Universal Credit

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  • zagfles
    zagfles Posts: 20,274
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    real1314 wrote: »
    No-one actually knows what the rules will be yet. The capital limit might be £16k, it might be £10k, it might be £20k or it might be £25k.

    The white paper says the capital rules will be same as for IS.
  • real1314
    real1314 Posts: 4,432 Forumite
    edited 18 January 2011 at 7:39PM
    zagfles wrote: »
    The white paper says the capital rules will be same as for IS.

    Does it? I didn't spot that when I read it - can you save me the bother of a full read and tell me where it was?

    Forget that - I've just re-read it and seen what you are referring to, however it doesn't say what the upper and lower limits will be. It just says the "same rules" - the IS rates have been changed over the years since 1988, so there's no basis to assume the same rates will automatically be used.
  • I've been reading about the welfare reform. My husband and I have worked hard over the last ten years and tried to save, also saving for our son's future education, to now find it's the same old story. Work, save and be penalised. Don't work, don't save and get everything. Where is the justice and what's the point in trying to help yourself (which is what the government keep trying to push). I myself am in a low paid job, there are no good paying jobs in the area I live in. The Government need to get in the real world!!!
  • rotoguys
    rotoguys Posts: 599 Forumite
    MS1998 wrote: »
    I've been reading about the welfare reform. My husband and I have worked hard over the last ten years and tried to save, also saving for our son's future education, to now find it's the same old story. Work, save and be penalised. Don't work, don't save and get everything. Where is the justice and what's the point in trying to help yourself (which is what the government keep trying to push). I myself am in a low paid job, there are no good paying jobs in the area I live in. The Government need to get in the real world!!!

    Unfortunately it doesn't pay to work and save, that is unless you are a high earner or have considerable capital wealth.

    For example everybody over 61 will get a minimum on means tested benfits of £142 a week if you are single or £218 for a couple. Along with that you pay no Council Tax or Rent/have the mortage interest paid for you.
    If you are disabled in any way - that figure goes sky high!!!!
  • Sixer
    Sixer Posts: 1,087 Forumite
    real1314 wrote: »
    Does it? I didn't spot that when I read it - can you save me the bother of a full read and tell me where it was?

    Forget that - I've just re-read it and seen what you are referring to, however it doesn't say what the upper and lower limits will be. It just says the "same rules" - the IS rates have been changed over the years since 1988, so there's no basis to assume the same rates will automatically be used.

    http://www.dwp.gov.uk/policy/welfare-reform/legislation-and-key-documents/welfare-reform-bill-2011/universal-credit-briefing/

    If you read the treatment of capital briefing note here, you'll see they've done a fair bit of number-crunching work and have every intention of retaining £6k-£16k.

    Quite how this is fair when the environment will likely have been 5+ years of 5% inflation by the time UC comes in, I'm not sure.
  • "Quite how this is fair when the environment will likely have been 5+ years of 5% inflation by the time UC comes in, I'm not sure."

    I don't think that the £6000 limit has been changed for a while so I would work to worst case scenario.

    To the poster saving for son's education - could this be transferred in a trust to him (ie max the amount put in the child's trust fund or an ISA in his name) as from my understanding money in a child's name would not count.
  • drwho2011
    drwho2011 Posts: 346 Forumite
    edited 12 February 2012 at 2:13PM
    Sixer wrote: »
    http://www.dwp.gov.uk/policy/welfare-reform/legislation-and-key-documents/welfare-reform-bill-2011/universal-credit-briefing/

    If you read the treatment of capital briefing note here, you'll see they've done a fair bit of number-crunching work and have every intention of retaining £6k-£16k.

    Quite how this is fair when the environment will likely have been 5+ years of 5% inflation by the time UC comes in, I'm not sure.

    I would doubt you'd have inflation running at 5% for 5 years simply because wage inflation would occur and thus exacerbate inflation.

    Try looking at inflation figures from 2007-2011 and you'll see they have fluctuated from inflation to deflation and back to inflation.

    Averaged it worked out at: 2.64% annually

    2007 = 2.32%
    2008 = 3.61%
    2009 = 2.16%
    2010 = 3.28%
    2011 = 4.47%

    The later inflation increases were linked with the increases in VAT.
  • Sixer
    Sixer Posts: 1,087 Forumite
    drwho2011 wrote: »
    I would doubt you'd have inflation running at 5% for 5 years simply because wage inflation would occur and thus exacerbate inflation.

    Try looking at inflation figures from 2007-2011 and you'll see they have fluctuated from inflation to deflation and back to inflation.

    Averaged it worked out at: 2.64% annually

    2007 = 2.32%
    2008 = 3.61%
    2009 = 2.16%
    2010 = 3.28%
    2011 = 4.47%

    Later inflation increases can be linked with the increases in VAT.

    Ok. Five years may be a bit of an exaggeration!

    However, we are in a unique financial situation at the moment and, thanks to the eurozone, bank recapitalisation and QE, we are more than likely to see 4-5% ongoing inflation and no wage inflation at all, at least until the institution of UC. That's the policy. Inflate away the debt. Since the world economy is a teetering house of cards, there's no room whatsoever to allow the usual wage inflation to soothe away the damage of price inflation. Yet another reason we need the price of housing to come down.

    I maintain that the £16k capital limit will be worth much less by the time UC comes in. I also maintain that this will entirely suit the rationale of the government, so they won't be too worried about it anyway.

    Eventually, many people will decide the intrusiveness and conditionality of UC will not be worth the money it pays. So it'll be a benefit of the very poor.

    Many hereabouts may think this is a good idea. Maybe it is. But it'll still leave us in a high labour tax environment in comparison to competing economies because all of the various tax allowances that merged into tax credits in addition to the old welfare payments will simply have disappeared.
  • rotoguys
    rotoguys Posts: 599 Forumite
    Sixer wrote: »
    Ok. Five years may be a bit of an exaggeration!

    However, we are in a unique financial situation at the moment and, thanks to the eurozone, bank recapitalisation and QE, we are more than likely to see 4-5% ongoing inflation and no wage inflation at all, at least until the institution of UC. That's the policy. Inflate away the debt. Since the world economy is a teetering house of cards, there's no room whatsoever to allow the usual wage inflation to soothe away the damage of price inflation. Yet another reason we need the price of housing to come down.

    I maintain that the £16k capital limit will be worth much less by the time UC comes in. I also maintain that this will entirely suit the rationale of the government, so they won't be too worried about it anyway.

    Eventually, many people will decide the intrusiveness and conditionality of UC will not be worth the money it pays. So it'll be a benefit of the very poor.

    Many hereabouts may think this is a good idea. Maybe it is. But it'll still leave us in a high labour tax environment in comparison to competing economies because all of the various tax allowances that merged into tax credits in addition to the old welfare payments will simply have disappeared.

    I believe that if the government could get away with it, they would impose a '0' policy on savings. In that benefits would only be available to those with absolutely nothing in the bank!
  • drwho2011
    drwho2011 Posts: 346 Forumite
    edited 12 February 2012 at 2:22PM
    Sixer wrote: »
    Ok. Five years may be a bit of an exaggeration!

    However, we are in a unique financial situation at the moment and, thanks to the eurozone, bank recapitalisation and QE, we are more than likely to see 4-5% ongoing inflation and no wage inflation at all, at least until the institution of UC. That's the policy. Inflate away the debt. Since the world economy is a teetering house of cards, there's no room whatsoever to allow the usual wage inflation to soothe away the damage of price inflation. Yet another reason we need the price of housing to come down.

    I chose the 5 year period because of when the credit crunch began. I would agree we are in a unique financial situation but I would disagree that inflation will remain high over the long term. I also disagree that it is government policy to "inflate" debt away and this is a common misconception. Historically Government policy generally has to been to encourage or maintain healthy growth so that it can afford to roll over its debt. A huge deficit with no or little growth hinders this and so QE is imposed to stimulate lending and therefore spending within the economy, in effect inflation increases the burden on public spending when 29% of state income is currently spent on the welfare state. As many benefits rise with inflation or above inflation this would necessarily increase borrowing.

    5% inflation year on year would inevitably lead to wage inflation and a much higher spending on welfare as a result, in a worst case scenario it could lead to hyperinflation.
    Sixer wrote: »
    I maintain that the £16k capital limit will be worth much less by the time UC comes in. I also maintain that this will entirely suit the rationale of the government, so they won't be too worried about it anyway.

    Of course £16,000 will be worth less than it currently is once UC is introduced, but if we had high levels of inflation it would likely be increased.
    Sixer wrote: »
    Eventually, many people will decide the intrusiveness and conditionality of UC will not be worth the money it pays. So it'll be a benefit of the very poor.

    Of course if people will decide this, especially if the lower capital limit is £6,000, bear in mind that group that will likely be most effected by this are working families in receipt of CTC but have savings/capital above the thresholds.

    Many would argue that this group does not need the support it currently receives if they had over £16,000 in savings.
    Sixer wrote: »
    Many hereabouts may think this is a good idea. Maybe it is. But it'll still leave us in a high labour tax environment in comparison to competing economies because all of the various tax allowances that merged into tax credits in addition to the old welfare payments will simply have disappeared.

    And yet it is likely that the personal threshold will continue to rise to £10,000 per year, putting more money in most peoples pockets.

    As for competing economies, an economy must change and adapt to changing circumstances. It will depend on the political will to make tough decisions but if the consequences could be dire, just look at Greece.
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