LRD Booklets April 2017

State benefits and tax credits 2017

Further Information


[pages 5-11]

State Benefits and Tax Credits 2017 is the latest edition of the Labour Research Department’s annual guide to the benefits system. It focuses on the types and rates of benefit available from 6 April 2017, and includes any changes to the rules for claiming benefits and tax credits from this date.

The welfare revolution

There have been massive changes — as well as huge cuts — to the benefits system as a result of the “welfare revolution” started by the Coalition government and continued under the Tories. The reforms are the most fundamental changes to the social security system for 60 years. In addition to a new single benefit (Universal Credit), which is gradually replacing six existing benefits including Jobseeker’s Allowance (JSA) and Housing Benefit, the Tories are continuing to freeze, cut, remove and reduce benefits and tax credits for unemployed and in-work households. 

On top of the £15 billion welfare cuts brought in under the coalition, the Tories pledged in their 2015 election manifesto to slash the welfare budget by another £12 billion by 2018. While work and pensions minister Damian Green has prmised that there will be no “new” welfare cuts in this parliament, those already in place or planned, as well as the four-year benefit freeze, will continue to cause hardship and misery. 

The main changes brought in since the LRD guide State Benefits and Tax Credits 2016 was published in April 2016, and before April 2017, include the following: 

• the removal of the Family Premium from Housing Benefit (worth up to £17.45 a week) for new claims and new births from May 2016 (see Chapter 7);

• in September 2016, the Scottish Parliament gained new powers to legislate to create new benefits and make changes to and top up the UK benefits that people in Scotland already receive (see box on page 11); 

• a lower benefit cap phased in between November 2016 and January 2017. The maximum amount that families with children can receive in benefits was cut from £500 to £442.31 a week (or £26,000 to £23,000 a year) in Greater London and from £500 to £384.62 a week (from £26,000 to £20,000 a year) outside London. For single adults without children living with them, the caps were reduced from £350 a week to £296.35 (or £18,200 to £15,410 a year) in Greater London and from £350 a week to £257.69 ( or from £18,200 to £13,400 a year) for those living outside the capital (see Chapter 2); and

• in February 2017, the government moved to overturn tribunal rulings extending the disability benefit personal independence payment (PIP) to around 160,000 claimants, mainly with those mental health conditions. 

From April 2017:

• there is a new “two-child policy” for support for children through tax credits and Universal Credit (UC). From 6 April 2017, for new claims and new births, the child element within UC is limited to two children (with certain exceptions) and Child Tax Credit “elements” are also restricted to two children and are not included for a third or subsequent child born after this date (again unless an exception applies) (see Chapter 1). There are equivalent changes to Housing Benefit (see Chapter 7);

• the “first child premium” within UC and the equivalent family element within tax credits are abolished for new claims;

• parents claiming UC, including lone parents, are expected to have work-focused interviews when their youngest child turns one, start work preparation when their youngest child turns two, and look for work when their youngest child turns three; 

• the “taper rate” for UC reduces from 65% to 63%, meaning that claimants can keep an additional 2p (now 37p) of every £1 earned above the work allowance;

• the UC Youth Obligation will be rolled out. Eighteen to 21-year-olds who have been claiming UC for six months will have to apply for either training or apprenticeships or attend a work placement, unless they are exempt because they are considered to be vulnerable (see Chapter 1);

• Housing Benefit entitlement is withdrawn for some 18-21 year olds (see Chapter 7);

• new Employment and Support Allowance (ESA) claimants who are placed in the Work-Related Activity Group will receive the same rate of payment as those claiming Jobseeker’s Allowance – a cut of around £30 a week. The equivalent in UC, the Limited Capability for Work element, is also cut (see Chapter 1);

• Bereavement Allowance, Bereavement Payment and Widowed Parent’s Allowance for new claims are replaced by a new Bereavement Support Payment (BSP), leaving many worse off (see Chapter 8); 

• the coalition government’s flagship welfare-to-work work programme finished at the end of March 2017 and has been replaced by a much smaller work and health programme (see Chapter 3); and

• Tax-Free Childcare, a new government scheme to help working parents with the cost of childcare, is to be launched from 28 April 2017 and all eligible parents will be able to join the scheme by the end of 2017. For every £8 a parent puts into an online account to pay for childcare from a registered child care provider, the government will pay £2. Parents can receive up to £2,000 a year per child up to the age of 12 (£4,000 for disabled children up to the age of 17). Parents must be in work and earning at least £115 a week. There is an annual earnings limit of £100,000 a year (see Chapter 5). 

Future changes:

• UC will be phased in for new claims in Northern Ireland from 25 September 2017; and

• although free childcare will be doubled from 15 to 30 hours a week for working parents of three- and four-year-olds from September 2017, there are concerns about whether there will be enough places and that costs for care outside of the free hours available will rise (see Chapter 5).

Benefit and Tax Credits frozen for 2017-18

Benefit and tax credit rates are currently subject to a freeze, which began in April 2016 and will continue for four years in total. The Institute for Fiscal Studies (IFS) calculated that the freeze on benefits will affect 7.8 million working families who will lose an average of £280 a year. The think tank also estimated a real-terms cut of 8% in benefits between 2012 and 2019. More recently, in March 2017, another think tank — the Resolution Foundation — reported that because of expected rises in inflation, the freeze will be even more catastrophic and take £3.6 billion more than expected from some of the poorest people in the country by 2020.

The benefits affected by the freeze are: 

• Child benefit;

• Jobseeker’s Allowance;

• Employment and Support Allowance;

• Income Support;

• elements of Housing Benefit; and

• basic, couple and lone parent elements of Working Tax Credit and family and child elements of Child Tax Credit.

The freeze follows three years during which the annual rise for most working-age benefits was capped at 1% in cash terms.

Impact of Universal Credit roll-out 

The roll-out of UC across the country will also result in more hardship as many claimants find themselves worse off under the new system. The Resolution Foundation told a recent Work and Pensions Committee inquiry examining UC that “… essentially there will now be more losers than gainers … the losers will be losing more and the gainers gaining less as well”. Shopworkers’ union Usdaw has warned its members that most working people who are currently eligible for tax credits will be much worse off under UC. 

In February 2017, the Public Accounts Committee relaunched its inquiry into the roll-out of UC following “compelling evidence of the problems”. Its chair, the Labour MP Frank Field, said there were huge delays in people receiving payments resulting in debt, rent arrears, health problems and reliance on food banks (see Chapter 1). 


Meanwhile, the public spending scrutineer, the National Audit Office, reported in November 2016 that almost a quarter of Jobseeker’s Allowance claimants received at least one sanction between 2010 and 2015 and estimated that the Department for Work and Pensions (DWP) withheld £132 million from claimants due to sanctions in 2015 and paid them only £35 million in hardship payments.

The impact of the welfare reforms, cuts, freezes, reductions and removals is explained throughout this booklet. According to reports by unions, charities, think tanks, government agencies and parliamentary committees and others, they will not only hit many thousands of unemployed people and their families, but will reduce the household incomes of many working households too. 

The role of unions

The booklet also looks at how unions, campaign groups and charities are fighting the cuts. At a local level, trade unionists can also play an important role in helping members and their families claim the in-work benefits to which they are entitled. Tax credits and benefits are crucial for lifting low-paid workers out of poverty, particularly the one in four (5.6 million) workers across the UK who earn less than the voluntary Living Wage rate of £8.45 an hour outside London and £9.75 an hour in London.

It is vital for union reps to be aware of the latest reforms in order to give accurate initial advice on benefit entitlements. This guide is designed for that purpose. It is not intended to be a definitive guide to state benefits which is a complex area requiring specialist advice. Organisations and publications giving this specialist advice are listed on pages 00-00, and web references for downloading application forms and other relevant information relating to different benefits are listed throughout the booklet. 

State Benefits and Tax Credits 2017 enables reps to access the current benefit rates and basic rules for qualification in order to indicate to members whether or not they are eligible to apply for them. Thousands of low-paid workers are unaware of their entitlements and as a result as much as £13 billion benefits went unclaimed in 2014-15, according to data published by the Department for Work and Pensions (DWP) in its June 2016 report, Income-related benefits: estimates of take-up. 

This shows that, for example, only 57% of JSA that could have been claimed was claimed, with £2.4 billion going unclaimed and as many as 800,000 families missing out on an average of £3,000 each that year. Up to 1.4 million families entitled to receive Pension Credit did not claim it, leaving £3.1 billion unclaimed and families missing out on an average of £2,000 each that year. 

As well as entitlements for those who are on a low income or are unemployed, this booklet covers benefits and tax credits for parents and children, help for those sick, injured at work or disabled (and those looking after them), pensions, help with housing costs and help for someone whose husband, wife or civil partner dies.

Do your members have an entitlement?

Rights to some benefits and credits may be based on payment of National Insurance Contributions (NICs) or level of income. 

In some cases, the rules relate to length of time in employment and level of earnings, or length of residence in the UK.
For example, to get Jobseeker’s Allowance (JSA)you must prove that you’ve been living in the UK for the three months before claiming if you are:

• an EU national and you haven’t worked since arriving in the UK; or 

• a UK national who has recently returned from abroad and you haven’t worked since coming back to the UK. 

There are also special rules for claiming Child Benefit for families moving to the UK from abroad.

Some benefits depend on NICs. These are paid on earnings above the lower earnings limit (LEL), which from 6 April 2017 is £113 a week. In fact, you only start paying NICs if you earn over £157 a week, because for earnings between £113 and £157 you are credited with contributions. For most benefits, the relevant NICs are Class 1 contributions — those paid by employees. Class 2 contributions are those paid by self-employed people. 

Entitlement to contribution-based JSA, which you can receive for up to 182 days (approximately six months), is based on how many Class 1 NICs you have paid in the last two tax years. The tax year starts on 6 April and finishes on 5 April (12 months).

Income-based JSA is based on your income and savings. You may get this if you have not paid enough in NICs, or you have only paid Class 2 contributions for self-employment and you’re on a low income.

The level of your retirement pension will depend on your NICs over your working life (see Chapter 6). Entitlement to Statutory Sick Pay and maternity benefits depends on you being in employment and earning more than the LEL (see Chapters 4 and 5).

There are also other means-tested benefits, including Income Support, Pension Credit and Housing Benefit. These are not tied to NICs, but you can only get them if your income is less than what is called your “applicable amount” (see pages 31). Means-testing for Child Benefit was introduced in January 2013 (see page 68).

State Pension changes

State benefits and tax credits 2017 also examines recent developments with regard to state pensions. It outlines changes arising from the introduction of the new single-tier State Pension last year. This replaced the basic State Pension for those reaching the State Pension Age on and after 6 April 2016. The full State Pension is now £159.55 a week, compared with the standard rate of the old basic State Pension for a man or woman with a full contributions’ record of £122.30 a week. Although this sounds like a big increase, the single-tier pension replaced not only the basic State Pension, but also the second state pension (SP2), Additional Pension (which used to be called the SERPS earnings-related pension), and “outdated” pensions such as the Category D pension and the Age Addition. These were all abolished for new pensioners. 

The National Pensioners Convention warned that 6 April 2016 was “set to be a disastrous day in the history of the State Pension as millions of future pensioners find out the government has short-changed them, and millions of existing pensioners see their pensions rise by less each year as a result of unfair indexation arrangements” (see Chapter 6).

Claiming benefits

Claimants are increasingly having to make claims for benefits over the phone and online. The PCS public and commercial services union is currently campaigning against government proposals to close more than one in 10 Jobcentres across the UK, incuding eight out of Glasgow’s 16 Jobcentres. The union says the proposals put thousands of jobs at risk and would mean unemployed people having to travel further to get help getting back to work.

You can get an estimate of what benefits and tax credits you could get, and find out about claiming specific benefits, from the Benefits Adviser website:

The appeals process

The DWP appeals process for the benefits it administers is as follows:

Mandatory reconsideration: When a person receives a decision from the DWP that they dispute, they must request that the Department conducts a mandatory reconsideration before they are allowed to lodge an appeal. They must do this within a month of the decision.

Direct lodgement: People who want to appeal after mandatory reconsideration must send their appeal directly to HM Courts & Tribunals Service (HMCTS). 

Time limits: The DWP has 28 calendar days to provide an appeal response. 

For most benefit appeals, you must fill in form SSCS1 which can be found on the government’s website.

Benefits and Scottish devolution

In September 2016, the Scottish Parliament gained the power to:

• create new benefits in devolved areas;

• top up reserved benefits (such as UC, Tax Credits and Child Benefit);

• make discretionary payments and assistance;

• change employment support; and

• make changes to UC for the costs of rented accommodation and on the timing of payments and recipients.

From 1 April 2017, it took on the power to make discretionary housing payments. Other welfare powers (including responsibility for carers and disability benefits, maternity payments and funeral payments) will transfer at a later date. The Scottish government is setting up a new social security agency and is expected to introduce a Social Security Bill by June 2017 to deliver the devolved benefits.