Welfare Reform Bill

Additional memorandum submitted by COSLA (WR 72)

Further to COSLA’s written evidence submission which you received on 26th April 2011, please find attached the case study evidence from Glasgow City, City of Edinburgh and Highland Councils. In our submission we made reference to having drawn our evidence from these case studies, along with wider survey work undertaken with all Scottish Councils. The case studies offer more detail around the specific issues for each of the three Councils. In providing these we hope to inform the Committee’s understanding of the very real concerns which Scottish Councils share over the way in which these reforms are being brought about.

I would also like to draw the Committee’s attention to key messages from the councils given below, many of which have been touched upon in our submission and which are in the case studies attached to this letter.

The messages are as follows:

· Councils have very strong concerns generally at the absolute lack of detail in the Welfare Reform Bill itself, in particular they are concerned that there is no clarity on either on the proposals for centralisation of Housing Benefit or localisation of Council Tax Benefit and what resources are being provided to support transition into the new arrangements.

· The big message from Councils is that the timetable of less than 2 years for Council Tax Benefit local schemes to be in place and transition to full Universal Credit by 2017 is unrealistic. There is a need for a robust and achievable timetable to bring about the changes, recognising the full scale of the changes which Councils will need to bring about operationally.

· Councils are concerned that there is a real risk that large numbers of benefits staff will lose their jobs as a result of the reforms and that there is no clarity as to the role any Council staff will have in the transition to Universal Credit or delivery once UC is fully established. This uncertainty will impact on retention and motivation of staff and Councils’ ability to retain experienced staff over what will be a highly challenging transitional period.

· Councils anticipate major operational impacts and loss of economies of scale from withdrawal of the benefits functions due to their integrated nature with other finance and housing functions and also where Councils have innovated with shared back office arrangements.

· The introduction of Council Tax local schemes will complicate this picture further and, above all, Councils have big concerns there is insufficient time to bring about the operational changes needed, this includes the re-design of software, re-negotiation of IT contracts, staff recruitment and retention, training and communication in preparation for whatever comes in place of the existing arrangements.

· Councils expect collection rates to drop significantly if the housing element is paid directly to individuals even if they step up recovery efforts which in themselves will have increased costs for Councils. There is an overwhelming strength of feeling that direct payment to landlords needs to continue in some shape or other even under Universal Credit.

· Under occupation is a key issue for Councils as in many instances the housing stock is not available to allow those who are under-occupying to move to smaller houses. This would require housing strategies and investment programmes to be re-focused at a time when with dwindling resources this investment is unlikely to be achievable. Therefore through no fault of their own tenants may be evicted and forced to present themselves as homeless and Councils will then be forced to focus more on crisis intervention rather than prevention strategies.

· Advice is another key issue highlighted by Councils as, whilst the Universal Credit is intended to be easier to understand, the complexity for the individual will increase as many will not have capacity to deal with paying rent and Council Tax and on line application. This will require significant advice mechanisms to be in place both by the voluntary sector and Councils own advice provision.

· There was a unanimous view from Councils that the amount available under Discretionary Housing Payments will be wholly inadequate to address the likely level of claimants and that, in any case, DHP is meant to be for crisis situations often one off in nature rather than an ongoing safety net.

Case Study Evidence

Glasgow City Council

Introduction

1. In support of COSLA’s previous submission to the Committee, this case study presents further evidence from Glasgow City Council for the Committee’s consideration.

2. Glasgow City Council is an urban housing stock transfer local authority with a population of around 592,820, which accounts for approximately 11.4% of the total population of Scotland.

3. Glasgow City Council was chosen as a case study local authority for the following reasons:

· Glasgow is an urban housing stock transfer council

· Glasgow is Scotland’s largest City, and the largest of the 32 Scottish local authorities

· Glasgow has particular social and economic circumstances which will heighten the impact of welfare reforms in the city

Key Issues

· Glasgow has a high number of recipients of welfare benefits and reductions in benefits to residents and issues around direct payment and potentially increased arrears will reduce the council’s income

· Glasgow effectively has stock standstill this year with under/over occupancy likely to emerge as an issue, due to the likely rise in household growth but reduction in household size

· Registered Social Landlords (RSL’S) view direct payments as a threat to income, and there is an expectation of increasing rent and council tax arrears

· Glasgow may have greater difficulty in meeting the Scottish Government’s 2012 homelessness targets due to the effects of welfare reform

· Glasgow uses it’s full allocation of Discretionary Housing Payment (DHP), and the additional funds offered will make little impact given the size of the losses

· There will be increasing numbers of people drifting into the worklessness category in the city, and welfare reform will make it more difficult to direct specific initiatives/interventions at this group

· Reductions to Disability Living Allowance (DLA) is likely to have a significant impact on the councils non residential care charging policy

General Trends

4. Glasgow exhibits a relatively high score across a range of deprivation measures, and the rate of unemployment in the city often exceeds the Scottish average. As such, Glasgow continues to experience large concentrations of worklessness, even during periods of growth, and has the highest rate of poverty in Scotland. However, Glasgow City Council remains committed to addressing high levels of worklessness and poverty within the city. In advocating a pro-active approach to easing hardship, Glasgow has been the highest spender of Discretionary Housing Payments (DHP) in the UK in recent years.

5. Up to the recession, and according to the Scottish Index of Multiple Deprivation (SIMD) Glasgow’s share of Scotland’s overall deprivation has been falling, which is supported by other indicators such as the proportion of working-age adults on benefits. Even though worklessness rates have increased recently, as a result of the recession, they are still lower than the rates in the 1990s and early 2000s.

6. The major concern remains that areas of severe and persistent deprivation become cut off from the rest of the city, and that levels of inequality within the city widen. It is possible that areas of less severe deprivation could move out of deprivation while at the same time areas of severe and persistent deprivation are relatively untouched.

Welfare recipients in Glasgow

7. Within Glasgow there are estimated to be 199,000 recipients of DWP benefits, which includes 101,000 of working age. There are 91,740 recipients of state pension, and 44,990 of these recipients also claim the pension credit within the city. Furthermore there are 64,600 families in the city in receipt of Tax Credits. Glasgow has 90,560 recipients of housing benefit, and 101,480 recipients of council tax benefit, with 82,000 claiming both housing and council tax benefit.

8. There has also been a growth in those claiming Job Seekers Allowance, this was 25,145 in February 2010 and rose to 26,045 in February 2011. At the same time there has been a decrease in the numbers of vacancies notified, and the numbers of individuals moved into employment. Although some movement will be seasonal, it is an anticipated that there will be an overall decrease in the numbers of vacancies which will be available.

9. In addition Glasgow has 36.5% of its households reliant on Housing Benefit and/or Council Tax Benefit and has the highest rate of reliance on Housing Benefit/Council Tax Benefit in Scotland. In terms of other cities and major population areas in the UK, only Liverpool, Middlesbrough, and the London Boroughs of Hackney and Newham have a higher proportion of households reliant on Housing Benefit or Council Tax Benefit. This highlights the scale and significance welfare reforms will have for Glasgow.

Glasgow City Council’s response to welfare reform

· Co ping strategies have targeted resources and services to those in greatest need, such as funding for specific projects via the old Fairer Scotland Fund;

· Ameliorating strategies to minimise the worst effects of deprivation, such as the financial inclusion strategy, credit unions and Scotcash;

· Transfor mative measures designed to fundamentally improve areas, including the housing Transformational Regeneration Areas and the employability measures covered by Glasgow Works.

The recession, cuts in public services and the possible effects of welfare reform have made the implementation of these strategies much more difficult.

Specific work undertaken to monitor the effects of t he recession and welfare reform inc lude:

· Officer and member briefings on key economic trends, and likely cost impact of welfare changes;

· Monitoring claimant numbers via the Scottish Observatory for Work and Health;

· Profiling likely effects on services via joint work with NHS Greater Glasgow & Clyde.

· B riefing sessions by welfare rights team to Advice Agencies on impact of changes to the welfare system and time line for implementation

· R eport s taken to the Corporate Management Team and to the Executive Committee highlighting the financial impact of benefit cuts to the Glasgow economy.

Impact of welfare reforms

10. Reforms to the welfare system will have significant and far reaching impacts upon the most vulnerable citizens of Glasgow as well as on Council Services, revenue, staff, RSLs and private landlords. The reduction of welfare will have financial consequences for citizens in terms of increased indebtedness and the increased risk of homelessness, thereby increasing demand for Council services. Changes to Housing Benefit for private sector tenants will lead to high rent areas of the city being less affordable, and potentially leading to a concentration of private sector claimants in low rent areas within the city. It is also believed that there may be increased ‘in work’ poverty within the city due to the reforms to the welfare system.

11. Further issues which may arise for the Council in light of welfare reforms are the efficiency of rent collection and rent arrears, and risks to revenue streams and the capacity for future borrowing. The reduction in council tax benefit resulting from non-dependant deductions could lead to increases in unpaid council tax. This would obviously impact upon the funds available to the council for provision of services to residents and for future planning.

12. There has been a steadily reducing administration subsidy from DWP, from £13.3m in 2006/07 to £9.5m in 2011/12. The DWP provided an additional £23,000 of administration grant to cover the changes effective in 2011/12. Changes to the administration of welfare and benefits clearly need to be considered in light of this decreasing funding from DWP, and the minimal amounts being offered to help deal with the changes.

13. There will also be a need for customer-facing staff to receive training to allow them to deal with enquiries which arise from the changes. The role and provision of advice will be a crucial issue as the reforms progress, and there is likely to be increased demand for such services. Again, these issues will need to be considered in light of tightened financial circumstances for local government and the current review of advice services.

Council Tax Benefit (CTB)

CTB currently awarded to Glasgow City Council and impact of proposed reduction

14. Currently £74.6 million of CTB is awarded to Glasgow City Council. Assuming the proposed 10% cut in CTB is shared equally and the monies continue to be paid direct to the council, Glasgow will have to collect an additional £7.46 million in council tax to maintain existing income/collection rates. 

15. If the monies are paid directly to the claimant as part of Universal Credit the claimant will have to choose to make payment to the council. Affording the claimant that level of responsibility at the same time as housing and other elements of the Universal Credit are capped may increase the risk that monies intended for council tax are used for other purposes. This could put downward pressure on collection rates for CTB recipients, thereby further impacting on the council's income and the indebtedness of the customers.

Council tax liability, balances, and unpaid balances in Glasgow City Council

· At 31st March 2011, there were 68,404 accounts or 26.65% of the caseload with a balance of greater that zero for 2010/11. Of those 5,545 or 2.16% have a balance of less than £10.

· At 31st March 2011, 23,266 CTB recipients had a balance outstanding for council tax of more than zero for 2010/11. This equates to 19.57% of the overall CTB caseload (full and partial CTB).

· At 31st March 2011, 56,577 or 46.93 % of CTB recipients had a balance of greater than zero for Water and Waste Water for 2010/11.

· £16.50 is the estimated cost of collection for 2010/11 per property. This is net of Scottish Water contribution of around £5.50 per property giving an actual cost of around £22.00.

Housing Policy and Housing Benefit (HB)

Background and tenure profile

16. The Scottish Index of Multiple Deprivation (SIMD) is a relative measure of deprivation and the latest SIMD for Glasgow indicates an improvement on previous years showing Glasgow’s population living in the bottom 15% datazones has fallen by 64,887, or by 21.1% from 2004.

17. However, there remain over 240,000 people living in the most deprived parts of the city, representing over 41% of Glasgow’s population, meaning that Glasgow still has disproportionately more people living in extremely deprived areas. This can be defined as the bottom 5% - the 325 most deprived datazones in Scotland. While the number of datazones in Glasgow in this category has fallen from 226 in 2004 to 169 in 2006, and to 147 in 2009, almost half the datazones in Scotland of this type are in Glasgow.

18. It is estimated that around 36% of all households in the city receive Housing Benefit (HB) and/or Council Tax Benefit (CTB), which is the highest rate of reliance on HB/CTB in Scotland. This equates to about 109,000 households and is split by tenure as follows: -

Housing Association (including Supported Accommodation) 76,256

Private Rented Sector 13,129

Owner Occupied (CTB only) 19,824

The overall tenure profile (as at April 2010) for Glasgow is shown below:

19. The owner occupied sector makes up just under half of the stock in the city. Therefore most stock is rented, either social or private rented, with the latter increasing significantly in recent years.

Make up/availability of housing stock

20. In terms of make up and availability of housing stock in Glasgow around a third of the stock is made up of one or two apartment dwellings in the RSL sector. For housing in the city as a whole, 17% of homes consist of one or two rooms with 56% being 3 or 4 rooms. This proportion of smaller sized accommodation should not obscure the fact that the changes regarding under occupancy for working age households, the extension of single room rate to 35 and increased non-dependent deductions present real and significant problems to households and landlords in the city.

21. Although the rate of growth in single adult households is estimated to have levelled off there are still projected to be almost 140,000 single adult households by 2018. At 2008 the estimate was 116,000. Estimates indicate from the above that out of a total stock for the city (295,000) there are about 50,000 properties with one or two rooms. In the RSL sector data shows that there were about 34,000 one and two apartment dwellings in 2009/10 but less than 5,000 were single apartments. More refined analysis is required but there are indications that there may be fairly significant levels of under-occupancy by households many of which will be on low incomes and/or may be eligible to housing benefit. Part of this analysis has to identify where households are under-occupying if households are working age.

22. Even if in numerical terms there is no issue in respect of supply of smaller accommodation, the condition, type, and location still needs to be taken into account. If properties are in unsuitable locations, wrong house type or poor condition, this will affect supply. Landlords may not have access to private finance (partly due to increased loan costs resulting from welfare changes) in order to bring dwellings to suitable standards.

Impact on the housing sector

23. Welfare reform will have a significant impact on Glasgow’s housing sector. Although most of the analysis below focuses on housing benefit issues many tenants who claim HB will be dependent on other benefits and/or low paid employment.

24. For example, about 75% of tenants of Glasgow’s largest RSL (Glasgow Housing Association- GHA) are in receipt of Housing Benefit. 61% are on full HB and 14% on partial HB. For the social rented segment of the housing sector as a whole, there is still likely to be a significant level of reliance on HB (about 70%). Measures such as the increase in non-dependent contributions, reduction in benefit for working age households that underoccupy, and the extension of the shared room rate (the lowest Local Housing Allowance rate) to single adults up to the age of 35 will increase pressure on the social rented sector, impose additional administrative costs on landlords and the City Council, and may affect the pattern of investment and re-structuring of the housing supply. For example the impact of extending the age range for shared room rate will affect 1700 claimants with an annual loss of £2.1m.

25. The private rented sector (PRS) also has a large proportion of tenants who claim housing benefit although not to the same degree as the social rented sector. Currently, almost three in ten tenancies in this sector attract an element of subsidy through HB/Local Housing Allowance (LHA).

26. There has been some commentary that linking the Local Housing Allowance (LHA) to the 30th percentile rather than the median rent for the Broad Rental Market Area (BRMA). It is estimated that this will affect 9,000 claimants resulting in an annual loss of £5.45m.

27. There are suggestions that this change might reduce rents in the longer term. However, the segment of the market represented by buy to let owners may prevent this happening to any great extent. The loan covenants for buy to let may not allow rents to fall below certain levels. It may well be that landlords move out of this market segment. Analysis has indicated that the PRS sector may shrink by as much as 20% over time due to the LHA change to 30th percentile (Scottish Government Community Analytical Services).

28. The cap on LHA may make the high rent areas in the city unaffordable for poorer households. This will increase pressure on the social rented sector and may further concentrate poor households in parts of the city where social rented sector predominates. There are real threats that homelessness representations will increase at a time when the 2012 homelessness target has to be met.

29. The impact of the welfare reform changes will be cumulative and therefore will affect the whole housing sector in short, medium and longer term to the extent that the structure and characteristics of the sector may radically change. Therefore it is felt that further research is necessary.

Impact of d irect payments

30. Direct payments are an area of great concern for landlords. Previous pilots south of the border whereby housing benefit was paid direct to the tenant received criticism from landlords and others because of the adverse effect on rental income and increase in arrears.

31. There are two aspects to Universal Credit (UC) that are concerning – Housing Benefit being subsumed into UC and that it is paid directly to the claimant. The concern is that tenants may not regard rent payment as a first priority, that there are other household costs that have to be met and that other debt has to be managed (where there is a fixed income is constrained).

32. It is anticipated that the direct payment of Universal Credit to tenants will lead to increases in rent arrears, more demand for welfare benefit counselling and undermine tenancy sustainment. If tenants cannot sustain tenancies void levels and associated costs will increase.

33. Glasgow has the highest levels of poverty in Scotland and increases in rent arrears could impact on a large number of low income households and also impact upon the income stream for RSLs, thereby limiting their ability to develop affordable social rented housing.

34. The fact that Housing Benefit will be subsumed into UC may have an effect on rent increases. UC will rise by CPI on an annual basis. RSLs normally increase rents annually (after consultation) by some percentage point above RPI: will they have to review increasing rents by RPI+ and move to the CPI index? If so, how might that affect loan covenants with lenders and their working capital?

35. The focus of housing management services will increasingly be in areas highlighted above and a higher proportion of organisations’ costs (and income) will be directed here rather than in other areas of service delivery and/or asset management.

36. Households in greater financial stress, particularly if they do not have access to jobs will make greater demands on welfare and advice services. The impact of increases in non-dependent deductions may mean that more adult children leave the household with the risk of becoming homeless.

Impact of reforms on r ents/new builds

37. It is also envisaged that reforms will impact on rents and new builds. The degree of certainty of income stream to RSLs is an important risk factor for lenders when assessing lending to RSLs. Direct payment of Universal Credit to tenants for instance may be viewed as a greater risk compared to direct payment to landlords. It is likely that lenders will see greater risk to rental income streams for RSLs and price their loans accordingly. RSLs have already experienced renegotiation of loan covenants with lenders that have increased their costs before the impact of welfare reform because of the crisis in the financial sector.

38. There are administrative aspects to this change which may also adversely affect households and landlords. Housing Benefit is currently administered by local authorities on behalf of the Department of Works and Pensions (DWP). UC will be administered by DWP rather than Local Authorities with this transition being a phased approach.

39. Higher cost of borrowing will be reflected in higher rents and may also deter RSLs from developing. RSLs could use reserves but their capacity to do so will not be inexhaustible.

40. As a local authority with no stock of its own, Glasgow’s strategic aims with respect to meeting housing needs may be undermined as a result; there may be increases in homeless applications and our capacity to meet these needs will be curtailed by the nature of some of the proposed changes.

41. Supply and demolition, and under/over occupancy are likely to emerge as significant issues. There is an effective stock standstill in Glasgow, GHA have a demolition in place, but counter to that this year it is unlikely that there will be any supply of new units. Again this creates difficulties if insufficient housing is being retained, and has an effect on the drive to eradicate fuel poverty. Under/over occupancy is also likely to emerge as an issue due to the time much of the stock was built, population growth, and the projected new households, which are likely to be smaller in size.

Impact of reforms on homelessness

42. It is also considered that the welfare reforms will impact on homelessness services. The cuts to DLA will mean that some people currently protected from non dependent deductions will be faced with them in the future. Non dependent deductions this year rose by 27% (potential further increases in the next two years). These two factors in conjunction with lower housing benefit payments in the private sector will make it more difficult, particularly for households with non dependents. Glasgow City Council are expecting to see a number of younger adults leaving home through necessity in order to protect the housing benefit income of their parents.

43. The announced increase to the age of 35 before a single adult is entitled to housing benefit above the shared room rate will make it difficult to meet homelessness responsibilities in that the rental levels may be above the amount available through Housing Benefit. Additionally it will often be inappropriate to place a vulnerable homeless person in shared accommodation.

44. Welfare reforms are also likely to impact upon the Council’s ability to meet the Scottish Government’s 2012 homelessness targets. At present these are challenging targets and welfare reforms will make it more difficult to achieve these targets.

Discretionary Housing Payment (DHP)

45. Glasgow has been the highest spender of Discretionary Housing Payments (DHP) in the UK in recent years, supporting a pro-active approach to easing hardship. The UK Government has announced an increase in funding for DHP UK-wide of £10m. However, Glasgow has not fared well in terms of the allocation of this additional funding, with an increase of only 5%, amounting to around £60,000.

46. Demand for DHP will rise due to changes to Local Housing Allowance and, in comparison with other areas, Glasgow’s allocation is inadequate as the average increase in Scotland is 14%, and a sample of councils in London and South East England reveals average increases of 86%. Glasgow City Council have requested further information from the DWP in terms of the allocation to Glasgow, and have also highlighted the inadequacy of the increase.

Social Fund and Locally Administered Financial Relief

Details of emergency payments and spend on emergency payments

47. Section 12 Social Work (Scotland) Act and s22 Children (Scotland) Act are administered with local Social Work Offices. Discretionary Housing Payments are administered within Financial Services.

48. Section 12 is an emergency payment to vulnerable adults who present at a Social Work office as destitute.  The payment can be made to purchase a fuel card when electricity has been cut off or for food or other essentials.  Section 12 can also be granted for "promotional use" within a community.  These are usually small payments to voluntary groups in a community who provide a service to individuals who would otherwise be requiring a service from social work, e.g. a group who work with disabled children.

49. Section 22 are payments made to families in crisis, which would prevent a child(ren) having to be placed in accommodated by the council.  This involves the department assuming parental rights over these children.  The payment could be for beds, white goods, clothes or associated expenses. Payment is to maintain the children at home whilst at the same time assuring their welfare.

50. The payments under sections 12 and 22 are generally made to service users known to the social work department.  They are generally allocated cases, in that they have an assigned social worker.  As they are known to the department, a financial assessment/maximisation of benefits check would have been carried out at the initial assessment stage.

51. In terms of Glasgow’s spend to date for 2010/11 on Section 22, this amounts to £275,732 and for Section 12 stands at £19,577.

Disability Living Allowance (DLA)

Impact of reductions in DLA on Glasgow City Council’s non residential care charging policy

52. The UK Government’s attempt to save 20% of DLA budget is likely to have a major on Glasgow City Council’s non residential care charging policy. Total weekly loss of income to the authority through homecare charges would be approximately £10,000. Total annual loss would be in excess of £500,000. Currently 60% of DLA appeals represented by the welfare rights team in the council are successful, if this level of success is continued it could be possible to directly protect around £300,000 of the annual money generated by the non residential charging policy.

53. The government's proposals to reduce the numbers of recipients of DLA will predominately affect those under 65 years old and there will be a corresponding effect on income raised by all local authorities including Glasgow.

DLA recip i ents and estimated loss of income

54. As at July 2010 there were 8,284 service users receiving a homecare service in Glasgow. Scottish Government statistics show that in Scotland 24.86% of such service users are under 65. This gives a figure of 2,060 relevant cases in Glasgow.

Statistics from the DWP indicate there were 48,550 DLA care component recipients in Glasgow . Awards were split between the rates in the following ratio:

DLA care component was until April paid at the following rates:

In order to simplify this analysis, certain assumptions have been made

· All service users receiving homecare will be in receipt of DLA. This would be expected after the involvement of the Income Maximisation team.

· All service users are assessed as single people. There are different rates for couples and there is insufficient data to assess the ratio between single people and couples.

· All service users are receiving a 'standard' amount of means tested benefit such as income support and do not have other sources of income.

· Each of the three rates of DLA will be affected equally by the Government's proposed 20% reduction in caseload.

· The charge threshold has been set at the rate for those under 60 and income assessed at the equivalent rate. Those in the age group 60 – 65 are entitled to Pension Credit and have a higher income and charge threshold.

The income and charge of each group was calculated and is detailed below:

Note 1: H/M/LRC – Highest, Middle, Lowest Rate Care; PA – Personal Allowance; DP –Disability Premium, SDP = Severe Disability Premium; EDP – Enhanced Disability Premium

Using these figures the potential loss of income to the authority can be calculated as follows for the 2,060 total homecare service users in Glasgow :

55. The total weekly loss of income to Glasgow City Council through homecare charges would be £10,222.35. The total annual loss to the authority would be £531,562.22. These figures are at 2010/11 levels but the change will not take place until 2013/14 and therefore the total would be expected to rise. These figures do not take into accou nt the wider loss of income in local communities from the cut in t he income of affected claimants, and also do not take into account any effect of Housing and Council Tax Benefits which would also have a direct impact on the authority.

Tribunals

56. In terms of pursuing tribunals between April 2009 and April 2010 there were 1,009 DLA appeals represented by the Glasgow’s Welfare Rights Team within Social Work Services. 46% of all the appeals within that year were DLA appeals. Of those DLA appeals 58% were successful. The total additional benefit payable to individuals as a result of successful DLA appeals was £2.2 Million per annum. This figure includes additional means tested benefits that would become payable as a result of winning the appeal. The above appeal success rate for DLA if maintained under the new rules could potentially save 58% of the projected loss outlined above. Costs per appeal are approximately £110 covering salary costs of welfare rights officers in the appeals team and administrative support.

Childcare

57. Families with children have several different benefit changes; there is the freeze on child benefit and the increases in respect of children in tax credits. However for working families in receipt of housing benefit and council tax benefit, payments of tax credits are assessable income and as such they stand to have up to 85% of the extra tax credit payments clawed back through the benefit taper. As child benefit is disregarded for HB/CTB, the situation would have been better for working families in receipt of HB to have any extra money paid as child benefit. This in conjunction the cut to the amount allowed for child care within Tax Credits available to working families is out of step with the overarching principle of the reform process in terms of making work pay.

58. In Glasgow there are 67,550 families claiming child benefit for 109, 535 children. This will result in an estimated annual loss of £5m.

Economic Development / Job Creation

Partnership working

59. With welfare reform being based upon local opportunities for claimants to enter the labour market, Glasgow City Council are clear that partnership working is essential. The City Council, the Glasgow Regeneration Agency, Skills Development Scotland and the Chamber of Commerce are focusing on greater collaboration and employer engagement.

The Council is looking to achieve:

· a more coherent message from across Employability Programmes ;

· targets for securing sustainable employment for targeted clients/ claimants and to;

· an increase in the number of employers taking on targeted clients/ claimants.

60. The partnership are seeking to demonstrate a strategic approach to economic growth across the city. The Council will work closely with Jobcentre Plus and the new DWP Work Programme Prime Contractors, Working Links and Ingeus/ Deloitte. There is also a need to ensure successful delivery of the Glasgow City Council Commonwealth Jobs Fund, which is creating 1000 jobs for young unemployed people in the city.

61. Glasgow City Offenders and the Employability Strategic Group, Glasgow Works and the Glasgow Community Justice Authority are addressing current activity and practice in the area of employer engagement in relation to supporting offenders/ ex-offenders to access labour market opportunities in the city. Raising the profile of offenders/ ex-offenders as a potential workforce amongst city employers is one of the group’s key actions.

62. Education Services are leading on the School Gates Initiative. This is about raising employment and employability opportunities with parents, particularly those on low income, 50% of whom are Lone Parents. The Young Parent Project is working with women who are 13 weeks pregnant, in terms of addressing employability and parenting issues. The Bridging Service works with health and social care services addressing and bridging the gap with employability.

Availability of work, low pay , and employability outcomes

63. In terms of the work available, in February 2011 there were 26,045 JSA claimants in Glasgow, 3,175 vacancies notified, 4,045 moved into employment compared to 25,145 JSA claimants, 3,455 vacancies notified, and 4,180 moved into employment in February 2010.

64. Low Pay remains an issue across Scotland with Dundee and Glasgow being the urban local authorities with the highest proportion of low-paid workers. Pay rates also vary by industry with the lowest rates of pay being in the food, beverage, accommodation service and retail sectors.

65. Rates of low pay also vary between the public and private sectors. Although directly employed public sector workers are less at risk of low pay than those in the private sector, they nevertheless account for around one-fifth of all those in low pay. Nearly all of these are women and just about all of them work in either education or health, including social work.

66. The impact of welfare reforms, including increased conditionality, will increase the challenge of achieving employability outcomes, particularly for lone parents and people with health related conditions. This is especially true in a labour market which is constricting and increasingly competitive. Whilst this has been a priority focus of Glasgow’s employability activity, it is anticipated that the enabling and person centred approach which had been fostered and encouraged may be put at risk.  In addition, Glasgow anticipate an increased demand for support and access to employability related services at a time when, due to financial pressures, services are being revised.

Other Issues

67. A variety of other issues relating to reform of the welfare system and associated implications, questions, and details of the reform process were raised by Glasgow City Council. These include:

· Staff implications of the reforms, both during the transitional period and after 2017

· Administ ration of a diminishing H ousing B enefit caseload from 2013

· Loss of economies of scale and the efficiency of combined H ousing B enefit and C ouncil T ax B enefit assessment , and the resultant high er cost of administration

· Further reductions in the a dmin istration grant received from the DWP

· Uncertainty over possible subsidy reduc tions

· Lack of detailed and available knowledge and information about t he council tax localised scheme

· Uncertainty relating to the 10% redu ced budget for localised scheme and whether local authorities would be exp ected to fund the shortfall

· Lack of confirmation from the DWP as to whether TUPE arrangements will apply to fraud staff from 2013

· The need for local authorities to i nform the introduction of a benefit cap in H ousing B enefit in 2013 which will have significant impac t on households. This is crucial as from a local authority perspective this means information will need to be gather ed, which was previously not required , in order to ascertain the level of welfare benefits a claimant receives. This will determine the excess to be deducted from H ousing B enefit . e.g. at present if a claimant is receiving Income Support the council will automatically award maximum HB/CTB. From 2013 it will be necessary to establish the actual amount of income support to determine if an ex cess applies when added to other benefits. This will require additional work and resource , and changes to software. This represents a large amount of work for a diminishing caseload

· Local Authorities forte is in providing frontline services particular to vulnerable client groups; there is a need for local authorities to be involved to protect these vulnerable individuals

68. There are a variety of issues on which Glasgow City Council felt that additional information was required in relation to the on going process of welfare reform.

· Localised scheme for council tax

· What , if any frontline services will be utilised by DWP in administering Univ ersal Credit

· Questions over what will happen to homeless; supported; exem pt accommodation housings costs as the Welfare Bill advises they will not be part of Universal Credit (UC).

· What is a ‘housing cost’ and how will this be determined for both working age and pensioners?

· What will be the staffing implications?

· Local Authorities have put an infrastructure in place at a cost to administer housing and council tax benefit. Will Local Authorities be reimbursed as a result of redundancy; TUPE; IT; property costs?

Case Study

City of Edinburgh Council

Introduction

69. This report details a case study undertaken by COSLA, in April 2011, of the City of Edinburgh Council (Edinburgh) to assist the understanding of the likely impact of the proposed welfare reform changes.

70. Edinburgh is Scotland’s capital city and has a population of 471,650 people (2008). The population is projected to increase to 550,932 people by 2033. The city has been responsible for generating 15% of the country’s wealth. The owner occupier sector remains the major tenure for households in Edinburgh. The Edinburgh Solicitor’s Property Centre stated the average price for a two-bedroom home in 2010 was £181,000; 20% higher than in 2005 and nearly five times the average household income in Edinburgh.

71. The city’s affordable housing is provided mainly by the council or Housing Associations. Edinburgh owns 21,137 properties (2009/10). There are nearly 25,000 people registered on Edinburgh’s single common housing register waiting to rent a Council or Housing Association home. A projected 16,600 new affordable homes are needed over the next ten years Edinburgh has a large private rented sector which has rapidly increased from less than 9% in 1991 to 19% in 2007/08. Given the shortage of supply in the social rented sector, the private rented sector is a primary housing option for homeless households. The number of homeless applicants being housed in the private rented sector has increased from 8.9% in 2007/08 to 11.7% in 2009/10.

72. Edinburgh was chosen as a case study for the following reasons:

· it has a shortage of affordable housing;

· the council owns its own housing stock;

· there is a large private rented sector;

· There is a Private Sector Leasing Scheme which now manages 1600 homes, which are used as temporary accommodation for homeless households

Key Issues

73. Key issues raised by Edinburgh were:

· The removal of direct payment to social and private landlords will result in increased rent arrears and court action for both social landlords and private landlords. Increased rent arrears will not only have an impact upon the Council’s income directly but also on staff resources. The Government should consider retaining direct payments to social landlords within the new Universal Credit system.

· The Government should consider postponing restrictions on service charges in temporary accommodation until 2013/14 in order to give local authorities an opportunity to adjust to changes in income and to allow for consideration of other reforms in temporary accommodation finance.

· Restricted payments based on occupancy will present a considerable risk for the Council by increasing the demand for one bedroom properties. These are already in very short supply. This would require changes to the allocation policy and potentially expensive reconfiguration of properties. The Government could consider limiting under occupancy measures to larger properties rather than single people in two bedroom properties.

· The extension of the shared room rate to all single claimants under the age of 35 is a major concern. The demand for shared accommodation will increase dramatically..

· There is a danger that Landlords will not reduce rents to match the reduction in payments to those under 35. The evidence is that private rental rates are already being pushed up by lack of new build supply and mortgage lending restrictions. The Council will have to look at ways of supporting the development of shared accommodation in the private rented sector. The Government should consider direct payment of LHA to private landlords and phasing in the increase in the shared room rate to allow local authorities to better plan for the effects.

· Changes to DLA will increase pressure on the Council’s care services and reduce income from charging for services.

· The abolition of the social fund will increase pressure on local authority provisions. These do not have the same level of scrutiny and some changes in legislation would be required if they are to fulfil the same remit as the social fund. Any increase in resources required to meet this would have to be diverted from other priorities.

General Trends

74. The key trend for Edinburgh shows a narrowing of the gap between Edinburgh and Scotland unemployment rates. Edinburgh has previously had a significantly better performance on unemployment than the national average.. Edinburgh has 38,610 Housing Benefit (HB) recipients, of which 27,240 are in the social rented sector. There are 42,770 Council Tax Benefit (CTB) Recipients. Scotland wide there are 468,720 HB recipients and 558,500 CTB recipients.

75. In 2009/10 42,921 applications to councils across Scotland were assessed as homeless. In 2009/10, in Edinburgh, 4,648 applications were assessed as homeless under the Homeless Persons legislation, of these applicants 3,814 were assessed as priority homeless applicants.

Council Tax Benefit

76. There is potential that the centralisation of CTB will result in increases in non-payment. This would result in both a loss of income and increased costs to attempt recovery. CTB is currently very difficult to recover, and this will be exacerbated if it becomes a direct payment . Edinburgh is concerned that HB and CTB debt will have a cumulative effect, and that debt recovery will be ranked according to the priority of creditors, with HB and CTB at the bottom of the ranking list. Edinburgh want to see the retention of direct payment of HB and CTB to councils

77. Edinburgh raised the following questions about the centralisation of HB and CTB:

· What will happen to the administration of the remaining Council Tax payments? How will that be staffed?

· How will HB overpayments be pursued? By the council? Or centrally?

· How will Council Tax liability be updated to reduce annual Council Tax charge? How will this link in with Council tax discounts/exemptions?

Housing Benefit and Housing Policy

78. The benefit changes that will have the greatest impact in the council are:

· The removal of direct payments;

· Decrease in HB payment to those who are under occupying (including shared room rate);

· Changes to service charges for temporary accommodation; and

· Uncertainty surrounding the reaction of the private rented market

Removal of Direct Payments

79. The removal of direct payments will likely increase rent arrears meaning that the council will have to direct more resources in to arrears management and collection. Approximately 75% of all council tenants are in receipt of HB (approx 50% receiving full benefit and 25% receiving partial benefit). The council will have to direct more resources towards management and collection of rent arrears, which could result in services being cut elsewhere.

80. Increased rent arrears will also have an impact on the council’s direct income and ability to borrow. This will limit the amount of money the Council is able to invest in maintaining existing stock, and the amount that is available for investment in new affordable housing. The Council might need to review the new social stock investment plans. A reduction in the income of Housing Associations will also affect the council. This is because they will also have reduced money to invest if rental income falls. Given the major shortfall in affordable housing in the City this is a major concern.

81. Tenants who fall in to rent arrears may also face legal action and ultimately eviction increasing pressure on council services such as advice and information, homelessness services and accommodation.

82. Should the council lose income due to the direct payment of HB, Edinburgh may have to consider carrying out a review of its allocations policies. It would need to reduce or prevent new tenants from moving into larger properties which will not be covered fully by HB in order to minimise the risk of increased rent arrears.

83. In order to mitigate the effects of the removal of direct payments the council may have to review rent charges. If rent charges are increased this could help to cover some of the extra costs involved in monitoring arrears and rent collection. However, this may make the cost of social housing unaffordable to those on the lowest incomes. Lowering rental rates could potentially make it easier for people to keep up with rental payments, but this loss of income will limit the amount that the council is able to invest in new and existing housing across the city.

84. Another option would be to reconfigure existing stock. Larger properties could be divided to provide more 1-bedroom properties. This option would be very costly.

Decrease in HB Payment to those who are Under Occupying

85. As at 2009/10 the breakdown of Edinburgh’s housing stock by bedroom size is as follows:

86. There is currently a significant mismatch between property size and demand. Edinburgh’s 2009/10 figures for affordable housing , showed that 61.8% of applicants require a 1 bedroom property. The above table shows that currently, 1 bedroom properties only compromise 28.6% of the council’s total housing stock.

87. Initial analysis suggests that around 1 in 20 existing working age tenants are under occupying council properties. Around 1 in 5 new lets are made to working age tenants who will be classed as under occupying when the new rules come in to force.

88. Edinburgh does not currently have sufficient stock to meet demand if all tenants wish to downsize to avoid the difference between rent and housing benefit levels. This may result in increased pressure on temporary accommodation.

It is recommended that the Government considers applying under-occupancy rates to properties of 3 or more bedrooms. This would prevent tenants who are unable to access smaller properties from being penalised whilst there are no suitable properties available. Edinburgh cannot meet demand for one and two bedroom properties within the current stock, and would need to consider building smaller properties. Any new build scheme would not meet this shortfall for a number of years.

Uncertainty Surrounding the Reaction of the Private Rented Market

89. There is a large demand for private rented property in Edinburgh. It is not yet clear whether private landlords will be prepared to continue providing accommodation for LHA claimants, particularlyI if their income is no longer protected by direct payments. It is also unclear whether private landlords will be willing to reduce rates in order to allow current tenants to remain in their home with reduced income. If landlords decide they can fill their properties without having to take on LHA claimants this will certainly lead to increased pressure on social housing and homeless services in Edinburgh, and have serious implications on the council’s ability to meet its statutory obligation to provide all unintentionally homeless households with settled accommodation. .

90. The council are already considering increasing investment in mid market rent to meet the demand for affordable housing that cannot be delivered through current social housing stock.

91. When LHA is reduced to the 30th percentile it will be increasingly difficult for people to find properties in the private rented market within their budget, including those who face reduced income as a result of the extension of the shared room rate. As at April 2011, there are 250 1-bedroom properties available in Edinburgh. Of these, only 90 are below the new LHA rate of £475. There are 551 2-bedroom properties available, but only 178 are at or below the LHA cap of £595. Moving from RPI to CPI may lead to a shortfall in rent, and Edinburgh landlords are unlikely to reduce their rents if they are able to achieve more by renting to young professionals or students. Rents that currently sit within the LHA 30% are often privately let ex-council stock.

Homelessness and Temporary Accommodation Funding

92. In meeting the 2012 homelessness target, Edinburgh is concerned about the continued uncertainty over funding temporary accommodation. Current guidelines allow the council to claim over £300 per week for service charges in temporary accommodation. This amount will be significantly reduced for accommodation that the council leases as of April 2011. At the moment, 17% of the council’s temporary accommodation is leased. It is estimated that the proposed caps will result in the loss of approx £1.2m. The loss of this income will impact on other services. Re-negotiation of the rents of Edinburgh’s Private Sector Leasing initiative, which houses homeless applicants, will be difficult.

Extension of the Shared Room Rate

93. The extension of the shared room rate to all single claimants under the age of 35 is a major concern. In 2010/11, 985 single people under the age of 25 presented as homeless. These individuals would require shared accommodation if they are housed in the private rented sector. If the shared room rate was extended to all those under 35 during this period, the number of presentations requiring shared accommodation would have been 1,734. Given the shortfall in social rented housing in Edinburgh, this shows that demand for shared accommodation could increase dramatically when this measure is implemented in January 2012.

Social Fund and Locally Administered Financial Relief

94. Councils have a number of statutory provisions under which they are able, or may be required to provide assistance in cash or kind:

· Sect 12,12B Social Work (Scotland) Act 1968;

· Section 22 Children (Scotland) Act 1995;

· Section 27 and 29 payments Social Work (Scotland) Act 1968; and

· Sects 17,29 and 30 Children (Scotland) Act 1995.

95. There is considerable overlap between these provisions and the Social Fund. There is likely to be increased demand for payments from these provisions as a result of the abolition of the Social Fund. A number of other issues mean the need to consider amendments to primary legislation:

· The existing legislation does not permit payment in the same manner as the social fund – e.g. loans are not permitted under the Children (Scotland) Act;

· Some payments which are common under the social fund are not covered – for example travel expenses to visit someone in hospital;

· Current legislation does not cover all the people and circumstances covered by the social fund; and

· Current arrangements for funding these provisions are not sufficiently robust, and the amount of funding available will need to be increased. Systems for challenging decisions are not as sophisticated as social security review and appeal procedures and will need to be changed.

96. Current local authority budgets cannot be diverted to cover the increased demand without cutting other vital services. It is important that adequate funds are provided to local authorities for the increased demands.

Disability Living Allowance

97. DLA is a very important benefit to enable people with disabilities to maintain themselves in the community and in employment without reliance on Health and Social Care services. The lower rate of care component in particular enables people to live independently and to avoid deterioration in their condition. Removal of this rate of benefit will increase demand for Health and Social Care services such as home care. Reductions in the amount of DLA will have the effect of reducing income for charges for social care services. This in turn will result in further restrictions in the service available for people with disabilities.

98. This change, combined with the abolition of the Independent Living Fund will result in increased demand for Health and Social Care and other council Services – both community care services and advice services. People with disabilities will have significantly lower incomes to deal with the extra costs of living with a disability. They will need additional support if they are to remain in the community. For some the difficulties will be such that they simply cannot continue to remain in the community, and they will need to move into more expensive (both for the council and the individual) and less independent living arrangements.

99. Receipt of DLA results in further increased income in other benefits as well (Pension Credit for those over age 60, Income Support, Employment and Support Allowance, for those of working age, housing benefit for all eligible tenants, council tax benefit for council tax payers etc.) Overall, in 2010-2011 the increased benefit entitlement as a result of the advice undertaken by the Welfare Rights Service at the Advice Shop was over £13 million (final figure to be confirmed).

100. The Welfare Rights Service and other advice agencies funded by Edinburgh already face considerable demand for assistance with claims and appeals on Disability Living Allowance (DLA). This is likely to increase significantly. There are currently 22,865 DLA recipients in Edinburgh. People with disabilities often need help with the extensive DLA claim form. Edinburgh’s Welfare Rights Service provides advice and assistance with this, as do a range of Health and Social Care staff and other advice agencies funded by Edinburgh. With the proposed changes demand is likely to increase. Increased medicalisation of the process is also likely to increase demand for supporting evidence from health professionals, and social care professionals – in particular social workers and occupational therapists.

101. Edinburgh’s Welfare Rights Service (and other Health and Social Care staff) help people to challenge unfavourable decisions by appealing. In 2 out of 3 cases, the DLA decision changes following an appeal in favour of the disabled person. The Welfare Rights Service represents at around 300 appeal hearings per year on DLA, and over 70% of these are successful. The demand for this assistance will increase substantially as a result of increased rates of refusal and increased medicalisation of the rules.

Childcare

102. The position in relation to childcare within the new Universal Credit is still not clearly enough defined to assess the impact fully. Help with childcare costs is currently inadequate in a number of areas and any reduction in support will make it increasingly difficult for parents and carers to return to work.

103. Scotland’s childcare infrastructure differs from that in England in that there is no legislative duty on councils and a limited means of systematically monitoring Scottish wide provision. Moreover the UK Government has agreed to subsidise childcare for two year-olds in England and Wales. This does not apply to Scotland.

104. In Scotland in 2008, there were 42,500 parents receiving help with childcare costs through tax credits. They were in receipt of a total annual income to pay towards childcare of £147 million. Reductions in that income for working families will reduce the ability and the choices of parents.

105. The cost of childcare provision has risen across the UK, but the increase in Scotland has been greater than elsewhere. Research undertaken by the Daycare Trust Childcare show that costs have typically increased by more than the average wage, placing parents under further financial strain in the face of rising living costs. The cost of a childminder for a child aged two and over in Scotland increased by 8.3 per cent - almost four times as much as the average wage.

106. At the same time as costs have been increasing, availability has been reducing. Councils are not in a position to make a serious impact on increasing affordable childcare provision unless additional resources are made available.

Economic Development/Job Creation

Edinburgh’s Employability Model

107. Edinburgh, in partnership with colleges and the NHS, has a new employability model which targets groups that are not ready for employment through single work programmes. They are focussing on individuals on incapacity benefit and alcohol and substance mis-users. It aims to engage with clients as early as possible, and to better integrate their support mechanisms. These target groups will be entering the labour market at minimum wage.

108. However, there is the problem of data sharing between agencies regarding benefit claimants and data protection issues. This means it is hard identify individuals within the target groups. Edinburgh has a focus pilot in Craigmillar and Muirhouse which has identified 40 families that are considered ‘high tariff’. They are introducing these families to support services.

109. To get more people in to work the local economy needs to be expanded for entry level jobs, as well as, motivating individuals to enter the labour market. Council still need to sustain target group individuals once they are in employment e.g. help with paying rent and council tax.

Case Study Evidence

The Highland Council

Introduction

110. This report details a case study undertaken by COSLA, in April 2011, of Highland Council to assist the understanding of the likely impact of the proposed Welfare Reform changes.

111. Highland Council has a population size of 220,000 people and covers an area of 26,484 square kilometres, around 11% of the total size of Great Britain. The population is increasing particularly in the Inverness area however the growth is not evenly spread and this presents challenges to the Council as does a trend toward smaller and more numerous households.

112. Highland Council was chosen as a case study for the following reasons:

· It is a large geographically diverse and predominantly rural local authority;

· the council owns its own housing stock;

· It has unique local social circumstances particularly around remoteness of many of its communities.

Key Issues

· The timescales for change are extremely ambitious and the impact of change needs to be fully assessed in the Scottish context.

· The Council believes that a local approach is more effective both for Council Tax Benefit and Housing Benefit.

· Staff retention and motivation over the transition period are a major concern as is the impact of the changes on any future shared services arrangements.

· The reduced funding available for Council Tax Benefits and for DLA will impact on individuals and will force the Council to make difficult decisions over the support it gives to them.

· Direct payments to individuals of either Housing Benefit or Council Tax Benefit will lead to significant increases in arrears and collection costs and will have financial implications for the Council.

· The Council is concerned about the impact that welfare reform will have on homelessness particularly in such a geographically sensitive an area as is covered by the Council.

· Employability is a big issue for the Council and it is not clear how the welfare reform changes will enhance the prospects of getting people into employment within the Council’s area.

General Trends

113. Economic activity in Highland is high compared to Scotland and UK. However, whilst the rate of unemployment and those claiming out of work benefits is lower than Scotland and the UK, significant challenges remain in Highland.

114. The Single Outcome Agreement between the Community Planning Partners in Highland and Scottish Government identifies key strategic priorities in Highland’s geography and dispersed population ensuring -

· Provision of infrastructure assisting access to services (Housing; Learning; Childcare; telecommunications; transport links (internally and externally);

· Growth of sustainable jobs and business, including high value, SME’s and social enterprises;

· Reduction of inequality by supporting more people with better services and to make better life choices including work;

· Increasing earnings focused on those with lowest pay;

· Services are accessible, narrowing the gap and limiting the impact of distance from services in remote and rural communities;

· That new development and growth is planned and designed for sustainability;

· Alignment of public sector bodies responses to the recession (short term and long term).

115. There are pockets of deprivation even in relatively affluent wards. 4 Highland datazones are ranked within the 5% most deprived in Scotland and 16 are ranked within the 15% most deprived in Scotland.  Nearly all of Highland is classed as access deprived, on the basis of distance to the following services: GP, shopping centre, petrol station, primary and secondary schools, and post office.

It is universally recognised that poverty is no longer just about no or low incomes. Poverty is multi-dimensional and this is especially true of the Highland Council area. In addition to the traditional issues surrounding poverty, the rural dimension across the Highlands introduces considerable pressures:

· The difficulties posed through the low wage rural economy.

· The higher costs of living, transport and housing placed on people living within rural areas.

· Lack of access to essential services such as banking, post offices, cash machines and financial advice.

· Households within Highland spending proportionately higher amounts on heating their homes leading to fuel poverty.

· The national focus upon spatial concentrations of deprivation whereas in rural areas deprivation is spatially dispersed.

116. In common with other parts of the country Highland is experiencing disproportionately high increases in unemployment among young people under 25 and those over 50. Assisting young children out of poverty through parents obtaining or returning to work employment remains a priority in Highland. In April 2011, 4,149 individuals were in receipt of Job Seekers Allowance, of whom 1,085 were aged 18-24.

117. History shows that during recessions, people who have been made unemployed but who have skills (or have re-skilled) and work experience will return to work when the economy recovers and when work is made available. Those individuals already furthest removed from the labour market will be pushed even further away and deeper in to poverty. Welfare reform needs to be designed and delivered in a way that will enable such individuals to access appropriate work and support while seeking employment, eg provision of appropriate benefits, training, lifeskills, child care.

Council Tax Benefit

118. The Council considers that centralisation of Council Tax Benefit would not be an option suited to the way the Council provides its services given the scale and nature of the area it covers. The Council has a good track record of local Council Tax collection, across very often sparsely populated communities, and achieves this through direct customer contact when necessary. The Council believes this localised approach achieves higher collection levels.

119. Centralisation assumes residents have financial capability, however the Council is concerned about the impact, in particular on the more vulnerable residents and the elderly. The Council also considers that overheads, including the costs arising from increased administration and volumes of recovery notices, would increase. Increased staff time would have to be devoted to recovery and this would compound over time. The average cost to recover a case where a Sheriff officer needs to intervene is £26 and court action for the "won’t pay" category is £485. There is also a question over whether it would be appropriate to chase recovery in every circumstance.

120. If Council Tax Benefit is localised then the Council considers that there are arguments for overall scheme design at a national Scottish level to ensure uniformity, then to have local variations that can vary within parameters. This would minimise perceptions of a "postcode lottery" of benefits whilst ensuring the Council can respond flexibly to local circumstances.

121. The shared services agenda is particularly important to Highland and the Council encourages shared services where the political will exists. Currently there are 8 back offices within Highland for Revenues and Benefits, which operate on a "virtual team" basis, having a common infrastructure and using common software. The Council believes that there are further opportunities to capture efficiencies and to achieve effective delivery and service to customers through sharing across Council boundaries. The argument would be not to re-invent the wheel but make the best use of existing arrangements for any changed approaches to benefits delivery.

122. Delivering CTB with HB is understood from the customer perspective so it seems a retrograde step to remove this link. Moving forward the Council would want to see any changes to schemes to be demonstrably simple and for the transition to be by way of a staged approach:. Stage 1- Universal Credit to include entitlements currently administered by DWP and HMRC; Stage 2- Once Stage 1 fully embedded (this is important), further detailed review required to consider future arrangements for HB/CTB.

123. A 10% reduction in the overall level of CTB would have a very significant impact. The Council has concerns that there is a real risk that what is given out in one hand is taken away with another. If the focus is changed from current Benefits to other rebates the limited resources available would lead to winners and losers. The interplay of CTB with other benefits and knock-on effects, particularly if centralisation is an option need to be considered.

124. The Council’s collection rate for Council Tax is improving so there are concerns that welfare reform will cut across this especially if any decision is taken to centralise Council Tax Benefit. Councils are accountable for their performance unlike DWP which does not provide full and adequate information on its performance. (Will this change?) Councils also undertake important functions such as checking residency and there is no indication as to who will do this under any new arrangements. On-line application means there are no established local safeguards unlike under the current system and this is likely to present a significant risk of fraud and error. The Council is willing to share their fraud performance with the Committee, however as a general point the Council’s track record on fraud is good.

125. The Council has an in house Money Advice and Customer Income Maximisation service and also procures services from the CAB network to deliver advice. An in-house Guide to Benefits is made available to claimants and provided to relevant professionals in health, social work, education and housing services. The extent to which the Council uses local knowledge to ensure that Benefits are paid legitimately should not be underestimated. Service providers have noted an increase in demand from people affected by and concerned about welfare benefit changes. In 2010/11 there were in excess of 36,000 contacts from people in the Highlands seeking advice from the CAB network and the Council’s in-house team, and £8.3m of benefit entitlement was secured for clients through their actions.

Housing Benefit and Housing Policy

126. The Council has completed its Local Housing Strategy and Housing Need and Demand Assessment. Key messages are that employment rates are higher but incomes generally lower with a higher proportion of private rented accommodation often tied housing; there is a high level of housing need and this is projected to continue; there are very high levels of fuel poverty with large areas having no gas supply. Population is older and there is no large student population within the area covered by the Council.

127. As at 2009/10 the breakdown of Highland’s housing stock by bedroom size is as follows:

128. There is a shortage of smaller properties and single people are increasing pressure on existing stock. The Council can provide numbers for those under- occupying from Housing Register records, however this is likely to be an under-estimate as not all people who underoccupy are registered. Not all of those under-occupying are of working age.

129. Pressure on social housing and affordability of owner occupation mean that under 25s rely on private rented sector and owner occupation is not an option for many under 35s. The Council has concerns about the proposals to change the definition of a ‘young individual’ for Housing Benefit purposes, from 25 to the age of 35 years. The effect would be to limit the award of Housing Benefit for single people up to age 35 to the shared accommodation rate. This rate reflects the cost of renting property where the tenant has sole use of a bedroom but has shared use of other rooms such as a kitchen or bathroom irrespective of whether there is shared accommodation available to rent.

130. The Council has already seen benefit recipients finding it harder to access the private rented sector following the changes from the Emergency Budget.

131. The Council has high levels of homeless presentations, and there is an over reliance on B&B accommodation as temporary accommodation. It is implementing prevention strategies, which include increasing access to the private rented sector to try to address this.

132. The Council has concluded that welfare reform will cut right across its homelessness strategy and put its 2012 homelessness target (85-86% currently) and prevention strategies under severe pressure.

133. Direct payments to individuals will increase rent arrears and there will be additional management costs of recovery including pre-eviction actions. It is worth noting that with the geographic nature and dispersed communities, payments often are made at a paypoint or the post office and whilst the Council actively encourages payment by Direct Debit, these other forms of payment which are more expensive (35p for Paypoint compared with 2p for DD) are anticipated to increase under UC.

134. The Council wants to know what safeguards/exceptions for vulnerable people will be built into UC. An important issue is whether Councils could still receive direct payments in appropriate cases for housing, CTax elements.

135. Non dependant changes will impact on rent arrears and social housing and may actually increase homeless presentations..

136. The Council anticipates the changes to Housing Benefit will result in increased bad debt write-offs. This will impact on the Council’s strategy of reducing unit management and repair costs in order to fund new house building.

137. Discretionary Housing Payments will only have a marginal benefit with only a small sum of £54k available to the Council this year. There could have to be a political choice to top up DHP rather than deal with homelessness.

Social Fund and locally administered Financial Relief

138. The Council explained that they are developing a contract with NHS for adult care and find it difficult to see how social fund could be managed within this. There is nervousness on the potential business consequences. This would undermine the whole point of re-structuring if the NHS then have to sub-contract Social Fund administration back to the Council because the NHS don’t manage funds in that way or of that sort.

Disability Living Allowance

139. 20% less DLA will immediately have an impact. Self-directed Support grant has to have deflator built in and there are additional complications under NHS/Council contract. The DLA changes threaten to jeopardise early years/prevention services, meaning that there will have to be a review of discretionary spending. There has been an increase in DLA, for example, for children through escalation in diagnosis of children on autistic spectrum in recent years.

140. The Council invested early in self-directed care packages and changes to DLA will threaten that model and fundamentally alter the basis of calculations for resource allocation.

Economic Development/ Job Creation

141. The Council has undertaken a strategic review of how to address employability but faces big challenges including issues around care needs and previously looked after children. The challenge of finding employment if you have additional needs is being exacerbated by the deteriorating economic climate

142. There are a few large companies in the area that can offer large scale employment. There is a highly geographically-sensitive employment market that is very related to the housing market, so the welfare changes will potentially impact on homelessness. Given the size of the area and dispersion of communities, issues such as ability to commute to work are critical. The people who are furthest from employability are also the likeliest to be affected by the recession’s impact on employment chances. As the largest Highland employer, reductions in Council staffing arising from these reforms wil create pressures. The reforms rely on increased availability of work opportunities and child care provision. Economic growth and development are therefore necessary to successfully deliver reform.

Other Issues

143. On "passporting" of Benefits there is concern that the linkages will be lost, for example the link with CTB and charging and transport policies.

144. The Council is moving away from Single Shared Assessment to a different supported self-assessment, Self-Directed Support model and changing eligibility criteria. The links between CTB and HB and these other forms of benefit are critical to this.

145. Access to data – there is a concern that this will all be one way ie the Council provides data to DWP but not the other way round.

146. Elected members are concerned about local implications for Welfare Reform and have written both to Danny Alexander (the local MP) and to the Minister responsible for the reforms.

147. Staff retention is a major concern and clarity is required around TUPE. The impact on staff motivation cannot be under-estimated and there are instances occurring already where more experienced staff are leaving.

148. The Council has a general concern at the lack of prior consultation and continuing absence of detail on how UC will be managed and what role the Council will have.

149. The Council wants to understand impacts on early intervention as there is a concern that good work done so far will unravel. They want to better understand the transition to employability in the measures put forward.

150. There is a general issue re the timing and adequacy of communication of changes, to the general public and various client groups. There are also concerns at the public perception of the Council once the reforms kick in.

151. The LHA 30th percentile is big concern. As the table below shows, a family requiring a 3-bedroom property will face a reduction in benefit of £11.54 per week which in turn may give rise to homelessness and direct social consequences such as fraud, crime and loss of income to the local economy.

152. Example of 30 th Percentile rent to median rent (Highlands & Islands)

(for illustration purposes only – based on rents for March 2011)

153. The Council will need to manage legacy computer systems over the transition period and will need to run these down once UC is fully in place – There is an issue about how this can be done without significant disruption and cost.

154. Highland is highly devolved, using technology to deliver services effectively in communities where the local economy is fragile – centralisation goes against this.

May 2011