Welfare Reform Act

After its first reading in the House of Commons on 16 February 2011, and after suffering many readings, defeats and amendments along the way, the Welfare Reform Bill received Royal Assent on 08 March 2012.

Iain Duncan Smith, Work and Pensions Secretary, called the new Act ‘an historic moment for the Coalition Government’ and ‘the biggest [welfare] reforms for 60 years’.  The Act provides for the following:

The Universal Credit (UC)

• The UC will start from new claimants in October 2013, with migration from the existing benefits system over the next four years
• UC is a single household payment which merges Income Support, income-based Job Seeker’s Allowance, income-related Employment and Support Allowance, Housing Benefit, Child Tax Credit and Working Tax Credit into one payment, controlled by DWP
• The DWP will calculate a household’s entitlement to the UC by reference to personal and earnings information that is provided to them by HMRC.  Entitlement will be tapered in a way that the Government hopes will provide an incentive for people to take employment rather than rely on benefits.  As income increases, so the payment of UC will decrease

Benefits Capping

• Caps the total benefit that can be claimed to £500 per week, per household
• Limits the payment of contributory Employment and Support Allowance (ESA) to 12 months

Social Sector Size Criteria

• Restricts housing benefit entitlements  for social housing tenants where the accommodation is deemed larger than the accommodation that they actually need
• Uprates Local Housing Allowance rates by CPI

Personal Independence Payments (PIP)

• These replace the current Disability Living Allowance (DLA)
• The PIP will be reviewed and subject to face-to-face assessment

Tougher Penalties

• A new penalty of £350, or 50% of the overpayment, whichever is higher, subject to a maximum of £2,000, introduced for benefit fraud cases from May 2012
• A civil penalty in the sum of £50 for negligent or incorrect claims resulting in an overpayment from October 2012
• Potential loss of benefit for up to three years for fraudulent claims that result in a criminal conviction, from April 2012

Comment

The DWP White Paper ‘Universal Credit; welfare that works’ in November 2010 told us how the UC would be calculated on the basis of personal and earnings information which is supplied to them by HMRC:

Q

How do HMRC get this information?

A

We will be providing it via our RTI submissions.

Q

When does UC start and RTI have to be live?

A

UC starts for new claimants from October 2013.  By October 2013, all 1.9 million PAYE schemes will be submitting in real time

UC and RTI are intrinsically linked – UC simply cannot work without the information feed from HMRC which RTI will provide.  If someone on the payroll is in receipt of this new benefit, it is vital to understand that the information in our payroll systems, and the information that is then declared to HMRC, will have a direct impact on the UC payment that they receive.

Further Information

• DWP  – Press Release 08 March 2012
• Legislation.gov.uk  – The Welfare Reform Act 2012