On 10 December 2012 the Government took the latest step down the road to implementation of its welfare reforms when it laid before Parliament six sets of draft regulations (see http://www.dwp.gov.uk/policy/welfare-reform/legislation-and-key-documents/welfare-reform-act-2012/welfare-reform-regulations/) for supporting the introduction of the new working- age benefit, the Universal Credit, in accordance with the Welfare Reform Act 2012 (WRA).

The WRA received Royal Assent on 8 March 2012. The stated aims of the reforms enacted by it are to promote work and personal responsibility, and to make the benefit system fairer, more affordable and better able to tackle poverty, worklessness and welfare dependency. The principal instrument through which these aims are to be achieved is the Universal Credit (UC).

The legislative framework

Part 1 of WRA (not yet in force) sets out the framework for determining who is entitled to UC and how it is calculated. It also provides for the conditionality and sanctions regime under which claimants are to be subject to work-related requirements and may have their award reduced for failure to comply with those requirements. The fine detail of almost all the legislation will be set out in regulations.

The scope of UC

UC will replace Working Tax Credit, Child Tax Credit, Housing Benefit, Income Support (including Support for Mortgage Interest), income-based Jobseeker’s Allowance and incomerelated Employment and Support Allowance. It will not replace Disability Living Allowance (DLA) or Carer's Allowance. Part 4 of WRA (not yet in force) will introduce Personal Independence Payments which will eventually replace DLA altogether.  

Eligibility for UC

A claimant must meet both ‘the basic conditions’ and ‘the financial conditions’. The basic conditions (WRA, s4) are that the claimant:

  • is at least 18 and not yet at state pension qualifying age;
  • is in Great Britain;
  • is not in education; and
  • has accepted a ‘Claimant Commitment’ (CC). The CC will record all activities that claimants are required to undertake including, where appropriate, doing all that can reasonably be expected of them to find work or prepare for work. Refusal to accept their CC will disentitle claimants from UC.

Entitlement to UC will depend on both the claimants' capital and their income: UC will not be paid at all if either one is above a prescribed limit. Under the latest draft regulations the capital limit is set at £16,000 for both single and joint claimants: Universal Credit Regulations 2013, reg 18(1).  

The components of UC

An award of UC is calculated by reference to four components:  

a standard allowance;

an amount for responsibility for children or young persons;

an amount for housing;

an amount for other particular needs and circumstances: 

WRA, s1(3).

The under-occupancy deduction

This new and controversial measure (widely referred to as "the bedroom tax") means that housing benefit claimants in the social rented sector who are deemed to be underoccupying their homes, according to set size criteria, will lose part of their housing benefit from April 2013, and the deduction will be carried across to UC in due course. Under -occupation by one bedroom will result in a 14% cut, and by two or more in a 25% cut.

The benefit cap

An equally controversial measure, the cap will operate from April 2013 on the total amount of benefit which a single person or couple is entitled to. The cap will be set at average (median) net earnings for a working household – currently £500 per week for lone parents and couples with or without children, and £350 per week for single people with out children. A similar cap will be applied to UC claimants at equivalent monthly rates (£2167 and £1517 respectively).  

DPDPs

Preliminary research is already under way in the form of the Direct Payment Demonstration Projects, a 12-month research project running since June 2012 in six local authority areas across Great Britain. The DPDPs test how claimants cope with receiving their existing Housing Benefit as monthly payments made direct to their own bank account, and are designed to gauge how claimants of UC might manage when receiving payments in a similar form. The utility of the research is somewhat undermined, however, by the length of time it is taking the research team to publish its findings: the results of the baseline survey, carried out last summer, were only published last week; and the final report will not be published until the end of 2013, by which time the Government will have had at least six months in which to see for itself how claimants of UC cope in the real world.

How Universal Credit will be introduced

The Government intends to introduce UC in stages:  

Pathfinder Phase (April 2013 to October 2013). UC will be introduced from 29 April 2013 for a limited range of claimants who are resident in specific postcodes and who fall within the “Pathfinder Group”. Broadly speaking claimants are in the Group if they are:

  • British citizens habitually resident in the UK;
  • aged between 18 years and 60 years 6 months;
  • neither owner-occupiers nor in temporary accommodation;
  • single;
  • available for work or in work with low earnings;
  • not in receipt of existing benefits;
  • with capital of no more than £6,000;
  • without children.  

Phase 1 (October 2013 to April 2014). All new claims to current benefits and credits will be phased out, with new claims to Housing Benefit and Tax Credits the last to end in April 2014. Existing claimants who undergo a change in circumstances, such as the birth of a child, will migrate across to UC during this phase.

Phase 2 (April 2014 to end 2015). Existing claimants whose circumstances have not changed will begin migrating across. The intention is that households whose work behaviour is most likely to benefit from UC will be prioritised. Most of the migrants are expected to be those in part-time work and those who are economically inactive.

Phase 3 (end 2015 to end 2017). All remaining households will migrate to UC. Migration will take place geographically, so that each local authority can withdraw from Housing Benefit administration at a given time rather than be left managing parallel systems until the end of 2017.