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details of UC calculations
Are any detailed examples of how UC will be calculated available yet?
In particular will rent/housing costs be included in the calculation of the applicable amount (or whatever it will be renamed). Will childcare costs and the new earnings disregard be part of the calulation of earnings within the income calculation (as for HB?). Will the taper then be applied to the excess income figure?
Or will there be more complex steps (in the name of simplification!) when applying disregards and the taper to earnings, childcare costs and other income? (which mean an IT programme will be required and no one will be able to calculate UC on a paper calculation sheet - as in HB v TCs)
I’ll comment on both posts below. I have a very pretty moving graphic, in Powerpoint, on our training course that shows how the calculation works but I don’t think I can post even a still graphic here.
In particular will rent/housing costs be included in the calculation of the applicable amount (or whatever it will be renamed).
Yes, rent, mortgage interest - for some people, mooring fees, supported accommodation, temporary accommodation, site fees etc.
Will childcare costs and the new earnings disregard be part of the calulation of earnings within the income calculation (as for HB?).
No. Childcare costs (or 70% of them to a maximum) go into the ‘needs’ side of the assessment while earnings go into ‘what have you got’ side.
Will the taper then be applied to the excess income figure?
No; the taper only applies to excess earnings (and to some odd things like income from boarders).
will there be more complex steps (in the name of simplification!) when applying disregards and the taper to earnings, childcare costs and other income? (which mean an IT programme will be required and no one will be able to calculate UC on a paper calculation sheet - as in HB v TCs)
I take a very, very long time doing paper checks against our computer models. For example, the earnings disregard changes as housing costs change and that means assessable earnings change and that means that the taper changes - on the means side - while the needs side changes as well.
It can be very complicated.
3. Will childcare costs be part of the income calculation? Don’t know. I think it’s likely we’ll see a similiar method of including eligible childcare costs as with CTC. See this DWP briefing: http://www.dwp.gov.uk/docs/ucpbn-10-childcare.pdf
The same childcare scheme goes into UC, except that it will apply to people on below 16 hours earnings as well. Without seeing the details we don’t know whether it will apply to couples in the same way but it is possible that there may be advantages to get non-working partners into low hours of work.
4. Is the taper applied to an excess income figure? Yes. (ss 5&8 WRA)
... UC didn’t change much with the passage of the WRA through parliament.
See above re taper
As far as UC not changing during the Bill’s progress, there were a surprising number of concessions but some of them don’t seem to have made it, yet, to the awareness of DWP officials. For example the recent HB guidance on the benefit cap doesn’t reflect what ministers said in debate.
[ Edited: 29 Mar 2012 at 03:38 pm by Gareth Morgan ]Indeed Tony
But s.8(3)(a)&(b) allow for the application of the taper against earned and unearned income. This would appear to allow the taper to be applied to only earned or unearned income (or both) as a sub-calculation (similar to the PC savings credit sub-calc) rather than to the sum of both if that generates an excess income figure. This might allow, for example, different tapers to apply to different types of income in the future (for example, a % disregard of certain income rather than a 100%, 0% or £X disregard as at present). Compare the structure of s8 with SSCBA s130 (HB excess income & taper). Where childcare charges appear in the calculation could also affect the final entitlement. For example there is nothing in the Act that suggests they will be a disregard against earnings as in HB Reg.27. They could appear within ‘other particular needs or circumstances’ under s12.
I’m just to cynical to assume the IS/JSA/HB formula will be repeated within UC with only the changes to earnings disregard formula until I see it in black & white given the ‘back of an envelope’ approach to the details of UC. The scale of welfare reform may, or may not, have been over exagerated!
Thanks for your post Gareth - so they really are achieving the objective of simplification!
I say this as we had a visit from one of our local MPs (coalition party) last week and employed the age old demonstration of ‘simplification’ by comparing the thickness of the 1988 (introduction of Income Support) Sweet & Maxwell volumes against the current volumes. Crude but effective!
So - your Friday pm starter for 10. Using example from CPAGs UC briefing:
A lone parent with 2 children has rent of £80 p.w. (£4160 p.a.)
Assumed maximum earnings disregard is £9,000 and the disregard floor is £3,040.
Reducing the disregard by 1.5 times the help with housing costs (£6,240) would bring the disregard below the floor. So the earnings disregard that applies is the floor of £3,040 = £58.46 a week. As a result of the 65% taper, she also keeps 35p for each £1 of net earnings over £58.46.
Does this therefore mean if she were living with her parents the maximum earnings disregard would apply £9,000 = £173.07 p.w. As a result of the 65% taper, she also keeps 35p for each £1 of net earnings over £173.07.
This would seem to act as a signifcant disincentive to take work if a claimant has rent/housing costs (even before factoring in other in work costs like childcare, travel etc) but not to such an extent if they have no rent/housing costs liability.
Or has logic escaped me?
I’d like to see the moving graphic Gareth. Will I be very moved, or just a little emotional?
Does this therefore mean if she were living with her parents the maximum earnings disregard would apply £9,000 = £173.07 p.w. As a result of the 65% taper, she also keeps 35p for each £1 of net earnings over £173.07.This would seem to act as a signifcant disincentive to take work if a claimant has rent/housing costs (even before factoring in other in work costs like childcare, travel etc) but not to such an extent if they have no rent/housing costs liability.
That’s the way it works. If, however, her parents are on benefit then she has the non-dep deduction applied to them to consider.
If she’s in the housing costs band which produces an earnings disregard between the maximum and the floor then a £10 increase in housing costs gives a 25p increase in UC and a £10 decrease gives a 25p reduction in UC.
I’d like to see the moving graphic Gareth. Will I be very moved, or just a little emotional?
I think you’ll be in tears, of one sort or another.
So - your Friday pm starter for 10. Using example from CPAGs UC briefing:
A lone parent with 2 children ...
This would seem to act as a signifcant disincentive to take work if a claimant has rent/housing costs (even before factoring in other in work costs like childcare, travel etc) but not to such an extent if they have no rent/housing costs liability.
Or has logic escaped me?
At Benefits of Working we do lots of these calculations. Under the present system a typical calculation of a single person moving off JSA into work of 16 hours a week at national minimum wage results in them being about £8pw better off after housing costs. If they were living with parents, ie with zero housing costs, they’d be £26pw better off.
So the UC example above seems to replicate the current system and yes it does seem to act as a significant disincentive to take work if a claimant has rent or housing costs. There is more of an incentive to take work if they have no rent or housing costs.
The incentive to stay with parents had also ocurred to me. Combined with the age 35 single room rent and the mooted minimum of 25 to get HB/UC housing costs, it looks like there is a government agenda to get claimnts to move in with relatives.
This then has implications for overcrowding (with its effect on health and well-being - especially children), family relationships and labour mobility (ie in practical terms, you can only then look for work on the area where your relatives are).
But on the plus side it might help with underoccupancy in the social rented sector…!
Seriously though, it simply reaffirms and builds on the old agenda based on a rose tinted view of nuclear families able to maintain adult children at home that led to different rates of benefit for under/over 25’s. Now the HB bit has raised the bar to 35, what odds that UC will end up paying less for under 35’s?
Friends Life Coping Classes report labels this ‘The Family Bailout’
93% of working mothers with adult children (defined as those over the age of 21) have supported their adult children financially in some way
71% have “Let them live with you while they look for a full time job”
70% say that they have “Let them live with you when they have a full time job”
Average support in previous year was £3,180 which is about 29% of the Pension Credit minimum.
40% of non-dependents live in households with a claimant over 60.
What most deppresses me about this is that earnings disreagards have been the same since i believe 1988. At first glance, UC was doubling them, and then you realise that single claimants will even loose this if they have housing costs.
I appreciate that the Government wanted to prevent the Couple penalty in the benefits system, but penalising single people like this seems grossly unfair. Afterall, if they did find employment, they would tend to be net contributers to the system, so taking away any earnings disregard hardly helps.
Whilst it is simplistic to say that people would have a child to recieve extra assistance, when i speak to teenage girls living in a troubled household in areas with poor employment prospects, it often seems like the only way out of a bad situation…..even though an older sister or friend will tell them that it leads to an equally bad situation.
Single claimants have a fixed disregard. The highest and floor levels are the same so, for them, housing costs are irrelevant.
Single claimants have a fixed disregard. The highest and floor levels are the same so, for them, housing costs are irrelevant.
Am i reading this wrong then Gareth?
From what i can see in CPAG it suggests an earnings disregard of £13.46 for a single person. The disregard is reduced by 1.5 times the housing costs. I had read that to mean the earnings disregard would be reduced by this amount. The floor would then be £10 for a couple, but no floor for a single person. Could you clarify this for me - I must be being a bit dull in my thinking
The bit in the CPAG handbook (at least the online version) about floor levels of disregards is wrong.
They say
Couple £10, plus £10 for the ?rst child, and £5 each for the second and third child
Lone parent £30, plus £10 for the ?rst child, and £5 each for the second and third child
Disabled person £40
The maxima are right. The floor level figures are right in their UC book.
The actual levels changed during the course of the bill, originally there was to be no single person disregard at all. They have said that the change is due to the danger posed to work incentives by localising council tax support.
Specifically, this Impact Assessment sets out higher earnings disregards than were set out in the White Paper. This would allow a reduction in the risk of dual tapering (council tax support and UC being withdrawn simultaneously) ensuring that support can be directed to those who could otherwise be affected by the exclusion of council tax support from UC.
To achieve this, additions to the original earnings disregards have been proposed including:
An additional earnings disregard to couples with children of £250;
Increasing the child element in the earnings disregard from £2,700 to £4,000, and;
An increase in the disregard floor per adult of £700, including for single claimants.
The correct figures for floor levels are
Maximum Floor
Single £13.46 £13.46
Couple £57.69 £36.92
+1 child £139.42 £46.92
+2 children £139.42 £51.92
+3 Children £139.42 £56.92
Lone Parent +1 child £173.08 £53.46
+2 children £173.08 £58.46
+3 Children £173.08 £63.46
Plus there is a disabled persons disregard, which probably has the effect of replacing permitted work.
I did inform CPAG about the error.