In a press conference on new government policies to tackle the coronavirus, the Chancellor Rishi Sunak announced changes to the benefits system. This is what he said, and what it means:
Increasing the Universal Credit standard allowance for the next 12 months by £1,000 a year
The standard allowance for Universal Credit is the monthly baseline of money your household receives from the benefit (it differs, depending on the make-up of your household – if you’re single and 25 or over, for example, it’s £317.82). You then receive additional elements on top of this, such as for children and housing costs.
This change makes Universal Credit a more generous welfare system to those who do, or will, claim it by around £20 a week.
Apparently all this makes the welfare system £7bn more generous – for context, remember £12bn of welfare cuts were announced in 2015 to be implemented by the end of 2020.
Increasing the working tax credit basic element for the next 12 months by £1,000 a year
This applies to those still on the pre-Universal Credit system and will have the same effect as the above reform.
Suspending the minimum income floor for everyone affected by the economic impact of coronavirus
This is essentially help for self-employed people, whose Universal Credit payments are usually calculated on the basis of a minimum income floor – a calculation set at the national minimum wage based on how many hours you’re expected to work depending on your circumstances (in order to assume your earnings are similar to those of a low-income employee).
Removing this means self-employed UC claimants are entitled to higher payments, which, according to Sunak, are equivalent to statutory sick pay for employees (£94.25 a week).
This measure was announced in the Budget on 11 March for those “directly affected by Covid-19” – so it seems this latest announcement is an extension to all those economically impacted.
The next self-assessment tax payments will be deferred from 31 July to January 2021, which will help the self-employed in the immediate term.
Local housing allowance to cover at least 30 per cent of market rents in your area
Local housing allowance is the housing benefit for private renters, calculated based on local rent rates. This will help low-income renters by increasing the amount of rent that can be covered, calculated on the basis of the lowest 30 per cent of local market rents.
For context, when it was first introduced in 2008, the local housing allowance covered the cheapest half of local market rents, before being reduced to the lowest third in 2010 under the Conservative-Liberal Democrat coalition government, and then frozen at 2016 rent levels until it was announced this January that the freeze would be lifted from 1 April (significantly, local housing allowance was not at the time restored to cover a proportion of local rates – just to rise in line with inflation again from its 2016 level).
While these changes provide more relief for current and future benefit claimants, there is still a five-week wait for the first Universal Credit payment, which is bizarre given the priority should be to help people afford to stay indoors immediately.
Those who earn less than £118 a week are also still in a difficult situation, as they are not eligible for statutory sick pay or the contributory branch of Employment and Support Allowance. These low earners, employees having to live on statutory sick pay and self-employed people living on the Universal Credit equivalent, continue to face tough circumstances if they can no longer work.