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Budget Update October 2018

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The Chancellor of the Exchequer made the statement that “Austerity is coming to an end” early on in his budget speech yesterday. In comparison to the Prime Minister’s quote a few weeks ago that “Austerity is over” this was probably a warning we were unlikely to see a wide range of measures being put into place to fix the many problems being reported with Universal Credit. And so when Philip Hammond finally sat down and commended his Budget to the House it wasn’t too much of a surprise the changes in the world of welfare reform were few and far between.

So you don’t need to dig through the documents here are the changes announced, with dates and details know at the time of writing. 

From April 2019

The biggest announcement was that the Universal Credit work allowance will be increased by £1,000 a year for those with kids or disabilities.

Importantly though, for many people this is not enough to cover the value of the cuts made by the then Chancellor George Osborne in the 2015 Budget. Nor are they as high as the allowance under tax credits.

If we take a look at the work allowances in April 2015.…

  Legacy System Universal Credit
  Tax Credits Housing Benefit No rent Inc. rent
Single £6,420 £260 £1,330 £1,330
Couple £6,420 £520 £1,330 £1,330
Lone parent £6,420 £1,300 £8,812 £3,159
Couple with children £6,420 £520 £6,429 £2,660
Disabled, single or couple £6,420 £1,040 £7,759 £2,304

 

And what they will be from April 2019…

  Legacy system Universal Credit
  Tax Credits Housing Benefit No rent Inc. rent
Single £6,420 £260 £0 £0
Couple £6,420 £520 £0 £0
Lone parent £6,420 £1,300 £5,908 £3,376
Couple with children £6,420 £520 £5,908 £3,376
Disabled, single or couple £6,420 £1,040 £5,908 £3,376

 

We can see, as with most things UC related, there are some winners and some losers. First, the help via Universal Credit...

  UC before July 2015 UC after October 2018 Difference
  No rent Inc. rent No rent Inc. rent No rent Inc. rent
Single £1,330 £1,330 £0 £0
-£1,330
-£1,330
Couple £1,330 £1,330 £0 £0
-£1,330
-£1,330
Lone parent £8,812 £3,159 £5,908 £3,376
-£2,904
£217
Couple with children £6,429 £2,660 £5,908 £3,376
-£521
£716
Disabled, single or couple £7,759 £2,304 £5,908 £3,376
-£1,851
£1,072

 

And second, the help via the old and new systems...

  Legacy system Universal Credit Difference
  Tax Credits Housing Benefit No rent Inc. rent No rent Inc. rent
Single £6,420 £260 £0 £0
-£6,420
-£260
Couple £6,420 £520 £0 £0
-£6,420
-£520
Lone parent £6,420 £1,300 £5,908 £3,376
-£512
£2,076
Couple with children £6,420 £520 £5,908 £3,376
-£512
£2,856
Disabled, single or couple £6,420 £1,040 £5,908 £3,376
-£512
£2,336

 

In both tables, the winners – coloured blue – are those with children and/or disabilities if they are renting. While everyone else – coloured in red – continues to get less help both in relation to the existing legacy benefits and the original design of UC.

The Chancellor said in his Budget speech this change means 2.4 million households will keep an extra £630 of income each year. But before this change the OBR estimated 2.7 million households were set to lose £2,100 a year on average. So, while an extra £630 for some of these people will help, it is very far from eradicating the problem that UC makes millions of people worse-off.

July 2019 (for managed migration) and September 2020 (for natural migration)

All self-employed people will get 12 months grace before the Minimum Income Floor rules applies. This help is currently only available to those who have started their business within the last 12 months.

This measure, along with a few others that were already known and the two measures below, together make up the package of extra support announced by the Chancellor for people moving over to Universal Credit. This support will total £1 billion over 5 years.

The measures that were already known include the change for those receiving SDP who won’t be moved to UC (from January 2019) until they can get transitional protection and Tax Credits claimants with savings over £16,000 who will get transitional protection for 12 months (from July 2019).

October 2019

Maximum deductions from the standard allowance of Universal Credit for things such as fines and arrears drops from 40% to 30%.

July 2020

Those moving on to Universal Credit from income-related benefits Jobseeker’s Allowance, Employment and Support Allowance and Income Support will receive two weeks extra payment (affecting 1.1 million people).

From October 2021

Universal Credit advances can be repaid over a maximum of 16 months (now 12 months).

And what does all this mean for the roll out schedule?

Interestingly, the Budget’s Red Book still says the managed migration will begin in July 2019, as planned, and will end in December 2023. Whereas the supporting files state that, including a 6 month contingency assumed by the Office for Budget Responsibility, it is now expected to start in January 2020 and end in June 2024. We’re not sure either target will be met but that’s a blog for another day.

We hope you found this a useful summary. Where needed, all our tools will be updated to factor in the changes and if we find more detail on any of the announcements we’ll post them on our social media channels, so please do follow us on Twitter, Facebook and LinkedIn.

 

Sources:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/752202/Budget_2018_red_web.pdf

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/752208/Budget_2018_policy_costings_PDF.pdf

https://obr.uk/wtr/welfare-trends-report-january-2018/

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