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Benefits Blog

by Tombenefits

news and thoughts from the world of welfare rights
04 January 2018 at 14:15

Budget Pt 2: Of annual upratings

Hello again, 

Welcome back to this two part blog on the November Budget announcements in relation to the benefits system

In Part 1 - available here -  I looked at some important changes and real  improvements to Universal Credit (UC), that started being implemented this week.

These aren't costing a great deal, but some concessions to reality and common sense, will make a real difference to those who don't arrive at UC's doors with a recent monthly pay cheque just in at the bank.

Many have been really struggling in that first 5 weeks for basic money to live on or pay the rent. UC - in its pre-January 2018 guise - had the unfortunate effect of creating financial chaos, debt, rent arrears and in some cases homelessness and worse.

That immediate "destitution on first contact" effect for too many new UC claimants has largely been sorted by offering 100% advance payments  starting this week. Other helpful changes to come include the abolition of "waiting days" in February  and a 2 week run on in Housing Benefit from April .

Here in Part 2, I look at the more mundane, "same old, same old" announcement of the benefit rates that will apply from April 2018

This is more business as usual with no great changes in the formulas used nor exciting rumbles of backbench rebellions to hit the rolling news headlines. :-)

But in many ways it should be as sticking to previous practises is not the same as making no change at all. While many will get real protection from inflation - now rising to a more noticeable 3% - many others face yet another real annual  stealth cut in their benefits

As ever, I pick up the numbering from last time.


3. Annual uprating of benefit rates

Each year - around November or December -, the Chancellor announces the new benefit rates that will apply from the following April. You can see the full range of increases in:

  - Department of Work and Pensions (DWP) benefits here

  - in HMRC ones - such as tax credits and Child Benefit - by scrolling down to the benefit rates on the page here

There is a very different approach to those "over pension age" and those still of "working age" . So it makes sense to deal with each age group separately 


4 . Benefit uprating over pension age.

Retirement Pension is protected by the ‘triple lock” that offers a “best of three” measures on which to base the annual increase for Retirement Pension: the average increase in earnings, that in prices or 2.5% :-)

In past years, that 2.5 % figure during years of low price/wage inflation has meant some real increases in the state pension.

However, this year with the September inflation rate - as measured by the Consumer Price Index - on the rise, it’s the protection against price inflation that comes out top trumps in the "triple lock" :-) So the State Retirement Pension goes up by 3%.

That sounds a nice increase, but while it does mean that the increase usefully keeps pace with inflation, it does not offer a real increase this time (as it did in past years). So the full basic pension rises:

  - under the old pre-April 2016 scheme from £122.30 to £125.95 a week (plus any additional state pension)

  - under the new post April 2016 merged scheme from £159.55 to £164.35

Pension Credit only guarantees the cash increase in the old style pension, which does mean that in % terms,  less well off pensioners do worse than their better off friends :-(.

Last year there was a welcome switch to using the cash difference in the “new style “ Retirement Pension which is at a rate much closer to that of PC. That essentially meant that PC went up by the same % rate as Retirement Pension.

Sadly, it’s back to business as usual this year which means the increases for poorer pensioners is effectively reduced to 2.3 %, meaning a small real cut.

So the standard rates for Pension Credit goes up:

  - for singles from £159.35 to £163.00 - (rather than £164.15)

  - for couples from £243.25 to £248.80

Both of the important additions - very relevant to people affected by cancer - to that rate for carers and for severe disability are "protected" and go up by the full 3% 

But the real shame with PC, is that up to 40% of people who could get it don’t claim it.

PC goes further up the income scale than you may think - especially with the additions that can apply - and has no savings limit. So do check out any potential PC entitlement. Or message me and we can do some sums in private.

And if you are a "mixed age" couple (i.e one above and one below PC age) - or thinking of becoming one - then its particularly important to claim PC while you still can. At some point during 2019, any new claims from such couples would have to be for Universal Credit, leaving you between £140 and £250 a week worse off.

Attendance Allowance - that helps with some of the additional costs that cancer can bring, regardless of your savings and other income - is also protected and goes up by the cost of living increase each year ie by 3% . So the increases means:

  - the higher rate of AA  rises from £83.10 to £85.60

  - the lower rate of AA rises from £55.65 to £57.30


5. Benefits for people still of "working age"

 When it comes to "working age" benefits, some are "protected" against inflation in a way that once all benefits were, some are no longer protected and some have a bit of both going on.

5.1 Protected benefits in “working age”

Some key "working age" benefits - very relevant to people affected by cancer - are protected from the general freeze in working age benefits,  in the same way as Attendance Allowance and the PC additions for older people above. 

That means they will go up go up by the in April 2018 and so be protected from the effects of rising price inflation. The protected benefits - or parts of benefit include:

  - all rates of "disability benefits" such as Disability Living Allowance (DLA) and Personal Independence Payment (PIP)

  - Carers Allowance and the related carers premiums in means tested benefits and the carers element within Universal Credit (UC)

  - the disability premiums within means tested benefits (there aren't any within UC)

  - child and adult disability elements within tax credits - only the top child rate is protected within UC and the adult ones are missing

  - the Support Component within Employment and Support Allowance (ESA) - and its equivalent within UC.

  - industrial and war injuries benefits


5.2 Everything else is frozen :-(

There have been real year on year cuts in other benefit as a result of:

  - freezing the rates at April 2015 levels.

  - before that limiting increases to a maximum of 1% from April 2013.

  - And before that changing the measure used for inflation from the from the previous Retail Price Index (RPI), to the more standardadised Consumer Price Index (CPI)  That may sound rather too techie :-), but the practical upshot is that any increases in benefit rates are some 1/2 to 1% lower than they would have been :-( .

Ach away with you, Tom, and your slightly disturbing geekiness, I hear you cry :-) But over time those small missed increases and techie changes do mount up 

The freeze this year then means another real cut for the "unprotected" majority of "working age" benefits next April. And with inflation running a bit higher, it’s going to be a bigger cut this time too.

Take for example the £73.10 basic rate for a single person that is common to many of the benefits affected. Once again it will stay at at £73.10 from April 2018 .

If, as was the case under all previous Governments, this had been protected for price inflation this year, then such a rate would have been going up to this April to £75.30

However, if this Government and its predecessor had not made te changes above, then in the famous joke around road directions, "Well, you wouldn't be starting from here." :-)

The effect of this stealth cut mounts up each year . So had the the Government:

  - been content with switching the inflation measures from RPI then they would have been increasing a current rate of £76.15 to a new rate from April 2018 of £78.30 .

  - stuck to the historic RPI used by all its predecessors, then a current £80.50 would be heading next April to £83.75

But insteasd its good old frozen £73.10 again. In real terms then this key basic rate, has been cut by either 7% or 13% since 2011, depending on how you measure it.

But where did these rates come from in the first place? They date back to a mid 1960s assessment - by the standards of that time - as to what a basic essentials budget in the short term ought to be able to cover.

Essentially it was these short term sbasic subsistence rates that Government’s of all colours have protected, until this one. But cash cuts aside, these have also been affected by:

  - some real rises in basic costs since the 1960s

  - the abolition of long term rates that recognised a higher amount was needed if you were on benefits longer term as you might need to start replacing shoes and clothes, do minor repairs etc.

So basically, if you spend time at the basic minimum levels of income, you may well be considerably worse off than you would have been in the 1960s, whatever any passing Four Yorkshiremen from Monty Python's might tell you :-)  


5.4. The limits of protection

Protection of key parts of your benefits, though remains most welcome :-) But its not a full protection as other parts of that same benefit may be frozen. For example:

  - Dougal, like many people with a cancer diagnosis, qualifies for ESA with the Support Component during that busy year of receiving and recovering from chemo. His ESA Support Component is protected and goes up with inflation, but the main part of his benefit - that £73.10 basic allowance - is not. So overall his ESA goes up from £109.65 to £110.75 - an increase of just 1%.

The protection though does come in handy for his Personal Independence Payment PIP, so his total overall increase in benefits income in April 2018 will be a little healthier than the mere 1% on his ESA

  - Similarly, Florence, his ever so patient and cheerful carer, sees a similar story with her benefits. Yes, her Carer’s Allowance goes up by 3%, but the CA only gets taken away from her Income Support (IS).

So the real story for her, is what happens within the Income Support sums ? Her carers premium is protected and goes up, but again the basic personal allowance is frozen. Her weekly income - a mix of Carers Allowance and Income Support - will go from £108.05 to £109.10. Again an overall increase of 1%

Both Dougall and Florence then get some welcome help from protected elements of their benefit, but as this only covers a third of their basic income they both get an overall 1% increase, which amounts in real terms to a 2% cut. :-(

But as it’s not the first time this has happened, "The historic cuts bite more deeply than this dog" , said Douglas sardonically, when he gets out the sugar cubes and works out what his ESA should have been.

"Never mind," says Florence brightly "Next year with an extra push, I might hit £110 and thats such a pretty number ..."


And so...

The exciting newsy stuff was the very real - and hard fought - improvements to Universal Credit (UC). They don't quite deal with the problems they are seeking to address, but are certainly a lot better than the previous arrangements.

There may though be many more changes needed to make UC work as benefit for those either too unwell to work, facing long term extra costs or returning to work in recovery, where UC rather struggles with its claim to "make work pay"

The boring lists of new benefit rates is perhaps more routine and unexciting - and more of budgets and Spreadsheet Phil :-) But perhaps they do deserve more notice, especially in a year when the stealth cut within them is going to have a more noticeable effect.

From 2016 to 2020, the revised figure for savings from the stealth cut, will build up to £4,500 million a year !!!. And that figure is more than doubled if you count in the ongoing savings from previous changes and restrictions from 2011 to 2015. This makes this slightly hidden practise of taking a little more each year from a large number of people the biggest benefit cut of all. 

Some will notice a useful increase come April that protects them from inflation, even if there are no real increases on offer this time. Others will notice some important protections and others no change at all in all or part of their benefits

No change - and no new announcement - is not the same as doing nothing :-) Not increasing your benefit will be felt as prices continue to rise and every moth life will feel a little harder. For many, then,  the "safety net" is getting a little bit uncomfortably closer to the ground each year.

Can you be a bit less gloomy, Tom :-)? We should never have left you alone in a Library with a whisky and a pearl handled pocket calculator...

Well, yes I can :-) Because as ever there is one figure that knocks even the most Dick Dastardliest of cunning plans into a cocked hat - and that is the amount of benefit, however cut back - that goes unclaimed each year 

That comes to some £18 billion each year with some 40% of older people not claiming the Pension Credit they are entitled to and a similar number not claiming JSA or tax credits. And even those that do claim,  may be missing out on extra amounts in those benefits related to disability and caring.

And people at every income level may be missing out on non-means tested disability benefits, such as AA and PIP for adults and DLA for children. No official estimates here but research suggests that while it varies for different groups and parts of these benefits, on average for every person receiving one, there is someone who is not. If so, that means another missing £8 billion a year. 

So while I can't do anything about your annual increases on any current benefits, i can certainly check if you are missing out on any entitlements, which if claimed could make a real difference to your finances. So please do message me for a private chat.

Fair play to the Chancellor, there is some really good news on UC emerging from the November Budget so I celebrate those, just as much as I say say " Pah Humbug !"  to the continuation of some bad old ways. :-)

If you have any general comments or queries about the November Budget changes,  then please join the Conversation here.

But do make it your New Year's resolution to check out - even in increasingly tighter benefit times - whether  you are not missing out on some significant amounts with your name on them :-) You know where I am :-)

Best wishes,

Tom :-)



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