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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
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Budget summary & UC reform
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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
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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
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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
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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
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The individual measures
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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
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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
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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
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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
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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)
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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
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The cap and modelling
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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
HB and tax credits 2017
UC 2017
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Couple two children
Couple, two children, one earner, rent £75.00
July 2015 Budget changes
£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
HB and tax credits 2017
UC 2017
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Couple 2 children
Couple, two children, one earner, rent £75.00,
July 2015 Budget changes
-£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)
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Couples
Couple, one earner, rent £75.00
July 2015 Budget changes
-£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)
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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?
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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
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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
3 bed Couple 2 child
3 bed Lone parent 2 child
3 bed Couple 3 child
3 bed Lone parent 3 child
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PRS effect of cap 2015 system
0
20
40
60
80
100
120
140
160
2 bed Couple 2 child
2 bed Lone parent 2 child
3 bed Couple 2 child
3 bed Lone parent 2 child
3 bed Couple 3 child
3 bed Lone parent 3 child
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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)
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Devolution
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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
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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
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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
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Conclusions
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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
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Any questions?
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