REPORT
Introduction
The Income Support legislation requires the Minister for Social Security to bring forward any proposals to changes to the rates of components of Income Support for consideration by the States Assembly. These component rates must be reviewed at least once a year.
Most Social Security benefits are uprated annually in October to take into account either the increase in the cost of living or annual earnings, depending upon the benefit concerned.
It is normally quite straightforward to calculate the cost of a benefit increase as claimant numbers and claim costs change slowly from year to year. This is not the case with Income Support at present. The economic recession is having a significant impact on the cost of Income Support and the Department will need to meet the increased cost of claims. Funding has been requested from the Stabilisation Fund as part of the automatic stabiliser package. If this funding is not forthcoming, this proposition will be withdrawn as the Department will be unable to meet both the additional costs arising from the recession and an increase in benefits. Other measures would also need to be taken to reduce costs.
It is impossible to predict in advance the full impact of the recession and the ongoing cost of Income Support for the remainder of the year. This uncertainty also makes it difficult, at present, to fully quantify the precise additional cost of a benefit uprate.
Previous Benefit Increases
Income Support benefits have been increased three times since January 2008 when the scheme was introduced. In May 2008 components affected by GST were increased by 3% to coincide with the introduction of GST. In October 2008, components and fixed disregards were increased by 3.7%. In February 2009, a variety of increases were made to component rates, fixed disregards and percentage disregards.
A summary of the changes to date is provided in Appendix 1.
The increase in benefit that has been experienced by individual families is made up of a combination of the components appropriate to that family and the disregards applied to their other income.
Methods of Increasing Income Support Benefit
Improvement in Income Support benefit can be achieved in two ways:
The value of components can be increased. This is simple to implement and allows a percentage increase to be applied across the board. The disadvantage to increasing component rates is that it increases the base level at which benefits are paid, keeping more families in the benefit system. Increasing components does not provide any incentive for claimants to improve their own situation. If component levels are high, it may have the opposite effect and discourage people from seeking to improve their position through their own efforts.
Alternatively, the value of disregards can be increased. Disregards are applied to different types of income and savings. Some are provided as a fixed amount – e.g. a single pensioner currently has the first £32.06 of pension income disregarded per week. Others are percentage disregards – e.g. an adult earning £300 per week would receive a disregard of 10% of their gross earnings, worth £30 per week. As disregards are applied to income that the household receives or the savings that the household has, the impact of increasing disregards will vary considerably depending on the amount and type of income and savings for the individual household. This has the advantage that the increase in disregards acts as an incentive to encourage the household to seek to maximise its own income and become more independent.
There are some individuals and households who have very little opportunity for improving their own income and they are dependent on the component rates themselves.
Proposal
In order to implement increases in benefits on 1 October, component rates and disregards must be finalised by the end of August. In reality, this means that component rates which are set by Regulation need to be approved before the summer recess. Disregards are amended by Ministerial Order and can be set during August.
Given the uncertainty regarding the economic situation at present, it is proposed that an increase equivalent to 2.0% of the value of the components as at October 2008 is applied to most components from 1 October 2009. Details of changes to specific components are set out below. This Regulation sets out these component changes.
The remainder (approximately one-third) of the available budget will be allocated to improving incentives within the Income Support system. An indication of possible proposals is included below and these improvements will be finalised in August when more information will be available to estimate the cost of Income Support for the remainder of the year. At that point the Earnings Index for 2009 and the RPI for June 2009 will be available. In particular, the Earnings Index will determine the increase in contributory benefits in October, which has an effect on the cost of Income Support.
Until these indices are available it has been assumed for the purposes of costing these proposals that pensions and contributory benefits will rise by 3% in October 2009.
The following sections set out the proposed changes for individual components. The net effect on an Income Support household will be a combination of the increases in individual components and the improvements in disregards, which will add to the total benefit income available.
All increases will apply from 1 October.
Housing Component
A major component of the Income Support scheme is the financial support provided to tenants to assist with housing costs. The Housing Department is completing a major review of social housing policy which is likely to have significant implications for the manner in which rents are set in the public sector in future. Until the review is published and the recommendations discussed, it is premature to make any significant changes to the current rental levels.
The Housing Department intends to increase rentals by 2.5% in October 2009 and, accordingly, the Housing components within Income Support will rise by the same figure on 1 October.
Childcare component
Childcare costs were originally set in September 2007 based on the annual survey of childcare costs undertaken by the Jersey Child Care Trust. Since then the methodology of the survey has been revised and a more accurate analysis of local childcare costs is now available, in particular showing a higher average rate for the care of school age children.
The Education, Sport and Culture Department will be providing up to 20 hours term time free early years education for children who secure a place with a registered private nursery provider. This will commence from September 2009 and is available to children in the school year before they start compulsory education. The Education, Sport and Culture Department has agreed an initial rate of £4.55 per hour with private childcare providers for this scheme.
It is proposed that the hourly rates for 0,1 and 2 year olds be increased from £5.58 to £5.69 (2% increase)
It is proposed that the hourly rates for 3 and 4 year olds be increased from £4.37 to £4.55 (4.1% increase)
It is proposed that the hourly rates for children aged 5 -11 be increased from £3.14 to £4.50 (43.3% increase)
Clinical Cost Component
The clinical cost component provides additional benefit to those with chronic health conditions who require additional GP visits to monitor their condition. As medical costs are not subject to GST, this component was not affected by the increases in May 2008. It is proposed that these component rates be increased slightly in excess of other components, and that the two rates be adjusted so that the higher rate is double the lower rate.
It is proposed that the rate for Clinical Cost Component level 1 be increased from £2.73 to £2.87 (5.1% increase)
It is proposed that the rate for Clinical Cost Component level 2 be increased from £5.53 to £5.74 (3.8% increase)
Other components
Other components relate to living costs, personal care, mobility and carer allowances. These components were uprated to take account of GST and most were also increased in February 2009, in addition to the annual increase in October 2008. An increase of 2.0% in October 2009 will give a total increase in each of these components since the start of Income Support of a minimum of 9.0%, which compares closely to the anticipated increase in low income RPI over this period. The increase in the adult and child components will be in excess of 10%.
Where components have been increased in February 2009, the percentage increase for October 2009 is calculated from the October 2008 figure and then applied to the current rate.
A summary of all proposed component changes is given in Appendix 2.
The component formerly set out at paragraph 6(3)(d) of the Schedule to the Regulations has been removed. This provision specified a rate applicable to individuals living in residential care establishments. Specific regulations to cover Income Support for residential care residents are being developed at present but, until they are ready, individuals receive support through the Income Support (Transitional Provisions) (Jersey) Order 2008, rather than through the rate set in the Regulations. Fee rates have been agreed with local care providers and are reviewed on a regular basis.
Incentives
The balance of the budget available for increases in 2009 will be allocated to improving incentives within the Income Support system. In advance of the Income Distribution Survey (IDS) in 2010, it is proposed that the increase in incentives be applied to three specific areas. Following the results of the IDS, other incentives within the Income Support system will be reviewed to ensure that appropriate incentives are available to different household groups.
Using information available at present, it is anticipated that the improvements will be possible in the following areas:
- Earnings disregard could be increased by up to between 1% and 2.5%
- Capital disregards, either by increasing the value below which savings are disregarded by up to between 10% and 20% , or by improving the rate of deemed income by up to between 2.5% and 3.5%
- Pension disregards could be increased by up to between 2.5% and 5%
The exact nature and level of these incentive improvements will be determined in August, following the publication of the Earnings Index. At that time, it will be possible to produce a more accurate estimate of the cost of Income Support benefits for the remainder of the year. The changes to incentives will be made by Ministerial Order at the end of August.
A report will be circulated to Members giving examples of the impact of all proposed changes on a range of typical households in advance of the debate on this proposition.
Financial and manpower implications
The estimated cost of increases to components as proposed in these Regulations in 2010 is £1.62 million, whilst the improvements to incentives will be costed within an additional £0.8 million, both of which are provided for in the cash limits to be proposed to the States by the Council of Ministers. The effect of component increases for the 3 months to December 2009 is £406,000 and the improvements to incentives will cost approximately £200,000, both of which are provided for in the 2009 cash limit.
However, the recession has resulted in rising pressures on the Income Support budget, and the Minister for Treasury and Resources will be bringing forward a proposition to provide additional funds in 2009. In the event that funding is not agreed the changes proposed in these Regulations will not be affordable in 2009.
There are no additional manpower implications.
Appendix 1 Changes to Income Support rates and Disregards since 28 January 2008
Components – weekly rates (£) | 28/01/2008 | 01/05/2008 | 01/10/2008 | 01/02/2009 |
Adult | 83.58 | 86.10 | 89.32 | 90.30 |
Lone parent | 120.68 | 124.32 | 128.94 | 129.92 |
Child | 56.42 | 58.10 | 60.27 | 60.90 |
Household | 42.84 | 44.10 | 45.71 | 46.20 |
Accommodation (rented / owner occupier) | various | unchanged | increased by 3.7% | unchanged |
| | | | |
Personal care - 1st level | 20.37 | 21.00 | 21.77 | 21.77 |
Personal care - 2nd level | 83.58 | 86.10 | 89.32 | 96.32 |
Personal care – 3rd level | 122.85 | 126.56 | 131.25 | 138.25 |
Mobility – non earner | 20.37 | 21.00 | 21.77 | 21.77 |
Mobility – earner | 40.74 | 42.00 | 43.54 | 43.54 |
Clinical cost 5+ consultations | 2.66 | 2.66 | 2.73 | 2.73 |
Clinical cost 9+ consultations | 5.32 | 5.32 | 5.53 | 5.53 |
Carer | 41.79 | 43.05 | 44.66 | 44.66 |
Components – Hourly rate (£) | | | | |
Childcare under 3 years | 5.38 | 5.38 | 5.58 | 5.58 |
Childcare 3-4 years | 4.21 | 4.21 | 4.37 | 4.37 |
Childcare 5-11 years | 3.03 | 3.03 | 3.14 | 3.14 |
| | | | |
Capital disregards (£) | 28/01/2008 | 01/05/2008 | 01/10/2008 | 01/02/2009 |
single adult with personal care element | 11,443 | 11,443 | 11,866 | 11,866 |
Other single adult under 65 | 7,629 | 7,629 | 7,911 | 7,911 |
couple with at least one with personal care element | 18,967 | 18,967 | 19,669 | 19,669 |
Other couple under 65 | 12,645 | 12,645 | 13,113 | 13,113 |
Single adult 65 or over | 11,443 | 11,443 | 11,866 | 11,866 |
Couple 65 or over | 18,967 | 18,967 | 19,669 | 19,669 |
| | | | |
Income and earning disregards (£ per week) | 28/01/2008 | 01/05/2008 | 01/10/2008 | 01/02/2009 |
Pension – First pensioner | 26.11 | 26.11 | 27.09 | 32.06 |
Pension – Pension from Additional pensioner | 16.38 | 16.38 | 17.01 | 19.95 |
Lone Parent – 1st level | 15.68 | 15.68 | 16.24 | 16.24 |
Lone Parent – 2nd level | 26.11 | 26.11 | 27.09 | 27.09 |
Lone Parent – 3rd level | 47.04 | 47.04 | 48.79 | 48.79 |
Income and earning disregards (% of gross income) | | | | |
Earnings disregard | 6% | 6% | 6% | 10% |
Maintenance disregard | N/A | N/A | N/A | 10% |
Pension disregard (under 65) | N/A | N/A | N/A | 5% |
LTIA disregard | N/A | N/A | N/A | 5% |
Appendix 2 - Summary of Component Increases
All weekly rates are divisible by 7 and this has led to some adjustments in the exact amount of the increase.
Components | Oct 08 | Feb 09 | Oct 09 | % increase since Jan 08 | % increase since Oct 08 |
Adult | 89.32 | 90.30 | 92.12 | 10.2% | 3.1% |
Single parent | 128.94 | 129.92 | 132.51 | 9.8% | 2.8% |
Child | 60.27 | 60.90 | 62.09 | 10.0% | 3.0% |
Household | 45.71 | 46.20 | 47.11 | 10.0% | 3.1% |
Hostel | 72.59 | 72.59 | 74.41 | 6.3% | 2.5% |
Bedsit/lodgings | 104.16 | 104.16 | 106.75 | 6.3% | 2.5% |
One bedroom flat | 148.82 | 148.82 | 152.53 | 6.3% | 2.5% |
Two bedroom flat | 187.11 | 187.11 | 191.80 | 6.3% | 2.5% |
Three bedroom flat | 212.59 | 212.59 | 217.91 | 6.3% | 2.5% |
Four bedroom flat | 225.40 | 225.40 | 231.07 | 6.3% | 2.5% |
Five (or more) bedroom flat | 233.87 | 233.87 | 239.75 | 6.3% | 2.5% |
One bedroom house | 169.05 | 169.05 | 173.25 | 6.3% | 2.5% |
Two bedroom house | 220.08 | 220.08 | 225.61 | 6.3% | 2.5% |
Three bedroom house | 245.56 | 245.56 | 251.72 | 6.3% | 2.5% |
Four bedroom house | 265.72 | 265.72 | 272.37 | 6.3% | 2.5% |
Five bedroom house | 289.10 | 289.10 | 296.31 | 6.3% | 2.5% |
Six (or more) bedroom house | 302.96 | 302.96 | 310.52 | 6.3% | 2.5% |
Bedsit – owner | 5.39 | 5.39 | 5.53 | 6.8% | 2.6% |
One bedroom flat – owner | 5.39 | 5.39 | 5.53 | 6.8% | 2.6% |
Two bedroom flat – owner | 5.39 | 5.39 | 5.53 | 6.8% | 2.6% |
Three bedroom flat – owner | 7.63 | 7.63 | 7.84 | 6.7% | 2.8% |
Four bedroom flat – owner | 10.85 | 10.85 | 11.13 | 6.7% | 2.6% |
Five (or more) bedroom flat – owner | 10.85 | 10.85 | 11.13 | 6.7% | 2.6% |
One bedroom house – owner | 5.39 | 5.39 | 5.53 | 6.8% | 2.6% |
Two bedroom house – owner | 7.63 | 7.63 | 7.84 | 6.7% | 2.8% |
Three bedroom house – owner | 10.85 | 10.85 | 11.13 | 6.7% | 2.6% |
Four bedroom house – owner | 10.85 | 10.85 | 11.13 | 6.7% | 2.6% |
Five (or more) bedroom house – owner | 10.85 | 10.85 | 11.13 | 6.7% | 2.6% |
Personal care - 1st level | 21.77 | 21.77 | 22.26 | 9.3% | 2.3% |
Personal care - 2nd level | 89.32 | 96.32 | 98.14 | 17.4% | 9.9% |
Personal care – 3rd level | 131.25 | 138.25 | 140.91 | 14.7% | 7.4% |
Mobility – non earner | 21.77 | 21.77 | 22.26 | 9.3% | 2.3% |
Mobility – earner | 43.54 | 43.54 | 44.52 | 9.3% | 2.3% |
Clinical cost 5+ consultations | 2.73 | 2.73 | 2.87 | 7.9% | 5.1% |
Clinical cost 9+ consultations | 5.53 | 5.53 | 5.74 | 7.9% | 3.8% |
Carer | 44.66 | 44.66 | 45.57 | 9.0% | 2.0% |
Childcare under 3 years | 5.58 | 5.58 | 5.69 | 5.8% | 2.0% |
Childcare 3-4 years | 4.37 | 4.37 | 4.55 | 8.1% | 4.1% |
Childcare 5-11 years | 3.14 | 3.14 | 4.50 | 48.5% | 43.3% |
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