Benefits Britain: What should a right-minded member of society think?

The Work and Pensions Secretary, Iain Duncan Smith, wants to break the nation's dependency culture and to encourage the long-term unemployed back into the jobs market. But is this just targeting the less well off to cut the bill to the taxpayer or does he have a point?

Nearly a quarter of a million children will see their family lose money under the new benefits cap, with parents forced to cut back on everyday costs or move house, the Government has admitted for the first time. A £26,000 cap on housing benefit and other allowances, to be introduced next year, will affect 220,000 children in 67,000 households across Britain, with the average family losing as much as £83 a week.

The measure is the coalition's latest attempt to control Britain's benefits bill. By the end of March, it will break the £200bn barrier for the first time: double the health budget and four times the amount spent on education or defence.

In the Lords this week, the Government will try to seal the deal on its Welfare Reform Bill, radically changing the way state support is paid to the jobless, disabled and children. From time-limiting support for those whose ability to work is hampered by illness to capping benefits to the average income of working households, the reforms are ambitious, wide-ranging and controversial.

While, on average, families affected by the benefits cap will lose £83 a week, some 17 per cent will lose more than £150.

In The Independent on Sunday today Iain Duncan Smith, the Work and Pensions Secretary, argues the reforms are "about restoring fairness to the benefit claimant through making work pay and fairness to the taxpayer that their money isn't wasted on trapping people on benefits". He says three-quarters of us agree with his changes – but does that make them right?

We investigate the key issues at the heart of the Government's welfare reform agenda – and speak to the people who will be affected.

Benefit cap and bedroom tax

 

What is the problem?

After state pensions and tax credits, housing benefit constitutes the largest proportion of welfare spending: in 2010/11 it was £21.61bn, with 4.9 million claimants.

Some 670,000 households in the social rented sector in England "under-occupy" their accommodation by two bedrooms or more, while some 1.8 million families are currently on the housing waiting list in England.

What is the proposed solution?

A benefits cap of £26,000 (or £500 a week) on all out-of-work benefits, including housing benefit, jobseeker's allowance, child tax credit and child benefit, will be introduced on households across Britain from 2013. The cap will eventually be administered as part of the new "universal credit".

Separately, an "under-occupancy penalty" (also known as the "bedroom tax") will be imposed on council and housing association tenants living in homes deemed bigger than are needed.

What is the impact?

The Government says 67,000 households will get less money, saving £275m in 2013-14 and £305m in 2014-15.

Inside Housing, has shown how an unemployed couple with five children could easily spend benefits of £500 a week: £102.75 – couple rate for JSA; £24.59 – council tax benefit (Band C); £231.63 child tax credit; £73.90 child benefit. This would leave £67.13 for housing benefit – barely covering rent for a one-bedroom flat in London.

Under the bedroom tax, families would lose around £11 a week if they had one room more than required. Those with two or more extra would lose £20 a week. Tenants would lose an average of £670 a year in HB.

Fairness rating (out of 5): 4

Living with disability

What is the problem?

The number of people claiming disability living allowance has almost trebled from 1.1 million when it was introduced in 1992 to 3.2 million today. The Government estimates that by 2015 it will have topped 3.5 million people. Around 130,000 people receiving DLA have never had their claim re-examined. Some 70 per cent of people are on indefinite awards, even if their condition has improved, while 24 per cent of working-age DLA claimants have not had their claim looked at or changed in 10 years. Ministers claim that £600m of the £12.6bn annual bill is lost through overpayments each year, though more is saved through underpayments elsewhere.

What is the proposed solution?

Disability living allowance replaced by personal independence payments to those aged between 16 and 64, which will still be a non-means-tested, non-taxable cash payment to people in and out of work. It will still have two components – mobility and daily living. Most claims will be for a fixed term, with new assessments being made, mostly face-to-face with an independent health expert. A proposal to withdraw the mobility component from people in residential care has been dropped.

What is the impact?

Campaigners fear that 500,000 people will lose out. The money is paid to help with the additional living costs of being disabled – for example, hiring someone to carry out DIY or running a mobility scooter. Losing that money might mean they are unable to travel to work, or take part in community life.

Fairness rating (out of 5): 3

Sicknote culture

What is the problem?

Employment support allowance, for many, is a disincentive to work. In the first 13 weeks, claimants receive up to £67.50 (£53.45 for under-25s). From the 14th week, claimants are split between the Support Group, where they receive up to £99.85 a week and are not expected to work, and the Work-Related Activity Group, where they are expected to take part in work-focused interviews and receive up to £94.25 a week.

What is the proposed solution?

Limiting payments to the Work-Related Activity Group to 12 months. Around 60 per cent of ESA claimants stop claiming within a year.

What is the impact?

Around 700,000 will be affected, with two-fifths receiving nothing.

Fairness rating (out of 5): 2

Single parents

What is the problem?

Until 2008, single parents with a child under 16 could claim income support, which does not require a person to look for work. In November 2008, the age threshold for the youngest child was reduced to 12, and in October 2010 the Government reduced it again to seven. Parents with children over that age must instead claim jobseeker's allowance, or, if they have a disability, employment and support allowance.

What is the proposed solution?

To drop the age threshold for the youngest child to five, to encourage more single parents to look for work. Parents would have to claim JSA and actively seek employment, or claim ESA and show they had a health condition.

What is the impact?

Forcing single parents to find work at an earlier age will mean they have to find affordable childcare – which will be even more difficult under the Government's cuts to tax credits. The Government estimates that 15,000 single parents will be helped into employment, which they claim in turn will reduce child poverty, but it is thought that a total of 75,000 people will be affected by the change. It should save £250m.

Fairness rating (out of 5): 3

Universal credit

What is the problem?

The Government complains that the present system of more than 50 in-work and out-of-work benefits is too complicated and deters people from looking for work.

What is the proposed solution?

To combine the six major means-tested benefits, including tax credits, into a single universal payment. The Government claims the new benefit "will make work worthwhile at any number of hours, rather than clumping support around the 16- and 30-hour points". In nearly 1.1 million "workless" households, working just 10 hours a week would cut 70 per cent from an individual's benefits entitlement.

What is the impact?

Some 1.7 million households will have less money than under the existing system – and claimants will not see their entitlement uprated in line with inflation in future years. Women's groups have pointed out that, in many households, a single benefit would inevitably be paid directly to the man, leaving the woman dependent on her partner for her finances. It will actually cost £2bn (£4bn extra from entitlement changes and increased take-up, minus £2bn in reduced fraud, error and overpayments, etc.)

Fairness rating (out of 5): 3

CASE STUDIES...

Helen Searle

Helen Searle, 37, from Buckinghamshire, has cerebral palsy and experiences seizures

She stopped part-time work as a cashier eight years ago suffering from exhaustion and bad pain in her legs and back. She receives employment and support allowance as well as just over £400 in disability living allowance. She will have to undergo a medical reassessment under plans to move her on to personal independence payments. She worries her entitlements will be reduced under the new system.

"I think I will lose out; I have heard the three rates of the care component in DLA will be cut down under personal independence payment. I'm on the middle rate, so where am I going to go? For me, disability doesn't fit into a tick box system. Disabled people are going to have to undergo regular assessment. But as my condition is not going to go away, they're just creating more paperwork. My DLA pays for fuel to and from the hospital, prescription charges and extra heating costs. If there is any left over, it goes on wheelchair maintenance. None of it is being used on lavish holidays."

James Crombie

James Crombie, 41, lives with wife Jenny, 34, in Liverpool. Has four children, Samantha, 20, Jade, 19, Faye, nine, and Alfie, five

James acts as a full-time carer for Faye, who has cerebral palsy and epilepsy, while his wife, who has a muscular disability, does not work. Receiving an estimated £27,000 in benefits, the family would lose £1,000 of their income under the benefit cap. Because they will also have at least one spare room while their older children are at university, they also face losing more than £11 a week in housing benefit under the proposed bedroom tax. James feels he "is being hit from all sides".

"People imagine we sit around not doing anything and, generally, I understand what they are saying. There is high unemployment in the North, but I would love to go and get a job and do a full day's work; I never get a day off. I help Faye with everything: toilet needs, washing and dressing. If I lose £11 or more a week on housing cuts, I couldn't move out – the house is all fitted up for Faye. I would have to find cuts from one of the other benefits. It might come down to me literally not eating for a night."

Julian Rutter

The former water engineer, 44, from Crystal Palace had rare cancer of the jejunum (part of the small intestine) and was treated with surgery but refused chemotherapy

He has received employment and support allowance since April last year, and is in the Work-Related Activity Group so is at risk of losing the payment from April this year.

"It is quite difficult to get hold of employment and support allowance. I have had it since April 2011. Why should cancer patients feel like they are being persecuted? There shouldn't be time limits on cancer. I spend £100-a-week on organic fruit and vegetables for my diet. There is additional washing, hot water requirements, larger utility bills. I have gone from a good standard of living down to being terrified of being unable to pay the bills. The press sensationalise a couple of incidents but there are many people out there who genuinely need this benefit. Hopefully I will be able to go back to work and I can put money back into the exchequer. I have paid my taxes all my life, but when I ask for a bit of assistance I am made to feel ashamed. It is all very well for the Government to sit in their ivory tower but not everyone is so fortunate. When you are worried about your health, the last thing you need is to have the financial rug pulled from under you."

Marie Eadie

The 24-year-old, from Glasgow, is a single full-time mother to Andrew, five, and Dionne, four

Marie has two months to go until her youngest turns five and she is moved off income support and on to jobseeker's allowance.

The money she receives, approximately £100 a fortnight, will not be affected by the change, but she will be required actively to seek work or risk a benefit cut. Having been out of work for seven years, Maria says she feels daunted by the prospect of job-hunting when both her children are so young.

"I don't disagree with the idea that there should be a cut-off point and a moment when people are pushed into work, but I haven't had to sign on for a long time, so it's a bit scary to have to start looking for a job instantly. Before, when you had until your youngest was seven, you had time to gather information, find jobs and childcare – because they'd been in school for two years. Now, I'm looking for jobs – cleaning or at Asda – but most don't fit around my children's hours. It's hard for me to leave them; it is a big step for a mother and we should have plenty of time to prepare."

Nicky Robson

Single parent, 43, from Norfolk, has two children, Tilly, six, and Scarlett, four

Working part-time, 18 hours a week, as a self-employed dance teacher, Nicky receives £740 a month in working and child tax credits to boost the estimated £7,000 profit her teaching brings in. Using her tax credits to cover childcare costs, £400 a month and other expenses, she says it would be hard to cope without them. Unsure how she will be affected under plans to roll all work-related benefits into one universal credit, she says the uncertainty is making her nervous.

"The current system is not complicated in the slightest; it all comes to me in one single payment. The uncertainty of the changes does worry me, because I do need that money; I haven't even got used to the Iast changes in the system yet. I would like to work more hours, but it's not practical at the moment, as I have to be home to pick the kids up and put them to bed every night. I believe there should be a cap on benefits, but they are focusing on the wrong people – I want to work, but if my credits go down, it won't be worthwhile."

Expert view

"This Bill locks in cuts to childcare, takes tax credits from those who save, and cuts support for those who need it most."

Liam Byrne, Shadow Work and Pensions Secretary

"Penalising people for their failure to live in smaller homes when rents are regulated is irrational and socially divisive."

David Orr, Chief executiveNational Housing Federation

"Single-parent families are already twice as likely to live in poverty as couple families, and it is simply unjust that many of them will be worse off in future."

Fiona Weir, Chief executive, Gingerbread

"The Government should reduce the cap to match workers' real median take-home earnings: £21,000."

Sally Thompson, Adam Smith Institute

"This Bill has very little to do with reducing poverty. A very high percentage of welfare actually goes to people in work."

Julia Unwin, Chief executive,Joseph Rowntree Foundation

"Disabled people have been telling Government that the plans will backfire, making it even harder for them to live independently and contribute to their community."

Richard Hawkes, Chief executive, Scope

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