2012 is an
Among the provisions of the Act are changes to
Act
The main elements of the legislation are:[2]
- the introduction of Universal Credit
- stronger penalties for fraud and error
- new "claimant commitment"
- phasing out of Disability Living Allowance and replacement with Personal Independence Payment
- reform of Housing Benefit, including introduction of under-occupancy penalty, referred to by its opponents as a "bedroom tax".[3]
- changes to the Social Fund, including greater power to local authorities
- reform of Employment and Support Allowance
- changes to child support
Universal Credit
The Welfare Reform Act introduces a new welfare benefit called Universal Credit which is to replace six of the main means-tested benefits and tax credits:[6][7]
- income-based Jobseeker's Allowance (from the Jobseekers Act 1995)
- income-related Employment and Support Allowance (Part 1 of the Welfare Reform Act 2007)
- Income Support under section 124 of the Social Security Contributions and Benefits Act 1992
- Housing Benefit (section 130 of the 1992 Act)
- Council Tax Benefit(section 131 of the 1992 Act)
- Child Tax Credit and Working Tax Credit (Tax Credits Act 2002)
The benefit is to operate as a single payment to claimants and will be available to working people on a low income and the unemployed. Its stated aim is to improve the incentive to work by making it easier for people who have temporary, low-paid work to move in and out of employment without losing benefits, and to simplify the benefits system by bringing together several benefits into a single payment. Through this scheme, it is envisaged that unemployed people will be encouraged to take on more work for any period of time that is available. The system has some similarities to a
Universal Credit was launched in selected areas of
Council Tax Support
As of April 2013,
Under the reformed system, councils are required to design their own local Council Tax Reduction schemes, under which council tax bills will be reduced for certain categories of people, instead of paying out a virtual benefit to cover the cost of a standard bill. Schemes must be based on a claimant's income, or their status as the only adult in the property, and old-age pensioners must continue to receive at least the same reduction to their net council tax bill as they would have done under the Council Tax Benefit system. Frequently, councils have marketed these schemes as council tax support, and continue to portray them as a payment rather than as a reduction in tax owed.
The cost of providing Council Tax Benefit was covered by a central government grant to councils, and on the introduction of the replacement tax reduction schemes, central government continued to supply a grant contributing towards the cost of the schemes. However, the grant was reduced by 10%; requiring councils to limit reductions under the scheme, make cuts elsewhere, or increase council tax.[9] Although many councils have opted for schemes that keep reductions to the minimum allowed under law (87%) for people on low income, others have implemented schemes that continue to provide 100% discounts, while others are means tested in a more granular manner.[10]
Existing exemptions for council tax continue to apply.
Housing Benefit
Under the Act,
Since their landlord continues to charge the same rent, affected tenants must make up the shortfall. Housing benefit was historically paid directly to landlords of social housing, so that the tenant was essentially uninvolved in the rent payment; having to make up a shortfall, under the new arrangements, has therefore often been perceived as a tax. This perception has been used for propagandistic purposes by opponents of the government, who have referred to the under-occupancy penalty as the "Bedroom Tax"; conversely (and in response[12]) the government prefers to call the previous arrangements a "spare room subsidy".[13] A number of exemptions apply to the rule:; carers of disabled tenants who need to stay overnight are permitted to have one extra bedroom.
The care system, historically operated by local councils, has been augmented to include
Housing Benefit is to be phased out, and equivalent housing payments under similar rules will form a component of Universal Credit payments, and Pension Credit payments.
Benefit Cap
The Act limits the total amount of money available to social security claimants. As of 2013 – the year that the cap was first introduced – total benefits paid to a single person could not exceed £350 per week; the maximum available to families (single parents and couples with children) was £500 per week. The benefits limited by this cap include:[14]
- Housing benefit
- Jobseeker's allowance (JSA) and Employment and Support Allowance(ESA)
- Child benefit and Child tax credits
- Guardian's allowance
- Carer's allowance
- DWP maternity benefits and widows benefits
- Severe Disablement Allowance.
The benefit cap did not initially apply in Northern Ireland (as implementation of the Act was subject to partisan negotiations within the
A study published in November 2014 by New Policy Institute and Trust for London found there to be 46,000 households affected by the introduction of the overall benefit cap in April 2013, of which 46% have been in London.[15] When the cap was brought in, London had a disproportionately high amount of social housing, while also having disproportionately high housing prices.
Personal Independence Payment
Benefits available to
Context
The Act was introduced by the
Benefit | Expenditure (£bn) |
---|---|
State pension |
£74.2 |
Housing Benefit | £16.9 |
Disability Living Allowance | £12.6 |
Pension Credit | £8.1 |
Income Support | £6.9 |
Rent rebates | £5.5 |
Attendance Allowance | £5.3 |
Jobseeker's allowance |
£4.9 |
Incapacity Benefit | £4.9 |
Council Tax Benefit |
£4.8 |
Others | £4.7 |
Employment and Support Allowance | £3.6 |
Statutory Sick/Maternity pay | £2.5 |
Social Fund | £2.4 |
Carer's allowance |
£1.7 |
Financial Assistance Scheme | £1.2 |
TOTAL | £160.2 |
Reaction and analysis
Elements of the Welfare Reform Act 2012 have been subjected to critical scrutiny in the UK Parliament and in the media. Debate about the changes to Housing Benefit has mostly focussed on the under-occupancy penalty. Detractors have widely referred to the penalty as a "bedroom tax", while government advocates of the scheme have used the term "spare room subsidy".
Some media commentators have expressed opinions that the benefit rules may lead to a UK-wide housing crisis.[24]
Critics of the new benefit rules have commented on situations where tenants who are affected by the under-occupancy penalty will be forced to move to smaller properties to avoid losing money, and have drawn attention to a shortage of housing. According to the
In an interview on BBC Radio 4's Today Programme on 1 April 2013, the sponsor of the bill Iain Duncan Smith defended the welfare changes with the argument that the new benefits system would encourage people to be in work and reduce overcrowding whilst reducing benefit costs.[27] His statement in the interview that it was possible to live on £53 per week attracted considerable media attention; he made the claim in response to a complaint by a member of the public in a telephone interview, who stated that he was supplementing his low income as a market trader with state benefits and claimed that, after benefit cuts, he would have to live on £53 per week.[28] The accuracy of the caller's account was later called into question in the media.[29]
The UK disability rights organisation Scope was critical of the changes and, while it expressed support in principle for assessing claimants more carefully, took the view that the assessment criteria were flawed, would cause undue hardship to disabled people and were too strongly focused on cutting welfare budgets.[30] Work capability assessments carried out by the private contractor Atos Healthcare were subjected to critical scrutiny in Parliament following a number of controversial decisions in which disabled individuals were denied benefits and required to look for work. In a few cases, the individuals concerned were reportedly driven to suicide by their experience.[31]
On 21 February 2014 five disabled tenants of social housing lost a
In June 2014, a Trust for London-funded report by Child Poverty Action Group found there to be sixteen London boroughs that have more households claiming housing benefit than there are affordable properties, with families relying heavily on short term discretionary housing payments from councils to stay in their homes. The report concluded that London councils are struggling to find local housing for local families as a result of reform.[33]
In July 2014, a report was published by the DWP that said only one in twenty claimants affected by the change had downsized their property. In response to this, the Liberal Democrats signalled a change in their support for the policy, with both Nick Clegg and Danny Alexander stating that they would like to see changes to the way it is implemented.[34]
A report published in January 2015 by the London School of Economics and Political Science, partly funded by Trust for London, presented modelling to suggest changes to direct taxes, tax credits and benefits from May 2010 to 2014/15 were together fiscally neutral, rather than contributing to deficit reduction.[35]
Protests
Scotland
In Scotland, there were two major demonstrations on 30 March 2013 against the changes to welfare:
- Around 3,000 demonstrators took to the streets of Glasgow[36]
- Around 1,000 demonstrators assembled outside of the Scottish Parliament in Edinburgh[37]
Participants in the protests include the
North West England
On Monday, 22 July 2013, a man in Runcorn benefits advice office cut his own throat in protest of the bedroom tax. The injuries were not fatal.[38]
References
- ^ "Benefit changes: Who will be affected?". 27 March 2013. Retrieved 2 April 2013.
- ^ a b "Welfare reform". dwp.gov.uk.
- ^ a b National Housing Federation. "Bedroom tax". housing.org.uk.
- ^ "How will the housing benefit changes work?". BBC News. 15 March 2013. Retrieved 2 April 2013.
- O'Hagan, Ellie Mae (1 April 2013). "The bedroom tax's authors were either careless or cruel – it must be fought". The Guardian. Retrieved 2 April 2013.
- ^ "Section 33. Abolition of benefits". Welfare Reform Act 2012. UK Government/National Archives. March 2012. Retrieved 3 April 2013.
- ^ "Universal Credit". Department for Work and Pensions. Retrieved 6 April 2013.
- ^ "Apply for Council Tax Reduction".
- ^ "Council tax support from 2013". Shelter. Archived from the original on 23 October 2012.
- ^ "Statistics on the types of scheme".
- ^ Carersuk.org - "Bedroom Tax". Accessed 6 October 2013
- ^ Lewis, Paul (18 March 2013). "Naming and Blaming over (Coughs) Bedroom Tax". Paul Lewis Money. Retrieved 31 January 2014.
- ^ "Spare room subsidy: funding update". www.gov.uk.
- ^ a b "Benefit cap from 2013". Shelter. Archived from the original on 2 March 2013. Retrieved 3 April 2013.
- ^ Aldridge, Hannah (24 November 2014). "The overall benefit cap has hit London families hardest". London's Poverty Profile. Trust for London and New Policy Institute. Archived from the original on 6 February 2015.
- ^ "Personal Independence Payment (PIP)". Factsheet F60. Disability Rights UK. Retrieved 4 April 2013.
- ^ "Personal Independence Payment". Department for Work and Pensions. Retrieved 8 April 2013.
- ^ Osborne,George; Duncan Smith, Iain (31 March 2013). "'We're fixing the benefits system, and giving a better deal to those in work'". The Telegraph. Retrieved 2 April 2013.
- ^ "Conservative conference: Welfare needs 'cultural shift'". 8 October 2012. Retrieved 2 April 2013.
- ^ a b Rogers,Simon; Blight, Garry (4 December 2012). "Public spending by UK government department 2011-12: an interactive guide". The Guardian. Retrieved 2 April 2013.
- ^ "Housing benefit: Bedroom tax or spare room subsidy?". BBC News. 11 March 2013. Retrieved 4 April 2013.
- ^ Duncan Smith, Iain (7 March 2013). "Britain cannot afford the spare room subsidy". The Telegraph. Retrieved 4 April 2013.
- ^ "Oral Answers to Questions (Prime Minister's Questions)". House of Commons. Hansard. 27 February 2013. Retrieved 4 April 2013. Video version
- ^ Toynbee, Polly (18 February 2013). "How to turn a housing crisis into a homeless catastrophe". The Guardian. Retrieved 4 April 2013.
- ^ "Fears over housing shortage as 'bedroom tax' comes into force". STV. 1 April 2013. Retrieved 4 April 2013.
- ^ "Bedroom tax: Ed Miliband attacks David Cameron over Hull's 5,000". Hull Daily mail. 9 February 2013. Retrieved 4 April 2013.
- ^ "Iain Duncan Smith: Reforms 'make work pay'". BBC Radio 4. 1 April 2013. Archived from the original on 1 April 2013. Retrieved 4 April 2013.
- ^ Malik,Shiv; Wintour,Patrick (2 April 2013). "I could live on £53 in benefits a week, says Iain Duncan Smith". The Guardian. Retrieved 11 April 2013.
- ^ Hall, Melanie (2 April 2013). "Benefits reform: 'welfare victim' who dared Iain Duncan Smith to live on £53 is a gambler". The Telegraph. Retrieved 11 April 2013.
- ^ "Disability Living Allowance replaced by PIP scheme". BBC News. 8 April 2013. Retrieved 8 April 2013.
- ^ "Atos comes under attack in emotional Commons debate". The Guardian. 17 January 2013. Retrieved 8 April 2013.
- ^ "Five lose housing benefit cut appeal". BBC News. Retrieved 21 February 2014.
- ^ "Families on the Brink: welfare reform in London". trustforlondon.org.uk.
- ^ "Nick Clegg defends bedroom tax policy shift". The Guardian. 17 July 2014.
- ^ "The Coalition's Record on Cash Transfers, Poverty and Inequality 2010-2015". Retrieved 27 July 2015./
- ^ "Thousands rally in Glasgow to protest Coalition's 'bedroom tax'". 30 March 2013. Retrieved 13 August 2013.
- ^ a b "Bedroom tax: Thousands protest across Scotland". 31 March 2013. Retrieved 13 August 2013.
- ^ "Man cuts throat with knife in bedroom tax protest". Liverpool Echo. 26 July 2013.