The CREATE Consortium has campaigned for a number of years about the “benefit trap” and the need to tackle the situation where people are worse off working, then staying on benefit. We have welcome many of the changes that have been announced by the government especially their commitment to simplify and modernise the system and “make work pay”. Yesterday the government published its White Paper setting out its proposal to reform the benefit system – “Universal Credit: Welfare that Works“.
Making Work Pay
At the heart of our calls for change, has been the need for new earning disregards/allowances for people on benefits- allowing people to keep more of their earnings and benefits – making work pay and families better off . In the White Paper we are given some guidance on the new disregards but the actual figures will not be set for some time. Unfortunately, the paper does state that they do not expect to include a disregard for a single person without children – which seems a real opportunity missed. The figures we are given are;
- couples: £3,000 plus £2,700 per household for a child (regardless of number of children)
- lone parents: £5,000 plus £2,700 per household for a child
- disabled people: £7,000 per household if a recipient or either partner in a couple is disabled
However, working out exactly how much better off someone will be when they start work is not as simple as looking as their potential earning disregards. The amount that will be disregard will be reduced to take into account the amount that people receive in benefit to pay their rent or mortgage interest. The White Paper gives the following example:
A lone parent with three children has a rent of £80 a week
The maximum earning disregard is £7,700. However, the help she receives with her housing costs is £6,240. So she will not be entitled to receive the full disregard of £7,700. To make sure that work still pays, her disregard is not reduced to take into account the full cost of her housing ( usually would be reduced by 1.5 times the cost of housing support), she will be given a £2,600 disregard (£50 a week). Any earnings over this will be subject to the new, more generous earning taper – she will also keep 35p for every £1 earned
Under the current system on Income Support the earning disregard for a lone parent is £20 a week. Any earnings over this are deducted £1 for £1.
The new earning disregards and earning tapers should ensure that people are no longer financial penalised for taking up work and are actually better off.
When Iain Duncan Smith launched the White Paper yesterday he said that Universal Credit was an important first step. At a time when nationally there are 5 job seekers for every 1 vacancy, the next steps must be to make sure that people without up to date work experience or qualifications can actually get a job.
We are already working hard on the next steps – making sure that the right training and mini-jobs are in place to enable people to actually take advantage of these new earning disregards. The Community Allowance would create part-time jobs in local communities for unemployed people, so that they can start earning and gain the experience they need. It would be a major boost for local communities who directly benefit from the work that is done. Today I was talking to Seetec ( a Welfare to Work provider) about the Community Allowance approach and how we might be to work together to make sure that The Work Programme will actually support people to work – utilising the new earning disregards and tapers, to finally let people work.
I look forward to hearing your comments
Best wishes Louise