Universal credit: Policy changes
Although Universal Credit full (digital) service is not expected to be fully rolled-out for some time, a series of policy changes have been announced. In this section we highlight the principles of those changes, although the legislation (and therefore the fine detail) may not yet have been finalised.
- April 2018
- Northern Ireland
In order to address some of the problems caused by fluctuating earnings and the potential for self-employed (and employed) people to ‘manipulate’ their income to maximise UC entitlement, DWP introduced new legislation in 2014 (The Universal Credit (Surpluses and Self-employed Losses) (Digital Service) Amendment Regulations 2015). These surplus earnings rules were due to come into force in 2016 for those in full service UC areas only, and were subsequently postponed until April 2017, however on 20 July it was announced that these rules would not come into force before April 2018. We consider these some of the most complicated regulations we have seen and we are concerned how DWP will implement them and most importantly how claimants will understand what is happening.
The basic premise of the legislation is that if someone has a UC award terminated (for example because their income goes up due to a new job) a calculation will be done to work out their ‘surplus earnings’ for that month and the following five months. Surplus earnings are essentially the amount of income they have above the point at which their UC would reduce to nil plus a £300 de minimis. If the person then needs to reclaim UC within that period, say because they lose their job after four months, the surplus earnings for those four months will be applied to their new claim as income. This means they will receive either a reduced UC award or a Nil award and that will continue until the surplus earnings are used up or until 6 months has gone by since their old claim ended. These surplus earnings will apply to both employed and self-employed claimants.
The Social Security Advisory Committee published a consultation on the regulations before they were laid. In that consultation, DWP provided examples that showed how the policy would work for both employed and self-employed. However, none of the examples compared an employed person and a self-employed person. That would have shown that in some situations, a self-employed person earning exactly the same amount as their employed counterpart over a year could end up with far less UC over that period. This is due to how the surplus earnings policy interacts with the MIF.
For both the employed and self-employed, the policy is likely to be difficult to understand and people will need adequate warning that they will need to ‘save’ any excess wages for the first 6 months they are off UC following either a rise in income or a change in circumstances that results in less UC entitlement.
For the self-employed, DWP have also introduced recognition for losses. This means a loss from the previous 11 months can be carried forward and used in an assessment period. However, the loss can only reduce income down to the level of the minimum income floor and it cannot take account of any pension contributions. This is a small improvement on the existing rules but it does not compensate for the harsh effects of the MIF nor the lack of proper recognition of pension contributions for the self-employed.
Currently, claimants of universal credit and housing benefit can receive help with their mortgage interest as part of their benefit. From April 2018, support for mortgage interest will be paid as a loan, to be repaid upon sale of the home.
UC remains reserved to the UK Government, however under the Scotland Act 2016 the Scottish Government have some powers to amend payment arrangements under UC.
In January 2017, a consultation was launched by the Scottish Government to seek views on draft Regulations which cover two payment flexibilities:
- Having the option of being paid UC twice a month rather than monthly (although it will remain assessed on a monthly basis)
- Having the option of any UC housing element being paid direct to landlords
Two other flexibilities are also being considered – the power to vary the amount of housing costs paid to people in receipt of UC and the power to split payments between members of a household. There will be further announcements by the Scottish Government about these flexibilities. All other existing rules in UC will remain the same for Scottish claimants.
In Feb 2017, the Scottish Parliament published a research briefing on the introduction of UC and its impact in Scotland.
The briefing looks at who can claim UC and some of the difficulties with its introduction. It also includes a useful glossary of common UC terminology. It also contains links to useful research on the impacts of UC on claimants so far.
There is a section of the report which looks at the challenges that UC poses for the Scottish Government and three areas are identified:
- UC flexibilities – the Scottish Government have the power to change certain aspects of UC. They are currently consulting on the option for claimants to be paid twice monthly (instead of monthly) and the option for tenants to have payments of housing costs made direct to their landlord
- The need for support with UC – the report identifies that evidence is emerging of a significant need for support to manage claims for UC. As UC full service is rolled out across Scotland, the numbers of claimants will increase dramatically and will increasingly include more vulnerable groups. It concludes that effective agreements will be needed to ensure that vulnerable groups are able to manage their UC claims in the longer term and that in some areas arrangements may not be sufficient to meet demand.
- Wait for the first payment of UC – the first payment of UC may not be made until six weeks after the date of claim. Advance payments from DWP are effectively a loan of future UC entitlement, which is recovered from future UC payments. The report cites evidence given to the Scottish Parliament Social Security Committee from various organisations about the impact of this on claimants.
The report also looks at two related areas where UC will have an impact – Council Tax Reduction and passported benefits.
In April 2017, the Secretary of State for Work and Pensions wrote to the Scottish Social Security Committee setting out further information on the transfer of social security powers to Scotland. The letter is available on the Scottish Parliament website.
The Scottish Government responded to the January 2017 consultation on UC flexibilities in Scotland and published regulations allowing for twice monthly payments of UC and managed payments to social and private sector landlords with effect from 4 October 2017.
On 20 June 2017, the Social Security (Scotland) Bill was introduced in the Scottish Parliament – The Bill sets out an over-arching legislative framework for the administration of social security in Scotland. See our legislation section for more details.
UC started to roll-out in Northern Ireland on 27 September 2017. During discussions on the implementation of UC in Northern Ireland, the then Minister for Social Development secured payment flexibilities under UC for NI claimants. It was agreed that:
- Twice monthly payments will be available to all households as the default, with monthly payments available on request
- Split payments (paid into separate bank accounts) will be possible between parties in a household. This will be possible on the basis of the main carer and children to be determined by the Department. It will also be possible for a split payment for a couple with no children.
- Managed payment of the housing element of UC direct to the landlord will be available to all, with a direct payment to the household available on request to those who meet the criteria
In January 2017 a Department for Communities screening document was published setting out the arrangements for flexible payments.
In addition, the Northern Ireland Executive has agreed support for Universal Credit and Working Tax Credit claimants who are on a low income. These supplementary payments will be available to help with the additional costs of employment and are due to be introduced in 2018.
Updated 26 September 2017