Universal credit – an update

31 August 2012
Issue 229 (August 2012)

Simon Osborne describes recent developments concerning the introduction, main rules and claims and payments arrangements of universal credit.


When introduced, universal credit (UC) will see the start of a major restructuring of the social security and tax credits system. But the change will not be via a ‘big bang’. UC will be introduced gradually (ie, ‘rolled out’), and current claims of the other means-tested benefits will continue for a time. Recently, more detail has been announced about this process. Also, draft regulations have provided a good indication of some of the detailed rules that will apply to UC. Finally, some further detail of transitional protection for former claimants of the other benefits has been revealed.

Universal credit roll-out

Overall, UC will be extended, or ‘rolled out’, nationally between October 2013 and 2017. But a few exceptions and important details regarding new claimants apply.

UC will be introduced in areas of Manchester and Cheshire before October 2013, in an ‘early roll-out’ that will test the process before the more extensive roll-out begins in October. This ‘early roll-out’ will begin in April 2013. Then, UC will go live for new claimants in four areas: Tameside, Oldham, Wigan and Warrington. The DWP says that in these ‘pathfinder’ areas, the process will ‘mirror as closely as possible, but not completely, the launch of Universal Credit in October 2013’. The Department expects that up to 1,500 new claimants will come on stream each month in the early roll-out. Work is continuing to ensure that job centres, local authorities and employers in the Greater Manchester and Cheshire region are ‘geared up’ to support the new UC service.1

The main initial introduction of UC however will be in October 2013. Then, UC will be introduced for new claimants in one district per region. The DWP and HMRC have announced the sites that will deliver the ‘telephony and processing services’ in the first phases of UC introduction from October 2013. The DWP Processing Centres are: Birkenhead, Bolton, Canterbury, Cosham, Glasgow, Sunderland, Wolverhampton and Wrexham. The DWP Telephony Contact Centres are: Bangor, Bootle, Derby, Dundee, Grimsby, Makerfield, Middlesbrough and Paisley. The HMRC sites are: Blackpool (Ryscar House) and Merry Hill Contact Centre. Further sites are due to be announced in spring 2013 and 2014.2

Between October 2013 and April 2014, UC will be rolled out for new claimants nationally. At the end of that process, UC will be a fully nationwide benefit for new claimants. It is understood that the intention is to have closed income-based jobseeker’s allowance (JSA) to new claims by February 2014, tax credits by the beginning of April 2014 and housing benefit (HB), income support (IS) and income-related employment and support allowance (ESA) by the end of April.

That will leave existing claimants of the other means-tested benefits (IS, income-related ESA, income-based JSA and HB, sometimes referred to in this context as the ‘legacy’ benefits) and tax credits. The DWP says they will be transferred, or ‘migrated’, to UC over a four-year period between 2013 and 2017. A DWP briefing note in November 2011 indicated that before April 2014, current claimants ‘migrated’ to UC would be those who had had a change of circumstance (a ‘natural change’) affecting their benefit – for example, finding a job or birth of a first child. From April 2014 (though this may now be June 2014), it is planned that other existing claimants will be migrated to UC (‘managed change’), concentrating at first on those ‘whose work behaviour is most likely to benefit from Universal Credit.’3 Further details were not available at time of writing.

UC roll-out: a timetable

  • April 2013 - UC early roll-out in pathfinder areas in Greater Manchester and Cheshire (new claimants)
  • October 2013 - UC introduced in one district per region across Britain (new claimants)
  • October 2013 – April 2014 - UC rolled out nationally (new claimants, migration of current benefit/tax credit claimants with ‘natural change’ of circumstance)
  • April/June 2014 – end 2017 - Migration of remaining current benefit/ tax credit claimants (‘managed change’)

Universal credit: draft regulations

Draft UC regulations4 for the main UC rules were published on 15 June 2012 and were the subject of a (now typically short) consultation process, with comments due to the Social Security Advisory Committee by 27 July 2012.

A further set of regulations dealing with claims and payments issues for UC as well as other benefits was published at the same time.5 These regulations are referred to here as the ‘draft Claims and Payments Regulations’.

The draft regulations (both the UC and the Claims and Payments) provide some more detail on the skeletal primary rules contained in the Welfare Reform Act 2012 (see the article in Bulletin 227, also the UC factsheet and our publication Universal Credit: what you need to know). Being in draft form, the regulations are of course liable to change. However, they do provide a strong indication of some of the likely detail that will apply to UC.

UC claims and payments

The draft Claims and Payments Regulations with accompanying Explanatory Memorandum include provision for the following.

  • UC ‘must’ in most cases be claimed online. Where accepted, claims may alternately be made by telephone. A recent DWP ‘frequently asked questions’ on UC says that ‘claimants who cannot get online or use a computer will get support to complete their online claim for Universal Credit’ via a ‘high street outlet or via a telephone service’. Face-to-face help will also be available where needed (in July the government announced the first 15 likely local authorities in England who will pilot a face-to-face help with claims service).6
  • There will be no clerical (ie, hard-copy) claim form for UC.
  • For couples, there will be joint claims for UC; both members of the couple must accept a ‘claimant commitment’; the DWP will be able to treat single claims as joint claims for a couple where appropriate.
  • Backdating of UC will be in specified circumstances only (not automatically, and no general ‘good cause’) and limited to a maximum of one month.
  • Payment will be made for each monthly assessment period, and paid monthly in arrears.
  • Joint-claim couples will be able to nominate a bank account for receipt of payment; if not, the DWP will nominate one.

UC main rules

The draft UC Regulations, read with the Explanatory Memorandum, confirm a number of points of broad interest about the UC rules.

  • There will be a habitual residence test, part of which will be the right to reside test (see below for more).
  • There will be a general exclusion from entitlement for people in full-time advanced education. Those excluded from UC entitlement will also include young people in non-advanced education where they count as a ‘qualifying young person’, and someone undertaking a course not considered compatible with her/his expected hours of work or any work-related requirements.
  • However, some full-time (as well as all part-time) students may qualify, including lone parents and couples with a child, foster parents, ‘disabled’ students (see below for more) and, regarding non-advanced education only, a young person without parental support and aged under 21 (or 21 in some cases).
  • There will be standard allowance plus (possibly) various additional elements (see below for more).
  • Capital rules will generally follow those that apply in the existing means-tested benefits.
  • Earnings disregards will be set at different levels for different groups depending on the presence of children, a lone parent or a disabled claimant or partner; there will be an earnings taper probably of 65 per cent.
  • Earnings will usually be assessed over a given assessment period rather than averaged.
  • The benefit cap will eventually be applied via UC – ie, rather than via housing benefit as initially. Initially at least, the cap is to be set at £2,016 per month for couples and lone parents and £1,517 per month for single adults. But there will be no cap in certain situations, including where someone earns equivalent to 16 hours a week at the national minimum wage, is a war widow or widower or gets a specified benefit.
  • A ‘claimant commitment’ must be accepted to get UC (see below for more).

UC and right to reside

It is not certain that the DWP intends the right to reside test to apply to UC in exactly the same way it does currently to means-tested benefits. The Explanatory Memorandum says that ‘it is proposed that EU migrants who are workers or self-employed will be eligible for all elements of Universal Credit. We [the DWP] are currently considering whether EU work seekers they [sic] should also be eligible for all elements, or just the standard allowance’. Also the DWP is ‘currently considering the position in relation to individuals who derive an EU right to reside as the primary carer of a UK national child’.7

UC and disabled students

The draft regulations define a disabled student as someone who is ‘entitled to a disability living allowance or personal independence payment (PIP), and had limited capability for work, or limited capability for work and work-related activity’.8Clearly, there is no intention to repli-cate old income support provisions which did not restrict ‘disability’ to disability living allowance (DLA) cases. Note also the intention to require both receipt of DLA and satisfaction of the work capability assessment – ie, have limited capability for work.

UC standard allowance and elements The draft regulations confirm the intention that there will be a standard allowance or a single claimant or for joint claimants. There will be lower allowance for a claimant aged under 25 or where both members of a couple are aged under 25.

There will also be a child element which can be increased by an amount for a disabled child: a higher amount for a child entitled to DLA care component at high rate or PIP at the enhanced rate or registered blind; or a lower amount for a child entitled to DLA or PIP where the higher amount does not apply.

Other elements that may be included are: a housing costs element, limited capability for work (LCW) and limited capability for work-related activity (LCWRA) elements, a carer element and a childcare costs element. The housing costs element covers ‘rent payments’, ‘owner-occupier payments’ and ‘service charge payments’ (see below for more on housing costs). The childcare costs element is payable if a work condition is satisfied and there are allowable childcare costs: the maximum monthly amount payable is £532 for one child or £910 for two or more.9

UC and the claimant commitment

The claimant commitment will set out the claimant’s responsibilities, the sanctions that may apply for failure to comply with those and notice of the right of appeal against such a sanction.

Claimants will, depending on their circumstances, be assigned to one of four requirements groups. Firstly, those who have ‘no work-related requirements’ at all (to include those who satisfy an earnings threshold, those with limited capability for work-related activity, certain carers, certain pregnancy cases and claimants in certain types of education). Second, those who have only to attend ‘work-focused interviews’ (to include carers of a child aged one to four inclusive, other carers for children including foster carers and certain foster parents). Third, those who have to attend interviews and engage in ’work preparation’ (eg, attend the Work Programme: likely to apply to claimants with limited capability for work); or fourth, those who must engage in ‘all work-related requirements’, including looking for and being available for work (the default category where none of the others apply). Sanctions for non-compliance will be set at three different levels, according to the requirement group.10

Supposed ‘safeguards’ (not all specified in the draft regulations) will include that requirements must be ‘reasonable’ taking into account health, caring responsibilities etc.; that claimants may show ‘good cause’ for non-compliance and that claimants with LCW and a mental health condition will be visited before a sanction is imposed. Hardship payments will be possible in some cases where ‘immediate and most basic’ essential needs cannot be met due to sanction. Appeals will be possible, says the DWP, against ‘any decision to reduce their benefit...within one month of being notified of the decision to sanction.’11

UC and housing costs

The rules on housing costs are significantly different to those currently in place under either HB or means-tested benefit. Some of the main differences are:

  • the housing cost element will be available to both homeowners and tenants (or ‘renters’ as they are referred to in the regulations);
  • homeowners will not be eligible if they are doing any paid work and there will be no linking rules;
  • homeowners will only be ‘treated as entitled’ to UC for the purposes of satisfying the waiting period during periods where they fail the means test for UC and are getting contributory ESA or contribution-based JSA. Temporary absences will be limited to six months, save for those absences due to domestic violence;
  • non-dependant deductions will be made at a single rate, expected to be about £65 per month, and applied where the non-dependant is on a means-tested benefit;
  • the contrived tenancy rules for ‘renters’ have been rewritten and simplified; there are no mandatory fact specific exclusions.

Universal credit: transitional protection

A recently issued briefing note sets out some more detail on the policy.12The basis of the policy is that, on migration from means-tested benefit to UC, claimants will not suffer an immediate cash loss.

The briefing note states that, ‘The Government will provide cash protection to claimants whose Universal Credit award would be less than under the old system, in the form of an extra amount to make up the difference between the old and the new. The maximum amount will be fixed at the point of change...the cash protection amount will not be uprated over time along with the rest of the entitlement, and the protection will stop if a claimant ceases to claim Universal Credit or has to be reassessed for a significant change of circumstances.’ Increases in UC (eg, on uprating) will not increase the total amount paid until the extra amount has been used up.

The following will be regarded as significant changes of circumstance: a partner leaving the household; a sustained (three-month) earnings drop beneath the level of work in the claimant commitment; a sustained (three month) increase in earnings which would lift the claimant out of UC; the UC claim ending; the loss or gain of any elements that make up the UC award – eg, the childcare element or the housing element.

Please be aware that welfare rights law and guidance change frequently. Therefore older Bulletin articles may be out of date. Use keywords or the search function to find more recent material on this topic.

  • 1. Iain Duncan Smith: Early roll out of Universal Credit to go live in Manchester and Cheshire’, DWP press release, 24 May 2012
  • 2. DWP Touchbase magazine, June 2012
  • 3. Universal Credit Briefing Note 15, ‘Managing the build up of claims to Universal Credit’, DWP, November 2011
  • 4. The Universal Credit Regulations 2012 (draft) (the ‘draft UC regs’); see also the accompanying Explanatory Memorandum for the Social Security Advisory Committee
  • 5. The Universal Credit, Personal Independence Payment and Working-age Benefits (Claims and Payments) Regulations 2012 (draft) (the ‘draft Claims and Payments regs’), and accompanying Explanatory Memorandum for the Social Security Advisory Committee
  • 6. Regulation 9 draft Claims and Payments regs; ‘Universal Credit – frequently asked questions’, DWP, July 2012, via www.dwp.gov.uk/policy/welfare-reform/universal-credit; ‘Freud names local authority pilot long-list for Universal Credit’, DWP press release, 20 July 2012
  • 7. Explanatory Memorandum to draft UC regs, paragraphs 17 and 20
  • 8. Regulation 12 draft UC regs
  • 9. Regulations 18–31 draft UC regs
  • 10. Parts 8 and 9 of the draft UC regs
  • 11. Explanatory notes to the draft UC regs, paragraphs 285–290
  • 12. Universal Credit Briefing Note, ‘Transitional Protection’, DWP, 4 July 2012