Madeleine Moon MP

Labour Member of Parliament for Bridgend

Welfare Newsletter, July 2015

Welfare Newsletter, July 2015

An update on the government's Welfare and Work Bill and its implications for you and your families.


Welfare Newsletter- July 2015
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Welfare Newsletter- July 2015

On Monday 20th July, the Secretary of State for Work and Pensions introduced the Second Reading of his flagship Welfare Reform and Work Bill. The government had been keen to force through their controversial reforms before the Summer Recess. After a lengthy and acrimonious debate (click here to view) I voted against the Bill. It threatens to reverse the significant progress made by Labour to tackle child poverty in the UK and will have a serious and detrimental impact on the living standards of both unemployed and working families as well as people with disabilities. See below for the details of the government's reforms and how they might effect you.
Tax Credits
The Chancellor's Budget statement in June gave the first indication as to what the Welfare Bill would contain. In the lead-up I received a number of letters from constituents who were deeply concerned about the proposed changes to Tax Credit eligibility. The changes to and reductions in welfare benefits, tax credits and social housing provisions will account for around 70% of the £12-13 billion in welfare savings that the Chancellor has committed to making.

The Bill contains a reduction in the benefit cap from £26,000 to £20,000, a four year benefit freeze and a reduction in the number of people who are eligible to claim Tax Credits. Whereas currently the income threshold for Tax Credits is set at £6420 per year, in the future this will be reduced by £2570 to £3850. The government also intend to limit support through Child Tax Credits to two children for babies born after April 2017.  This also applies to disabled children: although disability premiums will continue to be paid for all disabled children, the Child Tax Credit and the child element of Universal Credit will not be paid for disabled children if they have two older siblings.

I am particularly concerned about this aspect of the Bill; it will have a profound impact on working families, including those who will receive the new National Living Wage. A family could lose over £3000 from their maximum child tax credit entitlement as a result of these measures. The proposal may also have serious implications for the UK's long-term economic outlook.  With an ageing population, we need a growing working-age population who can pay for the care and pensions of the elderly.
Child Poverty
The Bill amends the Child Poverty Act 2010 by repealing Labour's goal to eradicate child poverty and re-defining poverty by abolishing family income as an indicator. It also removes the duty on local authorities reduce child poverty. They are no longer obliged to produce a child poverty strategy, a sustainable communities strategy or to work collaboratively to reduce child poverty. As an alternative measure of disadvantage, the government intend to calculate the number of children in workless households. Whilst unemployment is a significant contributor to child poverty, the government continues to ignore the prevalence of in-work poverty. It is commonplace for two parents to be in full-time employment but still to struggle to make ends meet.
Although housing policy is devolved to the Welsh Assembly Government, the Welfare Bill contains provisions that will affect access to housing benefits and support in Wales. The benefit cap includes housing benefit and because the cap has been arbitrarily set and without reference to average income, it is insensitive to how housing costs vary throughout the country and within a given area. This comes as a further blow to JSA claimants below the age of 21 following the pre-election announcement that they will no longer be entitled to claim housing benefit. There is a real danger that these policies could lead to increased homelessness in Bridgend and throughout Wales, particularly amongst young people.

The proposal in the Budget Statement to freeze Local Housing Allowance (LHA) will make life even more difficult for renters in the private sector, whose rents will continue to out-grow wage inflation. Currently, 39% of those receiving LHA are in work but still struggle to make the rent. The Chancellor has promised additional Discretionary House Payments (DHPs), but they will not be sufficient to make up the gap that the freezing of LHA and the benefit cap will create in family budgets throughout the country.

There is also bad news for home owners. For those who currently struggle to pay the interest on their mortgage, there is help available from government in the form of a grant of up to £200,000 of capital known as an SMI. Under the new legislation, from April 2018 onwards, these payments will be replaced with a loan on which interest will be charged. This could further exacerbate affordability problems and add to the already heavy weight of debt that families must bear. In his Budget Statement, the Chancellor also announced an unnecessary and unwarranted increase in the waiting period in SMI eligibility from 13 weeks to 39 weeks.
Support for Disabled People
Currently, Employment and Support Allowance provides an income-replacement benefit for people whose disabilities impose restrictions on their ability to work. Claimants are also entitled to training and support through WRAG, the Work-Related Activities Group. They are offered help with composing CVs, skills training and assistance with job searching. The benefit of WRAG is that it is sensitive to the different needs associated with a variety of disabilities; its support is carefully tailored to the specific requirements of the individual claimant. 

The Bill effectively abolishes WRAG; in the future claimants will receive the same support as those on Job Seekers Allowance. Income-Related ESA will also be abolished and replaced by Universal Credit, the Limited Capability element of which will also be removed. In short, many of the existing provisions in benefits system that are in place to improve the living standards and employment prospects of disabled people, will be removed by this Bill.

In other areas of the Bill, the government has simply failed to consider the disability dimension of their proposals. The government's stated objective of full employment is not only nebulous and undefined, it also fails to consider how it relates to people with disabilities. Similarly, although the abolition of the SMI grant and its replacement with a loan is likely to hit home-owners who are unable to work, there is no provision in the Bill to soften the impact of the reforms on people with disabilities or life-ending illnesses. 
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