Pre-Budget Report 2009

Issue 214 (February 2010)

David Simmons highlights the most significant announcements relating to welfare benefits and tax credits.

Introduction

The Chancellor of the Exchequer presented his Pre-Budget Report 2009 to Parliament on 9 December 2009.1The most significant announcements relating to welfare benefits and tax credits are set out below.

Uprating

Most non-means-tested benefits and most elements of tax credits are normally uprated in line with inflation (the Retail Price Index – RPI – each September determines the following April’s uprating). The RPI, however, actually fell by 1.4 per cent in September 2009. To counter this, the Chancellor announced that a proportion of the increases anticipated in April 2011 will be brought forward a year, enabling most benefits and tax credits to be increased by 1.5 per cent from April 2010. The flip side of this, however, is that these benefits will only be increased in April 2011 by the remaining amount required to make up the difference with the RPI in September 2010. The basic state pension is to rise by 2.5 per cent, pension credit (PC) by 2 per cent and most income related benefits by 1.8 per cent. The child element of child tax credit (CTC) is to rise by just under 3 per cent.

Free school lunches

Free school lunches are to be extended to primary school pupils in working families with a household income below £16,190 (currently entitlement is restricted to low-income families on income support (IS), income-based jobseeker’s allowance (JSA), income-related employment and support allowance, PC or CTC). The extension is to be phased in from April 2010 to April 2011. The pilot schemes offering free school lunches to all children are also to be extended, so that there is one pilot in each English region.

Tax credits

From April 2011, a new category will be added to the groups of people who are entitled to working tax credit (WTC). People aged 65 and over will be eligible for WTC if they are working at least 16 hours a week. They will no longer have to fit into the 50+ category (which depends on starting work after six months on benefits, and is only payable for one year), or establish that they are responsible for a child, are disabled, or are working more than 30 hours a week.

The other major change relating to tax credits (offsetting overpayments resulting from couples forming or separating) is dealt with in the article on p7.

Housing benefit

The proposal to remove the provision, which allows claimants to keep up to £15 a week of the local housing allowance which exceeds their rent liability, has been postponed for a year (pending consultation). The Government will introduce a package of ‘administrative reforms’ aimed at saving £100 million a year and reducing error and fraud. A consultation document on the future of housing benefit (HB) has also been published 2which proposes radical reform of the system including:

  • fixed-term awards;
  • extension of the HB extension scheme from four weeks to three months but with a longer qualification period;
  • the exclusion of expensive rents when setting the local housing allowance;
  • the addition of non-resident carers and ‘shared care’ children when setting the size criteria.

Work credits and guarantees

The report announces the ‘roll out’ of the ‘Better-off in Work Credit’ which guarantees claimants who have been getting benefits for six months will receive more when they move into work. The guarantee that young people aged 18– 24 on JSA for six months will be offered a job, work placement or work-related skills training has been brought forward to January 2010 (they will be required to take one of these options after 10 months).

Pensioners

The pension age for women is to rise from 60 to 65 between April 2010 and April 2020 and linked pensioner benefits will rise in line with this (see p6 for details of pension reform from April 2010).

Information and advice

The report announces the provision of a new online service in 2010 which will bring together information relating to benefits and other entitlements to enable front-line staff and advisers outside Government to direct people to relevant services. In addition, £5 million extra funding is to be allocated to Citizens Advice to enable bureaux to extend their opening hours.

Lone parent students

The Government has also announced its intention to introduce new legislation that will allow lone parents who have a youngest child under the age of 16 and who are engaged in full-time study or approved training to claim IS, rather than JSA, in the summer vacation. Note that this announcement was not made in the Pre-Budget Report, but in a separate White Paper in December 2009.3The issue of lone parent students’ entitlement to IS under current legislation was discussed in Welfare Rights Bulletin 212.

 


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