More than 325,000 households claiming benefits will be better off following a rule change coming into force on Monday, October 5. The Department for Work and Pensions (DWP) says the change fixes the 'cliff edge' in the benefits system and will give people 'better reward' for working.
How the old system worked
Under the old rules, people living in supported housing or temporary accommodation received help with their daily living costs through Universal Credit, with rent support paid separately via Housing Benefit. The two systems had different rules about how much claimants could earn before benefits were reduced, and for those on Housing Benefit the rules were less generous than for those who claimed only through Universal Credit.
This meant some people who started working or increased their hours could actually lose money because their Housing Benefit would reduce by more, leaving them worse off despite earning more. The government says this created a 'cliff edge' where people became trapped on benefits.
What the rule change means
The DWP says the change aligns how Housing Benefit is calculated with Universal Credit, strengthening work incentives for more than 325,000 residents in supported housing and temporary accommodation. The department described it as part of the Government's commitment to move from a welfare state to a working state.
Prime Minister Andy Burnham said: "People should never have to choose between keeping a roof over their head or being able to work. But the system has been rigged against some of the very people trying their hardest to get on, particularly young people starting out, who are being left worse off for earning more."
He added: "We're putting that right through a common-sense change that will help people keep more of what they earn. This is what progressive welfare reform looks like: helping people into work and giving families the security and breathing space they need to get on. That's how we make Britain better off."
Government response
Sir Stephen Timms, Minister for Social Security and Disability, said: "For too long, the system has been doing the opposite of what it should: it discouraged some of the most vulnerable residents from working rather than helping them into jobs."
He added: "We're putting that right, so that residents keep more of their earnings, and so that working more hours leaves people better off than staying on benefits. This is a promise from our Autumn Budget now being put into action, and it's part of a much bigger effort to overhaul a welfare system that has trapped too many people in dependency for too long. We're building a system that rewards work and lets people hold on to more of what they earn, while continuing to protect those who need it most."
