Spending Review 2010 Welfare Benefits

Published / Last Updated on 20/10/2010

The changes made to welfare benefits are far-ranging and, in some cases, relatively small in terms of the savings to be made. The main ones are:

The Employment Support Allowance (ESA), introduced to replace Incapacity Benefit and Income Support in October 2008, is to be subject to an additional restriction for anyone who qualifies on a contributory basis. Those who are placed in the Work Related Activity Group by the ESA assessment, ie anyone deemed able to work, will have their benefit payments time-limited to one year from 2012/13. Thereafter they will be placed on income-related ESA, which is means-tested, have to claim other benefits or move off benefits completely.
The impact of this change can be seen by the £2bn a year of savings the Government anticipates will arrive in 2014/15. The size of this saving stems from the fact that pre-October 2008 Incapacity Benefit claimants are gradually being transferred to ESA and will then also be subject to the new time limit.
With few exceptions, eg for those receiving Disability Living Allowance, from 2013/14 there will be an overall cap on the amount of benefits which can be claimed by working age households. This will be around £350 a week for a single person and £500 for a couple or lone parent.
The Mobility Component of Disability Living Allowance (£49.85 a week at the higher level in 2010/11) will be withdrawn after 28 days in adult care, where the care is funded by a public body. Self-funded care home occupants are unaffected.
The measures introduced by Alistair Darling in August 2008 to temporarily enhance the terms of Support for Mortgage Interest (SMI) will be extended for another year to January 2012. This means that the waiting period for claimants will continue to be 13 weeks and the maximum mortgage protected remains at £200,000. There is no change to the DWP's standard mortgage rate, which was reduced from 6.08% to 3.63% at the start of October 2010.
As announced at the Conservative Party Conference, Child Benefit (£20.30 a week for the first child and £13.40 for each additional child) will be withdrawn from 'higher rate taxpayer families'. The date of this withdrawal has been confirmed as January 2013, not the beginning of the 2013/14 tax year, as might have been expected.
The estimate of revenue this cut will yield has jumped dramatically: whereas suggestions three weeks ago were that £1bn would be saved, the Treasury now says it will be better off to the tune of £2.5bn by 2014/15. This could be an indication of an anticipated rapid growth in the numbers of higher rate taxpayers in the coming years or just evidence that the original announcement was made on the hoof, as some commentators suspected.

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Spending Review 2010 Tax Credits

Spending Review 2010 Background