Welfare Reform bill - Key policy proposals worth knowing about

Some of the key policy proposals are listed below. The full white paper can be accessed here

·         radically simplify the system to make work pay and combat worklessness and poverty

·         The Government is committed to ensuring that no-one loses as a direct result of these reforms. We have ensured that no-one will experience a reduction in the benefit they receive as a result of the introduction of Universal Credit

·         If the amount of Universal Credit a person is entitled to is less than the amount they were getting under the old system, an additional amount will be paid to ensure that they will be no worse off in cash terms.

·         people will no longer have to take a risk in moving from one system to another. For those in employment, Universal Credit will be calculated and delivered electronically, automatically adjusting credit payments according to monthly income reported through an upgraded version of the Pay As You Earn tax system (on which HM Revenue & Customs will be consulting shortly). The system will be simpler and will respond more quickly to changes in earnings so that people will not face the same complexities as they do now, particularly at the end of a tax year. As a result people will be much clearer about their entitlements and the beneficial effects of increasing their earnings by taking on more hours or doing some overtime.

·         People will have one system to contact rather than having to repeat information to three separate bodies, so strengthening the connection between financial and labour market support.

·         By allowing recipients to benefit financially from doing small amounts of irregular work Universal Credit will reduce the incentive for people to commit fraud by failing to declare work.

·         capping household benefit payments so that families do not receive more in welfare than median after-tax earnings for working households

·         Single taper would apply to earnings net of tax and National Insurance meaning that the highest Marginal Deduction Rate for low-earning workers would be reduced from around 96 per cent to 65 per cent for those earning below the personal tax threshold and to around 76 per cent for basic rate taxpayers.

·         The aim would be to allocate some of the current support to those working fewer than 16 hours, so that all types of work are rewarded.

·         it will now be financially rewarding for a lone parent to work 15 hours per week, or 17 hours per week (both of which would not have been financially rewarded under the existing system which only recognised 16 hours per week); and should more hours be available, the extra earnings will no longer face a Marginal Deduction Rate of 96 per cent. Under the current system a lone parent working 16 hours at the National Minimum Wage would only increase their take home pay by £5 a week if they increased their hours to 25 hours. Under Universal Credit the same lone parent would increase their take home pay by £17.

·         we are considering an option of allowing those pensioners who choose to extend their working lives to claim Universal Credit, rather than Pension Credit, so that they can take advantage of the tailored in-work arrangements. We would welcome views on this approach.

·         Financial support will remain unconditional for people who we do not expect to be able to work or prepare for work. None of the changes set out in this White Paper change that basic principle.

·         Disability Living Allowance - We intend to retain its role, outside the Universal Credit, as a non-means-tested cash benefit. It will continue to be paid to people in and out of work. We plan to consult shortly on our proposals, which will complement the support provided to disabled people by Universal Credit.