Policy in Practice responds to Budget 2018

“Switching to Universal Credit is a long overdue and necessary reform. This is not just a welfare measure it is a major structural reform to our economy that will help to drive employment for years ahead.”

Philip Hammond, Chancellor of the Exchequer, Budget 2018

Policy in Practice welcomes the investment into work allowances announced in Budget 2018 which will benefit 2.4 million families with children, who are in work, by around £630 a year. We also welcome the investment to help people transition onto Universal Credit. However, there was undoubtedly a missed opportunity to end the benefits freeze a year early, which would cost £1.9bn, instead of raising the personal tax allowance at a cost of £2.8bn.

We called for these measures ahead of the budget on the Victoria Derbyshire show and Sky News, arguing that the government can’t do welfare reform on the cheap.

Our LIFT Dashboard has been updated to take into account the changes announced in the budget and we will be giving clients a detailed overview of what is coming down the track and time to prepare. Contact hello@policyinpractice.co.uk to take a look.

Post-budget, Policy in Practice’s recommendations will focus on the administration of Universal Credit with the aim of making Universal Credit feel supportive and accessible, and help people on their journey towards independence.

I felt panicked when I was told I had to make a claim for Universal Credit, frontline advisors won’t have had the necessary training to roll out Universal Credit effectively.

The full budget statement is available here and you can download the red book here. In the meantime, a summary of the changes are below. The summary includes links to our research on amendments to Universal Credit, informed by frontline advisors using our support tools, which have been implemented by the Government. Sign up to our newsletter for a detailed breakdown of winners and losers following the budget, and to receive the changes in postcard format.

Universal Credit

• The Work Allowance will increase by £1,000 from April 2019 for families with children, and those living with a disability or health condition. This means that 2.4 million households will keep an extra £630 of income each year, worth £1.7bn by 2023/24 once Universal Credit is fully rolled out.
  • Analysis by Policy in Practice finds that the work allowance increase will affects 1.9m households with children and 0.6m households who have limited capability for work.
• JSA, ESA & IS will run on for two weeks, effective from July 2020, benefiting around 1.1 million claimants, worth £1bn in total.
  • 1.1 million claimants represents approximately 31% of the current number of claimants receiving these benefits, meaning that 2.4m claimants will miss out due to their delayed introduction.
• The maximum deduction for repayments will fall from 40% to 30% of the standard allowance from October 2019, and from October 2021 advances will be recovered over 16 months as opposed to 12.
• Managed migration will begin in July 2019 but the end date has been delayed until December 2023. 
• All self-employed people migrating to Universal Credit will have a grace period of twelve-months before the minimum income floor applies, and the surplus earnings policy in Universal Credit will continue to affect large earnings spikes (above £2,500) until April 2020, when it will revert to affecting earnings spikes of £300

Housing Benefit

• The transfer of rent support from Housing Benefit to Pension Credit will be delayed by 3 years, to align with the full implementation of Universal Credit.
• Funding for supported housing will be retained within the welfare system, rather than moving to a local funding model.

Minimum Wage

• The government will increase the National Living Wage (NLW) by 4.9% from £7.83 to £8.21 from April 2019.
  • 21 to 24 year olds by 4.3% from £7.38 to £7.70
  • 18 to 20 year olds by 4.2% from £5.90 to £6.15
  • 16 to 17 year olds by 3.6% from £4.20 to £4.35
  • apprentices by 5.4% from £3.70 to £3.90 per hour

Tax allowances

• The personal allowance will increase to £12,500
• The higher rate threshold to £50,000 from April 2019

Both measures are being introduced one year earlier than planned, at a cost of £2.8bn. Thresholds will be unchanged in 2020/21 and then rise by CPI.

Affordable credit

• In August 2018, the government announced that a new independent body would be established to promote financial inclusion. It will be responsible for deploying an initial £55 million of funding from dormant bank accounts, primarily to address the problem of access to affordable credit.
• £2 million to launch a challenge fund to promote innovative technological solutions to support social and community lenders, and legislation to allow Regulated Social Landlords (RSLs) to refer their tenants to sources of affordable credit.
• 60 day breathing space for people in debt, meaning that people will have protection from creditor action to make plans to pay back their debts in a sustainable way.