DWP issues major update on six changes affecting benefits and state pension payments
by Fionnula Hainey · ChronicleLiveThe Department for Work and Pensions (DWP) has detailed six significant changes that will affect millions of individuals claiming state pensions and benefits, following the first Budget under the new Labour government. Chancellor Rachel Reeves, in her address to MPs on Wednesday afternoon, laid out her plans to generate £40 billion through tax increases to mend a "black hole" in the country's finances.
While she upheld her pledge not to raise taxes on workers' wages, she imposed higher rates of National Insurance on employers, increased Capital Gains Tax, and introduced inheritance tax reforms. For those claiming benefits, the measures were varied.
The chancellor announced that over a million families on Universal Credit would receive a £420 increase due to changes in debt repayment methods. Carers are also set to see an income boost after the earnings threshold was raised.
However, she also confirmed that benefits would only increase by 1.7 per cent from next April, a move that critics had previously warned would "barely touch the sides" for those struggling on a low income. There was more positive news for state pensioners who are set to receive a 4.1 per cent rise, although the Budget also confirmed Labour's intentions to proceed with means-testing the Winter Fuel Payment this year.
On Thursday, the Department for Work and Pensions (DWP) made an announcement detailing all the budget changes that will affect those dependent on welfare. The DWP detailed six separate adjustments set to take place in the near future, reports the Manchester Evening News.
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Work and Pensions Secretary Liz Kendall remarked: "We promised change, and that is what we will deliver. For too long, millions of people have been denied opportunities to work and build a better life, and too many children are growing up in poverty, harming their life chances and our country's future."
She added, "This Budget shows the first steps in our plan to drive up opportunity and drive down poverty in every corner of the country. There is still much more to do, but this Budget has shown change has begun."
Highlighted within the update were six pivotal changes that benefit claimants and state pensioners should note:.
Boost for 1.2 million families on Universal Credit
According to the DWP, approximately 1.2 million individuals receiving Universal Credit will gain an extra £420 yearly due to a modification in how debt repayment is handled.
The introduction of a new Fair Repayment Rate will mean that deductions from Universal Credit payments will be capped.
Currently, the government can deduct 25 per cent from a household's Universal Credit standard allowance for debt repayment. However, starting in April next year, this deduction rate will be reduced to 15 per cent, allowing households to retain more of their income.
Ruth Talbot, a policy advisor at Save The Children UK, has hailed the new measure, stating: "The rate at which some of the poorest families in the UK have been required to pay back debt to the UK Government was utterly unfair and unsustainable. We welcome this announcement as a first step, as we know it will have a significant impact for families and put more money in their pockets for food, toys, clothes and books."
Thousands more to get Carers Allowance
In further good news, thousands more individuals providing essential care are set to receive financial support. The earnings threshold for Carers Allowance is slated to increase by £45 a week, ensuring that an additional 60,000 carers could be eligible for this vital benefit.
As it currently stands, the Department for Work and Pensions (DWP) disburses £81.90 weekly to carers who dedicate no fewer than 35 hours a week caring for someone. Previously, entitlement to this payment required earning less than £151 a week.
Nevertheless, from April 2025, the earnings limit will rise to mirror 16 hours of work per week at the National Living Wage, thus permitting carers the capacity to earn up to £196 a week whilst still retaining their benefit entitlement.
Ms Reeves pointed out that this adjustment marks the most substantial increase to the allowance since its inauguration in 1976, allowing a carer to earn in excess of £10,000 per year while continuing to receive the weekly payments.
The government has initiated an independent review into overpayments of Carers Allowance, to be led by Liz Sayce OBE. This follows criticism of the DWP's "cliff edge" approach to the benefit, which results in some carers receiving demands for thousands of pounds in repayments after inadvertently exceeding the earnings threshold, sometimes by as little as £1.
State pension and benefits increases confirmed
The Budget confirmed the eagerly awaited news for benefit claimants and state pensioners - the increase in their payments from next April. Benefits usually rise in line with inflation, while state pension increases are calculated using the triple lock guarantee.
Ms Reeves confirmed that benefits will rise by 1.7 per cent, while state pensions will increase by 4.1 per cent. The DWP stated that a 4.1 per cent increase in state pensions would mean that "those on the full rate of the new State Pension will now see an increase of over £470 per year".
A 1.7 percent increase to working-age benefits will be "worth an average £12.50 per month for a family on Universal Credit", according to the DWP.
More money for the Household Support Fund
The DWP also announced it will provide £1 billion worth of funding for local councils to "help struggling families and pensioners facing the greatest financial hardship".
This money will be used to extend the Household Support Fund for an additional year and maintain Discretionary Housing Payments in England and Wales.
The Household Support Fund, a scheme introduced by the Tories to aid those hardest hit during the cost of living crisis, is distributed among local councils. These councils then have the discretion to decide how best to allocate the funds.
Many local authorities utilise this money to provide free meals for children during school holidays or distribute cost of living payments, supermarket vouchers, or energy bill support to those with the lowest incomes. The fund was initially set to conclude in March 2025, but it will now continue until March 2026.
Local councils also offer Discretionary Housing Payments, which can assist those on Housing Benefit or Universal Credit with rent or housing costs.
DWP to shift focus 'from welfare to work'
In a significant shift, the DWP is launching major reforms that will change the department's focus "from welfare to work". As part of these plans, the DWP has announced a £240 million package it will "open up opportunities to millions of people left behind and denied the opportunity to get into work and get on at work".
The DWP stated that these changes will tackle "spiralling economic inactivity and a record 2.8 million people locked out of work due to long term sickness". The government has set itself a target of increasing the employment rate from 75 per cent to 80 per cent, which would mean bringing an additional 2 million people into work.
The government has announced that a 'Get Britain Working' white paper, set to be released in the autumn, will establish a new jobs and careers service aimed at increasing employment rates. Additionally, a new Youth Guarantee will be introduced to ensure all young people have the opportunity to earn.
Major crackdown on benefit fraud
The Department for Work and Pensions (DWP) also plans to crack down on benefit fraud with a range of new measures. The department aims to enhance its detection and prevention of fraud and error, with hopes of saving an estimated £7.6 billion by 2029.
The government plans to recruit 3,180 additional staff to tackle fraud and error across the DWP and HMRC. The forthcoming Fraud, Error and Debt Bill will grant the government new powers to verify correct benefit payments using data shared by banks and financial institutions.
The DWP will gain the ability to automatically recover debt by accessing claimants' bank accounts.
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