1. Introduction
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. Component rates were last reviewed on 1 October 2011 (P.107 / 2011) and this proposition sets out proposals to amend some component rates from 1 October 2012. It also describes improvements in Income Support disregards and incentives, which will be formalized through a Ministerial Order in August 2012.
Separately, these regulations also make changes to the treatment of adult who do not themselves satisfy the residence condition for Income Support but are included within an Income Support household.
2. Changes to disregard amounts and incentives
The value of Income Support benefit to a household is calculated as a combination of the household income, component rates and incentives and disregards. It is proposed that a significant proportion of the budget available for improvements in Income Support for 2013 should be allocated to continue to improve incentives within the Income Support system. The value of disregards is dealt with in the Income Support (General Provisions) Order and a new Ministerial Order will be made at the end of August.
2.1 Earned income incentive
Households who move towards financial independence by increasing their earned income are incentivised within Income Support through a disregard on gross earnings. It is proposed to increase this disregard from the current level of 20%. It is vital that the employment of local residents is encouraged as the Island continues to be affected by the economic downturn. The Department is currently leading the major Back To Work initiative, which has been identified as the key priority within the new Strategic Plan. An increase in the incentive for earned income will help to ensure that Income Support claimants are further encouraged to take up all employment opportunities. It is not possible to identify the exact improvement until the earnings index for 2012 has been published. Early estimates suggest that an improvement of 2% may be achievable within the available budget. A Ministerial Order will formalize the new incentive rate at the end of August.
2.2 Pensioners’ income disregard
Individuals aged 65 and above are incentivised to provide their own pension through a disregard on pension income. It is proposed to increase this disregard in line with the maximum increase in the Jersey Old Age Pension this year, so that all Income Support pensioners will receive the benefit of the uplift in the full rate of the Old Age Pension, regardless of the value of their own pension.
The Jersey Old Age Pension is increased annually in October in line with the Earnings Index for that year. The current forecast for the 2012 Earnings Index is an increase of 3.5%. It is proposed to increase the pension disregard by the same amount. Based on the current forecast, the full rate pension will increase by £6.46 per week from £184.45 to £190.91 and this would lead to an equivalent increase in the Income Support pension disregard of £6.46 per week.
As above, the exact value of the increase cannot be finalised until the end of August when the Earnings Index is published.
3. Component increases
Components within Income Support are used to fix the maximum level of financial support available in respect of different aspects of household expenditure. The value of each component is set out in the Income Support Regulations. The proposed Income Support (Amendment No.8) Regulations increase selected component rates.
3.1 Household component
This component is paid to all Income Support claimants who occupy their own accommodation, as lodgers, tenants or owners. It is not available to claimants who live as part of another household, or who live in hostel accommodation. The current value of the household component is £49.56 and it is proposed to increase this by 3.5% in line with the most recent increase in RPI(Y), to a new value of £51.31 per week.
| current weekly rate | new weekly rate – October 2012 |
Household component | £ 49.56 | £ 51.31 |
3.2 Accommodation
In consultation with the Minister for Housing, it has been agreed that the accommodation components of Income Support will be increased by 3.5% from 1 October 2012 to match the proposed increases in Housing Department rentals at the same time. The table includes details of the proposed rates for different property types and tenures.
Accommodation Components - weekly rates | Oct-11 | Oct-12 |
Hostel | £ 76.30 | £ 78.96 |
Bedsit/lodgings | £109.41 | £ 113.26 |
One bedroom flat | £156.31 | £ 161.77 |
Two bedroom flat | £196.63 | £ 203.49 |
Three bedroom flat | £223.37 | £ 231.21 |
Four bedroom flat | £236.88 | £ 245.14 |
Five (or more) bedroom flat | £245.77 | £ 254.38 |
One bedroom house | £177.59 | £ 183.82 |
Two bedroom house | £231.28 | £ 239.40 |
Three bedroom house | £258.02 | £ 267.05 |
Four bedroom house | £279.16 | £ 288.96 |
Five bedroom house | £303.73 | £ 314.37 |
Six (or more) bedroom house | £318.29 | £ 329.42 |
Bedsit – owner | £ 5.67 | £ 5.88 |
One bedroom flat – owner | £ 5.67 | £ 5.88 |
Two bedroom flat – owner | £ 5.67 | £ 5.88 |
Three bedroom flat – owner | £ 8.05 | £ 8.33 |
Four bedroom flat – owner | £ 11.41 | £ 11.76 |
Five (or more) bedroom flat – owner | £ 11.41 | £ 11.76 |
One bedroom house – owner | £ 5.67 | £ 5.88 |
Two bedroom house – owner | £ 8.05 | £ 8.33 |
Three bedroom house – owner | £ 11.41 | £ 11.76 |
Four bedroom house – owner | £ 11.41 | £ 11.76 |
Five (or more) bedroom house – owner | £ 11.41 | £ 11.76 |
This increase in Income Support components will ensure that all Housing Department tenants and Housing Trust tenants are fully compensated for the increase in Housing Department rentals. Private sector tenants and owner occupiers will also benefit from the rise in accommodation components.
The current timetable of the Housing Transformation Programme includes a major re-alignment of Housing Department and Housing Trust rentals in April 2013. The resulting increases in rent levels experienced by Income Support tenants will be fully matched at that time by a further increase in the accommodation components.
3.3 Childcare
The Income Support system includes assistance with childcare costs, for working parents who do not have family support to provide childcare. This extra assistance allows parents who would otherwise need to stay at home with their children, to take up employment, making a contribution to the economy and supporting themselves as far as they are able.
It is proposed to increase the maximum hourly allowance for childcare costs by 2.5%. This is in line with the increase agreed between the Education, Sport and Culture Department and childcare providers in respect of the Nursery Education Fund (NEF) scheme for 3 to 4 year olds funded by that Department.
Age of Child | Oct 2011 | NEF rate - Sept 2012 | Oct 2012 |
0 to 2 years old | £ 6.12 | | £ 6.27 |
3 to 4 years old | £ 4.78 | £ 4.90 | £ 4.90 |
5 and above | £ 4.73 | | £ 4.85 |
3.4 Medical costs
It is proposed to increase the component associated with the cost of GP visits, by approximately 3.5%, in line with the proposed increase in the rate of medical benefit under the Health Insurance Law. This component ensures that claimants with ongoing, chronic medical conditions can receive regular monitoring from their GP.
Clinical Cost component | current weekly rate | new weekly rate |
Level 1 | £3.01 | £3.15 |
Level 2 | £6.02 | £6.30 |
4. Changes to adult components
4.1 Summary
Income Support provides means tested support to households in which at least one adult satisfies a residence test. The test is that the adult has been resident for the previous five years or continuously for 10 years in the past. Further adults in the household, typically the spouse or partner of the claimant, are not required to meet this residence test.
There are currently estimated to be approximately 140 adults included in Income Support households who, if they were required to meet the Income Support residence test, would not do so in their own right.
It is proposed to introduce a new requirement for each adult individually to meet the residence test in order to continue to receive the adult component (£92.12 per week).
Adults who do not satisfy the residence test will continue to be included within the Income Support household, and the accommodation component will continue to be set to the needs of the entire household. Their income will be included within the Income Support calculation, and they will be subject to job seeking requirements, where appropriate. These adults will not be eligible to claim the adult component. They will also not be eligible for the carer’s component or any impairment component.
However, the childcare component will still be available. The childcare component will continue to assist an adult who does not satisfy the residence condition to return to work. Any additional take up of childcare support following the proposed change will be balanced by an increase in the earnings of the household, leading to a minimal net change in the cost of income support to the household and a reduced dependency upon benefits in the medium term.
These changes will mean that Income Support will continue to provide financial assistance to couples in which one partner has been resident in Jersey for less than five years, but this assistance will be set at a lower rate compared to the support provided to couples where both partners individually meet the residence conditions under Income Support.
4.2. Background
Income Support is a household benefit available to low income families in which:
- One adult in the household satisfies the residence condition; and
- All adults in the household satisfy the work condition
The current eligibility conditions do not require every adult in the household to satisfy a residence test. This is similar to previous benefit schemes such as Rent Rebate / Rent Abatement and Family Allowance.
The main test for residence is that the claimant has lived in Jersey continuously for the five years immediately preceding the date of the claim. An alternative test is that the claimant has lived in Jersey continuously for a period of 10 years at some point in the past. There are some additional rules to cover specific circumstances.
The Income Support law allows an adult who satisfies the residence condition to make a claim for Income Support which includes a partner who has recently arrived in the Island.
An analysis of 6,634 open Income Support claims in March 2012 identified 187 adults legitimately included on these claims who have yet to complete a continuous period of 5 years residence. It is estimated that approximately one-quarter of these individuals will meet the alternative residence test by providing evidence of ten years’ prior residence, leaving approximately 140 claims which include an adult who does not satisfy either residence test.
4.3. Proposal
Under the current Income Support rules a single person must live in Jersey for five years before being eligible for benefit. However, an individual who has lived in Jersey for less than five years has full access to Income Support if they are the partner of an Income Support claimant. This creates a concern that the treatment of these individuals is inequitable and it is appropriate to review the eligibility criteria for this tax funded benefit.
Public and political concern has been expressed as to the ongoing levels of immigration to Jersey and it is argued by some that the current eligibility rules for Income Support provide an incentive for migrants to remain in Jersey and to bring their partners or children to live with them. Departmental records do not provide any evidence of this type of behaviour becoming more common over the last few years. However, there is a continual movement of individuals to and from Jersey and individuals who satisfy the residence test for Income Support may return to the island with a partner from another country, or form a household with an individual who has recently moved to Jersey. In these situations the individual joining the Income Support household is treated more favourably than a single person who has lived in Jersey for a similar length of time.
It is proposed that the amount of Income Support available to a household which includes an adult who does not satisfy the residence test should be set at a lower level, by excluding any component associated specifically with that adult.
4.4 Extent of Exclusions
The change will only apply to adults in Income Support households. Under the Income Support Law, an adult is anyone aged above compulsory school leaving age. There will be no change to the components available to children below this age.
The change will apply equally to couples who are married, those who are in a civil partnership and those living together as if they are married or in a civil partnership.
For example: A Jersey born man moves to the UK in his mid 20’s, gets married and then returns to the island with his English wife and a young baby. Under the proposal, the family will receive Income Support components at the full rate in respect of the man and the baby. The family will not receive any components for the wife until she has satisfied the 5 year residence test in her own right.
Other components available to an individual include impairment and carer components. These will not be available to an adult who does not satisfy the residence condition in their own right. However, the Minister holds discretionary powers to make payments in exceptional circumstances and in the event of an accident or other unusual situation, existing discretionary powers could be used to provide financial support.
The childcare component will continue to be available to assist an adult who does not satisfy the residence condition to return to work. Any additional take up of childcare support following the proposed change will be balanced by an increase in the earnings of the household, leading to a minimal net change in the cost of Income Support to the household and a reduced dependency upon benefits in the medium term.
4.5 Timetable and transitional arrangements
It is proposed to introduce the new policy to apply to new claims immediately.
Although it will involve some extra administration, it is relatively straightforward to apply a residence test to all adults in respect of new claims. If approved, the draft Regulations will introduce this change from 1 August and from that date new claims will be processed under the new rules.
The draft regulations also include a transitional provision so that the new rules will apply to existing claimants from the beginning of next year. Subject to the approval by the States of the draft Regulations, existing claimants will be notified of the forthcoming changes and claims will be reviewed between August and December 2012 to allow existing adult participants to provide evidence of their residence in Jersey.
4.6 Analysis of Claims
The value of the adult component is £92.12 per week and most of the claims that will be affected by this change will experience a loss in benefit of £92.12. If the total Income Support benefit currently received is less than £92.12 per week, the household will no longer be entitled to any benefit.
The table below indicates the number of claims that might be affected based on an analysis of Social Security registration data. It also indicates the restriction in the value of Income Support payable in respect of these claims.
Data extracted March 2012 | Adult currently included on Income Support claim who has not been in Jersey for the last 5 years (based on existing registration data) |
Nationality of Adult included on Claim | No of adults | Full year impact of removal of adult rate from claim |
British | 85 | £ 463,287 |
Polish | 28 | £ 128,571 |
Portuguese | 43 | £ 177,441 |
Other | 31 | £ 62,298 |
As noted above, some of the 187 adults identified in this table will be able to satisfy the residence rest through a ten year continuous period in Jersey in the past. These will be reviewed on a case by case basis. Assuming that 25% of these adults satisfy the 10 year test, a total of approximately 140 claims will be affected and the overall withdrawal of benefit will amount to a saving of approximately £600,000 in a full year.
Over three-quarters of the claims that might be affected include one or more children. Details of the 187 claims above are shown in this table.
| Nationality of Claimant |
No of children in household | BRITISH | POLISH | PORTUGUESE | OTHER |
0 | 22 | 3 | 10 | 7 |
1 | 38 | 18 | 14 | 5 |
2 | 27 | 4 | 14 | 1 |
3 | 14 | 2 | 1 | 3 |
4 | 4 | | | |
As noted above, all components provided in respect of these children will continue to be paid.
4.7 Social Impact
The social impact of the proposal in terms of the impact on low income families, many of whom include children, needs to be weighed up against the ongoing concerns as to the level of current and future immigration into Jersey and the cost of the current level of support provided to these households. The proposal will affect approximately 2% of all Income Support claims, thus limiting any potential impact.
A consideration of long-term issues highlights the increased proportion of older people in the resident population and the need to maintain a sufficient number of local, younger working age people.
5 Ten year residence condition
As well as amending the eligibility for component rates for adults, it is also proposed to align the Income Support Law more closely with the new Control of Housing and Work (Jersey) Law (CHW).
As an alternative to the 5 year rule, claimants can currently satisfy the residence test through a continuous residence period of ten years at any time in the past. This option was added as a substitute for the “Jersey born” provision in the previous Parish welfare system. The differences between the Income Support rule and the current housing legislation can result in confusion for claimants and a degree of duplicated effort across States departments
Subject to the approval by the States of the CHW regulations later this year, the ten year residence test under the Income Support legislation will be amended so that individuals, who have “entitled” status under CHW (proposed regulations 2(1) a,b,c or d), will also be deemed to have satisfied the residence conditions for Income Support.
There will be an additional cost to Income Support as certain categories of individual with aggregated periods of residence but without ten years continuous residence will in future be able to qualify for Income Support. In particular, Jersey born persons and children of qualified persons who arrived in the Island before age 20 are able to aggregate periods of residence to gain entitlement (as they presently can under the Housing Law). However, most of these persons have actually completed a continuous period of residence and few take advantage of the aggregating provisions (or have 5 years continuous residence since their return) so the additional costs are expected to be relatively small. There will also be savings in administration costs and a co-ordinated approach between the two laws will simplify the application process for individuals – indeed, many applicants struggle to understand why they have to qualify themselves at two separate Departments at present.
The CHW draft regulations 2(1) (e) and (f) cover replacements for existing 1(1) (k) and 1(1)(g) “hardship” approvals. Gaining entitled status in these categories will not be included in the Income Support legislation, as neither category includes any requirement for residence in Jersey. However, existing arrangements that provide support for “hardship” cases will continue to be available through Ministerial discretion.
6. Financial and manpower implications
The total cost of the package of Income Support component rate and incentive changes in 2013 will be £2.64 million, as allowed for in the Treasury provisions for uprating in the Medium Term Financial Plan. This figure allows for an element of growth in the volume of Income Support claimants during 2013.
The changes will take place from 1 October 2012 and the increased cost of £650,000 in 2012 is provided for in the current departmental cash limit.
The financial impact of the change to the adult component is estimated at a full year saving of £600,000. This saving will contribute to the delivery of the departmental CSR target for 2013.
There are no additional manpower implications associated with the changes to Income Support financial parameters. There will be some increase in administration at the start of an Income Support claim due to the need to check the residence of both adults on a claim, but savings will be made in respect of those adults who have entitled status under CHW. Any net increase in administration will be absorbed within existing operational manpower.
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