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BENEFIT CHANGES – WILL THEY TIP MILLIONS INTO POVERTY?

Published on:April 2, 2013Author:The Debt Advisor

1 April marked the start of changes to Housing Benefit and reduced council tax benefits for millions.

The government argue that the Housing Benefit cutbacks, labelled the “bedroom tax” by Labour, are vital to make better use of social housing stock . They claim there are 2 million households on waiting lists and 250,000 families living in overcrowded  conditions. The changes will see families (not pensioners) losing 14% of benefit for 1 empty room and 25% of their benefits 2 empty rooms. The rules provide 1 room per person or for a couple, same sex children under 16 expected to share and under 10’s sharing regardless of gender.

Exceptions include those needing overnight care, families fostering, families with children serving in the forces (who still live at home) and disabled children who cannot share.

6 April sees benefits increasing by 1% which is less than 50% of inflation effecting around 4.1M people.

8 April marks the start of the Disability Living Allowance “DLA” being replaced by the Personal Insolvency Payment “PIP”. The government argues that the numbers claiming DLA have materially increased from 2.5M to 3.2M in the past decade. The basis of payout will now be based on how the disability effects a person rather than based on the actual disability.

15 April marks the start of a cap on overall benefits that individuals and families can earn in England, Scotland andWales. For single adults with no children the cap is £350 per week and for couples or single parents (no matter how many children) the cap will be £500 per week. This is to be rolled out initially in 4 London boroughs with roll outs in different boroughs in July and the remainder in September 2013.

28 April sees the introduction of Universal Credit which will be rolled out from 2013 to 2017. This will see 3.1 million people getting additional money and 2.8 million loosing out on certain benefits. The Universal Credit will replace a number of benefits including income support, income based job seekers allowance, Income related Employment Support Allowance, Housing Benefit, Child Tax Credit and Working Tax Credit.

The changes have many critics who argue that the cutbacks will push many of the poorest families over the edge. Changes to the DLA head the list with strident criticism from Disability Groups who condemn the plans as a money-saving exercise arguing that DLA is one of the most effectively targeted benefits with an estimated fraud rate of just 0.5%.

Bev Budsworth from The Debt Advisor recently commented on BBC Wales that it is going to be essential that those effected try to get to grips with the changes as soon as possible to understand the how this will effect their budget.  Identifying the potential shortfall in your budget as a result of the changes is essential. Advice agencies need to be ready to offer help and advice on these changes and how individuals can try to plug the gap.

Bev Budsworth added “maximising income is the greatest challenge in the current environment with many businesses not looking to recruit until the economy shows real signs of growth”.

The government has plans to help people get into employment or set up self employed businesses. There will be funding for local work clubs, enterprise clubs for budding entrepreneurs who can also access allowances of £1,274 plus low interest loans of £1,000.

Bev also expressed the view that given the lack of demand in the economy, this will make it very challenging for many of these self employed entrepreneurs to make a living wage.

Time will tell as to whether the Tory/Lib Dem government have got it right. There is no doubt that local authorities and advisory agencies will need to react quickly to help individuals and families in need are helped.