Mortgage help for benefit claimants has pitfalls

The government is introducing benefits on the hoof in response to the economic downturn, with clarity being a notable casualty

Revising social security policy can’t be easy. Be too generous, and you’re accused of encouraging idleness be too mean and you’re accused of crimes against humanity. But if you’re an ambitious young secretary of state, you ought to be able to devise policies that have the benefit of commonsense, logic and fairness. It would also be good if they didn’t add to the complexities of an already baffling system. For example, take the changes that come into effect this month to help with mortgage interest for benefit claimants. The basic principle of the reform is excellent – the waiting period before you can get help through the benefit system is reduced from 39 weeks to 13, and the amount of help is increased (from mortgages worth £100,000 to those worth double that – £200,000). How can that be bad news?

Mortgage relief woes

It certainly is if you lost your job or fell ill between June and December 2008. That’s because the new 13-week limit applies only to claims made from January 2009. So someone who claimed income support in August 2008 will still have to wait 39 weeks before they receive any help – they’ll be waiting for help with their mortgage until May 2009. Their neighbour on the other hand, who lost their job in January 2009, receives help with their mortgage in early April 2009, just 13 weeks later.

The trouble with ESA

And it’s not just some mortgage payers who are getting a raw deal – some sick and disabled tenants will too. Employment and support allowance was introduced in October 2008. You can qualify if you have a national insurance record – this gains you contributory ESA. Alternatively, you might gain income-related ESA, based on a means test. The basic amounts are the same although, in some cases, claimants of income-related ESA may get more than contributory ESA claimants, because of additional “premiums” within the means-tested version – and there lies the problem.

People who receive contributory ESA do not automatically qualify for the passported benefits available to people on income-related ESA – free prescriptions, full housing benefit and so on – although they may qualify on low income grounds.

Both versions of ESA include a disregard of any earnings from permitted work of up to £92 a week. If you receive income-related ESA, you will still get full housing and council tax benefit if you earn £91 a week, because you will retain your right to ESA. But those on contributory ESA, although they may be receiving exactly the same level of weekly benefit, can only earn £20 a week before their permitted work earnings are taken into account for housing and council tax benefit purposes. This could leave them up to £60 a week worse off.

Housing benefit dilemma

Finally, the introduction of ESA has caused another dilemma – who is the housing benefit claimant when a couple apply for help with their rent?

A couple’s applicable amount for ­housing benefit/council tax benefit purposes (what they are supposed to need for living expenses) depends on which partner makes the claim. Without continuing advice, customers will lose out as they cannot be expected to work out what they should do. Generally, the one who is the most disabled for ESA purposes should be the claimant – but will everyone know who that is?

These are just three examples of what happens when policy is made either too quickly (as with mortgage help) or in isolation (as with the lack of fit with housing benefit rules). Either way, it goes against the whole principle of “simplification”.

Published in Community Care 8 January 2009 under the heading Too Complex by Half

Gary Vaux is head of money advice, Hertfordshire Council