Welfare Reform Bill encourages people not to work
So. It’s here. The new Welfare Reform Bill, otherwise known as the biggest shake up in social welfare of recent years. Clearly, the Government’s primary aim is to make the benefits system work more efficiently, but the £18 billion cost savings probably have something to with it as well. Your first thought might be that the middle of a recession teetering on the edge of a double dip is probably the worst time to tug people’s security blankets, but don’t worry, these changes aren’t actually scheduled to take effect until 2013. And we’ll all be OK by then.
Let’s be honest though, your first thought probably wasn’t querying the economic impact of the Government’s timing, it was probably how far the new system would affect you. At the moment, the provisions are still at the draft stage, details of earnings or savings caps not clear, and the details in relation to child care are decidedly fuzzy. However, what we do know is that a ‘universal credit’ is due to replace working tax credit, child tax credit, housing benefit, council tax benefit, Income Support, income-based Job Seekers Allowance and income-related Employment Support Allowance.
Contribution-based JSA and ESA (you know, the ‘insurance policy’ you have been paying into your whole working life through your National Insurance contributions) will now come with conditions and penalties attached, for example, if you do not take a job you were offered, and benefits will stop after a year. The new rules will also mean that no family can get more than £26,000 per annum in benefits. Being as this is more than the average wage, this doesn't sound too bad. Unless you currently 'earn' more than that from benefits, in which case you're probably really pissed.
But what does this mean for 'normal' people like you and me? (Or, like me anyway?)
The ‘universal credit’ will mean that 2.7 million UK households will be actually be better off, although 1.7m will lose out, and over 425,000 of those to the tune of £25 or more per week. The Government accept that this will increase homelessness, which will mean them having to stump up for (more expensive) temporary accommodation. No I am not making this up.
People like Sally Single Mum or Dave Single Dad will be forced to work once their youngest child reaches five, or their benefits will be cut. However, Hatty Housewife, who does a bit of minimum wage work while the little darlings are at school, might be one of the £2 million households who would lose more of the money they earn from working an extra hour (the so-called benefit 'trap' trying to balance encouraging people to work more when they lose benefits if they do, so they may as well sit on the sofa watching Trisha instead).
Finally, 330,000 ‘second’ earners will lose more for each pound they earn under the proposals than they would now, and more than half of these will be people working more than 30 hours a week, those receiving tax credits or anyone not claiming housing benefit or council tax relief. Basically ‘normal’ people trying to get by…
Just as long as we’re all in it together. Again.