Welfare Reform Act 2012

The Welfare Reform Act introduces a new welfare benefit called Universal Credit which is to replace six of the main means-tested benefits and tax credits:[6][7]

• income-based Jobseeker's Allowance (from the Jobseekers Act 1995)
• income-related Employment and Support Allowance (Part 1 of the Welfare Reform Act 2007)
• Income Support under section 124 of the Social Security Contributions and Benefits Act 1992
• Housing Benefit (section 130 of the 1992 Act)
• Council Tax Benefit (section 131 of the 1992 Act)
• Child Tax Credit and Working Tax Credit (Tax Credits Act 2002)

The benefit is to operate as a single payment to claimants and will be available to working people on a low income and the unemployed. Its stated aim is to improve the incentive to work by making it easier for people who have temporary, low-paid work to move in and out of employment without losing benefits, and to simplify the benefits system by bringing together several benefits into a single payment. Through this scheme, it is envisaged that unemployed people will be encouraged to take on more work for any period of time that is available. The system has some similarities to a negative income tax but it is not the same as a basic income guarantee as payments are conditional on availability and means-tested.

Universal Credit was launched in selected areas of North-West England with a UK-wide rollout in 2013.

As of April 2013, Council Tax Benefit is replaced with a new system of Council Tax Reduction schemes.[8] Prior to this change, councils (local authorities) provided Council Tax Benefit to certain individuals who were otherwise unable to pay meet the cost of Council Tax, due to unemployment or certain other circumstances, using nationally set rules; the funding for this was provided by central government.

Under the reformed system, councils are required to design their own local Council Tax Reduction schemes, under which council tax bills will be reduced for certain categories of people, instead of paying out a virtual benefit to cover the cost of a standard bill. Schemes must be based on a claimant's income, or their status as the only adult in the property, and old-age pensioners must continue to receive at least the same reduction to their net council tax bill as they would have done under the Council Tax Benefit system. Frequently, councils have marketed these schemes as council tax support, and continue to portray them as a payment rather than as a reduction in tax owed.

The cost of providing Council Tax Benefit was covered by a central government grant to councils, and on the introduction of the replacement tax reduction schemes, central government continued to supply a grant contributing towards the cost of the schemes. However, the grant was reduced by 10%; requiring councils to limit reductions under the scheme, make cuts elsewhere, or increase council tax.[9] Although many councils have opted for schemes that keep reductions to the minimum allowed under law (87%) for people on low income, others have implemented schemes that continue to provide 100% discounts, while others are means tested in a more granular manner.[10]

Existing exemptions for council tax continue to apply.

Under the Act, Housing Benefit criteria now take into consideration the number of rooms and number of people occupying a property and restrict payments to allow for one bedroom per person or per couple; all children under 10 years of age are expected to share a room; children under 16 of the same gender expected to share. This had already been the case, for over a decade, for people living in private sector tenancies (and hence is a key part of calculating Local Housing Allowance), but is new to tenants of social housing.[11] If it is deemed that there are too many rooms in a rented dwelling for the number of occupants, an "under-occupancy penalty" is applied to the housing benefit payment, reducing it by 14% for one extra room, and by 25% for two or more extra bedrooms.

Since their landlord continues to charge the same rent, affected tenants must make up the shortfall. Housing benefit was historically paid directly to landlords of social housing, so that the tenant was essentially uninvolved in the rent payment; having to make up a shortfall, under the new arrangements, has therefore often been perceived as a tax. This perception has been used for propagandistic purposes by opponents of the government, who have referred to the under-occupancy penalty as the "Bedroom Tax"; conversely (and in response[12]) the government prefers to call the previous arrangements a "spare room subsidy".[13] A number of exemptions apply to the rule:; carers of disabled tenants who need to stay overnight are permitted to have one extra bedroom.

The care system, historically operated by local councils, has been augmented to include discretionary housing payments to cover the cost of the under-occupancy penalty (and the equivalent effect in private sector tenancies), where a need for an extra bedroom arises from disability, or for other reasons at the discretion of the council.

Housing Benefit is to be phased out, and equivalent housing payments under similar rules will form a component of Universal Credit payments, and Pension Credit payments.

The Act now limits the total amount of money available to social security claimants. Total benefits paid to a single person may not now exceed £350 per week; the maximum available to families (single parents and couples with children) is £500 per week. The benefits limited by this new cap include:[14]

• Housing benefit
• Income Support (IS), Jobseeker's allowance (JSA) and Employment and Support Allowance (ESA)
• Child benefit and Child tax credits
• Guardian's allowance
• Carer's allowance
• DWP maternity benefits and widows benefits
• Severe Disablement Allowance.

Council Tax support and free school meals do not count towards the benefit cap. Families in receipt of working tax credits are exempt from the cap, as are pensioners and claimants of certain other disability benefits (including Personal Independence Payment and Attendance Allowance).

The benefit cap will not currently apply in Northern Ireland (as implementation of the Act continues to be subject to partisan negotiations within the Stormont Assembly, which impinge on the viability of that assembly). It was introduced gradually into the rest of the UK; at first, from 15 April 2013 it only applied in the London boroughs of Bromley, Croydon, Enfield and Haringey, but reached the whole of Great Britain by the end of September 2013.[14]

A study published in November 2014 by New Policy Institute and Trust for London found there to be 46,000 households affected by the introduction of the overall benefit cap in April 2013, of which 46% have been in London.[15] When the cap was brought in, London had a disproportionately high amount of social housing, while also having disproportionately high housing prices.

Benefits available to people with disabilities are changed by the Act. The Personal Independence Payment (PIP) is to replace Disability Living Allowance gradually, first with an initial pilot in selected areas of north west and north east England which began in April 2013, with a full roll-out across Great Britain by October 2015. Claimants are required to undergo assessments to prove their eligibility for the benefit. The tests must be passed three months prior to claiming and claimants must be able to satisfy the requirements of the test for a period of at least nine months after their claim. Payments are varied according to the severity of disability as decided by the tests and relate to ability to carry out daily living activities and level mobility. Claimants are also required to undergo periodic re-assessments to ensure ongoing eligibility for the benefit; depending on the type of disability, a person may be given a short award of up to two years or longer PIP award which would last for up to five or ten years. PIP is not available to children under sixteen and PIP claimants must apply before they turn sixty five years old as new PIP claims cannot be made after that age. Responsibility for the tests has been outsourced by the DWP to two private companies, Atos Healthcare in the north of England, London, southern England and Scotland, and Capita Business Services Ltd in central England, Wales and Northern Ireland.[16][17]

In Scotland, there were two major demonstrations on 30 March 2013 against the changes to welfare:

• Around 3,000 demonstrators took to the streets of Glasgow[36]
• Around 1,000 demonstrators assembled outside of the Scottish Parliament in Edinburgh[37]

Participants in the protests include the Scottish Socialist Party and the Radical Independence Campaign. There were Yes Scotland and Scottish Green Party banners present at both events. Some parliamentarians from the Scottish National Party and the Scottish Labour Party issued statements of support.[37]

On Monday, 22 July 2013, a man in Runcorn benefits advice office cut his own throat in protest of the bedroom tax. The injuries were not fatal.[38]