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EXPLANATORY NOTES Welfare Reform Act 2012 Chapter 5 £15.50 These notes refer to the Welfare Reform Act 2012 (c.5) which received Royal Assent on 8 March 2012 WELFARE REFORM ACT 2012 —————————— EXPLANATORY NOTES INTRODUCTION 1. These Explanatory Notes relate to the Welfare Reform Act 2012 which received Royal Assent on 8 March 2012. They have been prepared by the Department for Work and Pensions in order to assist the reader in understanding the Act. They do not form part of the Act and have not been endorsed by Parliament. 2. The Notes need to be read in conjunction with the Act. They are not, and are not meant to be, a comprehensive description of the Act. So where a section or part of a section does not seem to require any explanation or comment, none is given. BACKGROUND AND SUMMARY 3. In July 2010 the Government published a consultation document 21st Century Welfare (Cm 7913). This set out a range of options for reform of the welfare system. Over 1600 responses were received, from external organisations, individual members of the public and Department for Work and Pensions staff. At the end of the consultation period, in November 2010, a White Paper Universal Credit: welfare that works (Cm 7957) was published, alongside the Government’s responses to the consultation (Consultation responses to 21st Century Welfare (Cm 7971)). The White Paper set out the Government’s proposals for welfare reform, which aim to improve work incentives, simplify the benefits system and make it less costly to administer. Not all the measures in the White Paper will require primary legislation, but this Act gives effect to those proposals that do. 4. The major proposal for reform is the introduction of a new benefit, to be known as universal credit, which will replace existing in and out of work benefits. The Act also makes provision for a new benefit, personal independence payment, which will replace the existing disability living allowance. 5. The Act consists of 7 Parts: • Part 1 – Universal credit • Part 2 – Working-age benefits • Part 3 – Other benefit changes • Part 4 – Personal independence payment 1 These notes refer to the Welfare Reform Act 2012 (c.5) which received Royal Assent on 8 March 2012 • Part 5 – Social security: General • Part 6 – Miscellaneous • Part 7 – Final 6. The following paragraphs summarise those Parts, and are followed by detailed explanations of the individual sections and Schedules. GLOSSARY 7. The following abbreviations are used for existing Acts: • SSAA 1992 – Social Security Administration Act 1992 • SSCBA 1992 – Social Security Contributions and Benefits Act 1992 • JA 1995 – Jobseekers Act 1995 • SSA 1998 – Social Security Act 1998 • SSFA 2001 – Social Security Fraud Act 2001 • SPCA 2002 – State Pension Credit Act 2002 • TCA 2002 – Tax Credits Act 2002 • WRA 2007 – Welfare Reform Act 2007 • WRA 2009 – Welfare Reform Act 2009 8. The following other abbreviations are used: • JSA – jobseeker’s allowance • ESA – employment and support allowance • IS – income support • DWP – Department for Work and Pensions • HMRC – Her Majesty’s Revenue and Customs 2 These notes refer to the Welfare Reform Act 2012 (c.5) which received Royal Assent on 8 March 2012 Part 1 – Universal credit 9. This Part of the Act contains provisions and confers regulation-making powers for an integrated working-age benefit to be called universal credit, which, depending on the claimant’s circumstances, will include a standard allowance (to cover basic living costs) along with additional elements for responsibility for children or young persons, housing costs and other particular needs. 10. Universal credit will be paid to people both in and out of work, replacing working tax credit, child tax credit, housing benefit, IS, income-based JSA and income-related ESA (for details on provisions for council tax support, please see the note on section 33). It will provide support for people between 18 (or younger in certain cases) and the qualifying age for state pension credit. 11. The aim of universal credit is to smooth the transition into work by reducing the support a person receives at a consistent rate as their earnings increase. 12. The financial support provided by universal credit will be underpinned by responsibilities which claimants may be required to meet. The level of those requirements will depend on the claimant’s particular circumstances. Part 2 – Working-age benefits 13. This Part of the Act makes provision for changes to the responsibilities of claimants of JSA, ESA and IS in the period leading up to the introduction of universal credit and the abolition of income-based JSA, income-related ESA and IS (the interim period). In particular provision is made for the introduction of a claimant commitment. The claimant commitment will be a record of the requirements claimants are expected to meet in order to receive benefit and the consequences should they fail to do so. 14. Once universal credit is introduced, ESA and JSA will continue alongside universal credit as contributory benefits. As well as the changes to be made in the interim period, this Part also introduces longer-term reforms to align ESA and JSA more closely with the provisions for universal credit. Sections 49 and 57 insert new sections into the JA 1995 and the WRA 2007 which replicate those for universal credit which relate to work-related requirements and sanctions, apart from where differences are necessary, so that what can be expected of a claimant of contributory JSA or ESA is the same as it would be for a similar claimant of universal credit. Part 3 – Other benefit changes 15. This Part of the Act contains changes to a number of other social security benefits. Part 4 – Personal independence payment 16. In June 2010 the Government announced, as part of the Budget, its intention to reform disability living allowance from 2013-14. Subsequently, in December 2010, a consultation paper Disability Living Allowance reform (Cm 7984) was published. The consultation paper set out the Government’s proposals to replace disability living allowance with a personal independence payment. The provisions in Part 4 set out the framework for the new benefit, while the consultation responses will feed into the detailed design of the benefit which will be provided for in secondary legislation. 3 These notes refer to the Welfare Reform Act 2012 (c.5) which received Royal Assent on 8 March 2012 Part 5 – Social security: general 17. This Part of the Act contains provisions relating to the administration of social security benefits, including provisions relating to a cap on benefit payments; measures to deal with benefit and tax credit fraud and enabling the Secretary of State to share data with other bodies. Part 6 – Miscellaneous 18. In January 2011 the Government published a consultation document Strengthening families, promoting parental responsibility: the future of child maintenance (Cm 7990). The document set out the Government’s view that parents should be encouraged and supported to make their own family-based arrangements for the maintenance of their children wherever possible, rather than using the statutory maintenance scheme. This will enable the Child Maintenance and Enforcement Commission to focus on those cases where it is not possible for parents to make those arrangements themselves. This Part of the Act makes provision to implement proposals which support the principles in the consultation document (but did not form part of the consultation) and which require primary legislation. 19. Provision is also made for an amendment to the Insolvency Act 1986 to put beyond doubt that arrears of child support are excluded from the debts which may be included in an individual voluntary arrangement. 20. In addition, provision is made to establish the Social Mobility and Child Poverty Commission. Part 7 – Final 21. Part 7 contains sections relating to the extent of the Act, commencement of provisions of the Act, and the short title. TERRITORIAL EXTENT 22. Most provisions in this Act extend to England and Wales and Scotland, but not to Northern Ireland. Northern Ireland has its own social security legislation, but there is a long- standing policy of parity in this area. 23. The provisions of the Act extend to England and Wales and Scotland except: (a) the following provisions extend to England and Wales, Scotland and Northern Ireland: • section 32 (power to make consequential and supplementary provision: universal credit); • section 33 (abolition of benefits); • section 76 (calculation of working tax credit); • section 92 (power to make consequential and supplementary provision: personal independence payment); • section 126(1) to (13) (tax credits: transfer of functions etc); 4 These notes refer to the Welfare Reform Act 2012 (c.5) which received Royal Assent on 8 March 2012 • section 127(1) to (9) (information-sharing between Secretary of State and HMRC); and • Part 7 (except for the Schedule of repeals); (b) section 128 (information-sharing between Sectretary of State and DPP) and section 129 (unlawful disclosure of information supplied under section 128) extend to England and Wales only; and (c) amendments and repeals made by this Act have the same extent as the legislation which is being amended or repealed. 24. In general, the provisions of the Act apply to Wales in the same way as they apply to England. Consent to legislate was given by the National Assembly for Wales in relation to provisions in section 131 allowing the sharing of information between local authorities in Wales (amongst other bodies) relating to welfare services. 25. There are also provisions which required the consent of Welsh Ministers because they impact on their functions, these measures are: • amalgamating a separate scheme for people injured as trainees into the main Industrial Injuries Disablement Benefit Scheme (section 66); • changes to allow localisation of the social fund (section 70); • provision relating to the Social Mobility and Child Poverty Commission (section 144 and Schedule 13).

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