The Chancellor's U-turn on tax credits cuts shows that he listened to many people, Policy in Practice included, who were concerned that the cuts announced in July would hit the pockets and the employment prospects of working families too hard.
Yet the welfare savings the Chancellor wants to achieve over the long term will still be realised within Universal Credit.
With the exception of households working mini-jobs, the new system leaves more people worse off in work than the current benefits system.
We've analysed the data from the SR2015 announcements and reveal our results in this webinar.
View this slide deck to learn:
> Why 52% of households working 16 hours or more will be worse off under UC
> Which groups of people will be most severely affected, and how
> When the biggest impacts will be felt over the next 4 years
> What actions local organisations can take now to mitigate against the impact of the cuts
Who should view these slides?
You should view these slides if you are designing support programmes or delivering change programmes, such as the welfare reform agenda, for your local organisation.
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Agenda
• Introduction
• The national impact of welfare reforms:
• Universal Credit
• Benefit Cap
• Tax Credits
• The local impact of welfare reforms, on each of your residents
• The software that makes it happen
• Questions
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Never mind the U-turn, here comes Universal Credit
• U-turn on tax credits but savings will still be made
• Universal Credit rollout continues
• Even more complex picture now
• Some people gain but some people lose badly
• Understanding the combined impact of all reforms is hard
• But understanding individual circumstances is critical
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Work Allowances under Universal Credit have been
cut significantly
2015 2016 Change
Single person £1,332.00 £0.00 1,332.00-£
Lone parent (with housing support) £3,156.00 £2,304.00 852.00-£
Lone parent (no housing costs) £8,808.00 £4,764.00 4,044.00-£
Couple without children £1,332.00 £0.00 1,332.00-£
Couple with children (with housing support) £2,664.00 £2,304.00 360.00-£
Couple with children (no housing costs) £6,432.00 £4,764.00 1,668.00-£
Disabled people (with housing support) £2,304.00 £2,304.00 -£
Disabled people (no housing costs) £7,764.00 £4,764.00 3,000.00-£
Work allowances in Universal Credit have been cut
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You have to be in work to lose out
The loss from lower work allowances
depends upon your earnings
Income Loss
on Universal
Credit, below
NI threshold
Income Loss
for NI only
Income Loss at
basic tax rate
Income Loss
individual for
people no
longer on UC
Effective Tax Rate 65.0% 69.2% 76.2% 32.0%
Single person 865.80-£ 921.74-£ 1,014.98-£ 426.24-£
Lone parent (with housing support) 553.80-£ 589.58-£ 649.22-£ 272.64-£
Lone parent (no housing costs) 2,628.60-£ 2,798.45-£ 3,081.53-£ 1,294.08-£
Couple without children 865.80-£ 921.74-£ 1,014.98-£ 426.24-£
Couple with children (with housing support) 234.00-£ 249.12-£ 274.32-£ 115.20-£
Couple with children (no housing costs) 1,084.20-£ 1,154.26-£ 1,271.02-£ 533.76-£
Disabled people (with housing support) -£ -£ -£ -£
Disabled people (no housing costs) 1,950.00-£ 2,076.00-£ 2,286.00-£ 960.00-£
• The amount you stand to lose depends on your earnings, and your effective tax rate
• People on Universal Credit earning below the income tax and NI threshold pay back 65p in every £1 lost through
the work allowance
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Mitigation measures in 2020 won’t offset the losses
35%
36%
29%
Worse off
Better off
Same
This chart compares UC in 2020 against tax
credits today.
It takes into account:
• National Living Wage
• Higher personal tax allowance
36% of households in work today will be
better off under UC in 2020
29% of households in work today will stay the
same under UC in 2020
35% of household in work today would be
worse off under Universal Credit in 2020
This figure falls to 30.5% if we take into
account childcare for 3-4 year olds.
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52% of households working 16 hours or more will be
worse off under UC
15%
60%
23%
30%
23%
28%
24%
11%
57%
51% 50%
52%
0%
10%
20%
30%
40%
50%
60%
70%
Out of work 1-15 16-23 24-29 30-39 40+
Percentageofhouseholds
Weekly hours worked
Distribution of households per hours worked
Better off under UC in 2020 Worse off under UC in 2020
• People working in mini-jobs will be better off under Universal Credit
22. “…by not proceeding with the changes to the tax credit threshold and
taper announced at the Summer Budget 2015... …the OBRs
assessment is that the cap is not met in 2016-17, 2017-18 and 2018-
19”
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The Chancellor’s Welfare Spending Cap depends partly upon the
rollout of UC
By the 2020 GE more people in work will be on Universal Credit, and
their circumstances will change.
They will be worse off.
The Chancellor is on a new collision course with
backbenchers
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It isn’t all about work incentives:
Some rules of thumb for the out of work award...
• Winners and loser vary by both income level and household type. Every household type includes families that
will see a higher entitlement under Universal Credit and families that will see a lower entitlement under Universal
Credit.
• Some household types will see a change in their base level of entitlements under Universal Credit. This will cause
some households to be better off and others to be worse off:
• The simplification of under 25 rates under Universal Credit will mean some household types will have a higher
entitlement while others will have a lower entitlement:
• People under 25 without children are not eligible for Working Tax Credit under the current system. Under
Universal Credit they will be eligible for in-work support, improving pockets and prospects.
• Lone parents between 18 and 25 will no longer be entitled to the over-25 rate of personal allowance as
they do under the current system. This change will mean a loss of around £65 per month and is expected
to impact approximately 240,000 young single parent families.
• Couples where at least one partner is under 18 will have a higher entitlement under Universal Credit.
• Couples where both partners are over 18 but under 25 will have a lower entitlement under Universal
Credit.
• The simplification of disability entitlements
• Disabled children that are not entitled to the highest rate care component of Disability Living Allowance
(DLA) or are registered blind could lose approximately half of the disability element of Child Tax Credit, a
loss of around £128 per month.
• Universal Credit will abolish the Severe Disability (SDP) and Enhanced Disability (EDP) Premiums for
disabled adults in an effort to simplify the system. Those in the ESA Support Group (the Lower Capability
for Work-related Activity element of Universal Credit) will benefit and see their entitlement for this
element rise from £151 to £304 per month.
24. The impact of the benefit
cap
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31. The combined impact on
households is typically
changing, complex and
confusing
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32. How do you decide who
receives what support?
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Policy in Practice’s approach
Your SHBE data
Our Universal Benefit
Calculator
A detailed impact
assessment - who is
impacted and how?
1.Use local data and
insights to inform better
decision making
2. See the impact of
specific and cumulative
reforms at an aggregate
and household level
3. Inform targeted and
tailored local welfare
support programmes
34. Benefit Cap
Under-
occupying
LHA cap
Council Tax
Reduction
CTRS
Lower UC Higher UC
Better off in
Work
# of households affected by
multiple reforms
No impact 1 reform
2
reforms
AA1 0 0 7 20 9 16 32 8 21 7
AA4 1 0 59 38 21 25 55 10 44 25
AA11 1 19 45 99 68 61 143 47 113 47
AA16 0 0 0 0 0 1 1 1 0 0
AB1 0 16 25 74 30 46 99 36 70 34
AB2 2 39 89 224 37 123 246 109 189 96
AB3 0 31 41 140 38 88 134 78 128 55
AB4 0 75 166 341 106 190 456 148 327 163
AB5 3 129 73 336 136 180 432 150 318 155
AB6 14 266 630 1355 406 899 1456 834 1354 575
AB7 17 629 346 1839 780 1038 2235 822 1636 838
AB8 43 442 1083 2662 1140 1306 2786 912 2119 1346
AB9 51 968 979 3466 1481 1614 3103 1411 3085 1676
Who has been
impacted by reforms
to date?
What will be the
impact of
Universal Credit?
Who has been hit by
multiple reforms?
The depth of our analysis goes even
deeper, to household level
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Explain a complex picture to Cabinet
35. If you had these insights
too what would you be
able to do differently?
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36. 169 161 115 85 76 114 23 12 1
2,263
951 955
756
1,003
1,153
200
3 1
£0-20 £21-40 £41-60 £61-80 £81-100 £101-150 £151-200 £201-300 £301+
NumberofCases
Weekly Benefit Cap Amount
£26k £20k
Recommendation:
Take proactive steps
• Focus intensive
outreach and
support on those
most severely
impacted
Reduction of the Benefit Cap:
Weekly Benefit Cap Amount
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37. Over to Peter for a live case study
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Next steps
1. Get a sample impact assessment report for our Welfare Reform
Impact Analysis
2. Get a tailored demo and pricing for our Universal Benefit
Calculator software
3. Visit our website to download:
I. Benefit Cap White Paper
II. Customer case studies
III. Flyers
Deven was a member of the team at Centre for Social Justice who developed Universal Credit and, when the policy was adopted by government, he left there to set up Policy in Practice. He was keen to ensure that the policy intent was actually put into practice.
Since then, and together with the team he's built at Policy in Practice, he's facilitated conversations between leading local authorities and the Prime Minister's office to ensure frontline feedback about welfare reform policy has been heard.
In addition, Deven and the team have helped local organisations to understand the aggregate and cumulative impact of welfare reform changes on their customers so that they can accurately target support programmes.
And finally, to close the loop, the software that Policy in Practice has developed simplifies the conversations that frontline advisors can have with customers by clearly showing what benefits they can get under the current system and when they move to Universal Credit, comparing the two side-by-side using data visualisation.
Given the significant changes to tax credits announced in the Spending Review yesterday (which Deven was high profile in arguing for) the focus for welfare reform is now firmly back on Universal Credit. Deven would be able to bring the unique experiences he has of policy creation right through to policy delivery to your event.
Thank you.
Thank you.
Is this vs Tax Credits 2020? Complex – caries by household type and level of earnings.