The Welfare Reform Act 2007

Issue 198 (June 2007)

The Welfare Reform Bill received Royal Assent on 3 May and became the Welfare Reform Act. Edward Graham summarises its main provisions. (This article builds on and should be read in conjunction with articles in Bulletins 193, 194 and 195.) Note: most of the provisions in the Act require further legislation to bring them into effect. In particular, it is currently expected that the employment and support allowance and related provisions will not be in effect before October 2008: see future Bulletins for updates.

Housing benefit

The Act provides for the national rollout of local housing allowances (LHAs). LHAs will replace the current method of rent restrictions for private sector tenants, the local reference rent. They do not affect other aspects of housing benefit (HB) such as non-dependent, capital limits, contrived tenancies etc. Instead of each individual application for HB being referred to a rent officer, the rent officer will draw up lists of rents for houses of different sizes (based on number of bedrooms) in 'broad rental market areas' and these will be used to determine the level of HB paid, irrespective of the actual rent paid. For full details see the article in Bulletin 194, p6.

The scheme enacted appears to differ from the current LHA pilots in a number of respects. First, the mid-point rather then median of rents will be used to determine the LHA. This change is likely to produce a lower figure and therefore more shortfalls between rent charged and HB paid. Second, the draft regulations published so far appear to alter the size criteria removing living rooms, so only providing for smaller accommodation. Third, although no regulations have been seen to this effect, if the LHA is higher than the rent the claimant pays, any gain to the claimant will be limited to £15 a week. The DWP has indicated that the LHAs will be rolled out nationally in April 2008.1

The Act also provides for HB sanctions for anti-social behaviour. The details of the scheme are essentially as proposed in the Bill and outlined in Bulletin 194, p6. HB claimants who have previously been evicted for antisocial behaviour and who subsequently fail to comply with a 'warning notice' can have their HB cut, and after eight weeks removed completely. HB will be restored once the claimant complies with the notice. The Government agreed to a 'sunset clause' being inserted into the Act, and so the scheme will in effect be a pilot, the powers in the Act expire at the end of 2010 and further primary legislation will be required to continue it after then.

Employment and support allowance

The Act provides for the replacement of incapacity benefit (IB) and income support (IS) on the basis of incapacity for work with the employment and support allowance (ESA). All new claimants will go through a 13-week assessment phase, during which they will be paid a basic allowance, at age-related jobseeker's allowance levels. During this assessment phase they will either undergo the new personal capability assessment (PCA), or be allocated, primarily on the basis of paper evidence including a new IB113, into the 'support group'. All those who undergo a PCA will also have a 'work-related health assessment'. Claimants will not actually go onto what the DWP refer to as the 'main phase' ESA (i.e., be paid any extra money) until the end of the 13 weeks.

New PCA

The new PCA will be prescribed in regulations and is currently being evaluated by the DWP. The main changes from the current PCA are the removal of all the physical descriptors scoring 3 points and a new mental health test along the lines of the physical (i.e., a score of 15 needed to pass the test). The proposal to end the ability to combine mental and physical scores has been dropped. The Act requires that the DWP produces an annual report for the first five years on the impact on the new PCA and the allocation of claimants into the support group.

Due to new terminology, claimants will no longer be tested for 'incapacity for work' - although in effect that is still what is being tested for. Those that pass the new PCA will instead have 'limited capability for work' and will receive a 'work-related activity component' of ESA on top of the basic allowance. They will be subject to conditionality (e.g., they will be obliged to participate in work-focused interviews) and, at some point in the future 'as resources allow', to undertake 'work-related activity'. Failure to meet the conditionality requirements will result in a sanction, the claimant losing half of the work-related activity component for the first four weeks, and all of it from then on. The sanction will be ended when the conditions are met. The support component of ESA will be paid to those who are assessed as having a 'limited capability for work-related activity'. This is likely to be a relatively small group who satisfy one of a list of high-threshold descriptors. The support group will not be subject to conditionality.

ESA will have both a contributory and a means-tested non-contributory element. Contributory ESA will not contain any age or dependent additions. Non-means tested ESA will replicate many of the features of IS for incapacity for work, such as housing costs, passporting, premiums etc. However, the disability premium will not be available on ESA, and claimants will no longer be able to claim IS on the grounds of incapacity, or receive the disability premium on the grounds of incapacity for either IS or HB/council tax benefit. The current rules on permitted work in IB will be retained for ESA, for both contributory and noncontributory elements.

Appeals and outstanding matters

Claimants will have the right of appeal on all decisions on sanctions, on whether they pass the PCA and whether they are allocated to the support group. The rates of either component of the main phase of ESA have not so far not been revealed. What constitutes work-related activity, who exactly qualifies for the support group and other details may still be subject to change, as so far only draft regulations have been published as an aid to the parliamentary scrutiny of the Bill.

The Act authorises and the Government envisage many services provided under the ESA being delivered by private contractors, and the Bill proposed that contracted-out suppliers could make decisions on sanctions. This power has been dropped from the Act: all decisions on sanctions must be made by the DWP.

Transitional protection

The precise nature of transitional protection for existing claimants of IB is still not clear, no further details have been revealed regarding what regime will apply since the Committee stage of the House of Commons (see Bulletin 195, p9 for details). Full details will only be known when regulations are published. It appears that the Government wants to migrate onto ESA first those IB claimants with children and those who have been on benefit the shortest time.2

Fraud

The Act also makes changes to fraud legislation, the current 'two strikes and your out' rule is amended. In future, a further conviction for benefit fraud within five years, rather then the current three, can result in benefit being withdrawn.


Please be aware that welfare rights law and guidance change frequently. Therefore older Bulletin articles may be out of date. Use keywords or the search function to find more recent material on this topic.

  • 1. HB/CTB S3/2007
  • 2. Welfare Reform Bill, Grand Committee House of Lords, 20 Feb col GC7