This year will see the introduction of some of the most controversial changes to welfare benefits including restricting Child Tax Credit and Universal Credit payments to two children and a reduction in financial support for claimants assigned to the Work-Related Activity Group in ESA. This year will also see an increase in free childcare as the government tries to encourage parents to return to work.
A simplified system for bereavement payments will be introduced from April 2017 focusing support on the first 12 months following a bereavement. Bereavement payments are currently taken into account when calculating means-tested benefits, with both Bereavement Allowance and Widowed Parent’s Allowance included in the Benefit Cap. This will no longer apply to Universal Credit or the Benefit Cap.
Child Tax Credit changes
Child Tax Credit will be restricted to two children, therefore further children born on or after 6 April 2017 will not be eligible for support. The child element will still be paid for any child born before 6 April 2017. There will be some exceptions to this rule where the child/children are from multiple births or as a result of rape or domestic coercion and control. The family element will also be removed from claims where the eldest child is born on or after 6 April 2017.
Employment and Support Allowance work-related activity group
One of the most controversial changes is the removal of the Work-related Activity component for new claims from April 2017. This is effectively a cut in benefit of £29.05 per week (2016/17 benefit rates). Claimants allocated to the Support Group will not be affected.
Universal Credit changes
Universal Credit will change to mirror the changes to both Child Tax Credit and Employment & Support Allowance. Families that already have more than two children born before 6 April 2017 will be redirected to Tax Credits until November 2018.
The higher rate ‘first child premium’ will also be removed if the eldest child is born on or after 6 April 2017 meaning the claimant will receive the same amount for each child.
In order to slightly address the issues brought about by the reduction in work allowances introduced in 2016, there will be a reduction in the taper rate to 63%. In essence, this means for every £1 earned over any eligible work allowance, Universal Credit will be reduced by 63 pence instead of 65 pence.
The age at which parents, including lone parents, will be expected look for work will also change. Claimants will have work focused interviews when their youngest child turns 1, start work preparation when their youngest child turns two and be expected to look for work when their youngest child turns three.
Universal Credit conditionality will change for 18-21 year olds, as they will undergo an intensive period of support at the start of their claim. If they are not in employment after six months, they will have to apply for an apprenticeship, traineeship, gain work place skills or go on a work placement.
With some exceptions, unemployed 18-21 year olds will no longer be automatically entitled to the housing element of Universal Credit.
Free childcare for all three and four year olds will be increased from 15 to 30 hours per week for working parents earning the weekly equivalent of 16 hours at the current national minimum/living wage rate. Both parents in a couple will be expected to earn this amount and the maximum earnings limit will be £100,000 per year. This is an average; therefore, it will be possible to earn this amount whilst working less than 16 hours.
Please note that some changes may still be subject to amendment.