Wednesday, 30 November 2016


The Government will leave carers aged over 25 stuck in a benefits trap in April 2017 despite a big increase in the amount they can earn before losing Carer's Allowance.

People get Carer's Allowance, which will be £62.70 a week from April, if they look after a disabled person for at least 35 hours a week. Many of them are parents - many single parents - some are over 60 without a state pension, and many are themselves disabled. Nearly three out of four (72%) are women.

Many carers supplement their Carer's Allowance by working part-time. If they earn more than a certain amount - the earnings limit - they lose their carer's allowance completely. At the moment that limit is £110 a week and will rise to £116 a week from April 2017.

In the past they could claim extra help through working tax credit. To get that they must work at least 16 hours a week*. But from April 2016 the new National Living Wage for those over 25 means they can no longer work 16 hours and keep below the earnings limit because 16 x £7.20 = £115.20 taking them above the £110 limit. So this year carers must choose between their carer's allowance worth £62.10 a week and working tax credit. For a lone parent that would be £76 a week, for someone over 60 £37 a week and for a carer who is disabled themselves it could be £94 or £119 per week depending on their disability. (Thanks to entitledto for those WTC calculations).

The same choice will have to be made in 2017/18 despite the big rise in the earnings limit to £116.

From April 2017 the National Living Wage will be £7.50 an hour. So 16 hours work will bring in £120, well above the new earnings limit. So again carers will have to choose between Carer's Allowance of £62.70 and Working Tax Credit of around £76.

The 5% of those on Carer's Allowance who are under the age of 25 will not be affected. The minimum wage for 21-14 year olds will rise to £7.05 in April so 16 hours work will bring in £112.80, well below the new limit of £116.

But could it be that the DWP has simply got its sums wrong? The new limit would work if the National Living Wage was not rising in April. Sixteen hours at £7.20 is £115.20, just below the new earnings limit. But with the announcement in the Autumn Statement that the National Living Wage is rising to £7.50 the new limit is £4 too low.

The DWP did not accept a mistake had been made. It told me that the rise in the earnings limit will help 2000 carers. It also says that the limit is kept under review and any increase must be "affordable and warranted".

There are more than 785,000 carers so 2000 is about a quarter of one per cent of them. If all those 2000 get Carer's Allowance that will cost an extra £6.5 million in 2017/18.

There is one possible escape for carers from the trap. By paying £8 a week - about £35 a month - into a personal pension the income that counts towards the earnings limit will be reduced to £120 and carer's allowance can still be claimed. The details are explained in my longer blogpost from May.

30 November 2016

*The number of hours people need to work to get Working Tax Credit is normally 30. But those responsible for children, disabled people, and anyone aged 60 or more need only work 16 hours to qualify. A couple with children normally need to work at least 24 hours between them as well as at least one of them working 16 hours. But the 24 hour rule is waived if either partner is disabled or over 60 or in some other circumstances.

Monday, 28 November 2016


The state pension will rise with the triple local from 10 April 2017 and some other benefits will increase by 1%, the Government announced on 28 November. 

Inflation hit 1% in September (CPI) and the revised rise in earnings May to July (KAC3) was 2.4%. benefits and pensions will be uprated by four different rates from Monday 10 April 2017. The rates will be 0%, 1%, 2.4%, and 2.5%. All amounts are rounded to 5p or 1p so may be slightly more or less than the stated rate of increase. 

Some benefits will be frozen. The Summer Budget 2015 listed the working age benefits that would be frozen for four years from 2016/17 to 2019/20. They are
  • Child Benefit
  • Jobseekers’ Allowance
  • Employment and Support Allowance
  • Income Support
  • Housing Benefit under women’s state pension age
  • Local Housing Allowance rates
  • Child Tax Credit
  • Working Tax Credit
  • Universal Credit (but the taper will be reduced from 65% to 63% which will mean a slight rise in benefits for those at work.
Any disability premiums or extras paid with any of these benefits will NOT be frozen. They will rise by 1%.

It is likely that in England council tax support, paid by local authorities, will also be frozen for people under women’s state pension age. In addition some English councils will cut the amounts paid to people further as they try to balance their books. In Scotland and Wales that will probably not be true.

Women’s state pension age at April 2017 will be 63 years and 9 month rising to 64 and 6 months by March 2018.

Other benefits including Universal Credit, tax credits, Housing Benefit, and council tax support will also be cut for some of those with children. 

Rise by 1%
Benefits which are not frozen will rise by the rate of CPI inflation for September 2016 which was 1%.

They include
  • Attendance Allowance - up by 80p to £83.10 a week for higher rate and 55p to £55.65 a week for lower rate
  • Personal Independence Payment - will remain the same as Attendance Allowance and rise by 80p to £83.10 a week for higher rate and 55p to £55.65 a week for lower rate
  • Disability Living Allowance - up by 80p, 55p, or 20p to £22 a week for lowest rate
  • Carer’s Allowance - up by 60p to £62.70 a week
  • Bereavement Allowance - up by £1.15 to £113.70 a week
  • Maternity Allowance - up by £1.40 to £140.98 a week
  • Statutory Maternity/Paternity/Adoption/Shared Parental Pay will be the same as Maternity Allowance
  • Statutory Sick Pay - up by 90p a week to £89.35.
  • All parts of the state pension which are NOT Basic State Pension or the full New State Pension. Details below.

Employment and Support Allowance falls partly under frozen benefits and partly under benefits that will be raised by 1%. The basic ESA of £73.10 a week is frozen. The extra paid to those who cannot work - the support component - will rise by 35p a week, an increase of 0.3%.

The 1% rise in April 2017 is well below the expected rate of inflation then which is forecast to be around 2% and to rise to 2.6% later in the year. 

Rise of 2.5%
The basic state pension and the new state pension will rise by 2.5%. They are covered by the so-called triple lock which guarantees an increase in line with prices measured by the Consumer Prices Index, earnings, or 2.5% whichever is the highest. CPI was 1%, earnings rose by 2.4%, so they will increase by 2.5%.

That will mean 
  • a rise in the basic pension of £3.00 from £119.30 to £122.30
  • a rise in the full new State Pension of £3.90 to £159.55.
Any extras paid with the basic pension – SERPS, State Second Pension (both known as additional pension), graduated retirement benefit, and extra pension for deferring a claim will rise by 1% in line with the CPI.

Any amount of the new State Pension which was above £155.65 in 2016/17 will also rise by only 1%.

It is worth noting that the Triple Lock only adds 15p a week to the state pension rise. The law currently provides for it to rise by the increase in earnings, That was 2.4% and would have resulted, after rounding, in a basic state pension of £122.15 and a new state pension of £159.40.

Rise by a different amount
Pension Credit is an anomaly in the benefit system. There are two parts to it.
  • Guarantee credit paid to men and women who are aged from women’s state pension age to 65.The standard minimum guarantee credit will rise 2.4% in line with earnings. The rate for a single person will increase by £3.75 to £159.35 a week and by £5.70 to £243.25 a week. 
  • Savings credit paid to men and women aged 65 or more who reached state pension age before 6 April 2016. Savings credit is NOT paid to anyone who reached state pension age from that date. The savings credit will rise by around 2.6% and the threshold at which it ends will rise by just 1% to £13.20 and £14.90.

The overall effect of the rise in the state pension and in pension credit will mean that people on pension credit will see a rise in their overall income of £3.75 (single) or £5.70 (couple) for the poorest 1.1 million who get no savings credit. For the 1.2 million who do get savings credit the rise will be £3.43 (single) or £5.31 (couple) for most of them. For many that will be a percentage rise of less than 2%.

Compared with April 2016
In April 2016 all benefits except the state pension were frozen. Some by the decision announced in the Summer 2015 Budget and others because CPI inflation in September 2015 was -0.1% which led to a zero rise. So for those on working age benefits that are increasing in April 2017 it will be their first rise for two years. 

The basic state pension rose by 2.9% in line with earnings. That £3.35 increase was more than the £3.00 due in April 2017. The extras paid with the basic state pension were frozen.

Benefit Rates 2017/18

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28 November 2016

Tuesday, 22 November 2016


The Treasury has released details of half a dozen of the more popular measures to be announced in the Autumn Statement this afternoon (23 November). Here are three.

Reduction of the Universal Credit taper rate from 65% to 63%. This is the deduction from Universal credit for every extra £1 earned. For those who also claim council tax support in most areas the taper will reduce from 72% to 70%. For those who also pay National Insurance and Tax the taper will fall from 81% to 80%. In other words those people will keep 20p in every pound earned rather than 19p. The Treasury says this will "increase work incentives" for 3 million families. As if being poor wasn't enough of an incentive. 

Benefit specialists say this will be a small improvement but will not offset the cost of the loss of the amount they can earn before their benefit is cut which happened in April. The change will probably happen in April 2017.

Banning letting agent’s fees in England. This measure will help 4.3 million tenants in private rented housing. Agent's fees, which have to be paid upfront, average £337 according to Citizen's Advice. Shelter has found that 1 in 7 pay more than £500. 

Housing specialists say that agents will simply make landlords pay the cost and landlords will simply pass the cost to tenants through higher rents. Housing Minister Gavin Barwell has opposed this move in the past, tweeting in September "Bad idea - landlords would pass cost to tenants via rent. We're looking at other ways to cut upfront costs & raise standards". Which is slightly embarrassing.

No date for the change has been announced.

Increasing the National Living Wage to £7.50 an hour from April 2017. The National Living Wage rate of the National Minimum Wage was fixed at £7.20 in April 2016, There will also be more money spent to enforce the National Minimum Wage.

This 4.17% rise will keep it well below the Living Wage as assessed by the Living Wage Foundation. It puts that at £9.75 in London and £8.45 an hour in the rest of the UK. Someone earning £7.50 an hour for 40 hours a week will lose 82p an hour to tax and National Insurance (using announced or predicted thresholds). 

The new language
The statement strings together the new Government's buzz phrases increasing fairness" "an economy that works for everyone" "help people’s money go further" "those who are struggling to get by" "ordinary working class people" and "a country that works for everyone". 

The Chancellor will make his Autumn Statement at 1230 on 23 November 2016.

23 November 2016
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Monday, 21 November 2016


The Bank of England has announced that the amount of savings that is protected if a bank or building society goes bust will rise from £75,000 to £85,000 on 30 January 2017. 

In reality it has little choice. The limit is set by an EU Directive at €100,000. That came into force in 2010. Before that the UK had a limit of £50,000. When the EU harmonised protection in all member states the countries which did not use the Euro had to fix the limit by converting €100,000 to their own currency.

At the time that level was £85,000 and that was the new limit from July 2010. The conversion rate is normally reviewed every five years and by the middle of 2015 the pound had strengthened against the euro, When the new level was set on 3 July 2015 €100,000 was worth a little over £71,000 which the Government rounded up to £75,000 - the maximum the Directive allowed. It also delayed the introduction of the new limit until 1 January 2016. 

Normally the limit in Sterling would be fixed for five years regardless of currency fluctuations. But the EU Directive has a provision which forces Governments to review it earlier in “unforeseen” circumstances. 

The wording of the Directive means the Government must take action if it accepts the fall in Sterling was unexpected. “Member States shall make an earlier adjustment of coverage levels, after consulting the Commission, following the occurrence of unforeseen events such as currency fluctuations.” (Directive 2014/49/EU Art.6 para.5)

Since the Referendum on leaving the EU the pound has fallen by about 15% against the euro and today €100,000 is worth about £85,000. 

The Bank of England, through the Prudential Regulation Authority, has accepted that this fall in Sterling and the vote to leave the EU were unforeseen when the level was fixed in 2015. So it has taken action to change the UK protection to its current level against the euro. It has chosen the level of £85,000 at which it was fixed for five years from 2010. 

Although the change will start from 30 January the regulator proposes giving banks, building societies, credit unions, and others which offer savings accounts up to five months after that date to adjust all the information they give to customers. It will not require them to tell customers individually of the change but expects their staff to be able to answer questions correctly at least from 30 January 2017. 

While the UK remains in the EU the Government will have to consult the European Commission about any change. It is not clear if it has yet done so.

In August, when I wrote about these rules in the Financial Times, the Treasury would not say if it was considering putting the matter to the Commission. A spokesman told me “The Government will abide by EU regulation until we leave. So we are where we are.”

Technically this change is also subject to public consultation but it would be very surprising if it did not go ahead as planned. If you want to comment read the Consultation Paper CP41/16 and submit your views by 16 December.

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21 November 2016