Universal credit

On 11 November 2010, the government published a White Paper on welfare reform; “Universal Credit: welfare that works”. It sets out plans to reform the welfare system by creating a new Universal Credit.

The main points are:

• The Universal Credit will bring all of the following benefits for working age people into a single benefit stream - Working Tax Credit, Child Tax Credit, Housing Benefit, Income Support, income-based Jobseeker’s Allowance and income-related Employment and Support Allowance;
• The Universal Credit will be administered centrally by the Department for Work and Pensions and will be accessed online by benefits claimants;
• The Universal Credit effectively removes the barriers into and out of work that deter many from taking employment for the fear of how it will affect their benefits; streamlining the process and allowing for an application to be updated automatically;
• There will be a maximum ceiling on the amount of Universal Credit paid of no more than £500 per week for a couple or lone parent household and £350 per week for a single person household. This ceiling will not apply to the following claimant groups - people receiving Disability Living Allowance, war widows and working families with children;
• Except for those with caring responsibilities, or who are clearly unfit for work, entitlement to the Universal Credit will be conditional on claimants taking all reasonable steps to move into employment. Failure to meet these conditions could result in benefit sanctions and financial penalties of up to three years;
• Jobcentre Plus advisors will have the freedom to agree both support and sanctions for jobseekers, including Mandatory Work Activity, whereby benefit recipients are placed in employment for up to four weeks to help develop “labour market disciplines”;
• Once established, it is also intended that the conditionality clauses within the scheme be used to encourage those in work to increase their earning/hours and move onto financial independence:
• As London boroughs will no longer have a responsibility for delivery of welfare support through Housing Benefit payments, transitional arrangements will need to be put in place to reduce the service accordingly.

The government will introduce legislation for the Universal Credit in January 2011.