Autumn Budget 2024 and welfare policy

Local Housing Allowance

The government has decided to freeze Local Housing Allowance (LHA) from April 2025. 

While we welcome the government’s commitment to uprating means-tested benefits in line with inflation, a failure to uprate LHA in line with rising rents means a significant cut in the real-terms value of benefits for many claimants.

Benefits uprating

The government has confirmed that it will uprate most non-housing benefit payments, including most Universal Credit elements, by 1.7%. However, there has been no announcement on uprating the benefit cap in 2025.

The cap was last uprated in 2023. Freezing the benefit cap will limit the positive impact of the 1.7% uprating of benefit payments, and will be particularly harmful for large families. Capped households in the private rental sector are also unable to fully benefit from the April 2024 increase in LHA rates. It is time to reform the benefit cap.

Universal Credit deductions

The government has announced that the overall cap on Universal Credit (UC) deductions will be reduced from 25% to 15%. A 15% cap will benefit over 1.2 million UC households, and bring a much-needed income boost of £420 on average per year. We are expecting this change to come into effect in April 2025. This is a very positive step, but only the first towards addressing the hardship resulting from deductions. The government needs to tackle the main causes of deductions: the 5 week wait and repayment of new claim advance loans, and benefit overpayment recovery.

Work Capability Assessment

The previous government announced several changes to the Work Capability Assessment (WCA), estimated to save £1.3bn per year by 2028/29. This government has confirmed that they will deliver these savings, although it’s not yet clear if this will be achieved through the same reforms. Any cuts to spending in this area are likely to result in a cut to income and increasing levels of conditionality for disabled claimants. The original reforms were estimated to move more than 400,000 people from the limited capability for work and work-related activity (LCWRA) group into the limited capability for work (LCW) work by 2028-2029 - meaning they’d lose more than £400 per month, a cut that our clients simply can’t afford. In addition, over 450,000 more people would be exposed to conditionality (or a greater level of conditionality) and with that, sanctions.

National Living Wage

The government has announced a 6.7% increase to the National Living Wage (NLW). This is a very welcome change that will increase wages for over 1 million people.  The current NLW is £11.44 per hour for people aged over 21, and will increase to over £12.21 in April 2025. For 18-20 year-olds, the National Minimum Wage will increase from £8.60 per hour to £10 per hour (a 16.3% increase). 

While the increase in the NLW provides an important boost to incomes, it interacts in complex ways with the benefits system. As a result of a higher NLW, some people receiving UC may be subject to more intense work search requirements, see their benefit income capped, and/or lose eligibility for free school meals.

Household Support Fund

The government has announced £1 billion to extend the Household  Support Fund (HSF) and Discretionary Housing Payments (DHPs) in 2025/26. The HSF had previously been extended until April 2025, while it was already expected that DHPs would remain available.

The further extension of the HSF is very positive, and ensures the fund will continue to provide immediate relief to households facing hardship into next financial year. However, the decision to freeze LHA will put more pressure on crisis support. Details of how the £1 billion in funding will be split between the HSF and DHPs – and whether this could mean unfreezing DHPs funding – has not yet been announced.