Welfare Reform Act 2012

Issue 227 (April 2012)

Do acts speak louder than words? Edward Graham gives a round-up of the changes on their way.

The Welfare Reform Act received Royal Assent on 8 March 2012. While it may be exaggerating to say that the Act ‘reforms virtually every part of our welfare system’, that didn’t stop the Secretary of State Iain Duncan Smith from saying so. But for once the hype may be justified.

The Act does far more than just enable the introduction of universal credit (UC). Disability living allowance (DLA), employment and support allowance (ESA) and the social fund are all transformed by the Act. Claimants may find themselves bamboozled by reforms, as they get letters about their benefit being capped or are informed of migrations to personal independence payment (PIP) and away from tax credits, rebates replacing their council tax benefit (CTB) and perhaps nothing replacing the social fund. Of course maybe we should not worry unduly, for perhaps not long after the introduction of UC, everyone will find work and become merry. In case not, the scale of change is such that, while many of the crucial details remain as yet unknown, advisers will need to begin assimilating the changes now.

It is important to note that despite the belated attention given by the media to the Bill in Parliament (most controversy surrounded the ‘benefit cap’ and changes to ESA), UC remains pretty much as presented to Parliament back in February 2011, as does the benefit cap. The social fund and council tax benefit are both still due to be abolished.

More importantly, the implementation of many of the changes provided for in the Act, both in terms of details and timings, are still to be decided or, at least, revealed.

Abolition of benefits to facilitate UC

Under Section 33, income support, incomerelated ESA, income-based jobseeker’s allowance (JSA), housing benefit (HB) and tax credits are all due to be abolished and replaced by UC. The details of migration from these benefits is not precisely known, but it is likely that there will be an initial period of ‘natural migration’ from April 2013 onwards (ie, some claimants of the above benefits having to claim UC upon a specified change of circumstances), and then a process of managed migration – ie, claimants compelled to move onto UC from 2014 onwards.

Council tax benefit

Section 33 also provides for the abolition of council tax benefit. It will be replaced with local rebate schemes in April 2013. Pensioners will remain entitled to rebates in accordance with national rules on a similar basis to now, and local authorities (LAs) will have discretion on how to provide help for working age people, with the government suggestion that those in work should not be worse off than at present and that guidance will be available to assist LAs on the subject of work incentives.

Funding to LAs for council tax rebates will be cut by 10 percent compared with current provision. This, however, could be found from other LA funding, so an LA could replicate the existing CTB scheme and make cuts to other services. Given the extremely tight timescale to implement this major change, this is a strong possibility. Otherwise, given the protection guaranteed for pensioners and the exhortations on work incentives, the impact on non-working, non-pensioner claimants could amount to their having to pay well over 10 percent of their CT liability. For the poorest in society, therefore, this could effectively be a return to the poll tax (a scheme not noted for its popularity or longevity) with many benefit claimants required to pay substantial amounts despite their obvious inability to pay.

Discretionary social fund

Section 70 provides for the abolition of the discretionary social fund (ie, crisis loans and community care grants) with responsibility passed to LAs. This will take effect from April 2013. There will be some provision for loans for one-off expenses and emergencies via ‘payments on account’ of universal credit.

Claimants not yet migrated onto UC will still be able to apply for budgeting loans.

Controversially, the funding passed to LAs will not be ‘ring-fenced’, accompanied by detailed guidance or even subject to reporting requirements as to what the money has been spent on. LAs will have discretion on what assistance (now being referred to as ‘local welfare provision’) to provide. The emphasis is likely to be on referrals to local charities for help in kind; it is not expected that LAs will make cash payments.

Benefit cap

Section 96 provides for benefits to be capped at the median earnings level after tax, likely to be around £350 a week for single claimants and £500 for lone parents and couples.

All benefits will be included in the cap apart from childcare costs, discretionary housing payments, and one-off payments like the social fund and free school meals. There will be exclusions for those getting DLA, working tax credit (WTC), ESA support component and war widow’s pensions. The cap will also not apply for a ‘grace period’ of nine months where a claimant has become involuntarily unemployed after working for at least a year. There will also be more provision of ‘discretionary housing payments’ for those facing homelessness.

From the end of April 2012, the DWP intends to send a letter to those it has identified as possibly affected by the cap. There will be an 0845 helpline for claimants to call and get information and be signposted to support. The DWP is seeking to have a single point of contact within each local authority and DWP district to handle enquiries.

The cap will take effect from April 2013, and and will be initially administered by LAs (and will remain so for those who are not claiming UC from October 2013 onwards). This means that only payments of HB will be able to be capped for those not on UC, so those with benefits above the cap that does not consist of HB will be spared the full effect until they transfer to UC.

‘Bedroom tax’

Section 69 allows for HB entitlement for working age people in the social rented sector to reflect family size – eg, HB will be restricted to the number of bedrooms allowed under the local housing allowance (LHA) size criteria. This will leave many with a shortfall to cover on their rent, and in many parts of the UK there will simply not be smaller accommodation for the claimants to move into. Note also that while the government says that pensioners are not

affected, if their partner is not a pensioner and so they have to claim UC rather than pension credit, they could be affected unless they are excepted from the general rule.

Overpayments

Section 105 grants the power to make all overpayments of the following benefits automatically recoverable:

  • JSA;
  • ESA;
  • housing costs of state pension credit (SPC). It is not known when this power will be brought into effect, but as the same rule will apply for UC, it may be brought in to align with the implementation of UC.

The DWP will have to change the decision on the claimant’s benefit, and calculate the overpayment. It seems that these decisions will be subject to appeal as they are currently. However, once it is established there is an overpayment, all overpayments will be recoverable, subject to a discretion not to recover. This means that, like tax credits, recoverability of overpayments will be dealt with in a policy which has yet to be devised. As with tax credits, decisions will not be appealable, but will be subject to judicial review.

Mandatory revision before appeal

Section 102 will require a claimant to seek a revision before being able to appeal a decision. Like the rule on overpayments, this is a feature of UC which is also being extended to other benefits (see p000). An obvious cause of concern is that many claimants will drop out of the appeal process by having to challenge the same decision twice, or simply get confused or defeated by the bureaucracy, especially if, as suggested, revisions will take place over the phone. In particular, ESA claimants challenging work capability assessment (WCA) decisions could find themselves having to lodge a review first, which does not attract the right to be paid pending its determination, and wait months and months for it to be determined (the DWP will resist having a mandatory time limit for dealing with revisions). This appears a rather cynical exercise in administrative obfuscation by the state to defeat a citizen’s legitimate right to challenge a decision over her/his means of subsistence.

Income support and lone parents

Section 58 provides that for a claimant to qualify for income support as a lone parent, her/his youngest child must be under five. This provision will be in force from 21 May 2012.1

Civil penalties

Section 116 provides for a civil penalty (understood to be around £50) to be applied where a claimant negligently gives incorrect information or negligently fails to disclose information relating to a claim or award of benefit which results in an overpayment. The penalty can only be applied where no prosecution or caution for fraud is pursued. The concern is that the application of penalties will be an automated process, and that any delay in notifying a change of circumstances will result in a penalty being automatically applied.

Penalties for benefit offences

Sections 113–115 make some changes to the system where a claimant can accept a penalty for a fraud offence as an alternative to prosecution. Firstly, there is no need for an overpayment to have been made for the penalty to be applied, only that if one had been made, it would have been recoverable from the claimant. Second, that the penalty shall be a minimum of £350 and a maximum of £2,000 (if no actual overpayment was made, the penalty is £350). Finally, that the amount of time the claimant has to change her/his mind about accepting a penalty is reduced from 28 to 14 days. All these changes come into effect on 8 May 2012.

 


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. The Social Security (Lone Parents and Miscellaneous Amendments) Regulations 2012, SI No.874