1 Department for Work and Pensions

Universal Credit & conditionality

UNCLASSIFIED

2 Department for Work and Pensions

Overview

• Recap - scope and design of Universal Credit

• Conditionality framework

• In work conditionality

• Sanctions

• Timetable for implementation

3 Department for Work and Pensions

Universal Credit: Scope

Universal Credit means the following benefits will no longer be needed…

• Income related Jobseeker’s Allowance

• Income related Employment and Support Allowance

• Income Support (including SMI)

• Child Tax Credits

• Working Tax Credits

• Housing Benefit

• Social Fund (budgeting loan elements)

But the following benefits will still be available…

• Disability Living Allowance (will be replaced by PIP in 2013)

• Contributory Benefits (although earnings rules aligned)

• Child Benefit

• Pension Credit (that will include a Housing Credit to support those who rent, the intention is it will broadly replicate Housing Benefit rules & a new additional amount for children in the Guarantee Credit)

• Carers Allowance

• Council Tax Benefit replacement

UNCLASSIFIED

4 Department for Work and Pensions

Universal Credit: Design

0

100

200

300

400

500

0 100 200 300 400 500 600

Gross Earnings

To

tal N

et

Inc

om

e

Total In Pocket Income

Universal Credit

Payment

Universal Credit: lone parent with two children

Disregard

Taper

UNCLASSIFIED

5 Department for Work and Pensions

• The Welfare Reform Bill sets out:

– four types of work-related requirement

– four conditionality groups

• No “partners” - each adult in a household will be placed into a group according to their individual capability and circumstances.

• Recorded in a claimant commitment

Universal Credit: Conditionality framework

No work-related requirements

Work-focused interviews

Work preparation

All work-related requirements

6 Department for Work and Pensions

In-work conditionality

• Previously … conditional out of work benefits, unconditional in-work benefits

• UC removes division – when should conditionality stop?

• In current system at around £70 per week / £3500 per year

• Under Universal Credit reach of conditionality higher:

– Expected hours of work * NMW

– Single claimant, max is 35 hours * NMW (£210pw)

– Joint claimants, max is 70 hours * NMW (£420pw)

• Enables use of conditionality to drive progression / support retention

7 Department for Work and Pensions

In work conditionality: challenges

• Cost / capacity issues …

– In-work conditionality brings in around 1.5m more claimants

• Evidence …

– Very limited evidence UK / international as to what interventions are effective in driving earnings progression

• Reasonableness …

– Can we require claimants to leave a job to take a different one?

– Impact on employers

8 Department for Work and Pensions

In work conditionality: pilots

• We therefore intend to pilot and evaluate a range of interventions before national implementation

• Key areas we are interested in:

– Requiring effective worksearch action– Interventions to improve employability e.g. mandatory skills referrals– Interventions to support childcare arrangements– Interventions to tackle negative attitudes to further work– Financial incentives

• Within these keen to explore the role that 3rd parties could play in delivery

– Is there a black box model?

• In process of developing long list of possible interventions

• Current aspiration to introduce pilots as soon as possible after UC launch

9 Department for Work and Pensions

Universal Credit: Sanctions

Sanction Applicable to: 1st failure 2nd failure 3rd failure

Higher Level

e.g. leaving employment voluntarily

Claimants subject to all work-related requirements

3 months 6 months 3 years

Medium Level

e.g. failure to undertake all reasonable action to obtain

work

Claimants subject to all work-related requirements

4 weeks 3 months

Lower Level

e.g. failure to undertake particular, specified work

preparation action, failure to participate in a work-focused

interview

Claimants subject to all work-related requirements

Claimants subject to work preparation and work-

focused interview requirements

Open ended until re-engagement followed by

1 week 2 week 4 weeks

Lowest Level

Failure to participate in a work-focused interview

Claimants subject to work-focused interview requirements only

Open ended until re-engagement

10 Department for Work and Pensions

Oct ‘13Apr ‘13 Oct ‘14 Oct ‘15 Oct ‘16 Oct ‘17

Test New claims from out of work customersApr ‘14Feb ‘11

Design & build

New claims from in work customers

“Natural” migrations as a result of changes of circumstances

Managed migrations

Legacy load

JSA, ESA, IS, HB, WTC, CTC

8m6m4.5m2.5m

UC load

When will we deliver Universal Credit?