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At the heart of this legislation are two key measures – the creation of a 'universal credit' and a budget cut of £18bn
The welfare reform bill, due for its second reading at the House of Lords on 13 September, is the biggest reshaping of the welfare state in six decades. At the heart of the radical bill are two key measures. One is to collapse almost all the subsidies paid to poor people – ranging from income support to housing benefit – into a new universal credit. This aims to remove the benefit traps that see some people lose 90p in every extra pound they earn as means-tested benefits are withdrawn. The second is to pay for this by cutting £18bn from the welfare budget over the next four years. Given the size and scope of the bill, almost no group has been left untouched by the radical changes that the government is pushing through. The most contentious are:
Childcare
The OECD says Britain has some of the most expensive childcare in the developed world and given the bill's emphasis on making work pay, there has been astonishment at the government's slashing of the cash made available to working parents under the bill. Parents used to be reimbursed for up to 80% of £300 a week for childcare costs – so they could recoup up to £240 for two or more children, depending on their income. The government is considering two options under the universal credit, beginning in 2013, that would further reduce childcare support. The first would mean parents could claim no more than £150.50 a week; the second would give them back just £136. This appears not to pass the "family test" that David Cameron said last month would apply to any new policy to ensure Britain was the most family-friendly country in the world.
Free school meals
Under the old system a child would get free school meals if the parents were on certain benefits, such as jobseeker's allowance. However, the universal credit system does not distinguish between those in or out of work. Despite the bill having been passed through parliament there is still no level of benefits set below which children will receive free school meals.
End of the piggy-bank welfare state
One of the most significant but little-heralded changes is that the welfare state should no longer be regarded as a piggy bank. In the past the public were told that by paying into national insurance, they would be guaranteed benefits should they fall on hard times. Instead, the government will limit its new "employment and support allowance" to a year for those who have been assessed as capable of being able to be work-ready. This single change saves more than £5bn. It will affect 700,000 people, according to the government's own impact assessment, among them 7,000 cancer patients who could see cuts of up to £94 a week. Although Labour leader Ed Miliband and Cameron clashed over the issue, there's been no stepping back from the government.
Underoccupation
Live in the north and have a home with a disabled person which has an unused bedroom? Then you stand to lose more than £500 a year in housing benefit. In one of the most draconian welfare cuts of recent years, 670,000 households – of which 430,000 are home to a disabled person – will be asked to make up the difference between a shrinking welfare payment and their rent for the first time in decades. About a quarter of all households affected are in the north.
Randeep Ramesh
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