Budget and benefits 2007 | CPAG

Budget and benefits 2007

01 April 2007
Issue 197 (April 2007)

Simon Osborne describes the main benefit and tax credit provisions in the 2007 Budget, as set out in the Budget Report.

Introduction - the headlines

Budget 2007 was announced on 21 March. Regarding benefits/tax credits, there were increases announced in the rates of child benefit and child tax credit - but not until 2010 and 2008 respectively. (Applause for this was drowned out by the boos that greeted the announcement of an increase in child poverty shortly after the Budget.) Other announcements were mainly in the areas of work, training, and administration and delivery. The full title of the Budget 2007 is Building Britain's long-term future: Prosperity and fairness for families. The full Budget Report is available at www.hm-treasury.gov.uk/budget/budget_07/report.

Children - child benefit and child tax credit

From April 2010, the weekly rate of child benefit for the eldest child will rise to £20 (Report paragraph 5.20. This, say the authors, is in line with the principle of 'progressive universalism'. But earlier the same report says, 'putting all the money into universal child benefit would fail to target support at people who need it most'. The authors evidently like having their cake and eating it.)

From April 2008, the child element of child tax credit will be increased by £150 a year above earnings indexation, so raising it to £2,080 a year (Report paragraph 5.13).


The in-work credit paid to certain lone parents is to be continued in the pilot areas until June 2008. (Report paragraph 4.33. The credit is paid to lone parents who have been on income support for more than 12 months, for their first 12 months back in work. It is a payment of £40 per week; but the report announces that in London it will be increased to £60).

From 6 April 2007, a four-week run-on will apply to working tax credit (Report paragraph 4.66). Basically, this provides a four week extension of entitlement from the day a claimant ceases to work for at least 16 hours a week. (The relevant statutory instrument has subsequently been published - see SI 2007 No.968.) Also from April 2008, the income threshold at which working tax credit is received in full will increase by £1,200 to £6,420 a year, and the rate at which tax credit awards are withdrawn (i.e., the percentage of excess income used to reduce the award) will increase by 2 per cent to 39 per cent (Report paragraph 5.15).

Local Employment Partnerships are to be drawn up between some large retail employers and Jobcentre Plus. The idea is to support benefit claimants into work. Measures will include things like 2-4-week work trials; increased subsidised employment places in the New Deal; pre-employment training programmes; employee mentoring of long-term benefit claimants to help them prepare for work and reviews of application processes. (Report paragraph 4.18. No dates are given.)


The Government is to consider the incentives given to Jobcentre Plus and the Learning and Skills Council to work together on longer term support and retention and advancement, and in the summer is to publish plans in response to the Leith Review of Skills, published on 5 December 2006 (Report paragraphs 3.107 and 4.11.)

In the New Deal for Young People, the Government is to test the impact of restricting the choice of options for those who already have the basic levels of skills needed to compete in the labour market, and of enabling the low-skilled to return to mainstream education and training leading towards a first level 2 qualification, ending the separate Full Time Education and Training provision procured by Jobcentre Plus (Report paragraph 4.15; no dates are given).

Activity Agreements for 16 and 17-year-olds not in education, employment or training and in receipt of JSA for severe hardship are to be introduced. The idea is to help the claimants to re-engage, and take up their statutory right to an appropriate place in education or training, or find a job with training. (Report paragraph 5.23. No dates or specific pilot areas mentioned.)

In London, the Government is to trial short, work-focused approaches to provide training in English as a second or other language (ESOL) in the London Cities Strategy pathfinders for parents on benefits or tax credits (Report paragraph 4.39; no dates are given).

Administration and delivery

In housing benefit reform, the Government is investing in further IT development to: improve information gathering processes in Jobcentre Plus and The Pension Service; develop enhanced data links between the DWP and local authorities, and extend the collection of fraud and data error (Report paragraph 4.57; no dates are given). Also, the Government intends to work closely with local authorities on future structural changes to housing benefit arrangements for temporary accommodation. The idea is that identifying and separating out reasonable costs for the rent and management of temporary accommodation will, 'improve transparency and value for money'. (Report paragraph 4.59. No dates are given, although the work is intended to contribute to the Government's 2010 target to reduce the number of households in temporary accommodation.)

On benefit simplification, a package of 'alignment measures' is to be introduced. This will 'streamline' rules on: benefit payment periods; the backdating period for Disability Living Allowance and Attendance Allowance forms; the treatment of rental income, and termination payments (Report paragraph 4.58; no dates are given).

Although unconnected to any specific new measure announced in the Budget, the Report also reveals that the roll-out of the Jobcentre Plus network is now almost complete, with over 850 out of 865 sites rolled out (Report paragraph 4.9) More widely, the Report states that the principles of welfare reform over the coming years will include 'a personalised and responsive approach' (as exemplified in the New Deals); 'joined up' delivery, making use of public, private and third sector expertise, and 'devolution and local empowerment', in which regions, cities and localities, 'play an important role in identifying strategic priorities and delivering solutions' (Report Box 4.1, following paragraph 4.7).

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