The Welfare Reform Act 2012: The Housing Benefit Cap - Research Paper Example

 The Welfare Reform Act 2012: The Housing Benefit Cap Introduction The welfare reform act 2012 is a government bill sponsored by Iain Duncan Smith and Lord Freud, both from the ‘Department for Work and Pensions’. The act received Royal Assent early 2012 following agreement by the two houses on the text of the Bill. It initiates a new Universal Credit meant to substitute a good number of existing benefits and put restriction on the overall benefits an individual can demand. The act as well initiates a new dimensional criterion in the social rented sector whereby it affects the means by which residents obtain benefits, in most cases, eliminating the preference of having benefits paid straight to proprietor. This essay is focused to describe one policy in conjunction with the Welfare Reform Act 2012, particularly the Housing Benefit Cap. Further, the essay will describe the stated objectives of this policy and give an explanation on how it intends will achieve them. Moreover, the paper aids to describe the impacts that an economic policy can impose on a public service with a particular focus on the service provided and changes made in the organization or sector. The housing benefit cap (description) The housing benefit cap is a crucial Welfare Reform Act policy that has developed an interest of helping pay the rent for low income people. The rent is paid to proprietors who may be private landlords, a council, or even the housing association. The rules of the Housing Benefit Cap are laid down by the government. The benefit cap is then run and administered by the local boards. It is understood that the rules of the housing benefit cap were changed in the early 2011 and still there are more changes intended to be made. The benefit cap which is announced as part of the government’s insufficiency diminution plan is anticipated to deliver economic savings of up to 290 million pounds in 2013-2014 and 330 million pound in the year period 2014-2015. The housing benefit particularly targets to help those people whose income is low and are either not able to pay their rent or struggle to do so. It does not put into consideration if these individuals are in a position to earn a wage or not but does consider the relevance of their savings and their income. Provided the people are in the bracket of those who need the help of the benefit cap according to its rules, it puts no limits as to who it can help. The people can be helped for a good number of different types of accommodation as provided they pay rent to the proprietor. These include: flats that are either furnished or unfurnished, bedsits, rented houses, rented lodgings, and rented houses. However, the Housing Benefit does not give to the people the benefit to buy or own a home whether for day-day costs or for mortgage payments. Moreover, the Housing Benefit does not cover every expense for the people. For instance, water and heating bills are not covered by the benefit, though it does help to take care of some service costs. It is quite difficulty for one to know that they are eligible to benefit from the Housing Benefit and how it is calculated, but then local councils are in a position and have the responsibility to lay it clear to the people. Generally, it is clearly indicated in the bill that whoever has a low income and his/her savings are below 16,000 pound per annum is eligible to claim the benefit. However, there are a set of factors that determine the amount of benefit they receive. The local council is the one that calculates the amount they receive, and this basically depends on the consideration of income, age, family size, and disabilities of individuals residing in a council property. This therefore implies that the beneficiaries of the Housing Benefit have to keep the council informed of any change of circumstances in the community. The Housing Benefit has a number of other benefits often connected to it – together with benefits, a good number of beneficiaries claim income support for example. On the other hand, there are those who are not entitled to the benefit of the Housing Benefit Cap due to their ineligibility. These are typically the people whose savings are above 16,000 pound per annum. However, they too can be beneficiaries of the Benefit only if they are entitled to receive the certification credit part of the Pensions Credit. Moreover, a number of full-time scholars in particular those who reside in their close relatives or friends’ homes and refuge seekers are also not entitled to benefit from the Housing Benefit. Not even a couple can claim but one of the couple residing together in a council property can claim the benefit. In addition, there is an age limit factor that dictates who earns the Housing Benefit. For instance, any unmarried people whose age falls below 25 years are only entitled to the Housing Benefit for a shared accommodation in one room or a bedsit. This particular rule is however intended to be changed to apply to all people whose age falls under 35 years. The people who are eligible for Housing Benefit get it paid directly into their rent accounts by the Housing Benefit local council. Private tenants however are usually paid by written cheque or by direct charge into a building society account or bank account. Lord Kirkwood of Kirkhope gave a description of relevant parts of the Welfare Reform Act as actually comprising “a straight and fatal attack on entitlement and the idea of entitlement.” As the benefit will firstly be put into practice by “pressuring” the Housing Benefit entitlement, housing firms in the private as well as those in the social rented sectors are highly worried regarding its impending impact on rent evictions, debts, and raising cases of homelessness among those it will affect. The impact is anticipated to be felt by a good number of households. This has provoked worries regarding overcrowding as households are likely to seek cheaper, less suitable, and smaller housing in order to lower their expenses. London councils for instance made call on the government to have a special case consideration on London due to its high rent levels; further it wants to make sure London receives a substantial fraction of financial support for optional housing payments to aid in managing the changes. Richard Capie (director of policy and practice with the Chartered Institute of Housing) said: “The new benefit cap of regarding nonworking people that is set at 500 pound per week does not consider the great variation in housing expenses existing around the UK and is expected to create hard time for households. Calculations reveal that it will be really hard for families to cater for their rents in 20% of communities in England. This will have severe impact particularly in families with children. Greater debts, evictions and arrears should be expected to occur. Most households will be forced to make a choice to reside in marginalized, overcrowded, and in poor conditions in their communities, or will be forced alternatively move away from their originally established networks definitely to poorer areas. Unless the housing element is sensitive to the local housing expenses, it will not only jeopardize and make difficult access to private finance to establish other homes, but also impact on people and have worthless implications on private and social proprietors. Welfare reforms are supposed to have the capacity to last for long and that businesses and individuals have the courage to plan against them. There are fears that the approach to housing expenses in the current plans will not be reliable in terms of sustainability and will therefore require some more changes in near future” (Wendy Wilson 2012). Objectives of the Housing Benefit Cap The key objective of the Housing Benefit Cap is to put limits and boundaries on the sum total of money that a nonworking family unit can receive to largely the degree of average earned wages of working family units, after calculations and deduction of tax and national insurance charges. In pursuit to achieve this objective, the policy will have to follow a number of guidelines and procedures. These include: Work alongside the other procedures announced in the 2010 Spending Review in order to structure just and manageable as nonworking family units will cease to receive any more than the average working households in benefits; The policy must strive to deliver financial savings; The policy will strive to enhance the existing working incentives for beneficiaries on benefits; and Ensure fairness in terms of delivery to the taxpayers in work It is understood that, when the Welfare Reform Act was being passed through parliament, Lord Freud (Minister for Welfare Reform) pressed on the intention to enhance behavior changes with the help of the Benefit Cap; “the housing benefit report gives a straightforward and clear message indicating the there must be an utmost degree of fiscal support that petitioners can look forward to the state to offer. The ultimate aspire of this policy is to realize constructive outcome though changed outlook to welfare, steadfast work incentives, and responsible life choices. Individuals must be encouraged to be responsible for the decisions they make pertaining what they can afford” (Wendy Wilson 2012). Moreover, while in the House of nobles, Lord Freud referred to the public support for the benefit cap: “first, the principal point is that family units should not have an advantage to receive more on the benefits over the average, working households earns in the Great Britain. Secondly, individuals on benefits should be allowed access to the same choices as working households, encompassing choices about the places they can afford to live. Thirdly, and individual in work is supposed to be better off as compared to one on benefits” (Wendy Wilson 2012). Still in pursuit to realize its objective, the statutory instrument that contains the rules in relation to the cap will be subjected to confirmatory ruling procedure; meaning it will have to be permitted by the House of Lords as well as by the House of Commons just before it is implemented. The government made plans to be in favor for households who are affected by the benefit cap in the time of consideration of the Welfare Reform Bill. Further, there is a devotion to evaluate the progress of the benefit cap annually: A significant part of the government’s plan is to use scans of its databases in order to discover any cases in time, provide ready information to the people, and give them a hand in working though various alternative options at their disposal. The government already has details over the cases in payment and frequent scans would aid to discover any upcoming cases. This will enable the government to give confident information pertaining the time the cap will apply to them. The progress will be closely monitored and controlled once the cases are identified. The House of Lords and the House of Commons will further engage across government, teams, and the local council to make sure that family units all forms of help that they might require. They aid to make sure that households are managed into appropriate accommodation. Furthermore, they look forward to employing more money to ease the work of local authorities in dealing with discretionary housing payments. They also want to ensure proper distribution of resources including money allocation to most demanding areas to help households deal with whatever challenges they might be facing. Impact of an economic policy in the voluntary sector An impact evaluation for the Household Benefit Cap that was in printed together with the Welfare Reform Bill created some insight concerning the effects that the cap will have over a number of households, particularly those that are out-of-work and families in high rent places that receive significant Housing Benefit costs. Estimations reveal that 67,000 and thereabouts families will experience significant reduction on the Housing Benefits as a consequence of this plan in the period 2013-2014. This represents about 1 per cent of the nonworking caseload. Further, in the period 2014-2015, 75,000 households will experience the same fate. It is expected that the 220,000 children and 90,000 adults will be contained in the families affected in 2013-2014. With regard to the amount of benefit gone, the impact assessment affirms: the average decrease in benefit in the period 2013-2014 prices is projected to be in the region of 83 pound per week. The median decrease in the same period is estimated around 56 pound per week; this is lower due to the fact that is skewed by quite a smaller number of families with huge reductions. It is also anticipated that 44 per cent of the affected households will reside in the social rented sector while the other 56 per cent will live in the private rented sector. Moreover, the Impact Assessment presents more information concerning the most expected location for affected families: it indicates that a good number of those affected are in England. Less than 3% of the affected families are in Wales (below two thousand); and less than 5% of those affected are in Scotland (just below three thousand). In consideration of region, it reveals that 54% of the affected families are in the Great London. With the S.E of English region having the highest percentage (9% representing six thousand), all the other shares of the English regions are actually below 10%. In considering the local authority also referred to as the unitary authority, nearly all areas have one of more affected families. However, in 2/3 the areas, less than 100 families are affected. The following list shows the local authorities that typically have over 1,000 families affected in 2013-2014: Westmer city, Islington, Enfield, Kensington, Croydon, Wandsworth, Haringey, Tower Hamlets, Hammersmith & Fulham, Bernet, Birmingham City, Newham, Hammersmith, Chelsea, and Hackney among several others. In Scotland, 1/3 of the affected families reside in Glasgow city or Edinburgh, with the left parts consisting less than 100 families. Around 4,000 accounts for adults in affected households in Scotland and between 7,000 and 8,000 children in the same place. Further, in Wales ¼ of affected households are in Cardiff, with the other places in Wales comprising less than 200 families each. It also comprises of 3,000 adults and 7,000 children in affected households. Consequently, a briefing concerning the anticipated impact of the benefit cap on children was published by the Children’s Society, in which the publishers concluded that the cap could have more adverse impacts on children as compared to grown-ups. The publisher pointed out the key risks associated with children as experiencing poor health cases, severe poverty, and the threat of homelessness among children. On October 2011, another impact assessment was published regarding the cap: the equality impact assessment. This clarified that the cap is expected to have an impact concerning the location for various households. The Housing Benefit may cease to take care of housing expenses and some families get themselves into rent debts. Consequently, this may demand that landlords together with the courts make efforts to remove and seek to regain the rent debts. It further explains that some families may present as without-homes, and they are likely to shift into quite costly accommodations at the expense of the local authority. Early analysis conducted by the National Housing Federation (NHF) reveal that the cap would not cater for the already existing residents of social housing. Nevertheless, an article published in the late 2010 indicates that a number of social housing residents particularly those with big families might be affected. Conclusion The Household Benefit Cap is an important policy of the Welfare Reform Act that is particularly concerned with wellbeing of the less privileged out-of-work tenants in our societies. The act is approved by the government and run by the local council. It therefore gives the government the mandate to put limits on the sum total of benefit which an individual or couple may be entitled to. However, despite its significance it has got a number of tribulations as criticized by some government officials and many business executives. This is directed to the negative impacts on the tenants and households in regard to the cap, as discussed earlier in the essay. In brief, the department for Work and Pensions provides a rough estimation indicating that most affected families are likely to lose a mean of 83 pound every week which amount up to around 4,500 pounds per annum. This means that 17 per cent of the affected households are estimated to lose roughly above 150 pounds every week. It is therefore important that the Housing Benefit Cap be revisited and be restructured to fit the needs of all people and take into consideration every necessary aspect such as its impacts and implications in operation in various capacities. 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