Written evidence submitted by Guinness
Northern Counties
EXECUTIVE SUMMARY
- — The
benefit structure conceived in the 1940's has been slowly but
inexorably undermined to the extent that it simply fails in too
many areas.
- — It
is taken for granted that Housing Benefit (HB) is too complicated,
but it is not clear how the complexities of HB could avoid being
transferred into a Universal Credit.
- — There
is a need to break the cycle of deprivation and to get people
back into work to avoid the situation where a high proportion
of customer's on social housing estates are unemployed. But this
will not be achieved by compulsion.
- — In
order to encourage people to take up employment, work must pay!
The disincentives which are currently created by the rate that
housing benefit and council tax benefit are reduced as income
increases, is the same as applying an extremely high tax rate
on the lowest paid. Work programmes need to emphasise that government,
employers and the unemployed all have responsibilities
and contributions to make.
- — The
changes being proposed in relation to the Local Housing Allowance
(LHA) will restrict the availability of the private rented accommodation
to benefit claimants. Private landlords may be put off letting
their properties to benefit claimants who will have a shortfall
to pay and who already receive the LHA payment direct.
- — The
shortfall in rent which some LHA and HB claimants will face as
a result of the proposed changes is likely to result in increasing
rent arrears for landlords, as claimants struggle to make up the
shortfall. Ultimately there is likely to be an increase in abandonments
and evictions putting greater pressure on homelessness services.
- — There
is also likely to be increased overcrowding as people give up
accommodation they cant afford to pay for or have to leave the
family home due to the increased non dependent deductions and
move into shared accommodation instead.
- — The
proposal for all Disability Allowance Claimants to be re-tested
is unlikely to result in significant savings as the majority of
these claimants have severe disabilities. The cost of re-testing
will be significant and the number of disputes is likely to soar,
putting the appeals service under pressure.
- — There
is a permanent problem with benefits administration, with a need
to improve the quality of staff and management, however this cannot
be done when staff costs are (seemingly always) being reduced.
MAIN SUBMISSION
General Comment
1. The coalition government have correctly identified
the many benefit issues that compromise the intention of the benefit
or create barriers to benefit recipients to make economic or social
progress. Many of the problems arise from what is acceptable as
public policy in the present day, being very different from the
policy intentions which were used in creating the benefits many
decades ago.
2. Subsequent changes to benefits have been ad
hoc and taken in isolation in many cases.
3. Beveridge was opposed to "means-tested"
benefits. His proposal was for a flat rate contribution rate for
everyone and a flat rate benefit for everyone. Means-testing was
intended to play a tiny part, because it created high marginal
tax rates for the poor (the "poverty trap").
4. Over the decades government economic priorities
have undermined the social insurance model and introduced many
levels of complicated means testing.
5. So the historical perspective is that a benefit
structure conceived in the 1940's has been slowly but inexorably
undermined by short term financial and political priorities, to
the extent that the benefit structure simply fails in too many
areas. There is no controversy in this view, everyone agrees with
it. But there is no agreement about what to do about it.
6. We note that there is no mention in the government's
proposals regarding a wholesale review of HB. This could be because
HB will be particularly difficult to reform because its rules
are so complex.
7. Simplifying HB could mean something currently
excluded will be eligible. This is directly contrary to the saving
money objective. Similarly dealing with "abuses" of
the HB system will complicate it more by the need for extra regulation/
rules.
8. The proposed way of simplifying HB (as set
out in the 21st Century Welfare document) is to incorporate it
together with income benefits and tax credits into a "Universal
Credit". This sounds an attractive idea but it is not clear
how the complexities of HB could avoid being transferred into
the Universal Credit.
9. Logically, eligibility for HB would need to
be significantly relaxed to remove complexity which would of course
significantly increase HB costs.
10. We will now address the specific issues raised
by the inquiry—
Incentives to work and access to low paid work?
11. In order to encourage people to take up employment,
work must pay!
12. The disincentives which are currently created
by the rate that housing benefit and council tax benefit are reduced
as income increases, is the same as applying an extremely high
tax rate on the lowest paid people.
13. This situation needs to change in order to
make people significantly better off in work than on Job Seekers
Allowance.
14. There is currently a four week run on period
for housing benefit when someone starts work, this could be extended
to up to six months.
15. In many cases low pay is simply not high
enough to allow someone to come off benefits.
16. There should be a bigger focus on training
and getting claimant's job ready by ensuring they have the skills
necessary to take up jobs. This would include information technology
skills which are now a pre requisite for the majority of office
jobs.
17. The cost of childcare is a major barrier
to some parents being able to take up work. There is a need for
more subsidised or free childcare places for people wanting to
start work
18. There are no real incentives for an employer
to take on a disabled worker.
19. There can be unequal competition between
EEC and local workers, with EEC workers taking up part time work
and receiving tax credits and child benefit totalling up to £150
per week for wives and children living in their home country.
Local unemployed single people cannot compete.
Levels of Rent including regional variations
20. Initially the changes being proposed regarding
the Local Housing Allowance (LHA) will have most impact in London
and other expensive areas in the south.
21. However by changing to the Consumer Price
Index rather than the Retail Price Index and using the 30th percentile
of rents rather than the 50th percentile of rents to set the LHA
rate, there will be a restriction on the private rented properties
available to LHA claimants nationally (unless they can make up
the shortfall in rent). This will increase the demand for social
housing and increase homelessness.
Shortfalls in Rent
22. 48% of existing LHA claimants already face
an average shortfall of £23 per week, this situation would
worsen.
23. The situation is particularly bad for one
bedroom properties, in some areas by 2015 there could be no one
bedroom properties which are fully paid for by LHA, thereby pricing
benefit recipients out of the private rented sector.
24. Shortfalls resulting from the proposal to
reduce HB by 10% for those who have claimed Job Seekers Allowance
for more than 12 months, working age claimants under occupying
and those with non dependent's, are all likely to result in increasing
rent arrears for housing associations, as claimants struggle to
make up the shortfall in rent.
25. Some claimants will find themselves in a
no win situation ie if a non dependent stays they will have a
reduction in housing benefit, if the non dependent leaves they
could be under occupying and will have a reduction in HB. Either
way they lose.
Landlord Confidence
26. Where a shortfall has to be paid arrears
are likely to occur, which could put off private landlords letting
properties to people on benefits.
27. This will compound the disincentive which
already exists by having LHA paid direct to the tenant in the
majority of cases.
28. If this situation was reversed, ie pay LHA
direct to landlords, they may be more likely to let properties
to LHA claimants and may be prepared to reduce their rents to
the LHA rates.
29. They may consider a guaranteed lower rent
return preferable to the uncertainty of renting to a non LHA recipient.
Levels of evictions and the impact on homelessness
services
30. We do not believe that the proposal to cut
Housing Benefit by 10% for those who have been claiming Job Seekers
Allowance for over 12 months, will result in lower levels of unemployment,
but will instead result in increased rent arrears as claimants
struggle to pay the shortfall. Ultimately this will result in
more abandonments and evictions putting greater pressure on homelessness
services.
31. Levels of evictions are likely to rise as
are abandonments by those subject to arrears recovery action.
This will have a knock on effect in terms of the repair costs
and rent loss for housing associations.
Community Cohesion
32. There is a need to break the cycle of deprivation
and to get people back into work to avoid the situation where
a high proportion of customer's on social housing estates are
unemployed.
33. But this will not happen by simply applying
sanctions, there needs to be an incentive to work so that people
are far better off in being employed compared to the marginal
or net effect on income that people currently face if moving from
unemployment to low paid work.
34. There is a need for work programmes to be
presented in a more positive ways. Too many past programmes were
perceived as negative by unemployed individuals because they felt
that the programmes placed responsibility and blame disproportionately
onto the unemployed. Predictably, enthusiasm was thin on the ground.
35. In contrast, consider a programme that emphasised
government, employers and unemployed individuals all had
responsibilities and contributions to make. Predictably this programme
could be more productive.
36. Housing Associations also have an important
role to play in achieving successful work programmes, by linking
up our customers with the partner agencies who can provide them
with work opportunities and training.
Disabled People, carers and specialist housing
37. The proposal for all Disability Allowance
Claimants to be re-tested is unlikely to result in significant
savings as the majority of these claimants do have severe disabilities.
The cost of re-testing will be significant and the number of disputes
is likely to soar.
38. The government may have been fooled by the
results of the change from Incapacity Benefit (IB) to Employment
and Support Allowance (ESA), where a high number of new ESA applicants
have been turned down. But this may be because those rejected
have been wrongly advised to apply for ESA.
39. The proposal to allow an additional bedroom
to accommodate a carer in the new property size criteria is welcomed.
Older people, large families and overcrowding
40. We are concerned that the under occupancy
rules for working age HB claimants could be extended to the elderly.
We can predict that elderly widow(ers) may feel at risk of being
forced from their decades old family home.
41. In order to free up under occupied accommodation
a local plan is needed involving all registered providers to incentivise
people into moving to more suitable accommodation.
42. There is likely to be increased overcrowding
as non dependents are forced to leave the family home and where
people give up accommodation they can no longer afford due to
the benefit shortfall.
Benefit Administration
43. Finally we would like to comment on the perennial
problem of benefit administration.
44. A permanent problem with HB and other benefits
is the poor quality of decision making. This is known and sometimes
tinkered with but never fully addressed, because the obvious solution
is unacceptable.
45. The obvious solution is to improve the quality
of staff and management. However this cannot be done when staff
costs are (seemingly always) being reduced. The actual position
is that temporary staff are overused, there is little or no continuity
or progression and the only criteria seems to be ability to make
savings.
46. The consequence of poor decision making is
that there are a vast number of appeals and a large proportion
of the appeals are successful.
47. The migration from existing incapacity benefits
to ESA is beginning in April 2011. Over 2,500,000 people will
get a new medical test. The Department for Work and Pensions themselves
expect a high rate of appeals.
48. Currently the Appeals service is going into
a backlog of four to six months. Also the Ministry of justice
is threatening 25% to 40% budget cuts. The predictable result
is that the tribunal service will grind to a halt sometime in
2011.
6 September 2010
| 
