Universal credit: recent rule changes | CPAG

Universal credit: recent rule changes

22 December 2015
Issue 249 (Dec 2015)

Simon Osborne describes a number of new regulations which make some important changes to the universal credit (UC) rules.

Work allowances

From 11 April 2016, the rules on UC work allowances are changed – to ‘simplify’ them, according to the official description, but in reality also to make them far less generous in a number of cases. There is no transitional protection. The result is a reduction in what is, in effect, the UC earnings disregard: once earnings exceed the work allowance, UC entitlement is reduced by 65 per cent of the excess.

The rules are amended in two ways. Firstly, the claimant groups who may get any work allowance at all are reduced so as to restrict eligibility to those who are responsible for a child (including a ‘qualifying young person’) and those who have limited capability for work. If a claimant(s) does not satisfy one or both of those conditions, s/he will not be eligible for a work allowance at all.

Secondly, the levels of the work allowances themselves are considerably reduced in some cases. From 11 April, they will be set at £192 per month for those with the housing element included in their UC, and £397 per month for those without a housing element included. By way of comparison, the current lower work allowance (for those with the housing element included) is, for example, £111 per month for claimants without a child, but as much as £263 per month for a single person with children; and the higher work allowance (for those without a housing element included) is currently £111 per month for claimants without a child, but as much as £734 per month for a single person with children.

The changes are made by amendment regulations.1 The Explanatory Memorandum to those says that they are to meet ‘certain commitments made by the Government in the 2015 Summer Budget’, by ‘simplifying’ the range of work allowances. No explanation is given for the reduction in levels, but (no doubt mindful of the severe reduction in UC for some in work) it is stated that ‘work incentives within Universal Credit will continue to be provided through the single taper rate which ensures that Universal Credit reduces gradually as a claimant’s earnings increase.’

More in the ‘lobster pot’

Under what is widely referred to as the ‘lobster pot’ principle, claimants who become entitled to UC generally remain so, even though a later change of circumstance (eg, becoming ill and having limited capability for work) means that they would no longer satisfy the ‘gateway’ conditions for making a claim in the first place.

However, claimants who instead actually stop being entitled to UC may, depending on exactly what has changed, not be included in the ‘lobster pot’, and may instead be entitled to the so-called ‘legacy’ means-tested benefits that UC replaces.

From 16 November 2015, rule changes ensure that claimants who stop being entitled to UC due to excess earnings, and are within the six-month ‘re-award’ period in which they can resume entitlement without actually having to reclaim UC, cannot claim ‘legacy’ benefits.2 As rules already excluded them from claiming income-based jobseeker's allowance or income-related employment and support allowance in this situation, the amendments specifically stop them from being able to claim income support, housing benefit or tax credits.

In short, claimants who lose entitlement to UC because of excess earnings are in effect in the ‘lobster pot’ for at least six months. The restriction on claiming legacy benefits during the six-month ‘re-award’ period also applies where UC has been claimed but is not entitled due to excess earnings. The changes do not apply in the UC ‘digital service area’.

Passporting to health benefits

UC’s role as a ‘passport’ to various other entitlements is evidently still undergoing consideration but, in England at least, change has begun. There, from 1 November 2015, it is no longer the case that UC entitlement is a passport to exemption from NHS costs (including prescriptions, dental care and travel costs) in all cases. Instead, an earnings threshold applies so that to qualify for exemption, the UC claimant must have monthly earnings below a certain level.3

Those who do not have children and are not entitled to a limited capability for work (LCW) or limited capability for work-related activity (LCWRA) element will be exempt if they have monthly earnings of £435 or less; those who have children or an LCW or LCWRA element will be exempt if they have monthly earnings of £935 or less. Transitional protection applies in cases where the cost arose before 1 November and a claim under the former arrangements was not made before that date. The Explanatory Memorandum to the amendments says that although the lower and higher thresholds have been set by comparison with, respectively, entitlement based on means-tested benefits and tax credits in mind, it is expected that once UC is fully rolled out, there will be around 604,000 people gaining entitlement to exemption and 596,000 losing entitlement.

Help with NHS costs under the low-income scheme remains possible.

Carers, childcare and others

Various changes are made under a set of miscellaneous amendments.4 From 5 November, where a carer gets carer’s allowance (CA), a different carer is not entitled to the carer element of UC in respect of the same disabled person – the carers may choose whether it is CA or the carer element that is paid. Also, where a carer gets the carer element as part of her/his UC, the disabled person cannot get a severe disability premium included as part of her/his means-tested benefit. (It should be noted that currently carers are, in any case, currently excluded from the gateway conditions for making an initial claim for UC, and these amendments do not change that.)

From 11 April 2016, as expected, the maximum support in UC for childcare costs is increased to 85 per cent of eligible costs (up from 70 per cent), up to a maximum of £646.35 per month for one child and £1,108.04 for two or more children.

Among various other changes, in rules regarding work-related requirements, sanctions and recoverability of hardship payments, weekly earnings are to be converted to monthly earnings, so as to bring the rules into line with those providing for monthly assessments and awards of UC.

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

  • 1. The Universal Credit (Work Allowance) Amendment Regulations 2015, SI No.1649
  • 2. The Universal Credit (Transitional Provisions) (Amendment) Regulations 2015, SI No.1780
  • 3. The National Health Service (Exemptions from Charges, Payments and Remission of Charges) (Amendment and Transitional Provision) Regulations 2015, SI No.1776
  • 4. The Universal Credit and Miscellaneous Amendments Regulations 2015, SI No.1754