Last week, the highly anticipated welfare reform White Paper, “Universal Credit: welfare that works”, which outlines plans to introduce legislation to transform the benefit system by creating a new Universal Credit. The government’s White Paper proposes a Universal Credit as an integrated working age credit providing a basic allowance benefit allowance credit with additional elements for children, disability, housing and caring that will support people both in and out of work. It will replace Working Tax Credit, Child Credit, Housing Support, income based Jobseekers Allowance and income related Employment and Support Allowance.  The government also proposes to place a cap on the maximum amount of Universal credit payable when combined with Child Benefit and non-universal Credit payments.

Contributory Jobseeker’s Allowance and contributory Employment and Support Allowance, Disability Allowance, Child Benefit, Bereavement Payments, Statutory Sick Pay, Statutory Maternity Pay, Maternity Allowance and Industrial Injuries Disablements will not be replaced but will exist in tandem.

The government’s rationale for this reform is to simplify the social security system and to incentivise people to make the transition into work.  The Government anticipates the impact of the new benefit to lift an expected 350,000 children and 500,000 working age adults out of poverty across the UK as a whole.

A significant feature of the new credit will be the concept of conditionality.  Individuals capable of looking for work will be obliged to do so as a stipulation of receiving benefit .Those failing to do so will face financial sanctions ranging from losing of payment of benefit from between one week to three years.

The Government intends to introduce a Welfare Reform Bill into parliament to give effect to these changes. It is expected that there will be a phased transition with the first claimants expected to enter the system from October 2013 and a staged approach thereafter.

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