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Autumn statement update November 2023

November 23, 2023 – Wendy Alcock Phil Agulnik
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If it weren’t for all the spin and speculation over the last few weeks, yesterday's Autumn Statement could almost be described as being ‘back to business as usual’ – at least for the headline announcements in the welfare world on benefits uprating and the Local Housing Allowance (LHA).

In effect, the ‘announcements’ were that one measure would follow its usual process (September’s CPI would be used to uprate all working age benefits) and the other would be reset (the freeze to LHA rates that has been in place since 2020 will be lifted). Hardly groundbreaking news!

For the last few years people on low incomes have had to travel the rollercoaster of uncertainty before they find out how their finances will be affected the following April. While everyone at entitledto welcomes the uprating and LHA increases announced yesterday we would rather have surety on these issues in the longer term.

Until that time, we will continue to dig into the major and minor changes that will affect people on low incomes from each fiscal event. Here are the details of changes announced:

Benefits uprating – April 2024

All working age benefits will be increased using September’s Consumer Prices Index (CPI) rate of inflation, which was 6.7%.

This includes the following benefits:

Adoption Pay, Attendance Allowance, Carer’s Allowance, Child Benefit, Disability Living Allowance, Employment and Support Allowance, Guardian’s Allowance, Incapacity Benefit, Income Support, Jobseeker’s Allowance, Maternity Allowance, Parental Bereavement Pay, Paternity Pay, Personal Independence Payments, Shared Parental Pay, Sick Pay, Statutory Maternity Pay, Tax Credit, Universal Credit.

All pension age benefits will be increased using the average annual increase in wages across the UK in September, which was 8.5%. This uses the rules of the ‘triple lock’ which says that pension age benefits will be increased based on the highest of wages (as above), September’s CPI or 2.5%.

This includes the following benefits - Pension Credit, State Pension.

Local Housing Allowance (LHA) – April 2024

Private renters claiming Universal Credit or Housing Benefit may be able to get more support from April as the maximum amounts available from the LHA will be increased to the 30th percentile of local market rents. At the moment this rule is only being applied for one year.

LHA amounts vary based on the area where someone lives and the number of bedrooms they are thought to need. The 30th percentile means that the amount in each category is set to cover the bottom 30% of market rents, so the LHA will cover the rents of up to three in every 10 homes in an area. This means many people will still have to top-up their rent from other income.

The level of LHA has been frozen since 2020 (although private rents have increased over this time) and the amount is much less than the 50th percentile we last saw in 2011.

National Insurance for employees – January 2024

Class 1 National Insurance will be reduced from 12% to 10% on all earnings between £12,570 and £50,270.

National Insurance for self-employed – April 2024

Class 2 National Insurance (currently a flat rate of £3.45 a week paid by people earning more than £12,570 a year) will be abolished. It can still be paid voluntarily.

Class 4 contributions will be reduced from 9% to 8% on all earnings between £12,570 and £50,270.

Minimum Income Floor for lead carers – January 2024

Note: the date of implementation for this policy was changed from April 2024 to January 2024 on 30 November 2023.

Last month, parents of 3 to 12-year-olds in the ‘All work-related requirements’ group of Universal Credit had changes applied to their claimant commitments around the number of hours they were expected to work. From January, the level of the Minimum Income Floor for parents of 3 to 12-year-olds who are self-employed will match the new rules for employees.

The rules are that main carers of children of this age are now expected to work (or look for work) for up to 30 hours a week, up from 16 hours for parents of 3 and 4-year-olds and 25 hours for parents of 5 to 12-year-olds. Most other people in this group have 35 hours a week as their expected number of work hours.

Here’s our Director Dr Phil Agulnik musing on some of these changes:

The Chancellor’s biggest give-away in yesterday's Autumn Statement, the 2% cut in National Insurance Contributions (NICs) for employees, will be of least help to low earners who claim Universal Credit (UC). That’s because, unlike tax credits, which were based on gross earnings and therefore unaffected by tax changes, when net earnings go up UC goes down. The reduction in NICs will, in effect, be ‘clawed-back’ by the 55% taper in UC.

The story is the same for self-employed people. The reduction in NICs is a bit more complicated, as self-employed people see a 1% cut in Class 4 rates and the abolition of flat-rate Class 2 contributions. But the interaction with UC is just the same – 55% of the gain is clawed back.

Moreover, there is the additional factor for self-employed UC claimants of the Minimum Income Floor, which penalises people for not earning enough. For self-employed claimants with children aged between 3 and 12 the Autumn Statement confirms that this minimum is increasing, because they must work more hours, causing large losses for some claimants and saving the government £80 million on projected UC spending.

National living and minimum wages – April 2024

The National Living Wage will increase from £10.42 to £11.44 an hour for those aged 23 and over and from £10.18 to £11.44 an hour for 21-22 year olds.

The National Minimum Wage will increase from £7.49 to £8.60 an hour for 18-20-year-olds and from £5.28 to £6.40 an hour for 16-17 year olds and apprentices.

Extra transitional element for some receiving SDP – February 2024

Since January 2021, most people who were receiving a Severe Disability Premium (SDP) when they naturally moved to Universal Credit have been receiving an extra transitional payment to compensate for the lower amounts available under Universal Credit.

In January 2022, the government lost a legal challenge into the fact it had failed to provide adequate transitional payments to these people if they were also receiving the enhanced disability premium, disability premium or disabled child premium.

From February 2024, those who qualify for a SDP transitional payment will receive an additional amount between £84 and £246 a month depending on which disability premiums they used to get. If your SDP transitional payment has been reduced to £0 since moving to UC you can still get these additional amounts you missed out on.

Universal Credit surplus earnings threshold – April 2024

The current surplus earnings threshold for Universal Credit of £2,500 will be extended for another year until at least April 2025. It was due to reduce to £300 from April 2022.

Back to work plan (mainly announced last week) – various

A whole raft of changes to encourage people on Universal Credit to work were announced by the government last week. The focus, from next year and for the next five years, will be on people with long-term health conditions and the long-term unemployed.

Changes include expanding schemes for people with mental health problems, offering specialised help to people who have had fit notes after a period of illness, intensive help for people who have been receiving Universal Credit for 7 weeks (as well as further help after 13 and 26 weeks) and more.

From late 2024, people in England and Wales will also need to take mandatory work placements if they have not found a job after 18 months. If they refuse, their benefit claim may be closed. Claims may also be closed if people have not engaged with their jobcentre for over 6 months, as long as they only receive the standard allowance of Universal Credit.

From 2025, there are also plans to change the ‘activities and descriptors’ needed to pass a Work Capability Assessment for new claimants of ‘new style’ Employment and Support Allowance and some elements of Universal Credit.

The government says that ‘Changes will better reflect the greater flexibility and reasonable adjustments now available in the world of work’, such as increased opportunities to work from home, but various charities are worried that the changes will be highly damaging to people with serious health conditions. We will provide updates on this as the situation changes.


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