To wonder why the UC savings threshold is £6,000?

[GiddyLurker]

Why is the Universal Credit savings threshold set at £6,000? What’s the reasoning behind that number?

It feels quite specific and I just wondered whether there’s a particular logic or policy decision behind it?

I don’t see how. She lives in a house. The value increase as she says ‘is nothing to do with her’. My grandmother bought a house for a relative pittance (but a huge amount to her at the time!) but it’s now worth about £1.5million. Why should she have to pay a wealth tax when the house is the same house she bought 50 years ago? Nothing has changed for her. She’s in the same position as the PP.

I don't know. I think the people sitting on millions + and living off the interest should be taxed more.
But someone living in a house they bought for not much back in then day, and it is worth more now... how will you bill them if they have not sold the house?

That is how wealth tax on housing works . Doesn’t matter on how much mortgage you have (you could live in a £2 million house but have a £1.9 million mortgage) or your age or how long you have lived there, you are just charged 2% on the value of the property every year. It’s very unfair as the previous PP has said but people have advocated that this is how you fund the welfare system.

Or to put it another way, should savings over £6k only be counted if they aren’t realised by selling said asset!?

It’s a daft argument. No one can justify whether it’s the current rules or not someone having and keeping no matter what, hundreds of thousands in capital assets and still claiming means tested benefits without recompense to tax payers ever when that asset is realised.

Not talking about those with modest assets but it’s a cake and eat it too anomaly especially when many families are struggling and have much less yet subsidise through taxes those with much more.

I don't think you're going to persuade anyone!
What you're suggesting would change the nature of the welfare state in a way that would be dangerous for all. If benefits became a loan, subject to chargeback, why not education or medical treatment? Why just houses and not other assets - you haven't explained that. Are we starting to see housing as a commodity rather than a necessity and if so, in what other circumstances could you be expected to ultimately sell up and pay back? Would we see a two tier system based on property owners and everyone else? Are we beginning to see the welfare state not as collective but as funded by individual subsidy and, if so, does that mean we start to move away from universal.if conditional eligibility and towards "deservingness"?
Your solution to what you see as unfairness is too simple, it's unworkable when you start to dig beneath the surface.

Yet it is inevitable means testing further will come in eventually as the rider is heavier than the horse with the welfare state as we know it already having its days numbered including pensions for all.

I did answer the what other assets Q. If someone has an heirloom ring and don’t sell it then it’s not currently counted. If they sell it for £10k and bank the £s then UC will want to know. Housing when sold should be no different.

Those who are not convinced are those who get to eat their cake and eat it too. House equity 100% + claiming means tested benefits they wouldn’t be entitled to if homes owned outright and their value was treated the same (not more, not less) than savings.

You haven’t answered my Q:

How is it fair that a working family, living month to month, renting, meagre savings must pay tax to fund means tested benefits for a family that own an asset over a certain amount and worth £0.5million+?

How is it fair most other assets when sold, and the money is banked count as savings but not housing?

What about those who downsize? Get to live off the taxpayer, with unlimited equity then opt to relinquish the claim to use the money they always were sitting on in the first place? Renters don’t have that luxury. Use up all or most of your savings (£6k/£16k) before you can claim?

Education is already a loan, again due to affordability for most, medicine also carries charges such as prescription and the sell off of NHS suggests unfortunately increased privatisation.

Unfortunately what you have to say is instantly negated by your first sentence. While managing the pensions and benefits aspect of the welfare state will undoubtedly be a challenge in the face of an ageing population, there's no realistic prospect of it being dismantled or even hugely retrenched. Probably the opposite in fact, as we need to find new ways of sustaining ourselves with the advent of AI and the loss of jobs it will bring. Also, as I so patiently point out in these threads, usually to no avail, looking at the proportion of GDP spent on benefits and pensions over the past decades will show that it's relatively stable (bar a few blood, for example during COVID). So all the breathless rhetoric in the world doesn't equate to a need to get rid of either our welfare state or its basic founding principles.

I disagree. We are already seeing the creep of further means testing and government circling on property wealth. Just in other ways at present. The only plus for renters is they mostly have nothing that can be taken. With less taxpayers due to 4th Industrial Revolution/including AI leading to un or under employment, more needs done with less. Days of home owners having their cake and eating it too with means tested benefits is not sustainable and contributions already required for care home fees due to same principle. Its not getting rid of the welfare state, it’s targeting it at those who genuinely have no or few other means and not to those sitting on hundreds and thousands of pounds. Each according to their means doesn’t work, if those with significant means have those means as at present fully disregarded. It’s a question of when/how not if changes to eligibility will happen.

In what way are we seeing the creep of further means testing re benefits and pensions?

So you would have home owners sell their homes and live on the proceeds before they could claim benefits ? A two tier system then ? And the requirement for homeowners to contribute to their care fees is nothing new. Which is fine if they're going into a care home and no longer need that property, but where do you propose homeowners live while they reduce their circumstances to the point where they can claim benefits. And you don’t seem to understand that those who self fund care also contribute to the costs of those who can’t pay themselves. So the homeowners you seem to despise are actually propping up the system.

I think pensions are effectively being means tested by taxation - thresholds aren’t being raised so those living solely on the state pension are eventually going to be dragged into tax brackets. And there has been some change to what were previously universal contribution based benefits such as ESA. These will effectively be means tested by time limiting - at the point of cut off the claimant would have no choice but to claim means tested benefits, and not all would qualify.

The problem with forcing people to sell their houses before they qualify for state benefits is firstly where will they live then?
And secondly, who’s going to buy them?
The only time a homeowner would qualify for universal credit is if they weren’t working very much at all less than minimum wage which would be unlikely to happen to many people
Would be in an absolute crisis scenario such as Covid or some sort of major world event like war. In which case is nobody including the government who’s gonna be queueing up to buy those properties?
So then what are people expected to eat, bricks and mortar they won’t be able to sell and they won’t be able to get benefits either.
What happens to their nice middle class children? Do they hand them over to the local paedophile ring? Sorry, I meant the church.

How is it fair to require those who own their own home to sell it instead of claiming benefits ? I fully agree with including second homes in the capital calculation, but you can’t have a two tier system which punishes those who try to better themselves by removing the welfare safety net because they happen to own their home they’re living in.

Most homeowners are going to be on universal Credit temporarily because of a crisis it’s not gonna be an ongoing situation

This. It’s ill thought through ideological claptrap.

Exactly. So the system this poster is proposing removes the safety net of welfare. You can't eat bricks and mortar and they don’t pay your bills. And there’s another element to this. Benefits are paid for by NI contributions. In this scenario the homeowner would be paying into a system they can’t benefit from - how does that work ? The poster seems to despise homeowners for some reason.

Potentially; but the pp appears to believe that means testing is a formal direction of policy. And I think that's just to serve an argument for which there's no evidence!

Extra taxes on homes worth over £2m (for now), extra Council Tax on empty or 2nd homes (for now), higher stamp duty, LBBT in Scotland, 2nd homes Capital Gains Tax increases… it’s incremental and will be extended. Whether that takes 5, 10, 20 years days rider being heavier than the horse and UK not ever returning to pre-2008 growth main problem.

Think tanks already calling for means testing of pensions…

How is that means testing? How are benefits being restricted according to means? What you're talking about are taxes on assets.

You’re using a meritocracy argument. Many renters work exceptionally hard too, they just don’t have a hand up or head start. Is it fair renters pay extra tax to pay for those who own and have much more meaning they are held back? Why should homeowners keep equity in full when house is sold, yet renters keep before taper just £6k and must pay tax to cover the £s to those much wealthier? Renters must use up their savings but homeowners get to keep all and the same rules don’t apply? Those defending what is objectively unfair by most measures are obviously currently benefiting. The point is through taxes they are in many cases taking from those who have much less and who could also benefit themselves if not crippled by tax.

I'm not sure you'll ever find a completely fair way of organising a welfare state. There have to be pragmatic choices within an imperfect system.

We all pay 6% of our tax into the benefit system as we may all need it someday. What would you do if you lost your job, your partner died, you have an accident or illness and become to ill to work, what if your child becomes disabled, what if you suddenly had to escape domestic abuse. People who own their own homes get significantly less uc then those renting

So again, effectively a two tier system. The working homeowner pays NI contributions while they’re working. These are what fund benefits. So what you’re telling homeowners is that they can only claim from a system towards which they’ve contributed in the same way as everyone else, if they agree to pay it back from the equity when they sell their home ? Are you on glue ?

But the most logical solution is that we remove the cap for people who rent and maybe we don’t remove the cap for people who have other assets so maybe we make benefits to people who have 50,000 or less in accessible assets which wouldn’t count bricks and mortar.
But it would allow somebody to save for a house deposit
But as I alluded to further up the thread and I’m not getting into how I know this the Dwp are not entirely in flexible when it comes to these things
They do look at individual circumstances as to how and why people have acquired things and what the long-term purpose of them is

I think this is the salient point. Paying rent and not mortgage costs serves to even the playing field - the homeowner will incur costs that the renter won't (ideally - this is somewhat breaking down in practice owing to high rents/frozen LHA). What the pp advocates means the homeowner paying twice over. That wouldn't be accepted as policy by the public and, in fact, wouldn't be suggested by any government that didn't want to piss off a large number of its voting base! It's one for the bin I think.