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An Analysis of the Changes in the Social Benefits in the UK after Covid-19


The global pandemic of COVID-19 has had profound impacts on societies worldwide. Among these impacts, changes in social benefits have been a key area of focus, particularly in the United Kingdom (UK). This article aims to analyse the notable changes in the UK's social benefits system, from the onset of COVID-19 until 2023.


The Covid-19 pandemic was a seismic event that rocked the world, leaving virtually no aspect of society untouched. One area of particular interest has been the changes in social benefits made in the United Kingdom (UK) in response to the pandemic. These changes have had profound implications, not just for the individuals directly affected, but for the broader British economy as a whole.



An Analysis of the Changes in the Social Benefits in the UK after Covid-19



Pre-Covid-19 Social Benefits Landscape

Before delving into the changes and their economic impact, it's essential to understand the pre-Covid-19 landscape. Prior to the pandemic, the UK had a complex system of social benefits, including Jobseeker's Allowance, Universal Credit, and various forms of Housing Benefits. These benefits were designed to support those out of work or on low incomes, but the system was often criticised for being complicated and sometimes punitive.


Changes in Social Benefits During Covid-19

With the onset of Covid-19, the UK, like many other countries, faced an unprecedented situation. Millions of people suddenly found themselves out of work or on reduced hours, and the existing benefits system was strained to its limits. In response, the government introduced several changes to the social benefits system. The most notable of these was a temporary increase in the amount of Universal Credit and the introduction of the Coronavirus Job Retention Scheme (CJRS), also known as the furlough scheme. These changes were aimed at helping people navigate the financial challenges brought on by the pandemic.


The initial response to the pandemic centred around three main areas of concern. The first was reintroducing conditionality related to work search and availability, with a focus on supporting claimants who have been shielded or are otherwise vulnerable. This included the recruitment of an additional 13,500 work coaches to provide strategic support to claimants.


The second area of focus was self-employment. Changes to the minimum income floor, surplus earnings, and reclaims process were designed to support self-employed Universal Credit claimants, a group hit hard by the pandemic's economic fallout​1​.


The third area concerned sickness and disability-related benefits. Operational changes were made to assessments, reviews, and extensions for Personal Independence Payments (PIP) and Employment and Support Allowance (ESA) awards to consider the effects of shielding and social distancing. The response to the needs of carers during the lockdown was also evaluated, including an analysis of whether the Carer’s Allowance or Carer’s premium was effective in reaching and supporting unpaid carers.


The global pandemic of COVID-19 has had profound impacts on societies worldwide. Among these impacts, changes in social benefits have been a key area of focus, particularly in the United Kingdom (UK). For instance, the Attendance Allowance has seen an increase from £92.40 (higher rate) and £61.85 (lower rate) in 2022/23 to £101.75 and £68.10, respectively, in 2023/24. Other benefits, such as the Bereavement Benefit, have also seen increases, with the Widowed Parent's Allowance rising from £126.35 in 2022/23 to £139.10 in 2023/24.


Now Let’s Dive Into the Details of Some Important Changes in the Social Benefits System



Policy Changes

Apart from rate changes, there have also been various policy changes to the social benefits system. A significant change is that the Department for Work and Pensions (DWP) intends to move all tax credits only claimants onto Universal Credit during 2023/2024. Additionally, the UK government has made the extra cost of living payments in response to the rising cost of living, with £900 for people on means-tested benefits, £300 for people over pension age, and £150 for people who receive disability benefits like Personal Independence Payment or Attendance Allowance.


Carer's Allowance

Carer's Allowance also saw an increase from £69.70 in 2022/23 to £76.75 in 2023/24, and the Benefit Cap increased across all categories. For instance, the annual level for couples (with or without children) or single claimants with a child of qualifying age increased from £23,000 to £25,323 in Greater London, and from £20,000 to £22,020 in the rest of Great Britain.



Mortgages

Changes have also been made to the rules for Support for Mortgage Interest, with the waiting period being reduced from 9 months to 3 months in Spring 2023, and changes to in-work conditionality requiring people earning the equivalent of over 15 hours per week at National Living Wage to look for more work or better-paid work were introduced in September 2023.


Changes to Child Benefits in the UK


Changes to Child Benefits

Regarding child benefits, the UK government has confirmed that parents of newborns can still claim Child Benefits during the lockdown, regardless of whether they are able to register their child's birth, a process which is normally necessary to claim the benefit. The payments for Child Benefits were increased by 1.7 percent, in line with inflation, marking an end to the working-age benefits freeze which had kept Child Benefit rates at the same level since April 2015. The weekly rate is now £21.05 for the first or only child and £13.95 for each additional child.


Child Benefit is made into the eligible claimant's bank account, typically every four weeks and only one person can claim it for a child. Importantly, Child Benefit claims can be backdated by up to three months, ensuring parents do not miss out by missing the deadline.


In situations where one partner is not working or paying National Insurance contributions (NICs), the claim can be made in their name, thus protecting their state pension due to National Insurance credits being provided. Furthermore, HMRC has reminded people affected by the High Income Child Benefit Charge of the importance of claiming Child Benefits, even if they opt out of receiving the money itself. The tax charge applies to anyone with an income over £50,000 who claims Child Benefit or whose partner claims it and is applied at a rate of one percent of Child Benefit for each £100 of income over £50,000​2​.


Universal Credit

Post-Covid-19 changes to Universal Credit have had significant effects. From January 2023, the Administrative Earnings Threshold (AET) was raised, meaning more people had to actively look for work while claiming benefits. This threshold was increased from the equivalent of 12 hours on the National Living Wage (£494 per month for single claimants and £782 per month for couples) to 15 hours (£617 for single people and £988 for couples). This change placed more people into an intensive work search group, intensifying the pressure to find work.


Moreover, Universal Credit claimants working 15 to 35 hours a week at minimum wage became required to meet a work coach to discuss increasing their hours or earnings. This change impacted 600,000 Universal Credit claimants. Furthermore, the Department of Work and Pensions (DWP) continued moving people from "legacy benefits" onto Universal Credit, a process known as "managed migration".


In April 2023, Universal Credit was increased by 10.1%, raising the standard allowance for those under 25's to £292.11 (single person) and £458.51 (joint claimants), and for those over 25 to £368.74 (single person) and £578.82 (joint claimants)​1​.


Housing Benefit

Housing Benefit was also uprated by 10.1% from April 2023. However, specific details about the changes in rates for Housing Benefits are not readily available, and additional research would be needed to provide a more comprehensive overview.


Working and Child Tax Credits

As of the current information available, the transition from "legacy benefits" like Working and Child Tax Credits to Universal Credit is ongoing. This process paused due to the Covid-19 pandemic, was restarted in November 2022 with completion expected by 2026.


Jobseeker's Allowance (JSA)

Like other benefits, Jobseeker's Allowance saw a 10.1% uprating in April 2023. More detailed changes to the structure or requirements of JSA due to the pandemic are not immediately available and would require further investigation.


Attendance Allowance

The higher rate increased from £92.40 to £101.75, and the lower rate went from £61.85 to £68.101.


Pension Credit

Pension Credit, too, was uprated by 10.1% starting from April 2023. Specific details regarding changes in the eligibility or distribution of Pension Credit due to Covid-19 are not currently available, necessitating further research.


Income Support

Income Support was among the benefits that saw a 10.1% increase starting in April 2023. Additional changes to Income Support in response to the pandemic are not immediately apparent and would require additional research for a complete understanding​1​.


Benefit Cap

For couples (with or without children) or single claimants with a child of qualifying age, the annual level of the Benefit Cap increased from £23,000.00 to £25,323.00 in Greater London, and from £20,000.00 to £22,020.00 in the rest of Great Britain. For single adult households without children, it increased from £15,410.00 to £16,967.00 in Greater London, and from £13,400.00 to £14,753.00 in the rest of Great Britain1.


Bereavement Benefit

The Widowed Parent’s Allowance increased from £126.35 to £139.101.


Regional Changes

The changes in the social benefits system have not been uniform across the UK. For instance, Scotland began making payments of a new Low-Income Winter Heating Assistance benefit in February 2023, and the Scottish Government transferred all recipients of child Disability Living Allowance (DLA) to Scottish Child Disability Payment in Spring 2023. Furthermore, the Scottish Carers Assistance is set to begin in late 2023 and be fully rolled out in Spring 2024.


The Economic Impact of Changes in Social Benefits


The Economic Impact of Changes in Social Benefits

The changes to social benefits have had a substantial impact on the British economy. The increase in benefits and the furlough scheme helped to prevent a complete collapse of consumer spending, which would have had a devastating effect on businesses and the economy. The support also helped to maintain social stability during an incredibly challenging period, preventing a potential increase in poverty and homelessness.


Moreover, the changes in the benefits system have had an indirect impact on the economy by helping to sustain demand for goods and services. With more money in their pockets, people have been able to continue spending, supporting businesses and jobs across the country. This has been particularly important in sectors like retail and hospitality, which were hit hard by the pandemic and have been slow to recover.


However, these changes have also had some negative effects. The increase in social spending has added to the UK's national debt, which will have implications for future generations. There are also concerns that the furlough scheme and increased benefits could create a culture of dependency, discouraging people from seeking employment.


Social Security Reforms and the Job Market

The government's response to the pandemic included various adjustments to social security benefits, which were swiftly implemented to meet the increased demand. These changes included the introduction of conditionality, which pertains to work search and availability. The SSAC is working to understand how these measures will affect those who have been shielding, as well as those with other vulnerabilities, including digital exclusion. The government's strategy to support training and re-skilling for claimants will play a significant role in shaping the job market's recovery, especially in regions and sectors hit hardest by unemployment​1​.


Impact on Self-Employment

Changes to social benefits also had a notable impact on the self-employed. Adjustments to the minimum income floor, surplus earnings, and the reclaim process have altered the landscape for self-employed Universal Credit claimants. We are keen to understand the full impact of these changes on self-employment, a sector that was notably affected during the pandemic.


Implications for Sickness and Disability Benefits

The pandemic also led to changes in sickness and disability-related benefits. These changes included alterations to the waiting days for Employment and Support Allowance (ESA) payments and eligibility for statutory sick pay. We are interested in understanding the effects of these operational changes on claimants, including those whose conditions worsened during the lockdown. The social security system's response to the needs of carers during the lockdown is also being reviewed​​.


Changes in Taxes

The changes in taxes and social benefits in the UK post-pandemic appear to be influenced by a variety of factors and are not solely a result of increases in social benefits. Here is a summary of some of the key changes:


1. Income Tax: The income tax bands for 2023-24 remain the same as the previous year, with tax rates ranging from 0% for the personal allowance (£0-£12,570) to 46% for the top rate (income more than £150,000)​1​.

2. National Insurance: There were significant changes to National Insurance in 2022-23, including an increase in rates and a change in the contribution threshold. However, these changes were later reversed, and no further changes are expected for 2023-24.

2.

3. Inheritance Tax: The inheritance tax threshold remains frozen at £325,000 until April 2028. This threshold has not changed since 2010-11.

4. Capital Gains and Dividend Tax: The tax-free allowance for capital gains tax has been cut from £12,300 for 2022-23 to £6,000 for 2023-24. Similarly, the dividend allowance will also be cut from £2,000 to £1,000 starting from 6 April 2023.

5. Council Tax: Local authorities can increase council tax by up to 3% without needing a referendum, with an additional 2% if they qualify for the social care precept. In Scotland, there is no limit set on council tax bill rises for 2023-24.

6. Stamp Duty: Changes to stamp duty took effect in September 2022 and will remain until 31 March 2025. First-time buyers won't need to pay stamp duty on the first £425,000 of the property they buy while existing homeowners won't have to pay on the first £250,000. Rates for people buying a second home in Scotland increased in December 2022.


Please note: that the information above is based on the most readily available data and might not fully capture all the nuances and specifics of changes to each benefit. So we cannot take any responsibility for the correction of this data. For a comprehensive understanding, more detailed research into each individual benefit would be required, especially to understand the specific impacts on different demographics or regions within the UK.


Moving Forward

Looking ahead, it's clear that the social benefits changes made during Covid-19 will continue to shape the British economy. As the country moves towards recovery, the government will need to balance the need for continued support with the need for fiscal responsibility. The decisions made in the coming months and years will have far-reaching implications, not just for those receiving benefits, but for the entire economy.


The government has shown readiness to make adjustments as necessary as the situation evolves. It is also evident that these changes in social benefits have been a crucial part of the UK's response to the economic and social challenges posed by the Covid-19 pandemic. The full extent of their impact will continue to unfold in the years to come.


Conclusion

In conclusion, the changes in social benefits in the UK after Covid-19 have had a profound impact on the British economy. They've helped to mitigate some of the worst economic effects of the pandemic, but they've also added to the national debt and raised concerns about dependency. As we move forward, the challenge will be to strike the right balance between supporting those in need and ensuring the long-term health of the economy. The lessons learned from the pandemic will undoubtedly influence social policy in the UK for years to come.


The COVID-19 pandemic has necessitated several changes to the social benefits system in the UK, with adjustments made to accommodate the shifting economic landscape and the needs of the public. Through changes in benefit rates, policy adjustments, and regional initiatives, the UK has demonstrated adaptability in the face of unprecedented circumstances. These changes are a testament to the ongoing efforts to support vulnerable groups and mitigate the socioeconomic impacts of the global pandemic.



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