Winners and losers

The new benefit rates that apply from April contain changes that could have a dramatic impact on your clients.

Take, for example, the standard deductions that are made from housing benefit where a tenant has their heating and hot water provided as part of the rent.

For many individuals and families on income support or jobseeker’s allowance, a significant part of their income can be eaten up by these “non-eligible” service charges.

In April, that deduction will go up from £11.95 a week to £15.45 where just heating is provided, and from £15.70 to £20.30 where all fuel charges are included in the rent. This represents a 29 per cent increase.

Where a person occupies just one room, the deduction is lower but is still going up by 29 per cent – from £7.15 to £9.25 a week.

Consider a young person on income support, living in one room in a hostel, or staying on as a lodger with former foster carers. Their weekly income support will rise from £45.50 to £46.85 a week in April – £1.35 extra.

Yet they will be expected to pay £2.20 extra a week towards their “rent”, even though they are on full housing benefit, because the service charge element has been increased by so much. So they will immediately be worse off than they are now – and that’s not allowing for inflation or any other extra costs.

Families in bed and breakfast and many vulnerable adults in supported accom­modation will also be hit by the increase in this deduction from housing benefit for fuel.

Fuel prices have risen, but the government has it within its power to protect these especially vulnerable households from fuel poverty and it has chosen not to do so.

There are other hidden cuts in living standards in the benefits up-rating. The amount that is allowed for child care costs when calculating housing benefit and working tax credit for low-paid parents is being frozen. The family and baby elements of child tax credit have been frozen too, despite the chancellor’s promise that the rate of tax credits would rise in line with inflation. The Sure Start maternity grant remains at £500. And yet this is a government that claims it is committed to combating child poverty.

The way that benefit increases are calculated also causes a few anomalies. Means-tested benefits have been increased by 3 per cent in line with the Rossi index, an inflation measure that excludes rents, mortgages and council taxes, while other benefits rise in line with the retail price index, corresponding to a 3.6 per cent rise. Pension credit rises in line with average earnings, however, which is 4.4 per cent this year.

Also some pensioners who have just missed out on pension credit in recent years may now qualify because pension credit rates have increased more than the retirement pension.

One other change in April that shows the government’s commitment to families is that child benefit will be paid from the 29th week of pregnancy instead of from the date of birth – but that’s April 2009, not April 2007 unfortunately. cc

Gary Vaux is head of money advice, Hertfordshire Council. He is unable to answer queries by post or telephone. If you have a question to be answered please write to him c/o Community Care