Comprehensive Spending Review - Employment and PAYE impact

Comprehensive Spending Review - Employment and PAYE impact
Thursday, 21 October 2010 16:04

In the review this week were a number of measures impacting on employment and PAYE matters. The main terms were

Contributory Employment Support Allowances
These are to be limited to 12 months for those in the work related activity group. This is likely to have an impact on some 1 million claimants.

Household welfare payments
These are to be capped at around £500, which is estimated to be median earnings for households after tax. Additional information in the CSR was that the Chancellor is exempting the Working Tax Credit is to be exempted from the cap.

From April 2011, the Working Tax Credit is to be frozen for 3 years. This relates to the basic and 30-hour elements. Beyond that the credit will rise in line with inflation measured by the by the Consumer Prices Index.

From April 2011, the proportion of costs covered by the childcare element of the Working Tax Credit will fall from 80 per cent to 70 per cent of costs.

A new Universal Credit is to be phased in over the next two Parliaments which will replace the current system of benefits. The government hopes that the new tapered single payment will encourage more people to seek employment.

PAYE systems 

Going forward real time PAYE information will be used to update the tax authorities on tax credit calculations. The government estimates that the real time processing linked to earnings and tax credits will help to eliminate errors and overpayments, so saving £300 million by 2014/15.

Department for Work and Pensions 
The Department for Work and Pensions is to reduce its core budget by 26 per cent in real terms by 2014/15.Some of these savings will come from dropping the present welfare-to-work programmes with a single new Work Programme.

The Department of Work and Pensions is also to stop issuing national insurance cards and will send out letters with the relevant information instead.

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