Summer Budget 2015: Chancellor announces benefits changes

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Chancellor George Osborne has announced changes to the benefits system, including lowering the cap on benefits and changes to the Employment and Support Allowance.

Osborne confirmed the cap on benefits will be lowered to £20,000 outside London, and £23,000 in London - the cap is currently set at £26,000 a year. 

There will be a freeze on benefits available to those of working age for four years, while the triple lock for the state pension will remain.

Statutory payments such as Maternity pay and Disability benefits, will be excluded from the freeze, it will apply to both tax credits and local housing allowance.

Social Housing rents will be reduced by 1% for four years to reduce the cost to the state of housing benefit, those on incomes over £40,000 in London, and £30,000 outside it, will pay market rents on social housing.

The Employment and Support Allowance (ESA), which replaced incapacity benefit will be reformed.

Those in the "work-related activity group" currently receive more than those on Job Seekers Allowance - under the reforms, the two will be aligned for future claimants.

All claimants will receive more support to return to work, the Chancellor said. 

The Chancellor aims to find £12bn of savings as part of the overall plans to balance the budget. Working age welfare benefits currently account for 13% of public spending, up from 8% in 1980.

The promise of free childcare for working parents of three and four year olds means parents with a youngest child aged 3 will have to look for work to claim for Universal Credit.

Tax Credits and Universal Credit will not increase for the third or subsequent child after April 2017.

Those aged 18-21 will have a "Youth Obligation" to either earn or learn, and there will be an end to automatic entitlement to housing benefit for those aged 18-21, exceptions being made for "vulnerable people and other hard cases" the Chancellor announced.

The Chancellor said: "Taken together, all the welfare reforms I have announced will save £12bn by 2019-20 and will be legislated for in the year ahead, starting in the Welfare Reform and Work Bill that will be published tomorrow.

"Mr Deputy Speaker, we are moving Britain from a high welfare, high tax economy, to a lower welfare, lower tax society."

GRID response

Katharine Moxham, spokesperson for Group Risk Development, said: "Nobody wants to think about something bad lying just around the corner, but the fact is, sudden loss of income can happen to anyone.

"Given that income from employment formed nearly three quarters (72%) of total household income in the UK in 2013/14, it's vital to look beyond the immediate and consider what back-up system is in place.

"Our research has found that nearly a quarter (23%) of employees would not be able to provide for their family if they were off sick for six months or more, showing not enough thought has yet been given to the ‘what if'.

"This is even more pertinent now that state support will be reduced.

"Relying on savings is a risky approach too, given that average household savings are at just £20.80 a month.

"There is an opportunity for employers to take the lead and ensure their staff are financially aware and prepared for loss of income.

"Educating staff about affordable financial protection cover will not only support employees, but will make a huge difference to morale and staff retention - key business benefits.

"No matter what salary is at stake, it's important everyone has a way to safeguard their income."

Further Reading:

Summer Budget 2015: IHT threshold rises to £1m 

Summer Budget 2015: IPT to rise to 9.5%

Summer Budget 2015: 'Our priority is the NHS' - Osborne

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