Welfare and benefits Flashcards
Our current system of welfare is a combination or contributory and non-contributory benefits
Contributory benefits - benefits that are paid on the basis of previous contributions. You pay in when you’re young, healthy and in work and you draw your benefits out when your old, sick or unemployed. National Insurance, introduced by the Liberal gov in 1911 is the obvious example. Your old age pension is dependent on NI contributions and you get higher Jobseekers Allowance benefits and if you have paid NI.
Non-Contributory benefits - These are paid on the basis of needs and are not dependent on previous contributions. Some of these benefits, such as Jobseekers Allowance and Housing Benefit are dependent on your income and claimants are required to undergo a ‘means test’ to ensure they need the benefit. Some are termed ‘universal’ benefits and are paid regardless or income, for example winter fuel payments and free TV licenses for elderly people. Child Benefit used to be a universal benefit but the Coalition Gov introduced restrictions on people earning over £50,000 p.a.
The cost
It is expensive. ‘Social Protection’ - mainly pensions and benefits is the largest items of public expenditure, costing about £256bn a year - about 30% of total public spending.
Welfare benefits include unemployment benefits, child benefit, housing benefit, child and working tax credits and disability benefits.
It will get more expensive as the population ages and life expectancy increases.
The criticisms
Some people argue that handing out universal benefits that are not dependant on contributions weakens the idea that people have a stake in the system.
It is no longer a temporary safety net - some people remain on benefits for many years, even in times of economic prosperity.
Some argue that handing out benefits without conditions acts asa disincentive to work, promotes idleness and traps people in poverty.
People on benefits face very high marginal tax rates when they enter employment. This means they pay a large proportion of each extra pound they earn in tax and lost benefits - plus they have to for child care, commuting costs etc
Current benefits
Jobseekers allowance - paid to adults working fewer than 16 hours a week. There is a higher payment for those with sufficient NI contributions.
Income Support -Non contributory benefit for those on low incomes and not in full time employment
Employment and Support Allowance and Disability Living Allowance - paid to the sick and disabled. Paid at different rates depending on disability. Coalition introduced Work Capability Assessments that have proved controversial.
Welfare Reform Act 2012
In 2012 the Coalition gov introduced radical reforms that will be rolled out gradually through 2017 (although the deadline has been pushed back) at a cost of £2bn
The idea is to simplify a complex system and ensure that ‘work pays’ and remove disincentives to work.
The idea is that claimants are able to retain more of their benefit as they move into work, thereby removing the problem of high marginal tax rates.
Keystone of the Act is Universal Credit that will replace six other benefits:
the means tested part of Jobseekers Allowance
the means tested part of Employment and Support Allowance
Income support
Child Tax Credits
Working Tax Credits
Housing Benefit - Rent element only
Work programme
The Work programme is designed to help the long-term unemployed into work.
Claimants may be asked to carry out Mandatory Work Activity to prepare them for work.
A new scheme, called Help to Work introduced in April 2014 requires claimants who have been on the Work Programme for more than two years to either undertake voluntary work, training or sign on everyday.
Benefits can be withdrawn if they fail to comply.
Several charities including Oxfam and the YMCA have refused to participate.
Benefits cap
The 2012 Act also introduced the Benefits Cap
The idea is that people on benefits should not get more money than the average family in work.
The total amount in benefits cannot exceed £500 a week (£26,000 pa)
April 2017 it was reduced to £20,000 (£23,000 in London).
Affects relatively few families - most often those with a lot of children living in expensive housing in central London.
Two child rule and ‘rape clause’
From April 2017 Child Tax Credit was limited to the first two children
Child Tax Credit is one of the benefits being phased out and replaced by Universal Credit
But the two child limit will also apply to the ‘child element’ of Universal Credit
Exemptions announced for adopted children and multiple births
Exemption also announced for child born through ‘non-consensual conception’ the so-called rape clause.
Housing benefit
Housing Benefit is administered by local authorities on behalf of the Department of Work and Pensions.
It pays part or all of the rent of low income tenants
Part of it will be replaced by Universal Credit
Local housing allowance (LHA) is a set amount of housing benefit paid if you are in private rented accommodation. The amount you get depends on where you live.
There was huge controversy when the government introduced the Bedroom Tax, more correctly known as the spare room subsidy
The idea is to free up larger properties for families on the waiting list
Those with spare rooms lose £40 a month in housing benefit
Pensions
Pensions are a contributory benefit paid to people when they retire
As the population ages the cost of pensions will increase
People are also living longer - also increasing the cost
The gov has responded to this by equaling the retirement age of men and women and gradually raising the retirement age to 66 in 2020 and 67 from 2026 and linking it to life expectancy in the future
