Proposed Changes to Universal Credit
The Institute for Fiscal Studies (IFS) has proposed that council tax support for working-age households in England be integrated into universal credit. This move, aimed at simplifying the welfare system, could strengthen work incentives for millions of claimants. The proposal comes as the government prepares for an upcoming uprating of universal credit payments in April.
Currently, council tax support has been locally designed and administered by English councils since 2013–14. This has resulted in a variety of schemes with differing levels of generosity and eligibility rules, leading to complexities for claimants. The IFS argues that integrating the support into universal credit could reduce complexity for claimants and administrative burdens for councils, though it also notes that reforms could create some financial risks.
Since the localisation of council tax support, the overall value of working-age support in England has fallen by approximately £630 million. This reduction is partly attributed to cuts in central government funding. Consequently, the disposable incomes of the poorest households have decreased by an average of £106 per year, or about 1%. Some councils have adopted ‘banded’ schemes, where entitlement drops sharply when incomes cross certain thresholds, potentially creating high marginal tax rates that discourage work.
As of now, around 8.3 million people on universal credit are set to receive an uprating in April. However, it is important to note that universal credit payments are made monthly in arrears, meaning many claimants will not see the increase until June. The standard allowance of universal credit will rise in April, with some households potentially experiencing gains of up to £750 a year.
In addition to the changes in universal credit, the rates for Personal Independence Payment (PIP) and Adult Disability Payment (ADP) will also increase from April. This adjustment aims to improve support for individuals facing extra costs due to disabilities or long-term health conditions.
Despite the positive outlook for many, the IFS has highlighted that the LCWRA (Limited Capability for Work-Related Activity) element for new claims is being reduced compared to previous support designs. This could affect the level of support available to new claimants who are unable to work due to health issues.
As the April uprating approaches, officials have indicated that most people will see the uprated universal credit in June. For instance, if a claimant’s assessment period runs from 15 April to 14 May, the uprating will apply to that specific period. However, the delay in receiving the increased payments has raised concerns among recipients, as many will not feel the financial benefits until well after the changes take effect.
The April uprating is viewed as a positive development for millions of universal credit recipients, but the timing of the increase has sparked discussions about the need for more immediate support mechanisms. As the government considers the IFS’s recommendations, the potential integration of council tax support into universal credit remains a topic of significant interest and debate.