A SURVEY OF THE UK BENEFIT SYSTEM
Andrew Leicester
Jonathan Shaw
THE INSTITUTE FOR FISCAL STUDIES
Briefing Note No. 13
A Survey of the UK Benefit System
Updated by Andrew Leicester and Jonathan Shaw*
November 2003
Institute for Fiscal Studies
Acknowledgements
This Briefing Note is a revision of earlier versions by Carl Emmerson, Greg Kaplan and Andrew
Leicester. The paper was funded by the ESRC Centre for the Microeconomic Analysis of Public
Policy at the Institute for Fiscal Studies. The authors would like to thank Stuart Adam, Mike
Brewer, Tom Clark, Andrew Dilnot, Carl Emmerson, Alissa Goodman, Howard Reed, Susann
Rohwedder and Jayne Taylor for their help and advice during revision of this and earlier versions
of the Briefing Note. All remaining errors are the responsibility of the authors.
*Address for correspondence: [email protected], [email protected]
1
Contents
1.
Introduction.........................................................................................................3
2.
Government Spending on Social Security Benefits...........................................4
3.
A Description of the Current Benefit System, 2003–04 .....................................7
3.1. Benefits for Families with Children................................................................................ 7
3.2. Benefits for Unemployed People .................................................................................. 14
3.3. Benefits for People on Low Incomes........................................................................... 17
3.4. Benefits for Elderly People............................................................................................ 23
3.5. Benefits for Sick and Disabled People ......................................................................... 29
3.6. Benefits for the Bereaved............................................................................................... 38
4.
Trends in Social Security Spending .................................................................42
4.1. Social Security Spending, 1948–49 to the Present Day ............................................. 42
4.2. Changes in the Composition of Social Security Spending......................................... 44
4.3. Major Reforms since 1948, and the Likely Direction of Future Reforms.............. 46
5.
Conclusions ....................................................................................................... 51
Appendix A. Benefit Expenditure from 1948–49 to 2002–03 ..................................52
Appendix B. The Social Fund ..................................................................................53
Appendix C. War Pensions.......................................................................................56
2
1. Introduction
This Briefing Note provides a survey of the benefit system in Great Britain. We begin in
Section 2 with an overview of the current system, giving total expenditure on social
security and the cost of individual benefits. In Section 3, we look closely at the present
benefit system, examining each benefit in turn. Benefits are arranged into six broad
categories based on the primary recipients: families with children, the unemployed, those
on low incomes, the elderly, sick and disabled people and the bereaved. Current benefit
rates are for the financial year 2003–04, expenditure figures are estimates for the
financial year 2002–03 and claimant data are for September 2002 unless noted otherwise.
Whenever possible, expenditure and claimant figures relate to Great Britain.
In Section 4, we look at how the system has evolved to its present state and assess how
the patterns of expenditure on social security have changed over the previous halfcentury. We also present a brief look ahead to how the system may change in the near
future, given the current set of government proposals. Section 5 summarises the main
findings.
Further details on benefit eligibility and information about relevant legal issues can be
found in the Child Poverty Action Group’s Welfare Benefits and Tax Credits Handbook
2003–2004.1 Current benefit rates, number of claimants and expenditure are given in the
Department for Work and Pensions’ Annual Reports and the annual DWP publication
Work and Pensions Statistics.2 In addition, much information can be found on the DWP
website at www.dwp.gov.uk. The Department of Social Security (forerunner to the
DWP) publications The Growth of Social Security and The Changing Welfare State: Social Security
Spending contain overviews of the trends seen over the last 50 years.3
1Child
Poverty Action Group, Welfare Benefits and Tax Credits Handbook 2003–2004, CPAG, London, 2003.
2Department
for Work and Pensions, Work and Pensions Statistics 2003, Government Statistical Service, London, 2003
(www.dwp.gov.uk/asd/wandp.asp).
3Department
of Social Security, The Growth of Social Security, HMSO, London, 1993; Department of Social Security, The
Changing Welfare State: Social Security Spending, DSS, London, 2000
(www.dss.gov.uk/publications/dss/2000/spending/index.htm).
3
2. Government Spending on Social Security Benefits
In 2002–03, almost £120 billion was spent on social security benefits in Great Britain.4
This amounts to approximately £2,030 for every man, woman and child in the country,
and represents 28.5 per cent of total government expenditure (11.3 per cent of GDP).
Expenditure on social security represents by far the largest single function of
government spending, the next largest being spending on health and personal social
services,
at
£82.0 billion (19.5 per cent of total expenditure).5
Over 30 million people in the UK – well over half the total population – receive income
from at least one social security benefit. For means-tested benefits such as income
support, receipt of the benefit will depend upon the income of the claimant and their
personal characteristics such as age and family type. For contributory benefits such as
incapacity benefit, eligibility for payment depends upon the claimant having paid
sufficient National Insurance contributions (NICs) during their life. NICs are made by
all employees whose earnings are above £89 per week (known as the primary threshold,
PT), although the government usually treats those earning between £77 (known as the
lower earnings limit, LEL) and £89 as though they are making contributions.6 Some
benefits, such as child benefit, are neither contributory nor means-tested and are
universally available to all people who meet some qualification criteria.
All benefits require some residence conditions to be met (usually that the person be
present and resident in the UK), although different degrees of ‘residence’ are required
for different benefits. By and large, people ‘subject to immigration control’ (i.e. people
who require leave to enter or to remain in the UK but do not have it) are unable to claim
benefits. As the UK was a signatory to the 1951 UN Convention on the Status of
Refugees, refugees in the UK have the right to claim certain benefits, such as income
support. The Asylum and Immigration Act 1999 removed asylum seekers from
mainstream benefit payments, and they now have payments administered by the National
Asylum Support Service.
4Appendix
A provides details of government spending on social security from 1948–49 to 2002–03.
5Sources:
population figures from www.gad.gov.uk/Population/2001/uk/wuk01singyear.xls, government expenditure
and GDP from www.hm-treasury.gov.uk/budget/bud_bud03/budget_report/bud_bud03_repbc.cfm, and the
breakdown of government expenditure from www.hm-treasury.gov.uk/media//81937/pesa_03_652.pdf. The £2,030,
28.5 per cent and 11.3 per cent all slightly underestimate the true figures since they are constructed by dividing GB
benefit expenditure by UK population, TME and GDP (compatible measures were not easily available).
6For
more about the National Insurance system, see S. Adam and J. Shaw, A Survey of the UK Tax System, Briefing Note
no. 9, Institute for Fiscal Studies, London, 2003 (www.ifs.org.uk/taxsystem/taxsurvey.pdf). Entitlement conditions for
contributory benefits are complex – see Child Poverty Action Group, Welfare Benefits and Tax Credits Handbook 2003–
2004, CPAG, London, 2003.
4
Table 2.1. Expenditure on social security benefits and related tax credits, 2002–03
Expenditure (£m)
Percentage of total
8,975
2
6,300a
2,300a
728
70
18,375
7.5%
0.0%
5.3%
1.9%
0.6%
0.1%
15.3%
2,052
514
6
180
2,752
1.7%
0.4%
0.0%
0.2%
2.3%
14,238
12,198
20
2,891
304
29,651
11.9%
10.2%
0.0%
2.4%
0.3%
24.7%
38,285
6,062
29
44,376
1,712
374a
46,462
31.9%
5.1%
0.0%
37.0%
1.4%
0.3%
38.8%
6,788
3,250
7,046
160a
957
997
31
1,187a
718
1
167
8
21,310
5.7%
2.7%
5.9%
0.1%
0.8%
0.8%
0.0%
1.0%
0.6%
0.0%
0.1%
0.0%
17.8%
1,090
48
1,138
0.9%
0.0%
0.9%
138
0
2
140
119,828
0.1%
0.0%
0.0%
0.1%
100.0%
Benefits for families with children
Child benefit
Guardian’s allowance
Working families’ tax credit
Children’s tax credit
Statutory maternity pay
Maternity allowance
Total benefits for families with children
Benefits for unemployed people
Income-based jobseeker’s allowance
Contribution-based jobseeker’s allowance
Job grant
New Deal programmes
Total benefits for unemployed people
Benefits for people on low incomes
Income support
Housing benefit
Discretionary housing payments
Council tax benefit
Social Fund payments
Total benefits for people on low incomes
Benefits for elderly people
Basic retirement pension
Earnings-related retirement pension
Non-contributory retirement pension
Retirement pension – total
Winter fuel payments
Concessionary television licences
Total benefits for elderly people
Benefits for sick and disabled people
Incapacity benefit
Attendance allowance
Disability living allowance
Disabled person’s tax credit
Severe disablement allowance
Invalid care allowance
Statutory sick pay
War pensions
Industrial injuries disablement benefit
Other industrial injuries benefits
Independent Living Funds
Motability
Total benefits for sick and disabled people
Benefits for the bereaved
Widows’ and bereavement benefits
Industrial death benefit
Total benefits for the bereaved
Others
Christmas bonus
Earnings top-up pilots
Other small benefits
Total others
TOTAL
For notes, see next page.
5
a
UK expenditure. Since total Northern Ireland benefit expenditure is approximately £4 billion, figures for
Great Britain would not be significantly different.
Notes: Figures are estimated out-turns. They may not sum exactly due to rounding. Child maintenance bonus
is included in income support and income-based jobseeker’s allowance.
Sources: Department for Work and Pensions, www.dwp.gov.uk/asd/asd4/Table3.xls; expenditure
information for working families’ tax credit and children’s tax credit from
www.inlandrevenue.gov.uk/stats/tax_expenditures/g_t05_1.htm.
Table 2.1 presents a breakdown of estimated expenditure on each benefit for 2002–03,
organised by primary recipient. The categories are: families with children, the
unemployed, those on low incomes, the elderly, sick and disabled people, the bereaved,
and others. Retirement pensions are the most expensive benefit, accounting for over
one-third of total expenditure. The top five – retirement pensions, income support,
housing benefit, child benefit and disability living allowance – make up almost threequarters of total expenditure. There are many other benefits on which total spending is
quite small.
It must be noted that it is difficult to categorise benefits as being entirely for particular
groups, such as ‘families with children’ or ‘people on low incomes’, since many people
fall into more than one group. For example, until the introduction of the pension credit
in October 2003, many recipients of income support were elderly people (45 per cent of
expenditure on income support in 2002–03 was for those over 60). Figure 2.1 shows the
breakdown of spending for 2002–03 when recipients (rather than benefits) are classed
into one of four demographic groups: children, of working age, over working age and
disabled. Not surprisingly, benefits for the elderly take up the largest share of
expenditure, at almost 50 per cent.
Figure 2.1. Expenditure by target group as a percentage of total, 2002–03
Disabled
10%
Children
15%
Working Age
26%
Over Working Age
49%
Notes: Spending on the working families’ tax credit has been allocated 50 per cent to expenditure on children
and 50 per cent to expenditure on people of working age. War pension spending has been excluded.
Source: Based on the Department for Work and Pensions benefit classification
(www.dwp.gov.uk/asd/asd4/Table1.xls).
6
3. A Description of the Current Benefit System, 2003–04
We look at the current system by dividing it into six major categories of primary
recipient –families with children, unemployed people, those on low incomes, elderly
people, sick and disabled people and the bereaved. Each subsection starts with a table
that summarises each benefit in terms of whether it is taxable or non-taxable, whether it
is contributory or non-contributory and whether or not receipt is means-tested. We also
give details of total expenditure and the total number of claimants. More up-to-date
numbers than in Section 2 are used here where possible; these reflect out-turn figures.
The Christmas bonus is the only national benefit not included in any of these sections.
This is a one-off payment of £10 payable to recipients of certain benefits in the week
beginning the first Monday of December. Only one bonus can be received per person,
although in couples where both partners receive qualifying benefits, two separate
payments can be made. Total expenditure on the Christmas bonus was estimated at
£138 million in 2002–03.
3.1. Benefits for Families with Children
Benefit
3.1.1
3.1.2
3.1.3
3.1.4
3.1.5
3.1.6
3.1.7
T
Child benefit
Guardian’s allowance
Working tax credit
Child tax credit
Statutory maternity pay
Maternity allowance
Child maintenance bonus
C
M
Claimants,
2002–03a
6,975,200b
2,400c
n/ae
n/af
100,000g
15,900h
n/a
Expenditure,
2002–03 (£m)a
8,975
2d
n/ae
n/af
728
70
n/a
T = taxable, C = contributory, M = means-tested
a
Estimated.
b
Number of families. In total, 12.45 million children were covered. Figures for November 2002.
c
Number of families. In total, 3,100 children were covered. Figures for November 2002.
d
Includes child’s special allowance (abolished for new claimants from April 1987).
e
Working tax credit only payable from April 2003. There were 1.70 million WTC claimants in October 2003.
Projected 2003–04 expenditure is £3.0 billion. Source: Dawn Primarolo in response to a question by Mr
Willets [107409], Hansard, column 486W, www.parliament.the-stationeryoffice.co.uk/pa/cm200203/cmhansrd/cm030516/text/30516w14.htm.
f
Child tax credit only payable from April 2003. There were 4.22 million in-work child tax credit claimants in
October 2003. Projected 2003–04 expenditure is £8.1 billion. Source: Dawn Primarolo in response to a
question by Mr Willets [107409], Hansard, column 486W, www.parliament.the-stationeryoffice.co.uk/pa/cm200203/cmhansrd/cm030516/text/30516w14.htm.
g
1999–2000 figure. Since the birth rate has not changed significantly, this figure is unlikely to be very
different for 2002–03.
h
November 2002.
Sources: Inland Revenue, www.inlandrevenue.gov.uk/stats/child_benefit/menu.htm and
www.inlandrevenue.gov.uk/pdfs/report2002.pdf; Department for Work and Pensions,
www.dwp.gov.uk/asd/asd4/Table3.xls, www.dwp.gov.uk/asd/asd4/TableC1.xls and
www.dss.gov.uk/publications/dss/2000/fsheets/mb.htm.
7
3.1.1. Child Benefit
Non-taxable, Non-contributory, Non-means-tested
Around 7 million families received child benefit (CB) in 2002–03, covering 12.5 million
children. Introduced in April 1977 to replace family allowance, CB has remained
universal, payable to all families with children regardless of income. It is paid at a higher
rate for the eldest or only child, and then at a lower rate for all subsequent children. For
the purposes of receiving CB, a ‘child’ is someone under the age of 16, or under 19 and
in full-time education.
Table 3.1.1. Current rates of child benefit, £ per week
Eldest or only child
Eldest or only child (lone parent)a
Subsequent children (each)
16.05
17.55
10.75
a
Available only to recipients existing before 6 July 1998.
Until 6 July 1998, lone parents were entitled to receive a higher rate for their eldest child.
After this date, new claimants can no longer receive this higher rate, although existing
claimants may continue to do so. In 1998, just over 1 million families received the loneparent rate of CB. In 2002–03, CB is estimated to have cost the exchequer almost
£9 billion.
3.1.2. Guardian’s Allowance
Non-taxable, Non-contributory, Non-means-tested
Guardian’s allowance is a benefit paid in addition to child benefit for people bringing up
a child or children whose parents have died. If only one parent has died, guardian’s
allowance may still be payable if the whereabouts of the other parent is unknown. A
step-parent does not count as a parent and so may be entitled to receive guardian’s
allowance for raising a stepchild if both natural parents have died. The claimant need not
be the child’s legal guardian, but the child must be living with the claimant or the
claimant must be making contributions for the maintenance of the child of at least
£11.55 per week. Adoptive parents of an orphaned child cannot claim. The rules about
who counts as a child are the same as for child benefit.
Table 3.1.2. Current rates of guardian’s allowance, £ per week
All children (each)
11.55
In May 2001, around 2,400 families were receiving guardian’s allowance, covering some
3,100 children. Expenditure on guardian’s allowance and child’s special allowance (the
latter of which was abolished for new claimants from April 1987) amounted to an
estimated £2 million in 2002–03.
8
3.1.3. Working Tax Credit7
Non-taxable, Non-contributory, Means-tested
Working tax credit (WTC) has been available since 6 April 2003 and provides in-work
support for low-paid working adults. It replaced the adult and childcare-cost elements of
working families’ tax credit, disabled person’s tax credit and the New Deal 50-Plus
employment credit, and extended in-work support to cover households without children.
Since WTC is a tax credit, it is administered by the Inland Revenue. Under international
accounting conventions, tax credits are counted as negative taxation to the extent that
they are less than the income tax liability of the family and as government expenditure
for payments exceeding the tax liability.8 For our purposes, however, we count all tax
credit expenditure spending as if it were public expenditure.
Families with children, and workers with a disability, are eligible for WTC provided at
least one adult works 16 or more hours a week. Workers with no children and no
disability are only eligible if they are aged 25 or over and work at least 30 hours a week.
WTC is made up of a number of components (see Table 3.1.3). There is a basic element,
with an extra payment for couples and lone parents (i.e. for everyone except childless
single people). For those working at least 30 hours a week (30 hours in total for couples),
there is an additional payment. WTC also includes supplementary payments for
disability, for severe disability and for those over 50 returning to work. Severe disability
supplements are payable where the recipient or their partner receives the highest rate of
the care component of disability living allowance (see Section 3.5.3) or the higher rate of
attendance allowance (see Section 3.5.4). The maximum amount of WTC payable is
calculated by adding together all applicable elements.
Table 3.1.3. Current rates of working tax credit, £ per week
Basic element
Couple and lone-parent element
30-hours element
Childcare element (maximum)
Disability element
Severe disability supplement
50-plus return-to-work payment (16–30 hours)
50-plus return-to-work payment (30+ hours)
29.20
28.80
11.90
94.50
140.00
39.15
16.60
20.00
30.00
Income below which maximum WTC is payable
Withdrawal rate
97.00
37%
One child
Two or more children
Note: Weekly numbers annualised may not match annual figures due to rounding.
7For more information on the working tax credit and the child tax credit, see HM Treasury, The Child and Working Tax
Credits, The Modernisation of Britain’s Tax and Benefit System, no. 10, London, 2002 (www.hmtreasury.gov.uk/mediastore/otherfiles/new_tax_credits.pdf).
8For
more information, see www.inlandrevenue.gov.uk/stats/announcepage_1.htm.
9
The childcare element of WTC is available to lone parents working 16 hours or more per
week and to couples where both partners work for 16 hours or more per week (unless
one is incapacitated and thus unable to care for children). This element is payable until
the September following the child’s 15th birthday (16th for disabled children) and care
must be provided by approved providers such as registered childminders, nurseries or
after-school clubs. The childcare component provides 70 per cent of eligible childcare
expenditure of up to £135 per week for families with one child, or £200 for families with
two or more children (i.e. up to £94.50 or £140). Unlike the rest of WTC, the childcare
credit is paid directly to the main carer.
WTC is subject to a joint means test with child tax credit – see below. For WTC claims
made before the beginning of a tax year, awards apply to the whole of that tax year (6
April to 5 April). For claims made after the tax year has begun, awards apply to the
remainder of that tax year. In some circumstances, changes to current income and
personal circumstances affect WTC entitlement. Examples include a fall in income
(relative to that used to assess entitlement) or an increase in income of more than
£2,500, a single claimant becoming part of a couple (or vice versa), and changes to
childcare costs.
WTC was introduced in April 2003, so there are no expenditure or claimant figures for
2002–03. However, in October 2003, approximately 1.70 million families were receiving
WTC, 1.54 million of whom were also receiving child tax credit (see Section 3.1.4). Just
under 10 per cent of WTC recipients had no dependent children.9 For 2003–04,
expenditure on WTC is projected to be £3.0 billion.
WTC that either includes a disability element or is received with child tax credit
passports recipients to a number of health benefits including free prescriptions, dental
treatment, sight tests and glasses, but not free school meals.
3.1.4. Child Tax Credit
Non-taxable, Non-contributory, Means-tested
Child tax credit combines, into a single integrated child credit, support previously
provided by children’s tax credit, child credits in working families’ tax credit, child
additions to most non-means-tested benefits10 and child elements (child additions and
family premiums) of income support and income-based jobseeker’s allowance.11 Child
tax credit is made up of a number of elements: a family element, a baby element for
families with a child under the age of 1, a child element, a disabled child additional
element and a severely disabled child supplement (see Table 3.1.4). Entitlement to child
tax credit does not depend on employment status but does require that the claimant is
responsible for at least one child aged under 16 (or aged 16–18 and in full-time
9Source:
10These
Inland Revenue, www.inlandrevenue.gov.uk/stats/personal-tax-credits/menu.htm.
benefits are carer’s allowance, incapacity benefit, retirement pension and widowed parent’s allowance.
11Between April 2003 and April 2004, families on income support or jobseeker’s allowance can choose whether to
receive child tax credit or to receive an identical amount through income support or jobseeker’s allowance. This is for
administrative reasons only.
10
education). Child tax credit is paid on top of child benefit (see Section 3.1.1) and directly
to the main carer in the family.
Receipt of child tax credit and WTC are subject to a (single) means test operating at the
family level. Households with pre-tax family income below £97.00 per week (£253.76 for
families eligible only for child tax credit) are entitled to the full child tax credit and WTC
payments appropriate for their circumstances. Income from most benefits (including
child benefit, housing benefit, disability living allowance and council tax benefit) is not
included in the WTC entitlement calculation. Once family income exceeds £97.00 per
week, the total child tax credit and WTC award is tapered away at a rate of 37 per cent.
The main WTC entitlement is withdrawn first, then the childcare element of WTC, and
finally the child and disability elements of the child tax credit. The family element of the
child tax credit, however, is not withdrawn until pre-tax income exceeds £958.90 per
week, and even then only at a rate of one in 15. Both child tax credit and WTC are
refundable, meaning that they are payable even if their amount exceeds the family’s
income tax and National Insurance liabilities.
Table 3.1.4. Current rates of child tax credit, £ per week
Family element
Baby element
Child element (each)
Disabled child additional element (each)
Severely disabled child supplement (each)
Income below which maximum child tax credit is payable
Income below which maximum is payable if not entitled to WTC
First withdrawal rate
Second income threshold
Second withdrawal rate
10.45
10.45
27.75
41.30
16.60
97.00
253.76
37%
958.90
6.67% (1 in 15)
Note: Weekly numbers annualised may not match annual figures due to rounding.
Child tax credit was introduced in April 2003, so there are no expenditure or claimant
figures for 2002–03. However, in October 2003, approximately 4.22 million in-work
families received child tax credit.12 For 2003–04, expenditure on child tax credit is
projected to be £8.1 billion.
Child tax credit passports its recipients to a variety of other benefits, such as free
prescriptions, dental treatment, sight tests and glasses. Free school meals are available to
those with weekly income below £253.76 who are receiving child tax credit but not
WTC.
12Inland
Revenue, www.inlandrevenue.gov.uk/stats/personal-tax-credits/menu.htm. A number of families without
work also received child tax credit, but an exact figure is not available.
11
3.1.5. Statutory Maternity Pay, Paternity Pay and Adoption Pay
Non-taxable, Contributory, Non-means-tested
Statutory maternity pay (SMP) is a legal minimum amount that employers must pay to
their employees during maternity leave, although almost all the cost can be recouped
from the government. Many women receive more than the minimum, but this is paid for
by employers and not the government. To claim, the woman must have been in the same
employment without a break for at least 26 weeks up to and including the 15th week
before the week the baby is due. She must have earned at least the lower earnings limit
for National Insurance contributions (currently £77 per week) on average during the
eight weeks up to and including the 15th week before the week in which the baby is due.
To claim SMP, the woman need not intend to return to work.
SMP can be paid for up to 26 weeks: for the first six weeks, it is paid at the higher rate;
for the remaining 20, it is paid at the lower rate. This period can begin at any time from
the 11th week before the baby is due until the week after the birth itself.
Table 3.1.5. Current rates of statutory maternity pay, £ per week
Higher rate
Lower rate
90% of the claimant’s average weekly earnings
The lesser of £100 or 90% of average weekly earnings
In 2002–03, a total of 100,000 women are estimated to have received SMP. Total
government expenditure on SMP in 2002–03 is estimated to have been £728 million.
From 6 April 2003, two new benefits are available: statutory paternity pay (SPP) and
statutory adoption pay (SAP). Both are legal minimum amounts that employers must pay
to their employees during paternity/adoption leave, and most of the cost can be
reclaimed from the government. SPP is usually paid to individuals whose partner has
given birth, but can also be paid when a child is adopted. SAP can only be claimed by
one parent (the other may be able to claim SPP). The eligibility requirements for SPP and
SAP are very similar to those for SMP, except for more stringent employment
conditions. For SPP (birth), the claimant must satisfy the 26-week employment rule (see
above), but also be continuously employed from the end of the 15th week before the
child is due until the child is born. For SPP (adoption) and SAP, the claimant must have
been continuously employed for at least 26 weeks ending with the week in which
notification is received that a child has been matched for adoption. Employment must
then continue until the child arrives.
Both SPP and SAP are payable at the lower SMP rate. SPP is available for up to two
consecutive weeks between the date when the child arrives and eight weeks after this
date. SAP is available for up to 26 weeks starting from no later than when the child
arrives and no earlier than two weeks beforehand.
12
3.1.6. Maternity Allowance
Non-taxable, Contributory, Non-means-tested
Maternity allowance (MA) is payable to pregnant women who are unable to claim
statutory maternity pay. The rules for claiming MA were substantially changed from 20
August 2000. Prior to this date, the claimant must have had earnings in excess of the
lower earnings limit for National Insurance contributions for at least 26 weeks in the 66week period before the week in which the baby is due. The current system requires that
claimants satisfy an employment test and an earnings condition. To satisfy the
employment test, the claimant must have been employed or self-employed (not
necessarily with the same employer or continuously) for at least 26 weeks in the period
of 66 weeks up to and including the week before the baby is due. The earnings condition
requires that average earnings from all employment are at least £30 per week (the
maternity allowance threshold).
MA is payable for up to 26 weeks (the period in which this begins is the same as for
statutory maternity pay). Claimants may be entitled to an additional payment for a
dependent spouse or an adult who cares for one or more of their children, but this is
only available if the claimant is in receipt of particular benefits and the adult dependant’s
earnings are not too high.
Table 3.1.6. Current rates of maternity allowance, £ per week
Standard rate
Adult dependant rate (payable for one)
The lesser of £100 or 90% of average weekly earnings
£33.65
In 2002–03, 15,900 women received MA, with total expenditure estimated at £70 million
for that period. MA claimants receiving income support (see Section 3.3.1) or incomebased jobseeker’s allowance (see Section 3.2.1) may be entitled to receive a Sure Start
maternity grant from the Social Fund. See Section 3.3.5 and Appendix B for more
details.
3.1.7. Child Maintenance Bonus
Non-taxable, Non-contributory, Means-tested
Child maintenance bonus (CMB) is in the process of being abolished, but existing
claimants as at 3 March 2003 can continue to claim. It is a one-off amount available to
low-income individuals receiving child maintenance payments. The aim is to reduce
disincentives to work caused by the withdrawal of means-tested benefits. CMB is payable
if the claimant or their partner starts or returns to work, or increases hours worked or
hourly earnings such that they are no longer entitled to income-based jobseeker’s
allowance (see Section 3.2.1) or income support (see Section 3.3.1). The amount of CMB
payable depends on the claimant’s ‘bonus period’. The bonus period is any period since
7 April 1997 when the claimant or their partner was entitled to income support or
income-based jobseeker’s allowance and was receiving (or was meant to be receiving)
child maintenance.
13
The amount of CMB payable is the minimum of:
•
•
•
£5 for each week during the bonus period when the claimant was paid (or meant to
be paid) at least £5 maintenance, and, for each week when the claimant was paid less
than £5, the amount due;
the actual amount of child maintenance received over the bonus period;
£1,000.
CMB is being replaced by a £10 weekly earnings disregard for child maintenance
payments in the calculation of eligibility for income support or income-based jobseeker’s
allowance.
3.2. Benefits for Unemployed People
Benefit
3.2.1
3.2.2
3.2.3
T
Income-based
jobseeker’s allowance
Contribution-based
jobseeker’s allowance
Job grant
New Deal programmes
C
M
Claimants,
2002–03a
Expenditure,
2002–03
(£m)a
630,400b
2,052
156,100b
514
n/a
n/ac
6
180d
T = taxable, C = contributory, M = means-tested
a
Estimated.
b
November 2002.
c
The numbers of individuals on the New Deal for Young Persons and the New Deal 25-Plus were 86,200
and 56,300 respectively.
d
This is the sum of expenditure on New Deal for Young Persons allowances (£37 million), New Deal 25Plus allowances (£45 million) and the New Deal 50-Plus employment credit (£98 million). From April 2003,
the New Deal 50-Plus employment credit has been replaced by working tax credit.
Sources: Department for Work and Pensions, www.dwp.gov.uk/asd/asd4/Table3.xls and
www.dwp.gov.uk/asd/asd4/TableC1.xls.
3.2.1. Jobseeker’s Allowance
Taxable, Either contributory or means-tested
Jobseeker’s allowance (JSA) replaced unemployment benefit and income support for
unemployed people from 7 October 1996. There are two main types of JSA:
contribution-based JSA is paid to people who have satisfied the National Insurance
contribution conditions; income-based JSA is paid to claimants who pass a means test.13
It is also possible to receive contribution-based JSA with an income-based JSA top-up.
To qualify via either method, the claimant must be under pensionable age and not
receiving income support. From 6 October 2003, those aged 60 or over are no longer
13A third type of jobseeker’s allowance – joint-claim JSA – is paid to members of joint-claim couples. It is very similar to
income-based JSA. Figures for income-based JSA include joint-claim JSA.
14
entitled to JSA. Instead, they can claim pension credit (Section 3.4.3). The claimant
cannot be working for more than 16 hours a week but must be capable of starting work
immediately and of actively taking steps to find a job such as attending interviews,
writing applications or seeking job information. They must also have a current
‘jobseeker’s agreement’ with the Employment Service, which includes such information
as hours available for work, the desired job and any steps that the claimant will take to
find work. They must be prepared to work up to 40 hours per week and have a
reasonable prospect of finding work (i.e. not place too many restrictions on the type of
work they are willing to undertake). If a claimant refuses to take up a job offer without
good reason, they may be denied further payments of JSA. People aged 18–24 who have
been unemployed and claiming JSA for six months or more are required to participate in
the New Deal for Young Persons; those aged 25 or over must participate in the New
Deal 25-Plus programme if they have been unemployed and claiming JSA for 18 months
(see Section 3.2.3).
Contribution-Based Jobseeker’s Allowance
Contribution-based jobseeker’s allowance can be paid for up to six months. To claim
contribution-based JSA, the person must have paid sufficient Class 1 National Insurance
contributions in one of the two tax years prior to the beginning of the year in which the
claimant signs on and claims benefit.14 They cannot have earnings above a specific level
(see below). If the claimant qualifies, they can receive contribution-based JSA
irrespective of savings, capital or partner’s earnings.
Table 3.2.1. Current rates of contribution-based jobseeker’s allowance, £ per
week
Age of claimant
Under 18
18–24
25 or over
32.90
43.25
54.65
If a claimant has earnings, £5 per week is disregarded (£20 for some occupations). Any
income over this disregard is deducted from the contribution-based JSA pound-forpound. Thus the most someone aged 25 or over could earn per week and still receive
contribution-based JSA is £59.65 (assuming that they are not in one of the special
occupations).
In 2002–03, 156,100 people were receiving contribution-based JSA. Contribution-based
JSA is estimated to have cost £514 million in 2002–03.
Income-Based Jobseeker’s Allowance
Those who do not qualify for contribution-based JSA may be able to receive incomebased JSA if they have sufficiently low income. Only one partner in a couple can receive
income-based JSA, and the partner of the claimant must not be working for more than
14For more information about the contribution conditions that must be satisfied, see Child Poverty Action Group,
Welfare Benefits and Tax Credits Handbook 2003–2004, CPAG, London, 2003.
15
24 hours per week (as described above, both forms of JSA require that the claimant is
not working more than 16 hours). From March 2001, young couples without children
have to claim JSA jointly. This means that both have to sign on and meet the conditions
for benefits.
Income-based JSA works much like income support (Section 3.3.1), topping up income
to a specified level (called the ‘applicable amount’), which is intended to reflect the needs
of the claimant‘s family. The applicable amount is the sum of personal allowances,
premiums and some housing costs (primarily mortgage interest payments). The amount
allowed for each is identical to that for income support (see Table 3.3.1). From April
2004, allowances and premiums relating to children will be transferred to child tax credit
(see Section 3.1.4). Clearly, to be eligible, the claimant’s income (minus the same earnings
disregards as for income support) must be less than their applicable amount. Incomerelated JSA is also only payable if the claimant’s capital does not exceed a specified level.
These capital limits are the same as for income support. Income-based JSA is payable for
as long as the qualifying conditions are met.
In 2002–03, 630,400 awards of income-based JSA were in payment, while expenditure
on the benefit was £2.05 billion. Receipt of income-based JSA automatically entitles
individuals to free school meals, health benefits (including free prescriptions, dental
treatment and sight tests), maximum council tax benefit and certain Social Fund
payments (the Sure Start maternity grant, community care grant, budgeting loans and
funeral payments – see Appendix B).
Table 3.2.2. Current rates of income-based jobseeker’s allowance, £ per week
Personal allowance – single person
Personal allowance – couple
Dependent child allowance (each)
Under 18
Aged 18–24
25 or over
Variesa
43.25b
54.65
One or both aged 16–17
Both 18 or over
Variesc
85.75
38.50
a
There are two rates: a lower rate of £32.90 and a higher rate of £43.25. Entitlement to the higher rate
depends on disabled and family circumstances.
b
This rate does not apply to lone parents: lone parents aged 18–24 receive £54.65, the same rate as single
people aged 25 or over.
c
The amount payable depends upon the age of each partner and whether one or both would be eligible for
income support (or income-based JSA) were they single. If both are under 18, there are three rates: £32.90,
£43.25 and £65.30. If only one is under 18, the rates are £43.25, £54.65 and £85.75.
3.2.2. Job Grant
Non-taxable, Non-contributory, Means-tested
Job grant is a one-off £100 tax-free payment for people aged 25 or over who are starting
or returning to full-time work (16 hours or more per week). To be eligible, the job has to
be expected to last at least five weeks and applicants must have to have previously been
receiving a qualifying benefit such as jobseeker’s allowance, income support, incapacity
16
benefit or severe disablement allowance. In 2002–03, it is expected that £6 million will
have been paid out in job grants.
3.2.3. New Deal Programmes
There are four main New Deal programmes, all of which help unemployed people into
work. None of the programmes pays benefits directly to participants. The New Deal for
Young Persons (open to those aged 18–24) and New Deal 25-Plus provide employment
subsidies and training grants to employers who take on previously unemployed
individuals. Both are compulsory for claimants of jobseeker’s allowance: the New Deal
for Young Persons after six months of benefit receipt, the New Deal 25-Plus after 18
months. The New Deal 50-Plus is voluntary and includes only a training grant. Until
April 2003, it also included wage top-ups paid directly to the participant, but these have
been replaced by the 50-plus element in working tax credit. The New Deal for Lone
Parents is also voluntary, but does not include any subsidies or training grants.
3.3. Benefits for People on Low Incomes
Benefit
Appendix B
3.3.1
3.3.2
3.3.3
3.3.4
3.3.5
Income support
Housing benefit
Council tax benefit
Discretionary housing payments
Social Fund payments:
Budgeting loans
Cold weather payments
Community care grants
Crisis loans
Funeral payments
Sure Start maternity grants
T
C
M
3,961,000b
3,794,000b
4,577,700b
2,000c
Expenditure,
2002–03
(£m)a
14,238
12,198
2,891
20
1,251,000d
1,675,000d
245,000d
1,064,000d
45,000d
232,000d
4
14
108
22
41
111
Claimants,
2002–03a
T = taxable, C = contributory, M = means-tested
a
Estimated.
b
November 2002.
c
May 2002.
d
Number of awards made in 2002–03.
Sources: Department for Work and Pensions (www.dwp.gov.uk/asd/asd4/Table3.xls,
www.dwp.gov.uk/asd/asd4/TableC1.xls,
www.dwp.gov.uk/publications/dwp/2003/sf/annual_report.pdf).
3.3.1. Income Support
Non-taxable, Non-contributory, Means-tested
Income support (IS) is a benefit provided to people on low incomes. Since October
1996, most unemployed people have had to claim income-based jobseeker’s allowance
(see Section 3.2.1) instead of IS; however, the two systems are very similar. IS is mainly
payable now to lone parents and carers, people who are incapable of work and disabled
17
people, though some other types of people are also eligible. From 6 October 2003,
pension credit replaced IS in most cases for those aged 60 or over. Recipients of IS
cannot be working more than 16 hours per week or be in full-time education (with some
exceptions).
To be eligible, the claimant’s income (minus any earnings disregards – see below) must
be less than their ‘applicable amount’. The applicable amount is the sum of basic
personal allowances, premiums and housing costs (see Table 3.3.1). The level of IS
payable is the amount needed to top up income to the applicable amount. From April
2004, allowances and premiums relating to children will be transferred to child tax credit
(see Section 3.1.4). Until 6 October 2003, IS was payable to those aged 60 or over, and
included a pensioner premium (see Table 3.3.1). It was often referred to as the minimum
income guarantee (MIG). From 6 October 2003, pension credit replaced IS for most
people aged 60 or over (see Section 3.4.3). In a small number of cases, however,
pensioner premiums are still payable under IS (for example, when a claimant aged under
60 has a partner over 60). Housing costs are principally mortgage interest payments.
Deductions from housing costs are made for non-dependants in the same way as for
housing benefit (see Section 3.3.2 and Table 3.3.2).
Table 3.3.1. Current rates of income support, £ per week
Personal allowance – single person
Personal allowance – couple
Under 18
Aged 18–24
25 or over
Variesa
43.25b
54.65
One or both aged 16–17
Both 18 or over
Variesc
85.75
Dependent child allowance (each)d
Premiums
38.50
Family
Family (lone-parent increase)e
Disabled child (each)
Carerf
Disability – single
Disability – couple
Enhanced disability – child (each)g
Enhanced disability – singleg
Enhanced disability – coupleg
Severe disabilityf
Pensioner premium – single
Pensioner premium – couple
Bereavement premium
15.75
0.15
41.30
25.10
23.30
33.25
16.60
11.40
16.45
42.95
47.45
70.05
22.80
a
There are two rates: a lower rate of £32.90 and a higher rate of £43.25. Entitlement to the higher rate
depends on disabled and family circumstances.
b
This rate does not apply to lone parents aged 18–24. They receive £54.65, the same rate as single people
aged 25 or over.
c
The amount payable depends upon the age of each partner and whether one or both would be eligible for
IS (or income-based JSA) were they single. If both are under 18, there are three rates: £32.90, £43.25 and
£65.30. If only one is aged under 18, the rates are £43.25, £54.65 and £85.75.
d
A child does not count as 16 until the September following their 16th birthday.
e
From 6 April 1998, payable to existing claimants only. After this date, new lone-parent claimants are
entitled only to the family premium.
18
f
Double this amount is payable if both partners qualify.
The enhanced disability premium was introduced in April 2001 and is payable where the claimant or family
member receives the highest rate of disability living allowance (care) and is aged 60 or below.
g
Some benefits are not counted as income (e.g. attendance allowance, disability living
allowance) and recipients of certain benefits may have up to £25 of their income
disregarded for the entitlement calculation. IS is not payable if the claimant and the
claimant’s partner together have more than £8,000 capital (£12,000 if either is 60 or
over, £16,000 if the claimant lives permanently in a care home). Capital up to £3,000 is
ignored (£6,000 for those aged 60 or over, £10,000 for those in care homes). Between
these two thresholds, IS entitlement is reduced by £1 for every £250 capital exceeding
the lower threshold.
In 2002–03, just under 4 million people received IS. Roughly 45 per cent of recipients
were aged 60 or over, 27 per cent disabled and 21 per cent lone parents. Total 2002–03
expenditure is estimated at £14.2 billion. Receipt of IS automatically entitles individuals
to free school meals, health benefits (including free prescriptions, dental treatment and
sight tests), maximum council tax benefit and certain Social Fund payments (the Sure
Start maternity grant, community care grant, budgeting loans and funeral payments – see
Appendix B).
3.3.2. Housing Benefit
Non-taxable, Non-contributory, Means-tested
Housing benefit (HB) is payable to people with low incomes who rent their homes (for
individuals who own their own homes, mortgage interest payments may be met through
income support – see Section 3.3.1). People on income support, income-based
jobseeker’s allowance or (from 6 October 2003) the guarantee credit of pension credit
are automatically entitled to the full level of HB. For other claimants, the amount of HB
payable depends upon income, in much the same way as for IS or income-based JSA.
Table 3.3.2. Current deduction from maximum housing benefit for each nondependant,a £ per week
Range of gross weekly income of non-dependant (aged 18+)
Less than £92.00b
£92.00–£136.99
£137.00–£176.99
£177.00–£234.99
£235.00–£292.99
More than £292.99
7.40
17.00
23.35
38.20
43.50
47.75
a
No deductions are made for any non-dependant if either the claimant or the claimant’s partner is blind or
receives attendance allowance or the care component of disability living allowance. No deductions are made
for an individual non-dependant in a range of situations. These include when the non-dependant is a full-time
student, or under 25 and on IS or income-based JSA. A single deduction is made for non-dependant
couples.
b
This rate also applies to those aged 18 or over who are not in work, or aged 25 or over on IS.
The maximum level of HB is equal to ‘eligible rent’ minus deductions made for nondependants. Eligible rent is the weekly contractual rate of rent less ineligible charges
19
included in the rent (such as certain fuel charges, service charges for washing, cleaning,
etc. and water charges). However, eligible rent is capped at a ‘local reference rent’, the
rent of suitably sized accommodation in the same locality. If there are non-dependants
living in the house, the maximum level of HB may be reduced because non-dependants
are expected to contribute towards the rent. An amount is deducted for each nondependant aged at least 18 based on their income (see Table 3.3.2).
Table 3.3.3. Current rates of housing benefit, £ per week
Personal allowance – single person
Personal allowance – couple
Aged 16–24
25 or over
Aged 60–64 (from 6 Oct 2003)
65 or over (from 6 Oct)
43.25a
54.65
102.10
116.90
All ages
One or both aged 60–64 (from 6 Oct)
One or both aged 65+ (from 6 Oct)
85.75
155.80
175.00
Dependent child allowance (each)b
Premiums
38.50
Family
Family with child aged under 1
Family (lone-parent increase)c
Disabled child (each)
Carerd
Disability – single
Disability – couple
Enhanced disability – child (each)e
Enhanced disability – singlee
Enhanced disability – couplee
Severe disabilityd
Pensioner premium – single
Pensioner premium – couple
Bereavement premium
15.75
26.60
6.45
41.30
25.10
23.30
33.25
16.60
11.40
16.45
42.95
47.45
70.05
22.80
a
This rate does not apply to lone parents aged 18–24. They receive £54.65, the same rate as single people
aged 25 or over.
b
A child does not count as 16 until the September following their 16th birthday.
c
From 6 April 1998, payable to existing claimants only. After this date, new lone-parent claimants are
entitled only to the family premium. From 6 October 2003, it is also only payable if the claimant is under 60.
d
Double this amount is payable if both partners qualify.
e
The enhanced disability premium was introduced in April 2001 and is payable where the claimant or family
member receives the highest rate of disability living allowance (care) and is aged 60 or below.
The amount of HB actually received depends on the claimant’s household income
relative to the ‘applicable amount’ and household capital. For HB, the applicable amount
is the sum of personal allowances and premiums (but not housing costs as with IS and
income-based JSA). These allowances and premiums (set out in Table 3.3.3) are similar
to those for IS and income-based JSA, but allowances vary less with age, disability and
family circumstances, and there is a higher lone-parent family premium. Also, from 6
October 2003, those aged 60 or over and not claiming IS or income-based JSA are
entitled to higher allowances but can only claim some of the premiums (family, disabled
20
child, enhanced disability, severe disability and carer’s premiums). This is due to the
introduction of pension credit (see Section 3.4.3). If income is less than or equal to the
sum of allowances and premiums, maximum HB is payable. When income exceeds this
level, there is a 65 per cent taper (so HB entitlement is equal to maximum HB minus 65
per cent of the amount by which income exceeds the applicable amount).
Some benefits are not counted as income (e.g. attendance allowance, disability living
allowance) and recipients of certain benefits may have up to £25 of their income
disregarded for the entitlement calculation. Some childcare costs can also be deducted
(up to £94.50 per week for one child, or £140 for two or more). If the claimant and
claimant’s partner together have capital that exceeds £16,000, no HB is normally
payable. Capital of between £3,000 (£6,000 for those aged 60 or over, £10,000 for those
in residential care) and £16,000 is assumed to generate £1 of income per £250 of capital.
From 6 October 2003, there is no capital limit for individuals getting the guarantee credit
of pension credit, and assumed income for those aged 60 or over is £1 for every £500.
Almost 3.8 million people received HB in 2002–03. Expenditure in 2002–03 was
£12.2 billion. Around 70 per cent of HB recipients also received IS or income-based
JSA.15
3.3.3. Council Tax Benefit
Non-taxable, Non-contributory, Means-tested
Council tax benefit (CTB) is payable to people with low incomes who are liable to pay
council tax on a property in which they are resident. Many of the conditions for claiming
are the same as those for housing benefit (see Section 3.3.2), including those on capital
thresholds, applicable amounts and premiums (although since nobody under the age of
18 is liable for council tax, nobody under 18 can claim CTB). There is an alternative
benefit, known as the second adult rebate, which is payable instead of CTB to people
who have an adult living with them who is not liable for council tax and does not pay
rent. Claimants eligible both for council tax benefit and for the second adult rebate are
paid whichever is of higher value. Second adult rebate is claimed by far fewer people
than main CTB and will be ignored for the remainder of this section.
People on income support or income-based jobseeker’s allowance are automatically
passported to entitlement to maximum CTB. Maximum CTB is the weekly cost of
council tax, worked out as the annual bill divided by the number of days in the year and
multiplied by seven. If there is more than one person in the house eligible to pay council
tax, the maximum benefit is the share of the total bill that each person is eligible for. So,
for example, if there were a married couple and a third person all eligible to pay council
tax for a given property, one member of the couple would be entitled to claim up to a
two-thirds share of the weekly tax and the third person could claim a one-third share.
There may be deductions for non-dependants; the rates of these are given in Table 3.3.4.
15Source:
www.dwp.gov.uk/asd/statistical_summaries.asp.
21
For people not on IS or income-based JSA with an income above their applicable
amount for housing benefit (see Section 3.3.2), the taper is 20 per cent.
Table 3.3.4. Current non-dependant deductions for council tax benefit, £ per
week
Range of gross weekly income of non-dependant (aged 18+)a
Less than £137.00b
£137.00–£234.99
£235.00–£292.99
More than £292.99
2.30
4.60
5.80
6.95
a
The rules for when deductions are not made are very similar to those for housing benefit. The main
difference is that all non-dependants on IS or income-related JSA (or, from 6 October 2003, pension credit)
are ignored, not just those under 25.
b
This rate also applies to those aged 18 or over who are not in work, or aged 25 or over on IS.
People living in high-value properties in council tax bands F, G or H (houses costing at
least £120,000 in England in 1991) who claim CTB after 31 March 1998 have their
maximum CTB restricted to that of a band E property.16
From 6 October 2003, CTB rules for people who are over 60 and not receiving IS or
income-based JSA changed. These changes were very similar to those for housing
benefit.
In 2002–03, just under 4.6 million people received CTB, making it the most widely
claimed of all means-tested benefits. It cost £2.9 billion in 2002–03. Of those receiving
CTB, 69 per cent were also in receipt of either IS or income-based JSA.17 For a detailed
description of the distributional impact of CTB, and some reform options, see T. Clark,
C. Giles and J. Hall, Does Council Tax Benefit Work?, Institute for Fiscal Studies, London,
1999.18
3.3.4. Discretionary Housing Payments
Non-taxable, Non-contributory, Means-tested
Discretionary housing payments are payments to help meet rent or council tax liabilities.
They are payable to those entitled to housing benefit or council tax benefit who require
financial assistance in addition to HB or CTB to meet their housing costs. No one has a
right to discretionary housing payments, and awards are made out of a cash-limited
budget. The amount and duration of payments varies. In 2002–03, an estimated 2,000
people were receiving discretionary housing payments, costing £20 million.
16For
more on council tax valuations, see S. Adam and J. Shaw, A Survey of the UK Tax System, Briefing Note no. 9,
Institute for Fiscal Studies, London, 2003 (www.ifs.org.uk/taxsystem/taxsurvey.pdf).
17Source:
18An
22
www.dwp.gov.uk/asd/statistical_summaries.asp.
executive summary is available at www.ifs.org.uk/press/counciltax.shtml.
3.3.5. Social Fund Payments
Non-taxable, Non-contributory, Means-tested
The Social Fund was introduced in 1987 to provide money for people in need under
different circumstances. Some of the payments from the Social Fund are regulated and
paid out under certain conditions to certain people. Other payments are discretionary
and budget-limited and paid out to people who satisfy the qualifying rules on a case-bycase basis. The various payments from the Social Fund are described in Appendix B. For
2002–03, total net expenditure from the Social Fund was £304 million.
3.4. Benefits for Elderly People
Benefit
3.4.1
3.4.2
3.4.3
3.4.4
3.4.5
T
Basic state pension
Earnings-related state pensions:
Graduated retirement pension
SERPS
State second pension
Pension credit
Winter fuel payments
Concessionary TV licences
C
Part
M
Claimants,
2002–03a
11,125,900
8,395,000b
5,655,000b
n/a
n/ac
11,415,000
3,771,000
households
Expenditure,
2002–03
(£m)a
38,285
6,062
n/ac
1,712
374
T = taxable, C = contributory, M = means-tested
a
Estimated.
b
1999–2000.
c
Pension credit only payable from April 2003.
Source: Department for Work and Pensions, Work and Pensions Statistics 2001, Government Statistical Service,
London, 2001.
3.4.1. Basic State Pension
Taxable, Partly contributory, Non-means-tested
The basic state pension (BSP) was introduced in 1948, following the Beveridge Report,
with the aim of providing an income for old-age pensioners based upon their record of
National Insurance contributions (NICs). Originally, the idea was for the BSP to operate
on a funded basis, with each generation paying for its own pensions through NICs. This
was abandoned immediately on introduction so that the pension could be made payable
to the existing generation of pensioners.
The BSP is payable from the state retirement age, which at present is 60 for women and
65 for men. All pensions are paid for life. The retirement age for women will be
increased by six months each year from 2010 so that equalisation at 65 is achieved in
2020. Married partners over the state retirement age receive a dependant’s addition on
top of the BSP, unless each partner in the couple is able to qualify for a larger pension
on the basis of their own contribution record. Widows and widowers are able to inherit
23
their deceased partner’s pension entitlement in full if this is worth more than their own
entitlement. Those not qualifying for the full amount (because of insufficient NICs – see
below) are able to receive a proportion of the BSP, subject to this being at least 25 per
cent of the full amount. Those aged over 80 are able to receive the less generous noncontributory basic state pension if this is more than the entitlement based on their own
contribution record.
In order to qualify for the full BSP, individuals need to have paid NICs for 90 per cent
of a working lifetime – currently set at 44 years for men and 39 years for women.19
Individuals are credited with NICs for periods spent out of the labour market due to
illness, disability or unemployment. Hence coverage among pensioner men in particular
is very high. Many married women pensioners do not qualify for the BSP, because prior
to 1978 they could ‘opt out’ of the BSP, in return for which they paid a lower rate of
National Insurance. From 1978, opting out has been prohibited, and time spent looking
after children has reduced the period for which contributions are required. Combined
with increasing female labour market participation, this means that more women will
qualify for the BSP in future.
Individuals can choose to defer receipt of the BSP for up to five years. Each year of
deferral results in an increase in the BSP of 7½ per cent. Any earnings-related state
pension (see Section 3.4.2) that the individual is eligible to receive is also raised through
deferral. Once the claimant reaches 80, they are entitled to an extra 25p per week. Extra
amounts are also available to those receiving the age-related addition for long-term
incapacity benefit (see Section 3.5.2) and for those with adult or child dependants.
Table 3.4.1. Current rates of basic retirement pension, £ per week
Basic state pension
Non-contributory basic state pension
Increase for dependants
Over-80s’ increase
77.45
46.35
Adult (for one)
Eldest or only child
Subsequent children (each)
46.35
9.55
11.35
0.25
Until the early 1970s, the level of the BSP was uprated on an ad hoc basis, but by more
than enough to keep pace with increases in average earnings. It was then formally linked
to the faster of growth in prices or growth in earnings until 1981, since when it has been
formally linked to price inflation. Hence the value of the BSP relative to earnings has
changed considerably over time, from just under 14 per cent when it was first
introduced, to around 20 per cent in the early 1980s, before falling to just under 15 per
cent today. The policy of price indexation means that, assuming real earnings growth of
1½ per cent a year, the value of the BSP would fall to under 7 per cent of average
earnings by 2050.
19For
more about the National Insurance system, see S. Adam and J. Shaw, A Survey of the UK Tax System, Briefing Note
no. 9, Institute for Fiscal Studies, London, 2003 (www.ifs.org.uk/taxsystem/taxsurvey.pdf).
24
Costing some £38.3 billion in 2002–03, the BSP is the largest single benefit, constituting
31.9 per cent of total welfare expenditure. It is received by 11.1 million pensioners.
Recipients of any category of state pension receive the Christmas bonus (see page 7).
3.4.2. Earnings-Related State Pensions
Taxable, Contributory, Non-means-tested
Graduated Retirement Pension
The graduated retirement pension (GRP) scheme operated between April 1961 and April
1975. It involved an earnings-related element to National Insurance contributions on top
of the then standard flat-rate contribution. This was designed to entitle individuals to an
earnings-related element on their state pension. Initially, all individuals had to contribute
to the scheme. This was changed from 5 October 1966 so that individuals who were
members of an occupational pension scheme could contribute at a reduced rate, in
return for which they received a reduced rate of benefit. The rapid inflation seen over
the period of the scheme’s life has left the entitlements available typically small. For men
every £7.50 of contributions paid into the scheme, and for women every £9 paid, yields
an extra 9.37 pence per week on the basic pension rate. The GRP is payable even if the
individual is not in receipt of the basic state pension.
State Earnings-Related Pension Scheme
The State Earnings-Related Pension Scheme (SERPS) was introduced in 1978 to provide
additional retirement income to around half the workforce, whose employer did not
provide an occupational pension scheme. Despite being introduced with cross-party
support, perhaps its most noticeable feature is how short-lived it has been. SERPS was
cut dramatically in the Social Security Acts of both 1986 and 1995, before being replaced
by the state second pension from 2002 (see below for more details). As of April 2002, no
future SERPS benefits are being accrued. SERPS is payable even if the claimant is not in
receipt of the basic pension.
In order to avoid crowding out existing private pension provision, those who were
members of a defined benefit (final salary) pension were allowed to ‘opt out’ of SERPS
immediately from its introduction in 1978. In return, their employer made lower
National Insurance contributions on their behalf and the individual’s contribution rate
was also reduced. In addition, from 1988, individuals were allowed to ‘opt out’ of SERPS
into a defined contribution (money purchase) pension scheme, in return for which a
proportion of their NICs were paid into the individual’s pension fund. This led to rapid
growth in personal pensions, particularly among the young, for whom SERPS
represented a worse deal.20
The original SERPS formula took individuals’ earnings in each year and uprated them by
average earnings growth to the year before the individual reached state retirement age.
20For more details, see, for example, R. Disney and E. Whitehouse, The Personal Pensions Stampede, Institute for Fiscal
Studies, London, 1992.
25
The lower of this amount and the annualised upper earnings limit (UEL) in the year
before retirement would then be used in the SERPS calculation. The value of the
annualised lower earnings limit (LEL) in the year prior to retirement was then deducted.
The SERPS pension that an individual would receive was to be equal to one-quarter of
this amount, averaged over the best 20 years’ earnings of their life. No SERPS was paid
on earnings below the LEL, since these were deemed to be covered by the basic state
pension. No additional SERPS was received on earnings above the UEL, since those
who were contracted out of SERPS only received a rebate on NICs between the LEL
and the UEL. Importantly, while contributions were indexed in line with earnings
between the year in which they were made and the year of retirement, once in payment
SERPS was indexed to price inflation. In addition, surviving partners could inherit the
full amount of their spouse’s entitlement.
The 1986 Social Security Act cut future SERPS expenditure (and hence generosity).
Individuals will now receive one-fifth rather than one-quarter of their revalued earnings
between the UEL and the LEL. In addition, this will be averaged over their entire
lifetime, rather than their best 20 years. These cuts are being phased in between April
1999 and April 2009, although earnings from before April 1988 will continue to accrue
at the more generous level. The 1986 Social Security Act also reduced the amount that a
surviving partner could inherit from 100 per cent to 50 per cent of their spouse’s
pension. Originally, this was to apply to surviving partners from 6 April 2000, but due to
government documentation failing to inform individuals of the change, it was delayed
until October 2002. It is now being phased in over a 10-year period.21 Those able to
show that they acted on incorrect information may be eligible for compensation after
this date.22
The 1995 Social Security Act further reduced the generosity of SERPS. This was due to
two changes. First was the increase in the state retirement age for women being phased
in between 2010 and 2020. Secondly, there was a technical change to the SERPS
formula. This meant that, instead of subtracting the LEL in the year prior to retirement,
now the actual LEL is deducted from earnings before they are uprated by average
earnings growth. This is less generous for those retiring now and for several years to
come, since the LEL being deducted now is essentially being uprated in line with
earnings to the current year while the LEL that was previously being used was increased
only in line with prices.
For 2002–03, over £6 billion was spent on state earnings-related pensions. A total of 9.2
million people were receiving an earnings-related state pension in 1999–2000.23
Approximately one in two pensioners were entitled to SERPS, and about three-quarters
received some form of graduated pension.
21See
www.thepensionservice.gov.uk/pdf/serpsoct2003.pdf.
22For more details of the SERPS scheme and inheritance, see Department of Social Security, Important Information on
Pensions: State Pensions and Inheritance, London, 2000 (www.dwp.gov.uk/mediacentre/pressreleases/2000/nov/29-11-001.asp).
23Social
26
Security Statistics. More recent figure not available.
State Second Pension
From 6 April 2002, SERPS was replaced (for new contributions) by the state second
pension (S2P), essentially a more generous version of SERPS. The formula used to
calculate the amount of S2P entitlement is much the same as that used for SERPS,
except that it deliberately favours lower earners: for 2003–04, individuals earning below
£11,200 qualify for S2P worth £2,878.40 (40 per cent of £11,200 minus the annualised
LEL), regardless of actual earnings. An individual qualifies for an additional 10 per cent
of earnings between £11,200 and £26,000, and an additional 20 per cent of earnings
between £26,000 and the annualised UEL (all thresholds are uprated annually). This
strange structure is designed so that no one loses out from the reform.
The 1998 Pensions Green Paper envisaged that the S2P would become a flat-rate top-up
to the basic state pension. This would create some losers as all individuals would receive
40 per cent of £11,200 (again minus the LEL) regardless of their earnings level.
Originally, the change was scheduled for April 2007, but the 2002 Pensions Green Paper
stated that its introduction was to be kept under review. 24
3.4.3. Pension Credit
Non-taxable, Non-contributory, Means-tested
From 6 October 2003, pension credit (PC) replaced the minimum income guarantee
(income support for those aged 60 or over). It was introduced to improve the incentive
to save for retirement. Previously, pensioners with income in excess of the basic state
pension but less than the MIG faced a 100 per cent marginal withdrawal rate (£1 of
support lost for every £1 extra of their own income). This acted as a major deterrent to
saving for retirement. Pension credit attempted to reduce this saving disincentive by
cutting the marginal withdrawal rate to 40 per cent.
There are two parts to the PC: guarantee credit and savings credit. Claimants may be
entitled to either or both elements. Guarantee credit works much like the MIG, topping
up income to a specified minimum level (called the ‘appropriate amount’). The
appropriate amount is the sum of a standard amount and additional amounts for special
needs or housing costs (see Table 3.4.2). To receive guarantee credit, claimants must be
aged at least 60 (this will increase to 65 between 2010 and 2020 in line with the
retirement age for women – see Section 3.4.1) and have income below the appropriate
amount. The sum payable is the difference between family income and the appropriate
amount. As with the MIG, capital is assumed to yield a flow of income, but the PC rules
are more generous. Capital below £6,000 is disregarded (£10,000 for those in care
homes), and above this level, every £500 of capital is assumed to provide £1 of income.
There is no upper limit on the amount of capital that can be held.
24For more information, see R. Disney, C. Emmerson and S. Tanner, Partnership in Pensions: An Assessment, Commentary
no. 78, Institute for Fiscal Studies, London, 1999. An executive summary is available on the IFS website at
www.ifs.org.uk/pensions/partnership.shtml.
27
Table 3.4.2. Rates of guarantee credit (from 6 October 2003), £ per week
Standard amount – single person
Standard amount – couple
Additional amounts
Severe disability – single
Severe disability – couple
Carera
Housing costs
Transitional
102.10
155.80
42.95
85.90
25.10
Variesb
Variesc
a
Double this amount is payable if both partners qualify.
b
Housing cost payments are very similar to those for income support (Section 3.3.1).
c
A transitional element is paid to those previously on income support or income-based jobseeker’s allowance
who would be made worse off by moving onto PC. The transitional payment covers the difference between
the final IS or income-based JSA applicable amount and the PC appropriate amount (aside from a few
adjustments).
Savings credit rewards people aged 65 or over who have saved for retirement. Only
those with (pre-guarantee-credit) income that exceeds the appropriate savings credit
starting point (see Table 3.4.3) are eligible.25 For those with income between this amount
and the appropriate amount, the amount of savings credit payable is 60 per cent of
income above the savings credit starting point. This implies a maximum savings credit
payment of 60 per cent of the difference between the appropriate amount and the
savings credit starting point. For those with income greater than or equal to the
appropriate amount, savings credit is withdrawn at a rate of 40 per cent. This means that
a claimant whose income is exactly equal to the appropriate amount will receive the
maximum award, but each additional £1 of income reduces the award by 40 pence.
Table 3.4.3. Rates of savings credit (from 6 October 2003), £ per week
Savings credit starting point – single person
Savings credit starting point – couple
77.45
123.80
Maximum savings credit – single person
Maximum savings credit – couple
14.79
19.20
Withdrawal rate
40%
3.4.4. Winter Fuel Payments
Non-taxable, Non-contributory, Non-means-tested
Households with a resident over the age of 60 are entitled to receive a lump-sum winter
fuel payment in December of each year (payable in addition to the Christmas bonus). In
almost all cases, it is worth £200. In 2002–03, approximately 11.4 million awards were
made. Expenditure in 2002–03 was approximately £1.7 billion.
25Different measures of income are used at different points in the calculation of entitlement to savings credit. See
www.pensions.gov.uk/pdf/pctechsept03.pdf.
28
3.4.5. Concessionary Television Licences
Non-taxable, Non-contributory, Non-means-tested
From September 2000, households in which a person over the age of 75 resides do not
have to pay for a television licence. The cost of a colour television licence is £116 a year
(£121 from April 2004). In 2002–03, 3.8 million households benefited from a free
television licence. The cost of the scheme was approximately £374 million.
3.5. Benefits for Sick and Disabled People
Benefit
T
3.5.1
3.5.2
3.5.3
3.5.4
3.5.5
3.5.6
3.5.7
3.5.8
Statutory sick pay
Incapacity benefit
Disability living allowance
Attendance allowance
Severe disablement allowance
Carer’s allowance
War disablement pension
Industrial injuries disablement
benefit
3.5.9
Independent Living Funds
3.5.10 Motability
Other industrial injuries
benefitsi
C
M
Part
Claimants,
2002–03a
n/a
1,505,800b
2,439,300c
1,334,300c
325,200b
402,700c
216,900
265,900e
14,000
400,000h
Less than
1,000
Expenditure,
2002–03
(£m)a
31
6,788
7,046
3,250
957
997
1,187d
718f
167g
8
1
T = taxable, C = contributory, M = means-tested
a
Estimated.
b
Recipients, November 2002.
c
November 2002.
d
Total expenditure on war pensions (including war disablement and war widow’s pensions) for 2002–03 was
£1,187 million (see Sections 3.5.7 and 3.6.2).
e
Number of assessments in payment. Some recipients have more than one assessment.
f
Expenditure on industrial injuries disablement benefit, reduced earnings allowance and retirement
allowance. See Section 3.5.8.
g
Includes some administration costs.
h
This is a very approximate figure for the number of Motability scheme customers.
i
Workmen’s compensation supplementation scheme and pneumoconiosis, byssinosis and miscellaneous
diseases benefit scheme. Both are payable to people who contracted certain industrial illnesses prior to 5 July
1948.
Sources: www.dss.gov.uk/asd/asd4/Table1.xls; www.dss.gov.uk/asd/asd4/Table7.xls.
3.5.1. Statutory Sick Pay
Taxable, Contributory, Non-means-tested
Statutory sick pay (SSP) is a benefit paid by employers for a maximum of 28 weeks to
employees incapable of work. It is a legal minimum amount, and many employers will
29
pay more than the minimum rate. As with statutory maternity pay (see Section 3.1.5),
much of the cost of SSP is reclaimed from the government.
To be incapable of work, an employee must be unable to do work that they could
reasonably have been expected to do under the terms of their employment contract.
Even if this is not the case, SSP may still be payable under some circumstances (e.g. a
doctor has stated that the employee should not work in order to rest or convalesce after
a period of illness). SSP is payable if the period of incapability lasts four or more days.
People under 16 or over 65 years of age cannot claim SSP (although those over 65 can
continue to receive it if they claimed before their 65th birthday, as long as their
entitlement remains). Also excluded are people on contracts of less than three months,
although employees who work on a series of short-term contracts can claim SSP as long
as the total period of employment is longer than 13 weeks. SSP cannot be claimed if
weekly earnings are less than the lower earnings limit, currently £77 per week.
SSP is currently payable at a weekly rate of £64.35. The total cost of SSP in 2002–03 is
estimated at £31 million.
3.5.2. Incapacity Benefit
Taxable, Contributory, Partially means-tested
Incapacity benefit (IB) replaced sickness benefit and invalidity benefit from April 1995.
Employed claimants who cannot work due to sickness will normally receive statutory
sick pay (see Section 3.5.1) for the first 28 weeks of their absence, and will then be able
to claim IB if they have been credited with enough National Insurance contributions or,
under some circumstances, are a widow or widower. The NIC conditions are similar to
those for contribution-based jobseeker’s allowance (see Section 3.2.1).
Claimants must be incapable of work. Capability for work is determined by the ‘own
occupation test’ for the first 28 weeks of incapacity, which determines whether or not
the claimant is capable of returning to the type of job that they were doing before they
became incapacitated. After 28 weeks, the claimant must satisfy the ‘personal capability
assessment’, which tests ability to perform all types of work. The personal capability
assessment replaced the ‘all-work test’ from 3 April 2000. The all-work test was not
introduced until 12 April 1995, and people claiming sickness benefit or invalidity benefit
prior to that date are exempt from the personal capability assessment.
Rates of IB are given in Table 3.5.1. Claimants of the short-term rate of IB cannot be
more than five years above pension age; claimants of long-term IB cannot be above
pension age. The lower tax-free short-term rate is payable for the first 28 weeks of
sickness if the claimant is not entitled to statutory sick pay, and the higher taxable shortterm rate is payable from weeks 29 to 52. After a year of entitlement, the taxable longterm rate becomes payable. Recipients of the long-term rate may be entitled to an agerelated addition to their benefit dependent on their age when entitlement to IB or
statutory sick pay began.
30
Table 3.5.1. Current rates of incapacity benefit, £ per week
Claimant under
pensionable age
54.40
33.65
–
–
Claimant over
pensionable age
69.20
41.50
9.55
11.35
Short-term IB (lower rate)
Increase for dependants:
Standard
Adult (for one)
Eldest or only child
Subsequent children
(each)
Short-term IB (higher rate)
Increase for dependants:
Standard
Adult (for one)
Eldest or only child
Subsequent children
(each)
64.35
33.65
9.55
11.35
70.95
40.80
9.55
11.35
Long-term IB
Increase for dependants:
Standard
Adult (for one)
Eldest or only child
Subsequent children
(each)
Under 35
Under 45
72.15
43.15
9.55
11.35
–
–
–
–
15.15
7.60
n/a
n/a
Age-related addition:
People who are terminally ill or who are entitled to the highest rate of disability living
allowance (care) (see Section 3.5.3) can receive an amount equal to the long-term rate of
IB after 28 weeks of eligibility instead of one year. People in receipt of invalidity benefit
or sickness benefit prior to the introduction of IB are protected by transitional rules.
Recipients of invalidity benefit automatically received the long-term rate of IB. People in
receipt of sickness benefit or invalidity benefit as a result of an industrial accident or
disease (for which NICs were not necessary) automatically received a transitional rate of
short-term IB and then, after a year, long-term IB.
From April 2001, new recipients of IB have had their IB entitlement reduced by 50
pence for every pound of personal or occupational pension income over £85 per week.
In 2002–03, total expenditure on IB was estimated at £6.8 billion, of which
approximately £5.7 billion was on the long-term rate. Expenditure has been slowly
falling (in cash terms) since 1995–96, when the total was £7.6 billion. Over 1.5 million
people were estimated to be receiving IB in 2002–03, of whom 91,300 were on the lower
short-term rate, 89,300 on the higher short-term rate and 1.33 million on the long-term
rate. Recipients of long-term IB are also entitled to receive the Christmas bonus.
3.5.3. Disability Living Allowance
Non-taxable, Non-contributory, Non-means-tested
Disability living allowance (DLA) was introduced on 1 April 1992 for people who
become disabled before the age of 65. It replaced and extended attendance allowance
and mobility allowance so that people who could not have qualified for these benefits
are able to claim DLA. Recipients are entitled to the Christmas bonus.
31
DLA has two components reflecting the benefits that it replaced: a care component and
a mobility component. Each is available at different weekly rates depending upon the
severity of the disability of the individual claimant.
Disability Living Allowance Care Component
There are three rates of DLA (care):
•
For the lowest rate of DLA (care), the claimant must be 16 or over and so disabled
that they cannot prepare a cooked main meal for themselves if given the ingredients.
Alternatively, they must be so disabled that they require attention from another
person for a significant period each day in connection with bodily functions.
•
For the middle rate of DLA (care), the claimant must require frequent attention from
someone else throughout the day or night in connection with bodily functions, or
continual daily or nightly supervision to avoid substantial danger to themselves or
others.
•
For the highest rate of DLA (care), the claimant must be so severely disabled that
they require supervision or attention throughout the day and night with respect to
bodily functions or to prevent danger to themselves or others.
For each rate, it is necessary to have satisfied the conditions for at least three months
prior to the claim and that the conditions are likely to be satisfied for six months after
the claim.
Terminally ill claimants with a life expectancy of six months or less are automatically
entitled to the highest rate of DLA (care) and do not have to satisfy the qualifying
period.
Table 3.5.2. Current rates of disability living allowance (care), £ per week
Highest rate
Middle rate
Lowest rate
57.20
38.30
15.15
Disability Living Allowance Mobility Component
To qualify for DLA (mobility), claimants must be aged between 5 and 65 (3 and 65 for
the higher rate) when making the claim, and show that they would benefit from being
able to take outdoor journeys. Further, they must satisfy the disability conditions:
•
To claim lower-rate DLA (mobility), the claimant must show that they cannot walk
outside without substantial supervision or guidance.
•
To claim higher-rate DLA (mobility), the claimant must be unable or virtually unable
to walk because of their disability, or be both deaf and blind, or be severely mentally
impaired with severe behavioural problems and qualify for the higher rate of DLA
(care).
32
Table 3.5.3. Current rates of disability living allowance (mobility), £ per week
Higher rate
Lower rate
39.95
15.15
Table 3.5.4. Number of recipients of disability living allowance, 2002–03a
Care rate
Mobility rate
None
Highest
Middle
Lowest
Total
None
–
40,700
102,000
181,200
323,900
Higher
473,800
366,100
358,300
331,600
1,529,800
Lower
104,000
104,900
274,100
102,700
585,700
Total
577,800
511,700
734,400
615,500
2,439,300
a
Figures for November 2002.
Notes: The figure 2,439,300 refers to the number of people receiving some form of DLA; other figures in the
total row/column are given by the summation of the figures in the relevant column/row.
Source: Department for Work and Pensions.
For both rates, the claimant must have satisfied the conditions for at least three months
and be likely to continue to satisfy them for the following six months.
Terminally ill claimants with a life expectancy of six months or less are not guaranteed to
receive DLA (mobility), but if they are entitled to it, they do not have to satisfy any
qualifying period.
In 2002–03, around 2.4 million people received DLA. Of these, 323,900 people received
only the care component, 577,800 received only the mobility component and
1.54 million people received both components. Table 3.5.4 shows the combinations of
care and mobility components received by the 2.4 million DLA recipients in 2002–03.
Of those receiving some form of DLA in 2002–03, about 20 per cent suffered mainly
from arthritis, 23 per cent had learning difficulties or other mental health problems and
23 per cent suffered from muscle, bone, joint, back or heart ailments.26 DLA payments
are estimated to have cost £7.0 billion in 2002–03.
3.5.4. Attendance Allowance
Non-taxable, Non-contributory, Non-means-tested
Attendance allowance (AA) is a benefit paid to people over the age of 65 with care or
supervision needs. Before April 1992, it could be paid to anyone irrespective of age; after
that date, disability living allowance (DLA, see Section 3.5.3) replaced AA for people
disabled before the age of 65. People over 65 cannot claim both AA and DLA.
26Source:
www.dwp.gov.uk/asd/asd1/dla/dla_quarterly_statistics_feb03.xls.
33
To qualify for AA, the claimant must satisfy the disability conditions and have done so
for a period of six months immediately before receipt of AA begins. AA is paid at two
rates: the lower rate is paid if the disability conditions for the middle rate of DLA (care)
are met (i.e. the claimant has day or night needs), and the higher rate is paid if the highest
rate of DLA (care) conditions are met (i.e. the claimant has day and night needs).
Table 3.5.5. Current rates of attendance allowance, £ per week
Lower rate
Higher rate
38.30
57.20
People with terminal illness and a life expectancy of less than six months are
automatically eligible for the higher rate of AA and do not have to satisfy the six-month
qualifying period.
In 2002–03, about 1.3 million people received AA at an estimated cost of just under
£3.3 billion. Recipients of AA also receive the Christmas bonus.
3.5.5. Severe Disablement Allowance
Non-taxable, Non-contributory, Non-means-tested
Severe disablement allowance (SDA) is payable to people who are incapable of work but
are unable to claim incapacity benefit (see Section 3.5.2) because they fail to satisfy the
NIC conditions. It has been abolished for new claimants since 6 April 2001. However,
people who were entitled to SDA before that date may continue to claim it.
The capability tests to determine eligibility for SDA are the same as those for incapacity
benefit (Section 3.5.2). People claiming SDA prior to 12 April 1995 are exempt from the
personal capability assessment. Three groups of people can qualify for SDA (these
qualifying conditions must be met prior to 6 April 2001):
•
those who are incapable of work for a consecutive 28-week period which began on
or before the claimant’s 20th birthday;
•
those who have been incapable of work for a consecutive 28-week period and are at
least 80 per cent disabled (including registered blind people);
•
those who were entitled to claim non-contributory invalidity pension before
November 1984.
Claimants must be aged between 16 and 65, although there is no upper limit on the age
at which entitlement can continue once an award has been made. Claimants aged under
20 on 6 April 2001 were transferred to long-term incapacity benefit by 6 April 2002 (see
Section 3.5.2).
SDA is made up of a number of allowances: a basic allowance, additions for dependants
and an age-related addition dependent upon the age at which the incapacity for work
began. These are shown in Table 3.5.6.
34
In 2002–03, an estimated 325,200 people received SDA, and expenditure was estimated
at £1 billion. Recipients of SDA are entitled to the Christmas bonus.
Table 3.5.6. Current rates of severe disablement allowance, £ per week
Basic benefit
43.60
Increase for dependants
Age-related addition
Adult dependant (for one)a
Eldest or only childb
Subsequent children (each)
25.90
11.35
Under 40
40–49 inclusive
50–59 inclusive
15.15
9.70
4.85
a
The adult dependant increase is reduced if the adult dependant earns more than £52.50 per week.
b
The dependent child increase is not payable for the claimant’s eldest or only child if the claimant’s partner
earns £160 or more per week. For earnings above £160, each additional £20.00 removes entitlement for
another child (if any).
3.5.6. Carer’s Allowance
Taxable, Non-contributory, Non-means-tested
Until April 2003, carer’s allowance (CA) was called invalid care allowance. CA is payable
to people aged 16 or over who are giving substantial and regular care (usually defined as
at least 35 hours per week) to a person receiving the highest or middle rate of disability
living allowance (care), or attendance allowance, or a constant attendance allowance
under the war pensions or industrial injuries scheme (see Sections 3.5.7 and 3.5.8 and
Appendix C). The claimant cannot earn more than £77 per week or be in full-time
education.
On top of a basic payment, CA includes an additional amount for adult dependants.
Until 6 April 2003, there were also payments for child dependants, but these have been
incorporated into the child tax credit (see Section 3.1.4). Claimants existing before 6
April 2003 can usually continue to receive CA child payments. Claimants caring for more
than one person cannot claim additional awards of CA.
In 2002–03, 402,700 people received CA. Expenditure for that year totalled an estimated
£997 million. Almost 75 per cent of claimants are female. The Christmas bonus is also
payable with CA.
Table 3.5.7. Current rates of carer’s allowance, £ per week
Basic benefit
Increase for dependants
43.15
Adult dependant (for one)
Eldest or only childa
Subsequent children (each)
25.80
9.55
11.35
a
No increase is payable for an eldest or only child if the claimant’s partner earns £160 or more per week.
Every £20 per week above £160 leads to the loss of entitlement for an additional child (if any).
35
3.5.7. War Disablement Pension
Non-taxable, Non-contributory, Non-means-tested
Individuals who have suffered injury or disability as a result of service in the Armed
Forces may be entitled to a war disablement pension, made up from a number of
allowances and supplements. See Appendix C for a detailed breakdown of the various
benefits available. Pensions are also available to widows and dependants of those killed
in service (see Section 3.6.2). Total UK expenditure on war pensions (including
disablement and widow’s pensions) is estimated to have been £1.2 billion in 2002–03.
3.5.8. Industrial Injuries Disablement Benefit
Non-taxable, Non-contributory, Non-means-tested
Industrial injuries disablement benefit (IIDB) is payable to people who have suffered
injury in an industrial accident, or who have contracted an industrial disease while at
work. In the case of injury, benefit is payable only for an industrial ‘accident’, so that an
injury that accumulates over a number of years, through, for example, heavy manual
labour, will not normally attract benefit. To receive payments in the case of disease, the
claimant must prove that the disease was caused by the occupation itself. In practice,
however, onset of disease within a month of last working in the prescribed occupation is
normally regarded as sufficient evidence.
The maximum rates of IIDB are shown in Table 3.5.8. The benefit actually paid depends
upon the extent of disablement (assessed on a percentage basis). To qualify for IIDB,
disablement usually has to be at least 14 per cent. Above this level, benefit is paid at the
appropriate fraction of the maximum rate, except that disablement of between 14 and 20
per cent counts as 20 per cent and all assessments above 20 per cent are rounded to the
nearest 10 per cent. Thus a person who is 60 per cent disabled would receive 60 per cent
of the appropriate maximum rate, while a 78 per cent disability attracts 80 per cent of the
maximum, and so on.
Table 3.5.8. Current maximum rate of industrial injuries disablement benefit, £
per week
100% disablement
Claimant aged 18 or under
not entitled to an increase
for dependants
71.55
All other claimants
116.80
Constant attendance allowance (CAA) or the exceptionally severe disablement allowance
(ESDA) may also be payable to those in receipt of IIDB. See Appendix C for details of
CAA and ESDA.
The reduced earnings allowance (REA) is a supplement payable only to those people
assessed as 1 per cent or more disabled as a result of their industrial injury or disease and
whose claim began before 1 October 1990. The payment is made to compensate people
for loss of earnings if they are unlikely to be able to return to their regular occupation or
36
to employment of an equivalent standard. The amount of REA payable is the difference
between the wage earned in their previous regular employment and the wage in a job
they are likely to be able to do, given their disability, up to £46.72 per week.
Retirement allowance (RA) is effectively a form of REA for people over pensionable age
(for whom REA is not payable). Recipients of REA of at least £2 per week who reach
pensionable age and give up regular employment are entitled to RA. The amount payable
is 25 per cent of the REA that was being paid, up to a maximum of £11.68 per week.
In 2002–03, there were an estimated 265,900 assessments of IIDB in payment, and
150,000 people received either REA or RA. Approximately £718 million was spent on
IIDB, REA and RA in 2002–03. Receipt of CAA, RA or REA entitles the claimant of
IIDB to the Christmas bonus.
3.5.9. Independent Living (1993) Fund
Non-taxable, Non-contributory, Means-tested
The Independent Living (1993) Fund is a government-financed trust to help severely
disabled people live at home rather than move into residential care. Claimants must be
between 16 and 65 (inclusive) years of age and be receiving the highest rate of DLA
(care) or attendance allowance. As long as the claimant is receiving at least £200 worth
of services each week from the local authority, they can receive up to an extra £395 per
week from the Fund to help pay for a care assistant. The amount received depends on
weekly care requirements and is means-tested (but the means test ignores earned
income). Every £250 of savings above £11,500 is assumed to yield £1 of income, and
claimants with savings of greater than £18,500 are not eligible. Expenditure on
Independent Living Funds for 2002–03 is estimated to be £167 million.
3.5.10. Motability
Non-taxable, Non-contributory, Non-means-tested
Motability is an independent charity set up as a partnership between government,
charities and the private sector. It offers disabled people receiving the higher rate of
DLA (mobility) hire or hire-purchase facilities on cars, electric wheelchairs and electric
scooters. Recipients will pay some or all of their DLA (mobility) income towards the
cost of hiring the vehicle. There is a 12,000 mile per annum limit on the distance that can
be travelled, and the claimant must cover costs such as petrol and oil, though extra
money is available to help pay for adapting vehicles to suit particular sorts of disabilities.
The Motability scheme had approximately 400,000 customers in 2002–03. Government
expenditure on Motability was approximately £8 million.
37
3.6. Benefits for the Bereaved
Benefit
3.6.1
3.6.2
3.6.3
3.6.4
3.6.5
T
Bereavement allowanceb
War widow’s pension
Widowed parent’s allowancee
Industrial death benefit
Bereavement paymentf
C
M
Claimants,
2002–03a
25,300
48,530
16,500
13,000
n/a
Expenditure,
2002–03
(£m)a
n/ac
n/ad
n/ac
48
n/ac
T = taxable, C = contributory, M = means-tested
a
Estimated.
b
Bereavement allowance replaced the widow’s pension from 9 April 2001. However, there were still 173,000
claimants of the widow’s pension in September 2003.
c
Total expenditure on widows’ and bereavement benefits in 2002–03 is estimated at £1,090 million.
d
Total expenditure on war pensions (including war disablement and war widow’s pensions) for 2002–03 was
£1,187 million (see Sections 3.5.7 and 3.6.2).
e
Widowed parent’s allowance replaced the widowed mother’s allowance from 9 April 2001. However, there
were still 36,800 claimants of the widowed mother’s allowance in September 2003.
f
Previously widow’s payment.
Source: www.veteransagency.mod.uk/aboutus/per2.htm.
3.6.1. Bereavement Allowance
Taxable, Contributory, Non-means-tested
Bereavement allowance (BA) replaced the widow’s pension from 9 April 2001, and is
payable to men and women widowed on or after this date. Claimants must be under
pensionable age, and aged at least 45 when their spouse died. The spouse must either
have satisfied the National Insurance contribution conditions or died as a result of an
industrial injury or disease. It is payable for up to 52 weeks after the date of death, unless
the claimant remarries in that time (in which case entitlement ceases). It cannot be
claimed at the same time as widowed parent’s allowance (WPA), although recipients of
WPA may become entitled to receive BA once they are no longer eligible to receive
WPA. Women whose husbands died before 9 April 2001 can continue to claim widow’s
pension, payable at the same rate as BA (men cannot claim widow’s pension). However,
women can receive a widow’s pension until they reach the age of 65 whereas
bereavement allowance is payable for only one year. The Christmas bonus is also payable
with the widow’s pension, but not with bereavement allowance.
The basic BA is £77.45 per week for claimants aged 55 or over. For every year under
that age, the claimant receives 7 per cent less per week, i.e. 93 per cent of the basic rate
at age 54 (£72.03 per week) down to 30 per cent of the basic rate at age 45 (£23.24 per
week). Ninety per cent of any SERPS (reduced to 50 per cent in steps by 2010) and half
of any S2P to which the spouse was entitled is also payable with BA. BA was claimed by
25,300 people in 2002–03.
38
3.6.2. War Widow’s Pension
Non-taxable, Non-contributory, Non-means-tested
The war widow’s pension (WWP) is payable to widows of men who have died as a result
of service in the Armed Forces. Widows of war pensioners can also claim if their
husband received constant attendance allowance at the time of his death or was assessed
as at least 80 per cent disabled and receiving unemployability supplement upon death. In
some circumstances, men may claim upon the death of a wife in service. Payment is
normally for life unless the widow or widower remarries.
Table 3.6.1. Current maximum rates of war widow’s pension, £
Rank of late husband
Supplementary pensiona
Private
NCO
Officer (maximum)
Officers
Other ranks
Childless widow
under 40
22.50 per week
22.50 per week
5,214 per annum
3,181.41 per annum
60.97 per week
Other recipients
93.85 per week
93.85 per week
5,214 per annum
3,181.41 per annum
60.97 per week
Age allowances:
Officers
Other ranks
Increases for children:
Officers
Other ranks
Rent allowanceb
Aged 65–69
Aged 70–79
Aged 80+
Aged 65–69
Aged 70–79
Aged 80+
561 per annum
1,072 per annum
1,594 per annum
10.75 per week
20.55 per week
30.55 per week
Eldest or only child
Subsequent children
(each)
Eldest or only child
Subsequent children
(each)
772 per annum
861 per annum
14.80 per week
16.50 per week
35.40 per week
35.40 per week
a
Payable to widows whose husband’s service ended before 31 March 1973.
b
Maximum.
Source: www.veteransagency.mod.uk/pdfolder/guidancepdfs/wpaleaflet9.pdf.
WWP is payable at two rates. The higher rate is paid if the claimant is aged 40 or over, is
aged under 40 but has children, or is unable to support themselves financially. It is also
automatically payable to all claimants whose husbands were ranked above Major (or
equivalent). Childless claimants under the age of 40 receive a lower rate (until they reach
40). Rates payable vary according to the rank of the late husband. Additional payments
are made for dependent children and for recipients reaching the ages of 65, 70 and 80.
WWP is not payable in addition to a contributory widow’s pension or bereavement
allowance (see Section 3.6.1) but it can be paid with a basic retirement pension (see
39
Section 3.4.1) earned by the widow’s own contributions. The Christmas bonus is payable
with WWP.
A number of other groups are entitled to a war pension. These include widowers
(maximum weekly rate for ranks other than officer is £92.30) and adult orphans
(maximum of £70.95 per week for ranks other than officer).
In 2002–03, 48,530 widows were claiming WWP. Total expenditure on war pensions for
2002–03 (including war disablement pension) was estimated at £1.2 billion.
3.6.3. Widowed Parent’s Allowance
Taxable, Contributory, Non-means-tested
Widowed parent’s allowance (WPA) replaced widowed mother’s allowance from 9 April
2001, and is a weekly benefit payable to men and women widowed on or after this date.
Claimants must be pregnant or have qualifying children (under the same definition as
child benefit – see Section 3.1.1). The late spouse must have satisfied the National
Insurance contribution conditions or have died as a result of an industrial injury or
illness. Claimants must be under pensionable age. Husbands whose wife died before 9
April 2001 can claim WPA, so long as they were aged under 65 on that date and they
have not remarried. Women receiving a widowed mother’s allowance before 9 April
2001 (men were not eligible) can continue to do so. It is payable at the same rate as
WPA.
Table 3.6.2 gives the current rates for WPA. Increases for child dependants were
abolished from 6 April 2003 due to the introduction of child tax credit. However,
claimants existing before 6 April 2003 can usually continue to receive child payments as
part of WPA. If the late partner’s National Insurance contributions record entitled him
or her to an additional pension under SERPS and S2P, then part of this is payable with
WPA (the same rules apply as for bereavement allowance). A lower WPA may be
payable if the late spouse’s NIC record is insufficient.
In 2002–03, 16,500 people claimed WPA. WPA attracts the Christmas bonus.
Table 3.6.2. Current rates of widowed parent’s allowance, £ per week
Basic allowance
Increase for child dependants
77.45
Eldest or only child
Subsequent children (each)
9.55
11.35
3.6.4. Industrial Death Benefit
Taxable, Non-contributory, Non-means-tested
Industrial death benefit (IDB) is payable to widows of men who died as a result of an
industrial accident or disease before 11 April 1988. After this date, other bereavement
benefits (mainly the bereavement payment and widowed parent’s allowance) are payable
instead. Recipients are entitled to the Christmas bonus.
40
Table 3.6.3. Current rates of industrial death benefit, £ per week
Basic rates
Children’s allowance
Higher rate
Lower rate
77.45
23.24
Eldest or only child
Subsequent children (each)
9.55
11.35
IDB is payable to existing recipients at one of two rates, depending upon the age at
which they were widowed. Allowances are also payable for dependent children. An age
addition of 25p per week is payable at age 80 as long as this addition is not being
received with any other social security benefit.
In 2002–03, 13,000 people received IDB. Total expenditure is estimated to have been
£48 million.
3.6.5. Bereavement Payment
Non-taxable, Contributory, Non-means-tested
Bereavement payment is a one-off, lump-sum payment of £2,000 to widows and
widowers who claim within three months of their spouse’s death. It replaced the widow’s
payment from 9 April 2001. BA claimants must be under pensionable age, unless their
spouse was not receiving the basic state pension (see Section 3.4.1). Further, the spouse
must have satisfied the National Insurance contribution conditions or have died as the
result of an industrial illness or accident, in which case the NIC condition is
automatically regarded as satisfied. Claimants who also receive a means-tested benefit
could be entitled to a funeral payment (see Appendix B for details).
41
4. Trends in Social Security Spending
In this section, we look at how spending on benefits has changed over time, both in
terms of how total expenditure has changed and in terms of how the targeting of the
spending has altered with respect to the recipient groups defined in Section 3. We then
go on to consider some of the reforms to the UK benefit system that are likely to come
in over the next few years.
4.1. Social Security Spending, 1948–49 to the Present Day
Social security spending increased almost continuously as a share of national income
from 1948 to the early 1980s. As shown in Figure 4.1, social security spending was just
over 4 per cent of GDP in 1948–49 and reached 11.5 per cent of GDP in 1983–84. This
was due to both an increase in the generosity of many state benefits and an increase in
the numbers eligible to claim. Perhaps the best example of this is the basic state pension,
which increased in generosity from around 14 per cent of average male earnings in
1948–49 to nearly 20 per cent in the early 1980s. Over the same period, the number of
people over the state retirement age increased from 6.8 million in 1951 to 10 million in
1981.27 Another extremely important factor is the large increase in the number of people
claiming unemployment benefits, from 340,000 in 1950 to 1,665,000 in 1980.28
The late 1980s saw the first substantial fall in social security spending as a share of GDP
since 1948–49. This was due to rapid economic growth and the associated fall in
claimant unemployment combined with the fact that many benefits, the most important
being the basic state pension, were only increased in line with inflation. The economic
downturn in the early 1990s saw the economy contract and unemployment rise to
2.9 million. This led to a dramatic rise in the share of national income spent on social
security, which reached an historic high of almost 13 per cent in 1993–94. Since then,
social security spending has again fallen as a share of GDP, as the economy has grown
and the unemployment count has fallen. Current government forecasts suggest that
social security spending as a share of GDP will stabilise, despite continued economic
growth. This is due to the current government increasing the generosity of income
support for pensioners and to the introduction of the pension credit.
As with the share of GDP, real expenditure on benefits has risen almost continuously
since the 1940s. Figure 4.2 shows the real increases in social security spending seen over
each five-year period since 1953–54. Over this period, social security spending has
grown on average in real terms by 4.2 per cent a year. There have been large fluctuations
in the pattern of this growth, but with a noticeable fall in the growth rate since the 1970s
and early 1980s.
27Source: Office for National Statistics, Annual Abstract of Statistics, 2000 edition, Government Statistical Service, London,
2000.
28Source:
42
Office for National Statistics website, www.statistics.gov.uk.
Figure 4.1. Social security expenditure as a percentage of GDP,
1948–49 to 2002–03
14
12
Percentage of GDP
10
8
6
4
2
19
48
-4
19 9
50
-5
19 1
52
-5
19 3
54
-5
19 5
56
-5
19 7
58
-5
19 9
60
-6
19 1
62
-6
19 3
64
-6
19 5
66
-6
19 7
68
-6
19 9
70
-7
19 1
72
-7
19 3
74
-7
19 5
76
-7
19 7
78
-7
19 9
80
-8
19 1
82
-8
19 3
84
-8
19 5
86
-8
19 7
88
-8
19 9
90
-9
19 1
92
-9
19 3
94
-9
19 5
96
-9
19 7
98
-9
20 9
00
-0
20 1
02
-0
3
0
Financial Year
Note: Includes working families’ tax credit and disabled person’s tax credit, where applicable.
Sources: Department for Work and Pensions; authors’ calculations; GDP deflators from ONS website,
www.statistics.gov.uk.
Figure 4.2. Average real increases in social security spending over five-year
periods, 1953–54 to 2002–03
8
7
Average percentage growth rate
6
5
4
3
2
1
0
53-54 - 57-58
58-59 - 62-63
63-64 - 67-68
68-69 - 72-73
73-74 - 77-78
78-79 - 82-83
83-84 - 87-88
88-89 - 92-93
93-94 - 97-98
98-99 - 02-03
Period
Sources: Department for Work and Pensions; authors’ calculations; GDP deflators from ONS website,
www.statistics.gov.uk.
43
4.2. Changes in the Composition of Social Security Spending
Not only have there been substantial increases in social security spending since 1948–49,
but there have also been large changes in the composition of that spending. This is
highlighted by Figure 4.3, which shows the percentage of social security spending going
to different types of benefits over the period 1948–49 to 2000–01.29 Spending on
retirement and widows’ benefits made up 40 per cent of social security spending at the
beginning of the period, and this rose to nearly 60 per cent by the mid-1970s as the
population aged and there were real increases in the generosity of the basic state pension.
Since then, the proportion of social security spending going to retirement and widows’
benefits has fallen back to under 40 per cent. The replacement of family allowance with
child benefit in 1977 led to an increase in spending in this area, since child benefit was
payable for all children whereas family allowance was only payable for the second and
subsequent children. The most significant change in the allocation of spending since the
mid-1970s is the sharp increase in the share of benefits to relieve housing costs and local
taxes. This has at least partly been a result of the substantial reduction in the provision of
council housing since 1980.
Figure 4.3. Share of total expenditure by benefit type, 1948–49 to 2000–01
100%
80%
60%
40%
20%
19
48
-4
9
19
51
-5
2
19
54
-5
5
19
57
-5
8
19
60
-6
1
19
63
-6
4
19
66
-6
7
19
69
-7
0
19
72
-7
3
19
75
-7
6
19
78
-7
9
19
81
-8
2
19
84
-8
5
19
87
-8
8
19
90
-9
1
19
93
-9
4
19
96
-9
7
19
99
-0
0
0%
Retirement and widows' benefits
Family allowance and child benefit
Sickness, invalidity and incapacity benefits
Family income supplement, family credit and working families' tax credit
Income support, jobseeker's allowance and predecessors
Disability and carer benefits
Benefits for housing and local taxes
Other social security benefits
Sources: Department of Social Security, The Changing Welfare State: Social Security Spending, DSS, London, 2000
(www.dss.gov.uk/publications/dss/2000/spending/index.htm); Department for Work and Pensions.
Additional insight into trends in social security spending is provided by looking at
spending by type of recipient rather than by type of benefit. Unfortunately, this
29The
44
last year for which data are available.
information is only available on a consistent basis from 1978–79 until 2000–01. This
breakdown of spending is shown in Figure 4.4. The largest change in the share of
expenditure going to each of the five major recipient groups has been the 9 percentage
point fall in the share going to the elderly, from 55.1 per cent in 1978–79 to 45.9 per
cent in 2000–01. This is consistent with the fall in the share going to retirement and
widows’ benefits over the period, as shown in Figure 4.3. Conversely, there was an
increase in the share going to families and children, from 16.1 per cent in 1978–79 to
23.6 per cent in 2000–01, making it the second-largest category. This came about largely
in 2000–01 as a result of the increase in generosity of the working families’ tax credit.
There has also been a substantial increase in the share going to long-term sick and
disabled people, from 11.2 per cent in 1978–79 to 23.2 per cent in 2000–01. The share
going to the unemployed increased from 8.7 per cent in 1978–79 to 16.6 per cent in
1985–86, and it has since fallen to just 3.8 per cent in 2000–01.
Figure 4.4. Share of total expenditure by recipient group, 1978–79 to 2000–01
100%
People with a short-term illness, widows and other people
80%
Unemployed people
60%
Families, including tax credits & children
40%
People with a long-term illness or disability, including tax
credits
Elderly people
20%
19
78
19 79
79
19 80
80
19 81
81
19 82
82
-8
19 3
83
19 84
84
-8
19 5
85
19 86
86
-8
19 7
87
19 88
88
-8
19 9
89
19 90
90
19 91
91
19 92
92
-9
19 3
93
19 94
94
-9
19 5
95
19 96
96
-9
19 7
97
19 98
9
19 8-9
99 9
-2
0
20 00
00
-0
1
0%
Sources: Department of Social Security, The Changing Welfare State: Social Security Spending, DSS, London, 2000
(www.dss.gov.uk/publications/dss/2000/spending/index.htm); Department of Social Security, The Growth
of Social Security, HMSO, London, 1993; Department for Work and Pensions.
45
4.3. Major Reforms since 1948, and the Likely Direction of Future Reforms
There have been substantial changes to the benefit system since 1948. These are briefly
summarised in Box 4.1.
Box 4.1. Major changes to the UK benefit system since 1948
Child benefit replaced family allowance from April 1977. While child benefit is payable to
all qualifying children, family allowance was payable only to the second and subsequent
children.
Working tax credit replaced working families’ tax credit and disabled person’s tax
credit in April 2003. In turn, working families’ tax credit replaced family credit in October
1999, and family credit replaced family income supplement from April 1988. Family
income supplement had been introduced in 1971. Disabled person’s tax credit had
replaced disability working allowance in October 1999.
Child tax credit replaced children’s tax credit (and the child elements of a number of
other benefits, including those in working families’ tax credit) from April 2003. Children’s tax
credit was originally introduced in April 2001.
Jobseeker’s allowance replaced unemployment benefit and income support for the
unemployed from October 1996.
Income support replaced supplementary benefit from April 1988. Supplementary benefit
had replaced national assistance from November 1966.
Pension credit replaced income support for people aged 60 or over from October 2003.
Between 1948 and 1966, many local authorities provided recipients of means-tested benefits
with additional help for rent and local taxes. In 1966, a national rebate scheme was
introduced. This was reformed many times up to 1990. Since then, help with rents has been
delivered through housing benefit, while rebates for local taxes were available from 1990
through community charge benefit and since 1993 through council tax benefit.
Although the basic state pension has been in place since 1948, the system of retirement
pensions as a whole has been subject to some major changes. Between April 1961 and April
1975, the graduated retirement pension was running to provide an earnings-related
element on top of the basic pension rate. In 1978, the State Earnings-Related Pension
Scheme (SERPS) was introduced for people who were not members of an occupational
pension scheme. SERPS is being replaced by the state second pension, which is being
introduced in two stages, the first of which happened in April 2002.
Incapacity benefit replaced invalidity benefit and sickness benefit from April 1995.
Severe disablement allowance replaced the non-contributory invalidity pension and the
housewives’ non-contributory invalidity pension from November 1984.
Disability living allowance replaced mobility allowance and attendance allowance for
those aged under 65 from April 1992.
Bereavement benefits replaced widows’ benefits in April 2001. Prior to this, the one-off
widow’s payment had replaced widow’s allowance and industrial death benefit for cases
where the husband died on or after 11 April 1988.
An important distinction between different types of benefits is the extent to which they
are non-contributory rather than contingent on having made National Insurance
contributions.30 Again, detailed figures for the expenditure on each type of benefit are
only available back to 1978–79. They are given in Figure 4.5, which shows that less than
30For
details of the current system of NICs, see S. Adam and C. Frayne, A Survey of the UK Tax System, Briefing Note no.
9, Institute for Fiscal Studies, London, 2002 (www.ifs.org.uk/taxsystem/taxsurvey.pdf). A recent Social Security Select
Committee Report also looked at the contributory principle
(www.publications.parliament.uk/pa/cm199900/cmselect/cmsocsec/56/5602.htm).
46
half of benefit expenditure (44.1 per cent) currently goes on contributory benefits. This
fraction has been declining almost constantly since 1978–79. In fact, these figures
overestimate expenditure on benefits for which contributions have been made, since
individuals can be credited with NICs without having actually paid them. This can occur
for several reasons – for example, periods spent in full-time education or as registered
unemployed are credited with contributions having been made. Also, since April 2000,
individuals earning between the lower earnings limit and the primary threshold will not
have to pay any National Insurance but will be credited as if a contribution has been
made.
Figure 4.5. Relative importance of spending on contributory, income-related and
other benefits, 1978–79 to 2002–03, selected years
100%
17.6
18.2
18.0
26.7
28.0
18.4
20.9
21.8
80%
17.0
35.0
32.7
60%
34.1
Non-contibutory nonincome related
Income-related
40%
Contributory
65.4
55.0
54.0
46.6
46.5
1993-94
1998-99
20%
44.1
0%
1978-79
1983-84
1988-89
2002-03
Financial Year
Sources: Department of Social Security, The Changing Welfare State: Social Security Spending, DSS, London, 2000
(www.dss.gov.uk/publications/dss/2000/spending/index.htm); authors’ calculations.
The decline in relative importance of contributory benefits has been largely due to the
growth of non-contributory benefits since the late 1970s. In real terms (2002–03 prices),
expenditure on income-related benefits has increased from £9.6 billion in 1978–79 to
£40.8 billion in 2002–03, an increase of 325 per cent. Expenditure on non-contributory
non-income-related benefits has, over the same period, grown by 162 per cent. In
contrast, expenditure on contributory benefits increased from £37.0 billion in 1978–79
to £52.9 billion in 2002–03, an increase of just 43 per cent.31 The vast majority of
spending on contributory benefits is on the basic state pension and SERPS.
31Sources:
Department of Social Security (www.dwp.gov.uk/asd/asd4/Table3.xls); authors’ calculations.
47
Recent developments, such as increases in government expenditure on tax credits,
continue this trend by expanding welfare payments to those on low incomes rather than
focusing on those who have ‘paid in’ to the system. Other examples include the current
government’s policy of focusing additional resources on the poorest pensioners by
increasing the minimum income guarantee in line with earnings (and replacing it with the
pension credit) while the basic state pension remains linked to prices.
Future Benefit Reforms
There are several reforms to the benefit system that are either in the pipeline or being
considered by the government.
The government has announced that it will introduce an education maintenance
allowance (EMA) nationwide from September 2004.32 This will be a benefit of up to £30
per week paid to young people from low-income families who decide to stay on in fulltime education for up to two years beyond the school-leaving age of 16. There will be
additional bonuses for attendance and achievement. The EMA was originally piloted in a
small number of local education authorities from September 2000, and has been
extended over time to cover more areas. The quantitative evaluation of the EMA pilots
has found that the EMA has increased participation in further education in the pilot
areas by 5.9 percentage points.33 Previously, the government has said that it will consider
whether the introduction of EMAs should be combined with the abolition of child
benefit for children aged over 16.34 The government is yet to announce whether or not
child benefit is to be abolished for those aged over 16.
The government has announced proposals to introduce ‘asset-based welfare’ policies.35
Specifically, it has suggested the introduction of a Child Trust Fund and a Saving
Gateway in the current parliament.36 These policies are designed to provide financial
support to recipients in the form of assets, or as an incentive to put funds into a
particular asset, rather than as supplements to current income. The decision to provide
support in these ways may stem from a government belief that poor families hold
insufficient savings and that there is benefit from encouraging a ‘saving habit’.
The Saving Gateway will be available to those with ‘lower incomes’ and will be a savings
account into which the government will pay contributions to match those paid in by the
individual. Pilot versions have been in operation in five locations across England since
32See
paragraph 6.17 of HM Treasury, 2002 Spending Review, Cm. 5570, London, 2002 (http://www.hmtreasury.gov.uk/Spending_Review/spend_sr02/report/spend_sr02_repchap06.cfm).
33See
the Department for Education and Skills website at www.dfes.gov.uk/research/data/uploadfiles/RB353.doc.
34See
paragraph 5.33 of HM Treasury, Budget 2002, London, 2002 (www.hmtreasury.gov.uk/Budget/bud_bud02/budget_report/bud_bud02_repindex.cfm).
35HM Treasury, Saving and Assets for All, The Modernisation of Britain’s Tax and Benefit System, no. 8, London, 2001
(www.hm-treasury.gov.uk/mediastore/otherfiles/36.pdf).
36For
more on these proposals, see HM Treasury, Delivering Saving and Assets, The Modernisation of Britain’s Tax and
Benefit System, no. 9, London, 2001 (www.hm-treasury.gov.uk/mediastore/otherfiles/delivering_savings.pdf), and C.
Emmerson and M. Wakefield, The Saving Gateway and the Child Trust Fund: Is Asset-Based Welfare ‘Well Fair’?, Commentary
no. 85, Institute for Fiscal Studies, London, 2001 (www.ifs.org.uk/pensions/abw.pdf).
48
the summer of 2002. These pay matching contributions at a pound-for-pound rate up to
a limit of £25 each month and £375 over the 18-month lifetime of the account. A full
evaluation of these pilot schemes could help to determine whether the Saving Gateway
should be rolled out nationally and what form any national scheme should take. In a
nationwide scheme, accounts might last for as long as five years. The lifetime limit on
the amount of matching that could be paid would be correspondingly increased but the
pound-for-pound matching rate that applies in all the pilots may well be retained. The
evaluation of the pilot versions of this policy might help to throw some light on whether
or not it will actually increase the level of private savings held by those on lower incomes:
rather than saving more, many people might just switch savings that they do have into
the Saving Gateway account.37
Details of the Child Trust Fund were announced in October 2003.38 Each child born
after 1 September 2002 will receive an initial endowment from the government of £250
(£500 for the poorest children). An additional payment (the amount of which has yet to
be announced) will be made by the government when the child reaches the age of 7, and
family and friends will be able to contribute up to £1,200 a year between them. The
funds will be available to the child once they reach the age of 18, with no restrictions
placed on the use of the fund once the child has access to it. Child Trust Fund accounts
are expected to be available from 2005.
The government has also announced long-term plans to reform housing benefit (HB).
From this year, HB awards for some private sector tenants will be based on local rent
levels rather than on the claimant’s actual rent. This is being piloted in 10 pathfinder
areas, and the government hopes that the system will eventually apply to all HB
recipients.39
Theoretically, the current HB system awards to claimants an amount equal to their rent,
and this award is then means-tested against income. The implication of such a system is
that the marginal cost to a claimant of a rent increase is zero, giving claimants no
incentive to seek reductions in their rent (and, similarly, depending on the effective
incidence of HB, giving landlords no incentive to reduce their rent). The government
hopes that its new system, by not basing HB awards on claimants’ actual rent, will
introduce such incentives.
To reduce spending on HB (and to limit the distortions in the rental market), HB awards
are, at present, assessed against ‘eligible rent’ rather than ‘actual rent’. Eligible rent is
equal to the lowest of actual rent and (at least) three rent ceilings (so eligible rent is lower
than or the same as actual rent). If actual rent is higher than eligible rent, then the
claimant is subject to a ‘rent restriction’. Anyone subject to a rent restriction already
37For a discussion of this issue and of other reasons why the Saving Gateway might prove expensive relative to the
number of genuine new savers and savings that it creates, see C. Emmerson and M. Wakefield, ‘Increasing support for
those on lower incomes: is the Saving Gateway the best policy response?’, 2003, Fiscal Studies, vol. 24, pp. 167–95.
38HM
Treasury, Detailed Proposals for the Child Trust Fund, London, 2003 (www.inlandrevenue.gov.uk/ctf/child-trustfund-proposals.pdf).
39See
Department for Work and Pensions, Building Choice and Responsibility: A Radical Agenda for Housing Benefit, London,
2002 (www.dwp.gov.uk/housingbenefit/publications/2002/building_choice/prospectus.pdf).
49
faces the full marginal cost of a change in rent. At present, 70 per cent of private sector
claims are subject to a rent restriction.40 The other motivation for the reform, then, is
that at the moment, eligible rent cannot be known at the time of the claim as it is
calculated on a case-by-case basis, which causes much of the considerable delay in
processing HB claims.41 These delays reduce work incentives and lead to uncertainty and
genuine hardship for claimants. The new system should be cheaper to run and will
process claims more quickly, as HB administrators will not need to know about the
actual rent or property being rented, but will instead just set an HB award equal to some
amount that varies only with location and family size (appropriately means-tested).
The pilots are beginning with private sector tenants for two reasons:42 first, rents in the
social housing sector are being restructured, as they currently bear little resemblance to
the economic cost of the property; secondly, tenants in social housing tend to have little
freedom to move to other social housing. For both these reasons, it would be unfair to
make tenants of social housing face their marginal rent.
It is impossible to reform HB in this way so that it is both revenue-neutral and has no
losers. In the pilots, there will be no losers, because the new housing allowances will be
equal to one of the existing rent ceilings. The government estimates that half of private
sector HB recipients already have their rent restricted below this level: they will gain
from the reform (of course, anyone who reduces their rent following the reform will be
financially better off). The cost of the reform is, as yet, unknown.
The government has also proposed some administrative changes that should reduce the
costs of claiming and administering HB, and it has stated that it ‘is looking at Housing
Benefit sanctions, as part of our wider strategy to tackle nuisance neighbours through
stricter tenancy agreements and improved anti-social behaviour orders’.43
40P.
Kemp, S. Wilcox and D. Rhodes, Housing Benefit Reform: Next Steps, York Publishing Services, York, 2002 (see
www.jrf.org.uk/pressroom/releases/230402.asp).
41See,
for example, Better Regulation Task Force, Housing Benefit: A Case Study of Lone Parents, 2001 (www.cabinetoffice.gov.uk/regulation/TaskForce/2001/BRTF%20Housing%20Benefit.pdf).
4218 per cent of HB claimants were renting from private landlords in 2002 – see
www.dwp.gov.uk/asd/asd1/hb_ctb/hb-ctbMay02.pdf.
43Andrew
50
Smith as quoted in Hansard, 17 October 2002, col. 479.
5. Conclusions
The social security system has been subject to almost continual reform over the last 40
years. The need for such reform has, in part, reflected changes to patterns of household
formation and increased levels of unemployment since the Welfare State was first
introduced after the Second World War. Another important driver of reforms has been
different distributional objectives of successive governments. This makes further reform
inevitable. It is important that continual reform does not leave the system looking ever
more complicated. The UK pension system is one prime example. The reforms of recent
years have led to an unnecessarily complicated system of delivering income to those in
retirement. Other areas of social security are in need of further reform, with perhaps one
of the most important areas being the current system of housing benefit. The challenge
for policy-makers is to introduce social security reform that simplifies the current system
without any unwanted distributional side effects.
51
Appendix A. Benefit Expenditure from 1948–49 to 2002–03
Table A.1. Spending on benefits in cash terms and real terms (2002–03 prices),
real increases and spending as a share of GDP
1948-49
1949-50
1950-51
1951-52
1952-53
1953-54
1954-55
1955-56
1956-57
1957-58
1958-59
1959-60
1960-61
1961-62
1962-63
1963-64
1964-65
1965-66
1966-67
1967-68
1968-69
1969-70
1970-71
1971-72
1972-73
1973-74
1974-75
1975-76
Cash
terms
(£m)
Real
terms
(£m)
504
640
652
687
830
874
898
1,008
1,050
1,125
1,378
1,445
1,487
1,662
1,761
1,881
1,954
2,322
2,456
2,788
3,170
3,390
3,635
4,227
4,894
5,505
6,896
9,327
11,457
14,210
14,057
13,689
15,499
15,905
16,013
17,360
17,127
17,572
20,965
21,751
21,932
23,771
24,424
25,636
25,450
28,807
29,248
32,260
34,960
35,504
35,131
37,437
40,108
42,119
44,068
47,614
Real
% of
rise (%) GDPa
24.03
-1.08
-2.62
13.22
2.62
0.68
8.41
-1.34
2.60
19.31
3.75
0.84
8.38
2.74
4.96
-0.72
13.19
1.53
10.30
8.37
1.56
-1.05
6.57
7.13
5.01
4.63
8.05
4.18
5.02
4.82
4.59
5.13
5.07
4.91
5.14
5.01
5.07
6.02
5.88
5.71
6.06
6.13
6.05
5.75
6.38
6.36
6.81
7.15
7.12
6.86
7.16
7.26
7.36
7.72
8.39
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
Cash
terms
(£m)
Real
terms
(£m)
Real
rise (%)
% of
GDPa
11,099
13,343
15,873
18,777
22,658
27,700
31,629
35,332
38,250
41,769
44,920
46,608
47,318
50,144
56,478
66,304
75,259
82,438
84,859
88,707
92,215
93,346
95,554
100,195
105,965
114,229
119,828
49,884
52,760
56,545
57,267
58,441
65,246
69,655
74,469
76,584
79,304
82,598
81,294
77,268
76,419
79,842
88,344
97,133
103,832
105,483
107,210
108,025
106,076
105,682
108,196
111,890
117,726
119,828
4.77
5.76
7.17
1.28
2.05
11.64
6.76
6.91
2.84
3.55
4.15
-1.58
-4.95
-1.10
4.48
10.65
9.95
6.90
1.59
1.64
0.76
-1.80
-0.37
2.38
3.41
5.22
1.79
8.54
8.83
9.17
9.05
9.57
10.69
11.14
11.49
11.57
11.53
11.53
10.81
9.84
9.56
9.98
11.17
12.20
12.65
12.27
12.17
11.93
11.33
10.99
10.95
11.01
11.38
11.34
a
The % of GDP figures slightly underestimate the true figures since they are constructed by dividing GB
benefit expenditure by UK GDP (compatible measures were not easily available).
Note: Figures should be interpreted with care since many changes have occurred to the ways in which
government support for individuals is delivered. For more details, see appendix C of Department of Social
Security, The Changing Welfare State: Social Security Spending, London, 2000
(www.dss.gov.uk/publications/dss/2000/spending/index.htm).
Sources: Department for Work and Pensions; HM Treasury for GDP figures.
52
Appendix B. The Social Fund
Below is a detailed breakdown of all the Social Fund payments for 2002–03 (see Section
3.3.5). Figures for recipients of and expenditure on each payment are taken from the
Annual Report by the Secretary of State for Work and Pensions on the Social Fund 2002/2003.44
Discretionary
Regulated
Repayable
Budgeting loans
Cold weather payments
Community care grants
Crisis loans
Funeral payments
Maternity payments / Sure Start
maternity grants
Notes: All repayable loans are interest-free. Funeral payments are recoverable from any money from the
deceased person’s estate.
Budgeting Loans
Budgeting loans are interest-free loans available to people on income support or incomebased jobseeker’s allowance to help them cover specific intermittent expenses that may
be hard to budget for. Loans are made from a limited budget. To be eligible, claimants
must have been receiving IS or income-based JSA throughout the previous 26 weeks
(short breaks are ignored). Loans vary between £30 and £1,000 depending on family size
and the length of time the applicant has been on benefit. If the applicant has capital over
£500 (or £1,000 if the claimant or their partner is aged 60 or more), the loan available is
reduced. The loan must be repaid.
In 2002–03, 1.77 million people applied for a budgeting loan and 1.77 million decisions
were made (including those held over from 2001–02). Of these, 1.25 million (71 per
cent) resulted in a loan being awarded, the average size of which was £366. Total
expenditure was £462 million, and £458 million was recovered from previous loans, so
net expenditure on budgeting loans was £4 million.
Cold Weather Payments
Cold weather payments are payable to people receiving income support or income-based
jobseeker’s allowance who are entitled to any pensioner or disability premium or who
have a child under the age of 5. Since April 2003, people on pension credit are also
entitled, so long as they do not live in a care home. The system links all eligible people to
one of 73 national weather stations. If the temperature at that station is, or is forecast to
be, 0°C or below for seven consecutive days (between 1 November and 31 March), the
cold weather payment of £8.50 is automatically payable. Capital is disregarded.
Clearly, the total cost of this payment is greatly influenced by factors outside the control
of the government. For the winter of 2002–03, 1.68 million payments were made,
44www.dwp.gov.uk/publications/dwp/2003/sf/annual_report.pdf.
53
costing £14 million. However, for 1994–95, only 11,000 awards were made and total
expenditure was less than £100,000 as a result of an exceptionally mild winter. The
following year, over 7.2 million awards were made, at a cost of £62 million.
Community Care Grants
Community care grants are payable to people in special circumstances who are in receipt
of income support or income-based jobseeker’s allowance. They are designed to help
people return to the community once they leave institutional or residential care (and can
be paid to people who are likely to receive IS or income-based JSA on returning to the
community), and to help prevent people being forced to move into care in the first place.
The grants can be paid to help pay for the care of prisoners on temporary release, to
help with travelling expenses, to help people set up home as part of a planned
resettlement programme or to help ease pressure on people and their families when
community care is involved.
The minimum award is £30 (with minor exceptions). There is no legal maximum.
Claimants with capital over £500 (£1,000 for those aged 60 or over) may have their
entitlement reduced. In 2002–03, 593,000 applications were received and 593,000
decisions made. The number of awards paid was 245,000, representing 41 per cent of
decisions. The average award was £342, with total expenditure being £108 million.
Crisis Loans
Crisis loans are interest free, and payable to people who have suffered an emergency or
disaster and have no other means to prevent serious risk to the well-being of themselves
or their family. It is not necessary for the applicant to be in receipt of any other benefits
to receive a crisis loan. There is no minimum payment, but the maximum is £1,000.
Repayments are flexible but should not usually take longer than 78 weeks.
In 2002–03, there were 1.39 million applications and decisions regarding crisis loans, and
1.06 million awards were made (76 per cent of the total). The average award was £75.
Total expenditure was £85 million, and £63 million of previous loans was recovered,
leaving net expenditure of £22 million.
Funeral Payments
Funeral payments can be awarded to claimants who are (for good reason) responsible for
organising the funeral of someone but are unable to meet such a large expense.
Claimants or their partners must be in receipt of income support, income-based
jobseeker’s allowance, housing benefit, council tax benefit, child tax credit (at a rate
exceeding the family element), working tax credit including disability payments, or
pension credit. The amounts payable cover the cost of burial or cremation, some travel
expenses and up to £700 for other costs. Capital limits of £500 (£1,000 for those aged
60 or over) on eligibility were abolished in October 2002.
In 2002–03, there were 70,000 applications and decisions and 45,000 awards (64 per
cent). The average award was £929, and gross expenditure was £42 million, with
54
£1 million being recovered (funeral expenses can be recovered from the deceased
person’s estate).
Maternity Payments / Sure Start Maternity Grants
Sure Start maternity grants replaced the old maternity payments from 27 March 2000. A
claimant who is a new mother or pregnant can receive the Sure Start grant if she or her
partner receives income support, income-based jobseeker’s allowance, child tax credit (at
a rate exceeding the family element), working tax credit including disability payments, or
pension credit. Claimants must prove that they have received advice on the health and
welfare of the child or expectant mother. The amount payable is £500 per child. As of
October 2002, previously existing capital limits on eligibility were abolished.
In 2002–03, there were 289,000 applications and decisions for the Sure Start maternity
grant, of which 232,000 (80 per cent) resulted in an award. The average award was for
£476 and total expenditure was £111 million.
55
Appendix C. War Pensions
The following is a brief description of the various pensions and allowances available to
war pensioners. Figures for recipients of each payment are taken from the Veterans
Agency publication, WPA Quarterly Statistics September 2002. Rates information comes
from the Veterans Agency leaflet, WPA Leaflet 945 and is correct as of April 2003.
Unfortunately, no figures for expenditure on each allowance are available.
War Disablement Pension
War disablement pension (WDP) is payable to people who have become at least 20 per
cent disabled (as assessed by Department for Work and Pensions doctors) while serving
in HM Forces. It is payable at varying rates according to the degree of disablement
(rounded to the nearest 10 per cent), with a one-off gratuity paid to those who are less
than 20 per cent disabled. The current maximum rate of WDP is £6,465 per annum for
officers and £123.90 per week for other ranks, payable to those assessed as 100 per cent
disabled. In September 2002, 216,865 people received WDP, of whom some 131,875
were aged 70 or over and 179,685 were assessed as 50 per cent disabled or below. Only
8,895 were assessed as the maximum 100 per cent disabled. The Christmas bonus is
payable with WDP if the recipient is aged 65 or over.
Unemployability Supplement
Unemployability supplement (US) is payable to war pensioners who are unemployable or
virtually unemployable as a result of their disability. New claimants must be under 65
with at least 60 per cent assessed disability. The current rate of US is £76.55 per week
for non-officers (£3,994 per annum for officers), with increases available for adult and
child dependants. In September 2002, 10,035 people claimed US, alongside which the
Christmas bonus can be paid. Recipients of US may also be entitled to receive an
invalidity allowance at a rate that depends upon the age at which unemployability began.
There are three rates for invalidity allowance: for non-officers, the highest rate (if aged
under 40) is £15.15 per week, the middle rate (if aged between 40 and 49) is £9.70 and
the lowest rate (if aged between 50 and 59) is £4.85. Invalidity allowance was claimed by
7,905 people in September 2002.
Constant Attendance Allowance / Exceptionally Severe Disablement Allowance
Constant attendance allowance (CAA) is payable to war pensioners who need daily care
and attention and whose war disablement pension is payable at the 80 per cent rate or
higher. CAA is payable at four rates: the part-time rate or ‘half-day rate’ (£23.40 per
week as at April 2003) if attendance is needed for half a day or less; the normal
maximum rate (£46.80) if attendance is needed for more than half a day; the
intermediate rate (£70.20) for people severely disabled who need extra attendance; and
the exceptional rate (£93.60) for very severely disabled people entirely dependent upon
45www.veteransagency.mod.uk/pdfolder/guidancepdfs/wpaleaflet9.pdf.
56
full-time attendance for their everyday needs. These are the rates payable to non-officers.
The Christmas bonus is payable with CAA. Claimants of either the intermediate or the
exceptional rate whose need for constant attendance is likely to be permanent may also
qualify for the exceptionally severe disablement allowance (ESDA) of £46.80 per week.
In September 2002, 4,125 people received CAA; of these, 675 (16 per cent) also received
ESDA. Recipients of either of the highest two rates of CAA still in gainful employment
may also be entitled to the severe disablement occupational allowance (£23.40 per week),
although this was received by only 10 people (0.2 per cent of those receiving CAA) in
September 2002.
Allowance for Lowered Standard of Occupation
An allowance for lowered standard of occupation is payable to war pensioners with a
reduced earnings capacity as a result of their disablement preventing them from
following their regular occupation. Claimants must be under 65 and have a disablement
of at least 40 per cent. The maximum allowance as at April 2003 is £46.72 per week, and
11,690 people claimed this allowance in September 2002.
Age Allowance
Age allowance may be payable to war pensioners aged 65 or over whose disablement is
assessed at 40 per cent or more. The amount varies according to the degree of disability;
the maximum rate is £25.50 per week. In September 2002, 63,085 people claimed age
allowance.
Clothing Allowance
An annual clothing allowance (currently £160) may be payable to war pensioners if they
are an amputee or their disability causes exceptional wear and tear on clothing. In
September 2002, 5,760 people claimed the clothing allowance.
Comforts Allowance
Comforts allowance may be payable to a severely disabled war pensioner receiving
constant attendance allowance or unemployability supplement to help with the extra
expenses associated with severe disability. It is payable at a higher rate of £20 per week
or a lower rate of £10. Comforts allowance was paid to 11,495 people in September
2002.
Mobility Supplement
The war pensioner’s mobility supplement is payable to war pensioners who are at least
40 per cent disabled and have severe difficulty walking. In September 2002, 18,810
people received the mobility supplement. For April 2003, the rate is £44.60 per week.
The Christmas bonus is payable with mobility supplement.
57