Welfare Reform Bill

Memorandum submitted by Crisis (WR 38)

Summary

1. Crisis, the national charity for single homeless people, is strongly supportive of the Government’s intention to make work pay and believes that a simplified benefit system under Universal Credit and its improved tapering of benefits as people move back into work is the right approach to take. We do, however, have some concerns about some of the specifics of this proposal and that there is a lack of detail about how significant elements of Universal Credit will be calculated. We are also concerned about some of the other measures to be introduced by the Welfare Reform Bill.

2. We have serious concerns over the lack of detail in the Bill and the extent to which key elements are being left to regulations. It is very concerning that details of the housing component of Universal Credit are not set out on the face of the Bill and that there is not yet any clear indication from Government as to how housing support will be calculated or operate within Universal Credit.

3. We believe that measures to reduce spending on Housing Benefit, including uprating by CPI and the overall benefits cap, will break the fundamental link between benefit rates and rent levels and could make it increasingly difficult for claimants to find affordable accommodation. We also believe that the Bill should allow tenant choice over the payment of the housing component of Universal Credit directly to landlords.

4. The new sanctions proposed for claimants who do not comply with work related requirements are extremely harsh and could leave households facing real hardship.

5. We are concerned about the winding down of the Social Fund without sufficient details of its replacement, since it acts as a lifeline for vulnerable people.

6. We believe that Council Tax Benefit should not be repealed without a clear proposal for what will replace it and that it should continue to fully support those who need it and not undermine work incentives.

7. Finally, the Government intends to restrict single claimants under 35 (rather than 25 as at present) to the lower Shared Accommodation Rate of Local Housing Allowance. This lower rate is based on the cost of a room in shared accommodation (rather than a self-contained property) and most of those affected are likely to lose their homes. Though the change will be in secondary legislation, the Welfare Reform Bill-which counts among its purposes "to make other provision about social security"-is an important opportunity to oppose this damaging measure.

8. We are calling for amendments to tackle these issues, clarify key points and explore the possible consequences of particular proposals. This memorandum considers, in the order in which they appear in the Bill, the issues that Crisis believes must be tackled to ensure that welfare reform works for everyone, including homeless and vulnerable people and does not cause undue hardship or an increase in homelessness.

Clause 8: Universal Credit taper rate

9. The Centre for Social Justice proposed in its paper Dynamic Benefits that the single taper rate for Universal Credit should be 55% [1] . For fiscal reasons the Government intends to set the taper rate of Universal Credit when it is introduced at 65%, which will still increase work incentives in comparison with the current system but could be further improved. We believe that this taper rate should be subject to review.

· Crisis believes that there is scope for the taper rate under Universal Credit to be improved in light of changing economic circumstances, and we would welcome a review structure to be included within the Bill.

Clause 11: Housing costs under Universal Credit

10. The way that housing costs are calculated for the housing component of Universal Credit is a particular concern for Crisis. The success or failure of Universal Credit as a whole will for many people depend on the method in which housing costs are calculated, yet the Bill contains only 30 lines on this whole topic, including subsection 4 of clause 11 which simply states that:

"(4) Regulations are to provide for the determination or calculation of any amount to be included under this section."

11. By leaving key decisions up to regulations, there is a real risk this Bill will not receive adequate scrutiny, with the risk that Universal Credit will not meet the housing costs of people on lower incomes. With no draft regulations published and little indication from the Government about what the regulations will contain, it appears that parliament is being asked to vote for measures that have not been fully developed.

12. Crisis has particular concerns that the housing component of Universal Credit may fail to fully reflect the large regional and local variations that exist in housing. With no details available on the method that will be used to calculate housing costs under Universal Credit, Crisis is deeply concerned that the link between rents and housing support may be broken.

13. The Government has already announced plans to uprate Housing Benefit in the private rented sector by CPI instead of by the cost of local rents from 2013 until the end of the spending review period. Though ministers have said that "CPI is not for ever" [2] the wording of Clause 11 is so wide that CPI or any other measure could be used as the basis for setting rents under Universal Credit.

14. If there is a move away from basing housing support on local rents then it is vital for the calculation of housing costs to be subject to statutory reviews. These reviews would be to ensure that the housing component of Universal Credit would be sufficient to meet the cost of housing in different areas of the country, whatever measure is used for uprating.

15. This almost complete uncertainty about the future of housing support is taking place in a context of the deep cuts that are already taking place to Housing Benefit, which total almost £2bn per year and have already led to sustained warnings about their impact on poverty and homelessness.

16. Changes to housing support are also a chance to review Broad Rental Market Areas, which are the geographical areas on which calculations of housing costs in the private rented sector are based. We believe that there is potentially scope for local authority areas and travel to work areas to be factored in.

· We believe that the Bill should be amended to explicitly maintain the direct link between the level of housing support and rents under Universal Credit. We believe that the housing component should meet 100% of the eligible rent in the social sector and be based on local market rents in the private rented sector.

· We believe that it is important to give tenants choice over whether the housing component of Universal Credit is paid directly to their landlord.

· We also believe that reform is necessary of Broad Rental Market Areas and that the the Bill represents a key opportunity to do this.

· We believe that far too little detail is on the face of the Bill and that the Secretary of State should not be given such sweeping powers to amend housing support without further parliamentary scrutiny.

Clause 11: Shared Accommodation Rate

17. Crisis believes that Clause 11 of the Welfare Reform Bill represents a key opportunity to challenge plans to extend the Shared Accommodation Rate to 88,000 single 25 to 34 year olds.

18. The Shared Accommodation Rate (SAR, previously called the Shared Room Rate) currently restricts single people aged under 25 on Housing Benefit in the private rented sector to claiming for the cost of a single room in a shared house, rather than the rate for a self-contained one bedroom property. We know that the SAR causes considerable problems for young people, with many unable to secure or sustain affordable accommodation and left facing shortfalls, arrears and homelessness.

19. From April 2012, the Government intends to extend this lower rate to claimants under the age of 35. 88,000 people will initially be affected [3] , with the average loss being £47 per week and some people seeing their benefit entitlement literally halved. In more than half of areas the shared accommodation rates are around a third or more lower than the one bedroom LHA rate. [4]

20. In many areas of the country there is a lack of available shared accommodation, leading to concerns that some of those affected by the cut will be unable to find suitable housing. Vulnerable groups for whom sharing is inappropriate could also be forced into shared accommodation by the measure, including those with mental and physical health conditions, pregnant women and people with dependency issues. We are also concerned that non-resident parents will find it difficult to have their children to stay with them under the planned arrangements

21. Although the planned changes to the SAR are being brought in through regulations, Crisis is advocating amendments to the Welfare Reform Bill to address this important issue, which we believe could be one of the most damaging of the cuts to Housing Benefit in terms of its impacts on homelessness as well as on important Government agendas such as reducing reoffending, tackling the link between mental health and poverty and making society family friendly.

· Crisis believes that the Welfare Reform Bill is an important opportunity to discuss this change, which will lead to tens of thousands of people losing their homes.

Clauses 26 to 30: Sanctions

22. The Bill proposes a new regime of compliance and sanctions to ensure that those in receipt of benefits are taking all steps necessary to find work. Claimants will be expected to attend work related interviews or take part in work related activity even if they are not required to actively seek work immediately. Non-compliance will result in a claimant being sanctioned through withdrawal of a portion of their benefits for a period of up to three years.

23. Crisis is strongly opposed to the introduction of increased conditionality and harsher sanctions for non-compliance. Bar a few exceptional cases, most people on benefits want to work. Yet, whatever the arguments about the effectiveness or otherwise of sanctions, the possible withdrawal of benefits for up to three years is a worrying proposal that risks causing real hardship.

24. The Government stated in the Universal Credit consultation paper that ‘as now, sanctions will not apply to […] housing benefit’ [5] but this is not confirmed on the face of the Bill. Sanctions affecting the housing component could lead to homelessness and we are seeking reassurance from the Government that its intention is still for sanctions to affect only the standard allowance component.

· Crisis believes that the sanctions proposed in the Bill are too harsh and should be amended.

· Crisis believes that only the standard allowance component of the Universal Credit should be affected by any sanctions and we are seeking assurances that the housing component of Universal Credit will not be affected.

Clause 34: Council Tax Benefit

25. The Welfare Reform Bill will abolish Council Tax Benefit (CTB), yet the Government still not made clear what will replace it. We believe that the outcome of this decision could be critical to the overall success of Universal Credit if the risks of undermining work incentives and creating a postcode lottery of welfare provision are to be avoided.

26. The intention to cut the bill for CTB by 10% risks creating shortfalls which would cause hardship to many of those affected. The Government plans to protect "the most vulnerable, particularly pensioners" [6] from this cut, yet we do not know who will be considered "vulnerable" for these purposes. Furthermore, those not classed as vulnerable will presumably face deeper cuts to compensate for the protection that others receive.

27. Despite the DWP’s expressed intentions [7] , there also remain serious concerns that a localised system of CTB could dramatically undermine the single unified taper element of Universal Credit, with the IFS warning that under a localised system "you can easily imagine some people could still have the 90% marginal tax rate they have at the moment" [8] .

28. In light of these issues of scrutiny and substance, Crisis is calling for Council Tax Benefit to be incorporated in Universal Credit. If CTB is to be abolished without being included in Universal Credit we would want strong assurances about:

a) The minimum level of council tax support that claimants will be able to expect

b) The taper rate that would apply and how any replacement will interact with Universal Credit

c) Which vulnerable groups will be protected from cuts to Council Tax Benefit (or its replacement) and what the effective loss will therefore be for those not protected

d) Other key details about how any replacement will operate

· Crisis believes that the simplest way of ensuring that the replacement for Council Tax Benefit improves work incentives is for it to be included in the Universal Credit.

Clause 68: Changes to Housing Benefit prior to Universal Credit

29. Clause 68 allows the Secretary of State to determine the appropriate maximum housing benefit (AMHB), whereas currently this power is restricted to rent officers. These powers will be used until the housing component of Universal Credit (as outlined in clause 11) becomes operational. The wording of Clause 11 is such that the powers granted to the Secretary of State under Clause 68 would remain under Universal Credit.

30. One planned use of the powers in this clause is to uprate the level of Housing Benefit according to the Consumer Price Index, rather than by an assessment of rents in each local area. Crisis is strongly opposed to this proposal, which would break the link between Housing Benefit and actual rents.

31. It is clear that in many areas the gap between what people receive in benefits and what they pay in rent will widen over time, forcing claimants to move to cheaper accommodation and leaving large swathes of the country unaffordable. While the rate of divergence between housing costs and CPI can only be estimated, the impact assessment assumes that CPI will rise by 2% each year and rental costs by 4% [9] . Research by Shelter and CIH estimates that within 10 years of introducing the measure 34% of local authorities will be "very unaffordable", including a majority in the East and South West of England [10] .

32. We believe that this change will undermine the fundamental purpose of Housing Benefit, and lessen work incentives by concentrating accommodation that is affordable to those on Housing Benefit in areas that have experienced less growth. The Government has said that the measure will be reviewed after two years, yet no review structure is included in the Bill and no commitment has been given that a direct relationship between housing support and housing costs will be reinstated when Universal Credit is introduced.

33. The Government also intends to use the powers under Clause 68 to restrict the maximum payable Housing Benefit in the social rented sector for those deemed to be underoccupying their accommodation. Whilst we understand the need to tackle under occupancy particularly in areas of high housing demand, we believe that this change is not well targeted since it will penalise all those who are deemed to be underoccupying whether or not there is smaller accommodation available to them and indeed whether or not underoccupancy is a problem in their area.

· Crisis believes that the aim to uprate Housing Benefit by CPI will break the crucial link between housing support and rents. We are also concerned that measures contained in Clause 68 will be carried over into Universal Credit.

· More broadly, Crisis also believes that, like Clause 11, Clause 68 gives powers to the Secretary of State to make further changes to housing support without adequate parliamentary scrutiny and should be opposed for this reason.

Clauses 69 to 72: Social Fund

34. The Social Fund is an important part of the welfare state and a vital resource and safety net for people on limited incomes. While we welcome measures to improve the scheme’s efficiency and operation, we fear that plans to localise payments could have unintended consequences. Without guarantees of ringfenced funding and strong statutory duties on local authorities regarding the support that they are to provide, the Bill could dismantle the Social Fund without creating an adequate replacement. Suggestions that support could be provided by vouchers [11] leaves Crisis concerned that the nature, as well as the scale, of support available could be far from what is required.

35. Within the Social Fund, Crisis is particularly concerned about the future of Crisis Loans and that one of the intended aims of the reform of the Social Fund is to reduce the proportion of spending on these [12] . Additionally, Crisis Loans are largely self funding (through loan repayments), but there have been no guarantees that the money from Crisis Loan repayments will be retained by the local authorities that are administering them. The future of Community Care Grants is also vitally important, since these provide crucial support to often vulnerable people leaving institutions such as supported accommodation to establish their own homes.

· Crisis believes that the Social Fund should not be wound down without a clear commitment from the Government about what will replace it.

· Crisis believes that if the Social Fund is to be localised then there must be ringfenced funding and strong statutory duties on local authorities.

Clauses 93 and 94: Household benefit cap

36. The Bill proposes an overall cap on out benefits for workless households, based on the median income of working households. The initial levels of the cap will be £500 per week for a family and £350 per week for a single person or childless couple. This measure will mainly affect families with more than three children and the losses that those affected will face are deeply worrying. As the national charity for single homeless people we are also particularly concerned about the consequences for the 7% of those affected who will be single adults or couples without children.

37. Crisis is seeking reassurance that those single people affected by the cap will not be vulnerable adults in supported or temporary accommodation that may have higher costs. Hostels and domestic violence refuges are currently exempt from the normal rules governing how housing benefit is calculated, but they are likely to be included in the total household cap [13] . It is not clear how far they will be affected by the measure, but it is important to avoid hitting the most vulnerable hardest with this cut.

· Crisis believes that the total cap on household benefits should be removed from the Bill.

· Crisis is seeking assurances that people in supported and temporary accommodation will not be affected by the cap.

March 2011