Budget 2014

Dear colleague,

As one of DWP's key stakeholders, please find below a digest of DWP measures announced in today's Budget.

The Chancellor has set out two key changes to the welfare system, to promote work and personal responsibility and ensure welfare expenditure is more sustainable in the future. These will:

1. Put expenditure on a long-term sustainable footing by capping welfare spending, and ensure that increases in spending do not go unchecked.

2. Support hardworking families by providing tax-free childcare for working families not already receiving support through tax credits, with support for 20% of costs up to £10,000 for each child under 12.

Other DWP measures in the Budget include:

· An increase in the Carer's Allowance income disregard from £100 to £102 per week. Over 1000 people will benefit from the increase.

· The extension of temporary measures to increase Support for Mortgage Interest for working-age claimants. Until 31 March 2016 the waiting period remains at a shortened period of 13 weeks (vs. 39 weeks) and the working-age capital limit remains at the higher £200,000 limit (vs. £100,000).

· Confirmation that a 7 day waiting period will apply in ESA as well as JSA and that this will be introduced in October 2014. This measure was announced at Spending Round 2013.

· A new scheme which will allow pensioners to top-up their additional State Pension by paying a new type of voluntary National Insurance contribution, called a Class 3A.

Several measures building on the government's welfare reform programme also come into force from April 2014, including:

o The 1% uprating of working age discretionary benefits and tax credits (for a further two years), Child Benefit (for two years) and Local Housing Allowance (for two years – with exceptions)

o Help to Work

o Opening Jobcentres to 16 and 17 year olds

o Measures to strengthen the responsibilities placed on jobseekers and Lone Parents claiming income support

Two pilots will also begin in the autumn: the first gives support for 18-21 year olds without English or Maths at level 2; the second provides work related activity including skills support, for 18-21 year olds unemployed at 6 months.

Further information on key DWP measures:

Welfare cap

Welfare spending accounted for 29% of total government managed expenditure in 2013/14. Despite this, it has not been subject to firm controls and has been allowed to increase significantly in real terms over the last two decades.

· The welfare cap will apply to all benefits in AME, with the exceptions of the state pension and JSA and its passported Housing Benefit (HB).

· The level of the welfare cap has been set at the level of the OBR's forecast for spending in scope of the cap. This amounts to £119.5bn in 2015/16, £122.0bn in 2016/17, £124.6bn in 2017/18 and £126.7bn in 2018/19.

· There will be a 2% forecast margin in all years of the cap.

· The Government has laid before Parliament a draft of the amended Charter for Budget Responsibility that will ensure the government is responsible to Parliament for setting and living within the cap.

Migrants Access to Benefit measures

The Budget confirms 3 measures – announced by the Prime Minister in January – to protect the UK's benefit system and discourage people who have no established connection with the UK from migrating here, unless they have a job or an imminent prospect of one. These are:

1. A 3 month residency requirement for claiming Jobseekers Allowance. This has been in force since 1 January 2014. It impacts on most EEA and non-EEA jobseekers, including returning GB nationals.

2. From 1 January 2014 EEA migrants are only eligible to claim Jobseekers Allowance for 6 months, unless they have genuine prospects of work. This measure complements Home Office amendments to immigration legislation creating a statutory presumption that unemployed EEA migrants will lose their right to reside in the UK after 6 months.

3. For new claims from 1 April 2014, EEA Migrants classed as 'Jobseekers' and who are entitled to income-based Jobseekers Allowance will no longer be entitled to Housing Benefit.

Support for Mortgage Interest (SMI)

Since January 2009, new claims for SMI from working-age claimants have been subject to a 13 week waiting period and a capital limit of £200,000 as a temporary recession measure due to end March 2015. The Chancellor confirmed extension of SMI for a further 12 months until 31 March 2016.

ESA waiting days

The Chancellor confirmed the introduction of a seven day waiting period for new claimants for Employment Support Allowance, bringing it into line with the changes previously announced for JSA. This will take effect from October 2014

This removes a perverse incentive for claimants to apply for ESA rather than JSA, in order to gain 4 extra days pay. As claimants can self-certify sickness for the first 7 days of a claim, it would be very difficult to prevent claimants from exploiting this without building in complex new processes.

Increase in Carer's Allowance earnings threshold

Carers cannot earn over a prescribed earnings limit, currently set at £100 a week, net of allowable expenses. The earning limit has not been increased since 2010. The Chancellor announced an increase in the prescribed earnings limit to £102.

UC childcare costs

The Budget announced that the Government will offer all families on Universal Credit childcare support up to 85% of their actual costs – an increase from the current rate of up to 70%.

The increase in support will provide a much clearer work incentive for families to increase their hours and work their way out of poverty. More and more families – especially women – will find that it pays to get a job, from taking the first few shifts back at work, right up to working full-time.

Class 3A Voluntary National Insurance Contributions (vNICs)

The Chancellor announced a new scheme in the Autumn Statement, which will allow pensioners to top-up their additional State Pension by paying a new type of voluntary National Insurance contribution, called a Class 3A. The single-tier pension to be introduced in 2016 will be particularly beneficial to groups such as women and self-employed who have poor State Pension outcomes under existing rules due to low levels of additional State Pension entitlement.

Class 3A will provide people in those groups, who reach State Pension age before 6 April 2016, with the opportunity to pay for extra additional State Pension of up to £25 per week, if they wish to do so. This will help pensioners who have savings and want to boost their state pension income in a way that protects them from price inflation and provides them with an income for life. The policy has been scored by the OBR at this Budget.

The full Budget and supporting documents can be found on Gov.UK.



Best regards,

DWP Strategic Engagement Team