What does progression under Universal Credit actually mean?

Posted on by Liz Sewell

Universal Credit should help parents start work as it makes it easier to take part-time, flexible or temporary jobs to help parents gain valuable skills and avoid CV gaps. Unlike previous benefits, Universal Credit doesn’t stop when a claimant enters work. Instead it stays with claimants as they progress in work and increase their earnings until they are entirely free of the benefits system.

Belina agrees with the research done by the Timewise Foundation that argues that the most important thing is to enable parents, especially lone parents and second earners to earn more, not just work more hours.

The Government has long believed that Jobseeker’s Allowance perversely led people to restrict the hours they work to avoid losing their benefits. Part of the reason for instigating the Universal Credit change is to increase the amount people earn or the hours people work and so make them financially independent. Under Universal Credit, claimants’ payments  reduce as their take-home pay increases, rather than being cut off completely after a certain number of hours, as with Jobseeker’s Allowance. So an individual can take on extra shifts and be flexible about the hours they work. The Government hope this will help employers too allowing them to adapt their workforce to their business needs with out fear that staff will loose out on benefits.

 

Over time there will be increasing numbers of UC claimants who are in work but earning less than the Government feels could reasonably be expected. Once fully rolled out the Government expect around 11 million individuals to be claiming UC of whom 5 million will be in employment.For the first time the Department will have a power to work with individuals to help them stay in employment and – where appropriate – support and encourage them to increase their earnings.

The Government has created six groups

  1. Working enough (individual and household)
  2. Working – could do more
  3. Not working
  4. Too sick to work right now
  5. Too committed to work right now
  6. Too sick to work

Groups 2 and 3 will both be in the work related requirements group: The current Jobseekers Allowance caseload will be joined by current claimants of tax credits/housing benefit who are working less than could “reasonably be expected”. The Welfare Reform Act enables the Government to place a wide range of mandatory requirements on this group (e.g. work search, work availability and work preparation requirements). Any requirement must be intended to help them find work, more work or better paid work.

What does the Government  mean by “working enough” and “working less than could reasonably be expected”?

Claimants who are working but could reasonably be expected to earn more – what we consider a reasonable level of earnings (the earnings threshold) is determined through the formula: the number of hours we can reasonably expect a claimant to work (max 35) * relevant National Minimum Wage. This equates to earnings of £216 pw for most individuals, £433pw for most couples, (the household threshold being the sum of the individual thresholds). Expected hours of work will be personalised to take account of a claimants particular circumstances and capability (ie to allow for caring responsibilities and/or health conditions). Claimants/households falling above their earnings threshold will be in the “no work related requirements” group because they are earning enough. There are expected to be around one million in the working could do more group.

 

What difference does it make?

The Child Poverty Action group says that currently when one or both parents work part-time the child poverty rate (after housing costs) is 56%; when one parent works full-time and the other does not work it is 33%; when one parent works full-time and the other part-time it drops to 9%.1 This underlines the importance of full time work and second earners in lifting families out of poverty.

The down side to  this CPAG says is that lone parents and second earners in couples often (re-)enter the workplace part-time but there are few high-quality, part-time jobs available.  The majority of jobs compatible with school hours are low-skilled and low-paid with few progression opportunities. This combined with inability to access suitable and affordable childcare, not only for pre-school children but before/after school and in school holidays, leaves many mothers stuck in such jobs for very long periods. There is a strong association between part-time work and failure to progress out of low pay, and three-quarters of people in part-time jobs are women. Thus the labour market can create severe ‘poverty traps’ for working families.

The Learning and Work institute have suggested that the government’s approach to In Work Progression should do four things:

  1. Improve individuals’ capability to increase their earnings – supporting people to get the tools, skills and experience needed to progress in work
  2. Address barriers that may make it harder for some to progress – in particular caring responsibilities, health and disability, language barriers, motivations, and perceived incentives to earn more
  3. Support individuals to find and then take opportunities to progress –helping to match and broker people into better and better paid work, or to progress within their current workplace
  4. Help to address the barriers for employers offering progression – which includes how jobs are designed, company structures and processes, employer behaviour, sectoral approaches and productivity

CPAG cite voluntary support as being better than conditionality the New Deal for Lone Parents doubled lone parents’ chances of getting a job. The national evaluation found that “impacts measured for the programme are very large and impressive” in terms of entry into employment, job satisfaction and job sustainability, and also that it was cost-effective and provided a net saving to the Exchequer. They suggest that many lessons could be learned from its design including:

  • –  Supportive, informed, one-to-one relationships developed with advisers;
  • –  Discretionary funds to support work and training;
  • –  Work experience provided alongside training;
  • –  Mentoring in work to assist retention and advancement;
  • –  Family-friendly environment for training;
  • –  Compulsory initial meetings with personal advisers for hard-to-reach groups, which led to greatly increased participation (subsequent participation was voluntary).

What are the Benefit Changes for Lone Parents 

This information is from the Gingerbread website

  • From April 2016 universal credit work allowances will be reduced to £4,764 a year for those without housing costs and £2,304 a year for those with housing costs.
  • From April 2017 the child element of universal credit will be limited to two children. Families who have a third or any additional child after April 2017 will not be eligible to receive an additional child element, while new claims made after April 2017 will not include the first child premium.
  • From April 2017 parents whose youngest child is aged 3 or older, including single parents, will be expected to look for work if they claim universal credit as a jobseeker.
  • Under universal credit if you’re working for fewer hours than your circumstances allow, you will be encouraged to try to increase your hours.

A watershed budget that changes the landscape for Lone Parents: Belina Seminar report

Posted on by Liz Sewell

This is the first of a series on blogs on issues that arose out of our Summer Afternoon Seminar

The 2015 Summer Budget was a watershed  that changed the tax and benefits landscape. The first conservative budget in 20 years had a clear ideological approach  over such a wide range of tax and benefit changes that it is exceptionally complicated to work out the difference it will make to each person, as they will be affected in different ways depending on the hours they work, their age, if they live in London, live in social housing, have one, two or more children or use childcare.

On the downside 

Freeze on Tax Credits and Child Benefit
Lower tax credit threshold and higher deduction rates
Lower benefits cap for the unemployed, even lower outside London
Need to be actively seeking work when their youngest child is aged 3.
Two child policy for tax credits and Universal Credit.
Continued conditionality on Universal Credit until they earn the equivalent of 35 hours at the minimum wage.
Loss of family premium on Housing

On the positive side 

£6.50 minimum wage in 2015 rising to a £9.00 living wage in 2020
Higher personal tax thresholds
Possibly lower housing costs if you live in social housing
Free 30 hours childcare for working parents of three and four year olds
Under Universal Credit childcare support starts from 1st hour and at 80%.

Our prediction is that parents will need to 

  • Lone parents will go back to work earlier
  • They will need to work for longer
  • Their opportunities to develop skills before they go back to work will diminish
  • The importance of in work support will increase

 

As Belina predicted, lone parents on Universal Credit will need to look for work when their children turn 3 – Belina Budget Blog

Posted on by Liz Sewell

As Belina predicted in May, Parents with a youngest child aged three or older, including lone parents, who are able to work will be expected to look for work if they are claiming Universal Credit. These parents will receive extra support from Jobcentre Plus. This comes on the back of free 30 hours a week childcare for working families. It looks as if this will impact both lone and couple families and will have a big impact on when mother’s are deemed ready to go back to work.

Working-age benefits, including tax credits and the Local Housing Allowances, will be frozen for 4 years from 2016-17 to 2019-20.

The Benefits Cap has been reduced from 26,000 a year. or £500 a week, to £20,000 a year  £384; In London it will be 23,500 or £452.

Child Tax Credits will be limited to 2 children for new claimants after 2017. Whilst the vast majority of Lone and couple families have one or two children, this will impact larger families.

From April 2016, the level at which a household’s tax credits are withdrawn for every extra pound earned will be reduced from £6,420 to £3,850. For Universal Credit, which is replacing six working age benefits including tax credits, the figures will be £4,764 for those without housing costs and £2,304 for those with  housing costs. State top-ups will also be reduced by larger amounts as people progress in work. As a result of the cuts, 500,000 households will move off tax credits and 300,000 off Universal Credit.

Policy Exchange say a typical renting household with one child, and one adult in work at the current minimum wage, is expected to see their net income rise by 6% in real terms over the Parliament, whereas the same household with no one in work is expected to see their income fall in real terms by 4%.