Fairness and reform at the heart of Budget settlement
22 June 2010

In keeping with the commitment to fairness and reform, the Department today confirmed the details of its emergency budget settlement based around the key principles of:

* protecting the most vulnerable
* ensuring the best value for the taxpayer
* reforming the welfare and benefits system
* creating real incentives to make work pay

At its heart, is the commitment to help and support the poorest and most vulnerable in society, whilst making almost £5 billion worth of savings for the taxpayer by 2014-15.

This settlement marks the beginning of a programme of radical and fundamental reform that will see the welfare state return to its core principles of providing a safety net for those who need it and value for those who support it.

The Chancellor confirmed that from April 2011 all DWP administered benefits will be uprated in line with the Consumer Price Index (CPI). This is a better indication of inflation and is the target that the Bank of England works towards, so it makes sense for the Department to uprate benefits using this measure.
Pensioners

The Government's support for pensioners remains absolute. The Budget affirms the commitment to a triple guarantee for pensions, meaning the basic State Pension will be uprated by the highest of the price index, earnings or 2.5%. We will ensure that the basic State Pension will go up in line with RPI for next year if that is higher than all of the three other elements.

We have secured vital support for the 2.5 million poorest pensioners. We will ensure that low income pensioners on the Pension Credit Guarantee Credit receive the same cash increase as provided for through the triple guarantee for the basic State Pension in April 2011.
Housing Benefit

This budget also sees the Government address some of the unfairness that has become inherent in the Housing Benefit (HB) system and in many cases a barrier to helping people into work. The reforms will save nearly £2 billion in the financial year 2014-15, whilst making the benefit more fair and better targeted. It also marks the first plank of the reform of the benefits system. A reform which will in the long term make the system simpler and fairer, and help reduce the fraud and error bill which today stands at £5 billion across benefits and tax credits.

Local Housing Allowance (LHA) will now be restricted to a maximum of four bedrooms for new and existing claimants. Alongside this, weekly LHA rates will be capped at £250 for a one bedroom property, £290 for two, £340 for three and £400 for a four bedroom property.

LHA rates will now also be based on the thirtieth percentile of rents of the local area. This reform means hard working individuals and families will no longer have to subsidise people living in properties they themselves could not afford. From April 2013 LHA will be uprated by CPI.

There will be staged increases in the rates of non-dependant deductions in the income-related benefits from April 2011. By April 2014, these increases will bring the rates to the level they would have been had they been fully uprated since 2001 to reflect growth in rents and council tax. This measure, phased over three years, will strike a fairer balance.

To help make work pay from April 2013, people who have been on Jobseeker's Allowance for 12 months or more, will have a 10% reduction in their Housing Benefit.

We will also work with local authorities to ensure that the housing stock is more sensibly utilised and that entitlement to social housing reflects a family size. Working age HB claimants who are living in a property that is too large for their household size will have their benefit capped. To help the most vulnerable people who could be affected by this change, the Additional Discretionary Housing Payments budget will be tripled to £60 million a year from 2013-14.
Carers

We recognise the important work done by carers up and down the country and so we will provide an extra £60 million by 2014 to help fund an additional room for carers.
Mortgage interest support

The current system of mortgage interest support means that 92% of customers get more help than they actually need. To ensure that Support for Mortgage Interest (SMI) is better targeted we will reduce the rate from 1 October 2010 from 6.08% to the Bank of England average (currently 3.67%).
Disability Living Allowance

Disability Living Allowance (DLA) was originally designed to give those with severe disabilities extra help so they could live with dignity and independence in their own homes. While we are absolutely committed to supporting vulnerable disabled people, over the last decade the system has become open to abuse and the numbers claiming has steadily increased. In just eight years the numbers claiming DLA have risen by more than half a million.

DLA awards can be decided on the basis of self-reporting of need and, although medical assessments are sought for certain awards, these are not mandatory. We believe support must be offered on the basis of genuine need.

That's why we're taking the decision to reassess everyone of working age on DLA, and ensure everyone in the future goes through a proper gateway to claim the benefit.
Lone parents

There are still almost 700,000 lone parents claiming some form of Income Support without any obligation to look for work. Currently lone parents are expected to start seeking work when their youngest child is seven years old – we will lower this to when their youngest child is five years old. Our Jobcentre Plus advisers will work closely with the parents using their current discretionary powers to ensure that these obligations take into account the school hours of their children.
Sure Start Maternity Grant

As part of making the system fair to all families, the Sure Start Maternity Grant of £500 will now be made payable to the first child only. The grant was designed to help with the costs of having a baby – such as buying a pram or cot – yet it was payable for every child and cost the country £73 million a year. Working families will often make use of a pram or cot for a second or third child and we would expect families on benefits to do the same.

[Here is a link to the DWP website.]