Universal Credit and other in-work benefits - a guide for union reps and workers (April 2019)



[pages 5-9]

Universal Credit and other in-work benefits is the latest edition of the Labour Research Department’s annual union reps’ guide to the benefits system. Because of the major recent changes in the benefits system, its title has changed from the previous State Benefits and Tax Credits series. It focuses on the types and rates of in-work benefits available from 6 April 2019, and includes any changes to the rules for claiming them from this date.

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

Thousands of low-paid workers are unaware of their entitlements. The Department for Work and Pensions (DWP) report, Income-related benefits: estimates of take up, shows that billions of pounds of available benefits went unclaimed in 2016-17. This included a massive £4.2 billion Housing Benefit – an average of £3,000 per year for each family who did not claim but was entitled to. Up to £2.4 billion of income-related Employment and Support Allowance also went unclaimed, an average of £4,500 per year for each family entitled to claim, but who did not claim it.

Trade unionists can play an important role in helping members and their families claim the in-work benefits they are entitled to. Tax credits and benefits are crucial for lifting low-paid workers out of poverty, particularly those earning less than the voluntary Living Wage rate of £9.00 an hour outside London and £10.55 an hour in London. This is the independently-calculated rate that the Living Wage Foundation says people need to earn to get by. An October 2018 analysis of Office for National Statistics (ONS) figures found there were more than six million (6,286,000) jobs in the UK where employees were being paid less than this “real” Living Wage for their area.

It is also vital for reps to be aware of the latest reforms in order to give accurate initial advice on benefit entitlements. These are highlighted throughout the booklet.

However, this booklet is not intended to be a definitive guide to state benefits, which is a complex area requiring specialist advice. Organisations and publications providing this specialist advice are listed on pages 79-80.

The government’s approach to social security

The “welfare revolution”, started by the Tory-led coalition government and continued under subsequent Conservative administrations, is introducing the most fundamental changes to the social security system for decades.

A new single benefit, Universal Credit (UC), is gradually replacing six so-called “legacy” benefits and tax credits. These are: income-related Jobseeker’s Allowance, Housing Benefit, Working Tax Credit, Child Tax Credit, income-related Employment and Support Allowance and Income Support.

The roll-out of the full digital service of UC to all areas of the country was completed in December 2018. New claimants and people who were receiving legacy benefits and tax credits but have had a change in circumstances must now make a claim for UC. This is known as “natural migration”.

The government also plans to start transferring people who have not had a change of circumstances from legacy benefits and tax credits to UC from July 2019. This is known as “managed migration”.

Earlier this year, welcome headlines appeared suggesting the next stage of UC roll-out would be scaled back due to a major government rethink. However TUC policy officer Anjum Klair pointed out that, despite those, it is “business as usual” and “there was no U-turn on UC”.

She said there was merely confirmation of an earlier announcement that only 10,000 people will be migrating from legacy benefits to UC from July 2019, with the roll-out of managed migration to increase from 2020. There would be no change to the timetable of completing the managed migration of UC by December 2023.

“The only new news was the delay in passing the managed migration regulations in Parliament, with government now intending to initially seek powers for the 100,000 pilot of UC only,” she wrote.

Klair added that the recent focus on the relatively small number of claimants to be moved from legacy benefits to UC later this year underplayed the total number of claimants who will be on UC this year through natural migration. DWP statistics published on the gov.uk website in February 2019 showed that 1.6 million people were on UC as at 10 January 2019. Of these, 560,000 (34%) were in employment. Eventually, as many as 8.5 million people will be on the new benefit, including half of all families with children.

The aim of the reforms was supposedly to simplify the benefits system and “make work pay”. The government gave assurances that no one would be worse off under the new system. However, the changes have been accompanied by huge cuts in the welfare budget and are causing widespread hardship and misery among both unemployed and working households. Those going through natural migration have no “transitional protection” (see pages 20-21) and many will lose out when they transfer to UC.

General union Unite says that where UC has been rolled out it has been “plagued with problems that are pushing more people into poverty” and “has caused tens of thousands of people to fall into debt, rent arrears and to become reliant on food banks”. The union has been particularly critical of the “digital-by-default” nature of UC, pointing out that the online-only application process is an additional burden for those without internet access or who cannot use computers. It says one in five UC claims fails because of problems people come up against during the application process.

Retail union Usdaw also says it has strong concerns, as reflected in the National Audit Office’s June 2018 report, that the UC system “is not currently fit for purpose”.

In September 2018, using figures from the House of Commons library, MP Frank Field reported that, by 2021, £37 billion less will be spent on working-age social security compared with 2010.

Just under half of the total savings, nearly £16 billion, will have come from the four-year benefits freeze on benefit and tax credit rates which began in April 2016. This followed a three-year 1% cap on the annual rise for most working-age benefits. The freeze affects:

• 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 United Nations Special Rapporteur on extreme poverty and human rights, Professor Philip Alston, produced a damning verdict of the impact of UC after visiting the UK in November 2018. “No single program embodies the combination of the benefits reforms and the promotion of austerity programs more than Universal Credit,” he wrote. “Although in its initial conception it represented a potentially major improvement in the system, it is fast falling into Universal Discredit.”

A system under stress

Claimants must increasingly make their benefit claims over the phone and online rather than face-to-face. The PCS public services union, whose members deliver the benefits service, says the “beleaguered service has faced severe under investment, staff shortages and criticism from claimants on how they are treated”. In March 2019, members working at UC centres in Wolverhampton and Walsall went on strike to demand action on workloads and staff recruitment. UC workers were demanding:

• 5,000 new staff and permanency for fixed-term staff;

• a limit on the number of phone calls per case manager;

• a limit on the size of the national telephony hub; no to contact centres, yes to service centres;

• improved consultation — no changes to offices without union agreement; and

• a quality-focused approach — no more management by statistics.

In January 2019, the union published Social security: the case for radical change setting out how the social security system has changed since 1945 and the union’s vision of “how it can be transformed into one we can once again be proud of” (see https://www.pcs.org.uk/sites/default/files/site_assets/campaigns/welfare/Social%20security%20A5_booklet.pdf).

Who’s eligible for benefits and credits?

Rights to some benefits and tax credits are based on an individual’s record of paying National Insurance Contributions (NICs) while others are based on their level of income.

NICs are paid on earnings above the lower earnings limit (LEL), which from 6 April 2019 is £118 a week. In fact, you only start paying NICs if you earn over £166 a week, because for earnings between £118 and £166 you are credited with contributions. For most benefits, the relevant NICs are Class 1 contributions — those paid by employees.

Class 2 NICs are those paid by self-employed people. In September 2018, the government announced it would not proceed with a previously announced abolition of Class 2 NICs during this parliament.

Entitlement to new-style Jobseeker’s Allowance (see pages 30-31), 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 to three tax years. The tax year starts on 6 April and finishes on 5 April (12 months).

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 your “applicable amount” (see pages 76-77). Means-testing for Child Benefit was introduced in January 2013 (see Chapter 5).

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: www.gov.uk/benefits-adviser.

In some cases, there are also rules relating to length of residence in the UK. Government advice to European Union (EU) nationals living in the UK on their rights and status post-Brexit can be found at: www.gov.uk/settled-status-eu-citizens-families and at www.gov.uk/guidance/eu-citizens-in-the-uk-benefits-and-pensions-in-a-no-deal-scenario.

Benefits in Scotland

The Scotland Act 2016 gave the Scottish government new powers relating to social security, including responsibility over certain benefits:

• Ill Health and Disability Benefits:

◊ Disability Living Allowance;

◊ Personal Independence Payment;

◊ Attendance Allowance;

◊ Severe Disablement Allowance; and

◊ Industrial Injuries Disablement Benefit.

• Carers Allowance;

• Pregnancy and Baby Payment (this replaced the Sure Start Maternity Grant in Scotland in December 2018);

• Funeral Expenses;

• Cold Weather Payments and Winter Fuel Payments;

• Discretionary Housing Payments;

• some powers in relation to Universal Credit (for example, the ability to split payments between household members)

Benefits that remain reserved to the UK Government are:

• Universal Credit;

• Contributory Jobseeker’s Allowance;

• Contributory Employment Support Allowance;

• Child Benefit;

• Maternity Allowance;

• State Pension;

• Pension Credit; and

• Bereavement benefits.

A motion agreed by the PCS public services union noted the progress towards a “transparent, well-staffed new system which provides dignity and decent living standards for claimants” as a result of the union working with the Scottish government. Dave Semple of DWP Greater Glasgow proposed the motion and said the new welfare system in Scotland will not involve any private companies. He also reported that anybody putting in a disagreement against a disallowance will not stop being paid benefits up until the day the tribunal makes its decision.

Information on claiming benefits in Scotland can be found at: www.mygov.scot/benefits

This information is copyright to the Labour Research Department (LRD) and may not be reproduced without the permission of the LRD.