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Welfare Reform on the Web (June 2010): Social security - UK

21st-century welfare: one all-purpose benefit and a pension delay

R. Bennett, J. Sherman & S. Coates

The Times, May 27th 2010, p. 6

Iain Duncan Smith, the Work and Pensions Secretary, is putting together plans to link retirement age to life expectancy. He has also asked officials to 'see how far they can get' in replacing the current 51 benefits to streamline the social security system.

Families on 100,000 a year in benefits

C. Hope

Daily Telegraph, May 28th 2010, p. 16

It is estimated that 670,000 households are eligible for benefits and tax credits worth more than 15,600 per year. Of those, 50,000 households are able to claim benefits worth more than 26,000 a year. Average pay is 25,500 a year. Other figures suggest that almost all of the 2.6m Incapacity Benefit claimants could be fit for work. The new Work and Pensions Secretary, Iain Duncan Smith has unveiled reforms, saying that the country cannot afford to go on in this way.

Local Housing Allowance

Work and Pensions Committee

London: TSO, 2010 (House of Commons papers, session 2009/10; HC 235)

The Local Housing Allowance (LHA) is a way of calculating entitlement to Housing Benefit for customers living in the private rented sector. The aim of the LHA is to give customers more choice and responsibility over their housing needs. LHA rates are set locally for each property size according to the number of bedrooms and customers are able to see in advance the maximum amount of benefit to which they are entitled. It makes the benefit much simpler to understand, transparent and easier to administer. The LHA is currently being monitored by the Department for Work and Pensions as part of a two-year review. This inquiry will provide an analysis of how the scheme has worked against its primary objectives of fairness, choice, transparency, improving personal responsibility and financial inclusion, reducing barriers to work and improving administration. Evidence suggests that whilst the objectives of LHA are sound, it is falling short of its original intentions and is in need of urgent review to ensure that those intentions can be met in practice. Particularly in the current economic climate, it is important to increase personal responsibility and financial inclusion and to remove barriers to work.

Making the country work again

R. Wellings

Daily Telegraph, May 19th 2010, p. 16

The dire state of the public finances means that the new Liberal-Conservative Coalition government will have to make substantial cuts in welfare expenditure and attack benefits dependency. The key to reducing welfare dependency is to remove the 'poverty trap' which means that claimants are better off on benefits than doing low paid work. To achieve this, the author recommends that: 1) the income tax burden on lower paid employees should be reduced; 2) Incapacity Benefits should be scrapped and people made to take out private insurance against being unable to work due to chronic health problems; 3) social housing should be a last resort for the homeless; and 4) child tax credits should be paid at a lower rate for workless households.

Management of benefit overpayment debt

Committee of Public Accounts

London: TSO, 2010 (House of Commons papers, session 2009/10: HC 444)

This report examines the Department for Work and Pensions (the Department) on the action it is taking to tackle overpayment and stem the rising trend in benefit debt; improve its knowledge of its client base; and set realistic targets to improve debt collection and reduce write-off. The Department has been successful in improving the effectiveness of its debt identification, referral and recovery procedures, increasing cash recoveries from 180 million in 2005-06 to 281 million in 2008-09. However, yet again, evidence proves that the Department needs to significantly improve how it makes benefit payments. The total amount of money owed to the Department as the result of benefit overpayments is now 1.85 billion and is rising as recoveries are not keeping pace with the increase in referrals. Helping customers avoid getting into debt is important for both the Department and its customers, and the increasing total level of debt reflects the difficulty of recovering money once overpayments have occurred. Overpayments arising from Income Support accounted for over 70% of all debts at 31 March 2008. It is therefore critical that the Department improves its debt prevention procedures and intervenes more directly to check that the circumstances of customers have not changed. It should also increase its knowledge of customers, such as by risk profiling. In 2007-08, some 9.3 million of small overpayments below 65 were written off because the Department considered them too small to justify the cost of recovery action. But the Department does not distinguish between different types of debtor or different recovery routes in assessing whether the costs of recovery are likely to outweigh the benefits. Moreover, the Department does not have a reliable means of verifying what level of repayment its debtors can afford and this process is open to abuse. It has begun to assess the feasibility of selling off some or all of its debt but would need to safeguard the welfare of vulnerable customers in any future sale. The Department has been slow to improve the quality of its management information. It needs to benchmark performance more actively with the private sector and assess the relative cost effectiveness of different recovery processes.

The real rent scandal

L. Phelps

Roof, May/June 2010, p. 46-47

Many households in private rented accommodation live in areas where rents far exceed the local housing allowance (LHA) rate. As many as 48% of LHA claimants face shortfalls between their benefit and their rent averaging 23 per week. This is a huge amount for households to find when they are struggling on means-tested benefits, which can easily pitch them into rent arrears, eviction and homelessness.

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