Introduction

State Benefits and Tax Credits 2014 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 2014, and includes changes to the rules for claiming benefits and tax credits from this date.

This year’s edition covers further changes taking effect as a result of the Welfare Reform Act 2012, which work and pensions secretary Iain Duncan Smith said will affect “virtually every part of our welfare system”. The reforms, which are complex and wide-ranging, are set out in detail in Chapter 1.

Further reforms were announced by chancellor George Osborne in June 2013 as part of the 2013 Spending Round. These are:

• the introduction of “upfront work search” — this will require claimants, at their first application for benefits, to write a CV, register with the government’s new Universal Jobmatch service and start looking for work. They will also have longer initial interviews with Jobcentre advisors;

• the introduction of weekly rather than fortnightly visits to Jobcentres with an in-depth progress review every three months;

• extending the three-day waiting period for Jobseeker’s Allowance (JSA) claimants to seven days. This will not apply to people claiming contributory JSA or the Employment and Support Allowance (ESA);

• requiring all claimants who are subject to “conditionality” (what you have to agree to do to receive your benefits) to verify their claim each year;

• requiring all claimants whose poor spoken English is a barrier to work to improve their English language skills, with mandatory English language courses and sanctions for those who refuse to participate;

• requiring lone parents who are not working to prepare for work once their youngest child turns three. This will involve regularly attending the Jobcentre, gaining qualifications and taking other steps to improve their readiness to work, although there will be no requirement to return to work until their youngest child is five; and

• testing different approaches to helping ESA claimants in the Work- Related Activity Group to return to work, including engaging with healthcare professionals.

These reforms are being phased in between April 2014 and April 2015.

Trade unions can play an important role in helping their members and their families claim the benefits to which they are entitled. New research published by the TUC in February 2014 shows that tax credits and benefits play a crucial role in lifting low-paid workers out of poverty. More than five million workers across the UK earn less than the living wage (£8.80 in London and £7.65 in the rest of the UK) and more than half of the benefit cuts taking place are hitting these working people.

The TUC says that any real programme to lift the low-paid out of poverty and enable them to share in the economic recovery requires increases in pay and a reversal of recent cuts to in-work benefits. TUC general secretary Frances O’Grady said: “The economic crash has led to the longest decline in living standards since the 1870s. Britain needs a pay rise but we must also defend and extend the in-work benefits that lift families — particularly those with children — out of poverty. The best way to make work pay is not only to spread the living wage, but also to reverse cuts in tax credits and make Universal Credit more generous for the working poor.”

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 on pages 79-80 and web references for downloading application forms and other relevant information relating to different benefits are listed throughout.

State Benefits and Tax Credits 2014 enables 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 are 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 (see box below). 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%.

The figures for unclaimed benefits come from the National Statistics publication, Income-Related Benefits: Estimates of Take-up, and were normally published annually. A government consultation proposed to stop publishing the statistics, but respondents, including the TUC, the Institute for Fiscal Studies, Age UK, Save the Children and the Child Poverty Action Group, argued successfully for the statistics to be retained. The decision to keep the statistical series came too late to produce figures for 2010-2011, so the next Income-Related Benefits: Estimates of Take-up report will be a combined report showing results for the years 2010-11 and 2011-12. It is due to be published “around spring 2014”.

As well as entitlements for those on a low income, this booklet covers benefits and tax 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.

For example, from 1 January 2014, to get income-based Jobseeker’s Allowance (JSA) you must prove that you’ve been living in the UK for the three months before claiming if you are:

• an EU national and you haven’t worked since arriving in the UK; or

• a UK national who has recently returned from abroad and you haven’t worked since coming back to the UK.

The coalition government brought in this rule change to coincide with the expiry of transitional controls on Bulgarian and Romanian workers.

However, some benefits depend on National Insurance contributions. These are paid on earnings above the lower earnings limit (LEL), which from 6 April 2014, is £111.00 a week. In fact, you only start paying National Insurance contributions if you earn over £153.00 a week (up from £149 last year), for earnings between £111.00 and £153.00 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 (approximately six months), is based on how much National Insurance you have paid in the last two tax years. The tax year starts on 6 April and finishes on 5 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 3 and 4).

There are also means-tested benefits, including Income-based Jobseeker’s Allowance, Income Support, Pension Credit and Housing 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” (see page 77). Means-testing for Child Benefit was introduced in January 2013 (see page 57).

Benefit increases 2014

The Welfare Benefits Up-rating Act 2013 gained Royal Assent on 26 March 2013 and caps the annual increases in most working-age benefits at 1% in cash terms in 2014–15 and 2015–16, in addition to the 1% cap on increases applied in 2013–14 (see box below for full details of increases).

Because the uprating changes apply to almost all benefits and tax credits, the cap affects both in-work and out-of-work households. Prior to this change, working-age benefits and tax credits were up-rated each April in line with the Consumer Prices Index (CPI) for the preceding September. CPI inflation was 2.7% in September 2013 and was forecast to be 2.2% in September 2014. The Institute for Fiscal Studies calculated in January 2013 that, based on forecasts of inflation at the time, the cap would mean a cumulative 4% real cut in the benefits affected.

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 website at: http//los.direct.gov.uk/default.aspx?type=1&lang=en. You can get an estimate of what benefits and tax credits you could get, and find out about claiming specific benefits, from the Benefits Adviser website at: www.gov.uk/benefits-adviser.