Introduction

State Benefits and Tax Credits 2012 is the revised edition of the Labour Research Department’s annual guide to the benefits system. It concentrates on the benefits and rates of benefit available for people in work effective from 6 April 2012, and includes changes to the rules for claiming benefits and tax credits from this date.

This year’s edition coincides with major changes taking place in the tax and benefits system which are set to adversely affect low paid workers generally, and those working part time in particular. Low paid working parents are hit hardest with major changes this year affecting Working Tax Credit and Child Tax Credit.

A further tranche of welfare reforms are scheduled for 2013 which, if they are accepted in their current form, will revolutionise welfare payments in the UK. However, these proposals may be significantly changed as they face growing concerted calls for amendment from trade unions and campaigning organisations such as the Child Poverty Action Group (CPAG), Citizens Advice, Carers UK and disability rights organisations.

All of these proposed changes form part of the coalition government’s controversial Welfare Reform Bill which passed its final hurdle in the House of Lords as this publication went to press.

Trade unions can play an important role in helping their members and their families claim the benefits to which they are entitled. As such it is crucial for union reps to be aware of the latest reforms in order to give accurate initial advice on benefit entitlements. This guide is designed for that purpose. It is not intended to be a definitive guide to welfare benefits, which is a complex, specialised area requiring specialist advice. Organisations and publications giving this specialist advice are listed in the final chapter and web references for downloading application forms and other particular information relating to different benefits are listed throughout.

This guide will enable reps to access the current benefit rates and basic rules for qualification in order to indicate to members whether or not they are eligible to apply for them. Thousands of low paid workers and others remain unaware of their entitlements and subsequently these are not taken up.

The latest Department for Work and Pensions (DWP) figures for unclaimed benefits cover the period 2009-10. These show that between £7,520 million and £12,310 million was left unclaimed in key income-related benefits over that period; representing a take-up of around 77% to 84%. This was somewhat higher than that for the previous year, which was, £6,440 million and £11,770 million.

As well as entitlements for those on a low income, this booklet covers benefits and credits for parents and children, help for those sick or injured at work, the basic state pension and pension credits, help with housing costs and help for someone whose husband, wife or civil partner dies.

Are you/your members entitled?

Rights to some benefits and credits may be based on payment of National Insurance contributions or level of income. In some cases, the rules relate to length of time in employment and level of earnings, or length of residence in the UK. However, some benefits — including Disability Living Allowance and Attendance Allowance — do not depend on any of these criteria.

National Insurance contributions are paid on earnings above the lower earnings limit (LEL). In the year commencing 6 April 2012, the LEL is £107.00 a week. In fact, you only start paying National Insurance contributions if you earn over £139.00 a week (up from £110 last year); for earnings between £107.00 and £139.00 you are credited with contributions.

For most benefits, the relevant National Insurance contributions are Class 1 contributions — those paid by employees. Class 2 contributions are those paid by self-employed people.

Entitlement to Contribution-based Jobseeker’s Allowance, which you can receive for up to 182 days, is based on how much National Insurance you have paid in the last two tax years. The tax year starts on the 6th April and finishes on the 5th of April (12 months).

Income-based Jobseeker’s Allowance is based on your income and savings. You may get this if you have not paid enough National Insurance contributions, or you have only paid contributions for self-employment, and you’re on a low income.

The level of your retirement pension will depend on your National Insurance contributions over your working life (see Chapter 5). Entitlement to Statutory Sick Pay and maternity benefits depends on your being in employment and earning more than the lower earnings limit (see Chapters 2 and 3).

There are also means-tested benefits including Income-based Jobseeker’s Allowance, Income Support, Pension Credit, Housing Benefit/Local Housing Allowance and Council Tax Benefit. These are not tied to National Insurance contributions, but you can only get them if your income is less than what is called your “applicable amount”.

Claiming benefits

You should be able to claim most working age benefits from your local Jobcentre, Benefits Agency or Jobcentre Plus office (which combines the two). To find out where your nearest office is look under Jobcentres in your local telephone directory or enter your postcode on the Directgov website at http://los.direct.gov.uk/default.aspx?type=1&lang=en.

Appeals

If you think a decision about your benefits is wrong, you can ask the office that made the decision to explain it in writing. You can also ask to get the decision reconsidered and, if you’re still unhappy, you can appeal against the decision to an independent tribunal. You can’t appeal against decisions on: Budgeting Loans, Community Care Grants or Crisis Loans.

An appeal must be made within one month and you should receive a statement of reasons within 14 days. If you are still unhappy, you will need to appeal in writing to the relevant office, setting out the decision you are appealing against and your reasons for thinking that it is wrong. Appeals are heard by an independent appeal tribunal administered by the Appeals Service.

Further information and downloadable appeal forms can be accessed at: www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/BeginnersGuideToBenefits/DG_10013949.

Changes in 2012

Working couples with children

Under changes which came into effect on 6 April 2012, couples with children will have to work a total of 24 hours a week to qualifyforWorking Tax Credit (WTC) with one partner working 16 hours or more. Prior to this change anyone responsible for at least one child and working at least 16 hours a week could get Working Tax Credit.

Working parents also face losing out on Child Tax Credits (CTC) which for many makes the difference between affordable childcare or not working at all. New rules mean that one-child families with an income of over £26,000 face losing their tax credits completely, while families with two children will be allowed an income of around £32,200 before their CTC is cut. The previous threshold was £41,300

This reform is happening against a background of soaring childcare costs. The 2012 annual childcare costs survey from childcare charity the Daycare Trust found nursery costs have risen by an inflation-busting six per cent for children under the age of two. For children aged two and over, costs have gone up by almost four per cent.

There is also increasing evidence that employers are not able to offer the increased hours parents need to now qualify for WTC. An employer survey carried out by work-life balance organisation Working Families in early 2012 found that:

• two-thirds of employers who responded were unaware of the changes to WTC rules;

• less than a fifth of employers (17%) are confident of accommodating a request for eight more hours of work. A further 33% said they may be able to offer some hours, but not eight, while 17% said it was “unlikely” or “impossible” to accommodate a request; and

• when asked about the impact on business if an employee left because they couldn’t get more hours of work, only 17% said “business would suffer”. Fifty six per cent thought it would be a “minor inconvenience” and 17% were confident that they could easily recruit a replacement.

Local Housing Allowance

The age threshold for the shared accommodation rate of Local Housing Allowance (LHA) increases from 25 to 35.

Support for Mortgage Interest

Temporary changes to the Support for Mortgage Interest Scheme which were due to come to an end in January 2012 have been extended until January 2013. These include a waiting period of 13 weeks and an increase in the eligible mortgage capital limit to £200,000. Further information is available at: www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/On_a_low_income/DG_180321.

Contributory Employment and Support Allowance

The Welfare Reform Act limits the amount of time people who are in the Work Related Activity Group of Employment and Support Allowance (ESA) can claim contributory ESA to a period not exceeding 365 days without re-qualifying. Time spent in the Assessment phase counts towards the 365-day time limit. People in this group who have already received contribution-based ESA for 365 days or more will have their entitlement stopped as soon as the change takes effect from 30 April 2012. Further information is available at: www.dwp.gov.uk/adviser/updates/changes-to-contribution/

Discretionary Housing Payments

The Discretionary Housing Payment budget has been increased to £60 million for 2012-13. You may get a payment if you get some Housing Benefit or Council Tax Benefit but are having difficulty paying the rest of your rent. In some circumstances, discretionary housing payments can be made to help pay rent arrears. The Department for Work and Pensions publishes a good practice guide to discretionary housing payments which is available to download at: www.dwp.gov.uk/docs/dhpguide.pdf

“50-plus element” of Working Tax Allowance

People getting an extra amount of Working Tax Credit, called the “50-plus element”, will lose it from 6 April 2012. This change also means that any Working Tax Credit could stop altogether, unless a certain number of hours are being worked.

From 6 April 2012, you will need to be working the following hours to qualify for Working Tax Credit. If you are not responsible for at least one child you — or your partner if you’ve got one — will need to work at least 30 hours a week or 16 hours a week if you are aged 60 or over or you’re entitled to the “disability element” of Working Tax Credit

If you are responsible for at least one child you will still qualify for Working Tax Credit if either of the following applies:

• you are single and working at least 16 hours a week; or

• you’re in a couple, and meet the new hours rules for couples.

New payment system to replace benefits cheques

With only a few special exceptions, all benefit payments are made into a bank or building society account or a Post Office Card Account. A new system to replace the giro cheque for pension and benefit payments, the Simple Payment Service, which is operated by Citibank and accessed through Paypoint terminals, is being phased in between April and September 2012.

Around 23,000 local shops have Paypoint terminals including almost all branches of the Co-op, 350 Sainbury’s locals, 50 Asda locals, Costcutters, Spa and Budgens.

Opting for the Simple Payment Service to use at Paypoint will mean the following:

• individuals will receive a card (about half the size of a debit card);

• the pension or benefit will be transferred electronically to the card;

• there will be no time limit (unlike the giro cheque where there is a one month limit on encashment);

• together with the card you will need to take identification (in the same forms as for the giro cheque) with you to the Paypoint;

• you will also need to give some memorable information either verbally or written to the cashier. This could be your date of birth or place of birth; and

• if the card is lost (or not returned by a carer) it can be cancelled by phoning the customer services number or visiting the website.