Major changes to millions of individual’s benefits come into force this week under changes announced by the government last year.
Designed to tackle what ministers have termed “perverse incentives” in the welfare system, the adjustments will see universal credit entitlement rise for most people, while falling dramatically for certain claimants.
Disability minister Sir Stephen Timms said on Monday: “The welfare system we inherited has for too long locked disabled people and people with long term conditions out of work.
“Laws coming into force today will change that, reducing projected expenditure on Universal Credit by almost £1 billion.
“Simultaneously boosting the standard allowance and investing £3.5 billion in employment support means we’re creating a welfare system that backs people to work and helps them build a better future.”
The government has also pledged that its investment in tailored employment support will offer people opportunities, supporting them to move into and stay in work “rather than leave people stuck on benefits”.
Here are the major changes to universal credit coming into effect:
Standard rate goes up for all
On 6 April, all universal credit claimants received an above-inflation income boost of around 6.2 per cent to the standard allowance. For a single person over 25, this is a £6 per week increase, rising from £92 to £98.
For couples with one or both partners over 25, it will be an increase of £9 per week, rising from £145 to £154.
Most other benefits were uprated by September’s inflation rate alone, increasing by 3.8 per cent. This includes PIP, DLA, attendance allowance, carer’s allowance, ESA and more.
Matthew Oulton, a research economist at IFS, said the changes “represent a shift in the direction of universal credit”.
He said: “The government is reweighting the system away from people with health conditions and towards everyone else, especially those with three or more children. Half a million families will see a large overnight increase in their incomes, and three million others a smaller rise.”
Health-related rate drops
At the same time, the weekly payment rate for the health-related element of universal credit for new claimants has been cut from £105 to £50. The rate for existing claimants will also be frozen until 2029.
This is a reduction of more than £200 a month, cutting the additional rate by around half.
The change will save taxpayers around £1bn, the government has said.
Statistics published last month showed there were 2.7 million people on universal credit assessed as having limited capability for work and work-related activity (LCWRA) across England, Scotland and Wales.
People in this category are not required to undertake any interviews or work-related activity.
This cut is “harder to spot” than the other changes, Mr Oulton said: “Since existing claimants are protected, it will only be new claimants who will lose out by thousands of pounds. This cut will take decades to have its full impact, but in the end it will affect millions of people.”
Two-child benefit cap scrapped
The chancellor announced an end to the two-child benefit cap in last year’s Budget, following intense pressure from backbenchers, campaign groups and political opponents.
The controversial policy prevented parents from claiming universal credit for children beyond their second. It was introduced by the Conservatives and came into effect in April 2017.
The move will increase the benefits for 560,000 families by an average of £5,310, the Office for Budget Responsibility (OBR) has calculated in its fiscal outlook.
The government estimates that the change will reduce the number of children living in poverty by 450,000 by 2029/30.
Chief executive of Child Poverty Action Group Alison Garnham said the move is a “gamechanger for children up and down the country who are without the things they need to learn and grow because of the two-child limit.
“This was one of the nastiest policies for children in modern times. Its removal is a ray of hope for the families affected and a first essential step towards ensuring every child has a fair start.”
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