Welfare reform in 2013

29 April 2013
Issue 233 (April 2013)

2013 is a landmark year in welfare reform. Simon Osborne outlines the main changes.


2013 sees the introduction of two major new benefits and the beginnings of the abolition of the present structure of the means-tested benefit system. Alongside this are a number of developments regarding claims, payments and appeals.

Apart from a 1 per cent increase to most working-age benefits and tax credits, the major changes are:

  • introduction of universal credit (UC);
  • introduction of personal independence payment (PIP);
  • abolition of council tax benefit (CTB) and introduction of localised council tax support;
  • abolition of community care grants and crisis loans from the social fund (SF) and replacement with localised support;
  • replacement of budgeting loans and interim payments;
  • introduction of a ‘benefit cap’;
  • introduction of local housing allowance (LHA) size criteria for housing benefit (HB) in the social rented sector (the ‘bedroom tax’);
  • introduction of a mandatory revision stage before appeal;
  • ‘automatic’ recovery of overpayments.

Universal credit

UC is a major new means-tested benefit that, when introduced, replaces entitlement to means-tested benefits and tax credits, initially for new claimants only but eventually (from April 2014, on a gradual basis) for all claimants.

The detailed rules on entitlement,1claims and payments2 and decisions and appeals3 are all now finalised. Along with the introduction of UC, the jobseeker’s allowance (JSA) and employment and support allowance (ESA) regulations are remade so that under the UC system JSA and ESA are in effect contributory only benefits. The sanctions regime for contribution-based JSA and contributory ESA is aligned with the UC sanctions regime, with the result that when under the UC system, a high-, medium- and low-level sanctions regime applies in UC and contribution-based JSA, and a low-level regime in contributory ESA.4

UC will be introduced for certain new claimants into ‘pathfinder’ pilot areas in Ashton-under-Lyne from 29 April 2013 and Wigan,Warrington and Oldham from July 2013. Then, from October 2013, it will start to be introduced for new claimants in other areas.5 At present, the new claimants affected must be completely ‘new claimants’ (ie, not already entitled to means-tested benefits or tax credits) who are single, aged 18 or over and under 60 and six months, and be fit for work (and not entitled to disability living allowance – DLA). It is not yet known whether such personal criteria will apply in the early phases of the roll-out of UC from October 2013, although it may well be, as it is expected that the roll-out will be applied to unemployed claimants first.

When a claimant is affected (ie, when s/he comes under the UC system), s/he will no longer be able to make a new claim for means-tested benefits (income-based JSA, income-related ESA, income support or HB) or tax credits. No details are presently available about this process; the intention is that by April 2014 it will have been introduced for new claimants everywhere.

Between April 2014 and October 2017, the intention is to transfer existing claims of means-tested benefits and tax credits to claims for UC.

Although pension credit is not in itself replaced by UC (ie, it will still exist for people not entitled to UC because they are of pension credit (PC) age), at time of writing it was expected that at the point a couple, with one member below PC age but the other of PC age, come under the UC system, then they will no longer be able to make a claim for PC and must claim UC as a couple instead.

Universal credit in 2013 and after

April and July 2013: Introduced in pathfinder pilot areas for certain new claimants

October 2013 to April 2014: Introduced nationally for new claimants from October 2013, starting on a small scale in every region across Britain

April 2014: No new claims for tax credits (except from people over pension credit qualifying age)

April 2014 to October 2017: Existing claimants transfer to UC

Personal independence payment

PIP is a new non-means tested benefit for people with disabilities, which replaces DLA for claimants aged 16 or over, initially for new claimants only but eventually for all claimants. Attendance allowance is unaffected. At present, DLA will remain for children aged under 16.

PIP will be introduced for new claimants initially from 8 April 2013 in certain postcode districts in northern England. From June 2013, new claims will be taken in all parts of Britain. From October 2013, a transfer of existing claims for DLA to claims for PIP will begin. Initially it will involve claimants whose fixed-term award is about to expire or who report a relevant change of circumstances. From October 2015, the process will involve the DWP contacting claimants to transfer their claim. The entire process is due to be complete by the end of 2016.

The detailed rules on entitlement,6 claims and payments7 and decisions and appeals8 are all now finalised. Also, consequential rules (mainly including reference to PIP where current rules refer to DLA) have been introduced regarding other benefits.9

Abolition of council tax benefit

CTB is abolished from 1 April 2013. Its replacement is in the form of schemes of council tax support (not benefits) administered by local authorities. There is a national scheme in Scotland10 (based closely on CTB rules). There are local authority schemes in England and Wales, which may vary from authority to authority but must observe certain rules, in particular regarding claimants of pension age;11there is a default scheme that applies where the local authority has not created its own scheme.12

Abolition of community care grants and crisis loans

Community care grants and crisis loans for emergency or disaster are abolished from 1 April 2013.13 (Applications made before that date can still be decided.) Their replacements are payments from local authorities (sometimes referred to as ‘local welfare provision’). Rules in the local schemes may vary from those that applied to community care grants and crisis loans.

In England, LAs have set up their own schemes, which vary greatly from area to area.

In Scotland, responsibility for support previously offered through community care grants and crisis loans (other than alignment payments) is devolved to the Scottish government from April 2013 and local authorities will administer the new scheme, called the ‘Scottish Welfare Fund’.

In Wales there is a national Discretionary Assistance Fund, which will provide for grants to assist with independent living and other emergency assistance.

Replacement of budgeting loans and interim payments

Budgeting loans continue for claimants who are not yet in the UC system – ie, are in receipt of, or can still make claims for, means-tested benefits. However, in the UC system, budgeting loans are replaced with ‘budgeting advances’ of UC – ie, advance payments of UC rather than a social fund payment. The rules do not specify that the advance must be for a specific purpose, but there is an earnings condition and a recovery condition. There is no right of appeal.14

Also available from 29 April 2013, as a replacement for the old ‘interim payments’ of benefit, are short-term advances of benefit (sometimes referred to just as ‘advances of benefit’). In effect, these also take the place of crisis loans for delay in assessing/paying benefit. There is a requirement for ‘financial need’, meaning a ‘serious risk of damage to the health of safety’ of the claimant or any member of her/his family. There is no right of appeal.15 (It is understood that, for child benefit and guardian’s allowance, HMRC will be retaining interim payments.)

The benefit cap

From 15 April 2013, a process of introduction of a benefit cap begins.16 The cap limits the amount a claimant can receive in benefits and tax credits. Initially, this is via a reduction in the amount of HB the claimant can receive once her/his total benefit entitlement is above a threshold of £500 a week for couples and lone parents, or £350 a week otherwise.

The cap is introduced in April in certain London local authorities (Bromley, Croydon, Enfield and Haringey), before being extended from 15 July 2013 to all other authorities by October 2013.

From October 2013, where a claimant is on UC, the cap is applied through UC – ie, and not HB. The threshold for UC is £2,167 a month for couples and lone parents and £1,517 otherwise.

Exceptions to the cap apply for claimants in receipt of certain benefits (including working tax credit or a number of disability benefits including ESA with the support component, attendance allowance, DLA, PIP and industrial injuries benefit.) Exceptions also apply if the claimant is within a ‘grace period’ of 39 weeks (nine months for UC) where the claimant or her/his partner was working and certain other conditions are satisfied. Where the claimant is in exempt accommodation, HB is not taken into account.

The ‘bedroom tax’

Regulations providing for this come into force on 1 April 2013.17They provide for a reduction in the social rented sector of eligible rent (by 14 per cent or 25 per cent) where the number of bedrooms exceeds the claimant’s size criteria. The government has said that it will define a ‘bedroom’ as that defined as such by the landlord.18

The rules have been amended so as to allow for an extra bedroom where the claimant is an approved foster carer or a parent of a member of the armed forces.19 Also, the government has dropped its further appeal in the Gorry case against the decision in Burnip v Birmingham CC and Anor and Gorry v Wiltshire CC and Anor [2012] EWCA Civ 629 (15 May 2012). Therefore, claimants who were able to show, following Gorry, that extra bedrooms were required for disabled children who could not share should be exempt from the restriction. Official guidance specifically excludes applying this ‘Gorry’ exception to other cases (eg, those involving disabled adults who cannot share20), although the point is arguable – note that the rules already provided for an extra room for an overnight carer.

Mandatory revision before appeal

For UC and PIP, where a claimant is so notified, then s/he must have a revision of a decision before it can be appealed to the First-tier Tribunal.21 The official intention is to introduce this for other benefits (though not for HB) from 28 October 2013.

‘Automatic’ recovery of overpayments

From 29 April 2013, overpayments of UC, contribution-based JSA and contributory ESA will always be recoverable – ie, even where not caused by failure to disclose or misrepresentation.22 (At time of writing, this would appear also to apply to overpayments of income-based JSA and income-related ESA, although it was understood it was not the official intention to apply this rule to them.)

2013 and after – a welfare reform timeline

1 April 2013

  • LHA size criteria introduced in social rented sector (‘bedroom tax’)
  • CTB abolished; local council tax support introduced
  • Local authority payments replace SF community care grants and crisis loans

8 April 2013

  • PIP introduced for new claimants in parts of northern England
  • PIP – introduction of mandatory revision before appeal

29 April 2013

  • UC – introduction of mandatory revision before appeal
  • UC introduced for certain new claimants in Ashton-under-Lyne pathfinder and in July 2013 in other pathfinders; JSA and ESA become contributory only benefits for claimants affected; sanctions regimes unified.
  • Short-term advances replace interim payments; for UC; budgeting advances replace budgeting loans
  • Introduction of automatic overpayment recovery in UC, contribution-based JSA and contributory ESA

June 2013

  • PIP introduced for new claimants nationally

April – September 2013

  • 15 April – benefit cap via housing benefit introduced (certain London local authorities in April; elsewhere starting from 15 July; complete by end September)

October 2013

  • Certain people on DLA begin transfer to PIP
  • UC begins to be introduced for new claimants nationally – gradual process; likely to be for unemployed claimants first
  • Benefit cap via UC introduced

28 October 2013

  • Mandatory revision before appeal expected to be applied to other benefits

April 2014

  • Existing claimants of means-tested benefits and tax credits begin transfer to claims universal credit


  • Everyone else on DLA will start to be contacted to apply for PIP (expected October 2015)


  • PIP expected to have replaced DLA (except for children aged under 16) – expected late in year


  • Transfer of existing claims of means-tested benefits and tax credits due to be complete (by October)

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. The Universal Credit Regulations 2013, SI No.376
  • 2. The Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support Allowance (Claims and Payments) Regulations 2013, SI No.380
  • 3. The Universal Credit, Personal Independence Payment, Jobseeker’s Allowance and Employment and Support (Decisions and Appeals) Regulations 2013, SI No.381
  • 4. The Jobseeker’s Allowance Regulations 2013, SI No.378; The Employment and Support Allowance Regulations 2013, SI No.379
  • 5. ‘Universal Credit – Pathfinder update’, DWP press release,28 March 2013
  • 6. The Social Security (Personal Independence Payment) Regulations 2013, SI No.377
  • 7. SI 2013 No.380
  • 8. SI 2013 No.381
  • 9. The Personal Independence Payment (Supplementary Provisions and Consequential Amendments) Regulations 2013, SI No.388
  • 10. The Council Tax Reduction (Scotland) Regulations 2012, SI No.303
  • 11. The Council Tax Reduction Schemes (Prescribed Requirements) (England) Regulations 2012, SI No.2885; The Council Tax Reduction Schemes and Prescribed Requirements (Wales) Regulations 2012 SI No.3144
  • 12. The Council Tax Reductions Schemes (Default Scheme) (England) Regulations 2012, SI No.2886; The Council Tax Reduction Schemes (Default Scheme) (Wales) Regulations 2012, SI No.3145
  • 13. The Welfare Reform Act 2012 (Commencement No.6 and Savings Provisions) Order 2012, SI No.3090 (C.123)
  • 14. Regs 11–18 The Social Security (Payments on Account of Benefit) Regulations 2013, SI No.383
  • 15. Regs 5–10 SI 2013 No.383
  • 16. The Benefit Cap (Housing Benefit) Regulations 2012, SI No.2994; regs 78–83 SI 2013 No.376
  • 17. The Housing Benefit (Amendment) Regulations 2012, SI No.3040
  • 18. House of Commons Hansard, 11 March 2013, column 100W
  • 19. The Housing Benefit (Amendment) Regulations 2013, SI No.665
  • 20. Housing Benefit and Council Tax Benefit Urgent Bulletin U2/2013, 12 March 2013
  • 21. Reg 7 SI 2013 No.381
  • 22. s71ZB Social Security Administration Act 1992