Written evidence submitted by Cambridge
City Council
Universal Credit is described as a simple system,
and a simple system is likely to be either very unfair, or very
expensive. In order to create fairness, a system needs to be complex.
For example, Housing Benefit for social housing is currently worked
out according to an individual's rental liability and their actual
income and savings. This will be difficult to replicate within
a centrally delivered, simplified scheme and whilst Housing Benefit
may be complex to administer, it is penny perfect and is assessed
on current levels of income and is therefore a fair system, reflecting
current and immediate needs.
It can also be argued that whilst complex to administer,
Local Authorities have made vast improvements over the past decade
with customer service delivery, and the process has been simpler
for customers over recent years.
1. BROAD RENTAL
MARKET AREAS
(BRMAS)
1.1 Regionally based allowances will create a high
number of losers, particularly in areas such as Cambridge, where
there is an expensive urban area, surrounded by a large rural
area, much cheaper in rental market terms.
1.2 One of the recommendations in a recent Social
Security Advisory Committee's report is that "the Department
reviews the BRMAs so as to ensure that 30% of PRS properties are
available to HB claimants in each LA area", which
is certainly not the case in Cambridge.
1.3 Research by Shelter found that in Cambridge only
4% of rental properties were currently affordable (using the 50th
percentile calculation) to people on LHA, as opposed to 70% being
affordable in the rural areas of the BRMA. The change in calculation
of LHA rates to the 30th percentile will make it less likely for
people to find affordable privately rented accommodation in Cambridge.
I cannot emphasise how paramount this (this is very different
to available properties within a BRMA) and will inevitably be
part of the foundations for Universal Credit.
1.4 Failure to do so will inevitably result in increases
in the number of households with rent arrears, eviction and households
presenting themselves as homeless, an increase in the number of
households living in overcrowded conditions and a decrease in
the number of and quality of private rented sector properties
available to Housing Benefit tenants.
1.5 Furthermore, the lack of affordable accommodation
will push people out into rural areas where the substantial additional
cost of traveling will act as financial burden and act as a disincentive
to commuting back into the city to do low-paid work.
1.6 There is already evidence that the introduction
of such broad rental market areas has increased the amount of
Housing Benefit paid versus the more traditional Local Market
Rent Housing Benefit payments. Figures quoted are some £9
per claim per week. Tailoring payments towards actual rents rather
than a broad-brush approach may achieve actual savings.
1.7 The alternative is to pay less benefit, which
will result in a significant number of losers.
2 CENTRAL OR
LOCAL DELIVERY?
2.1 Central control is key within the White Paper,
but could prove difficult in relation to the way that Universal
Credit will be delivered. Housing Benefit is currently delivered
by Local Authorities and there are essential links with local
council tax, homelessness and housing teams as well as strong
accountability to local Members. These local links are essential
when dealing with some of the most vulnerable within our society,
and would be lost within central delivery.
2.2 A suggestion would be to keep Housing and Council
Tax Benefit outside of the Universal Credit, and for this to continue
to be administered locally as one of Local Authorities strengths
is its proven track record in administering Housing and Council
Tax Benefit as well as excellent customer contact. Fraud and Error
rates are lower than HMRC and some other DWP administered benefits.
2.3 Alternatively Local Authorities would be better
placed to implement the Universal Credit as they have excellent
performance track records, are linked to local strategic issues,
have over recent years done more for less, and already collect
most of the information needed to assess other benefits.
2.4 It can be argued that it would be far easier
and cheaper to develop existing LA software systems to set up
Universal Credit. Strong links are already established between
LA's and DWP as well as with LA's and housing providers.
2.5 Although a high proportion of private rental
claimants have their rents paid direct, this is not the case for
social housing. These tend to cater for the more vulnerable individuals
who would be unable to manage a single income stream with multiple
outgoings. This would be exacerbated if the amount allowed for
housing costs were to not be readily transparent in the Universal
Credit calculation.
2.6 Rental collection costs associated with an increase
in direct payments will surely push up rents and therefore place
a pressure to increase the general Universal Credit housing addition
amounts to cover these costs.
2.7 A large centralised delivery system will not
have the appropriate coordinated approach required to support
people back to work nor link into the localism agenda.
3. INFORMATION TECHNOLOGY
RELATED ISSUES
3.1 It is a dangerous assumption that the 8 million
people who will be affected by Universal Credit will have access
to on-line claiming facilities. Nearly one third of households
do not have Internet access at home, and whilst telephone claiming
has some success in recent years, on-line claiming and reporting
of changes is still in its infancy.
3.2 Real time look-up of HMRC data to verify earned
income would make claiming more straight forward, but is it really
achievable in the timescales proposed? Currently employers are
only required to report this information to HMRC on an annual
basis and the self-employed have different arrangements, so this
must be seen as an aggressive, if not unfeasible timescale.
4. AFFORDABILITY
V FAIRNESS
4.1 The Emergency Budget and the Comprehensive Spending
Review saw announcements to changes to the existing Housing Benefit
system that pave the way to Universal Credit.
4.2 From April 2011, Local Housing Allowance rates
will be set at the 30th percentile of local rents for new claims
and a period of up to nine months transitional protection will
be available for existing customers from the date the claim is
reviewed.
4.3 Nationally, for two-bedroom rate, the
difference between the 50th percentile (used currently) and the
30th percentile is £9 per week or less in over half the areas
in England. In Cambridge the difference is £25, representing
a decrease of 15.3%, which is significantly greater than
the percentage loss in London.
4.4 Currently Cambridge has 800 LHA claimants, and
if on average, each claimant loses £20 per week, this would
equate to £832,000 per year.
4.5 Whilst it is accepted that the above figures
relate to the current scheme, the changes to Housing Benefit are
seen as paving the way to Universal Credit and that in order to
achieve the considerable savings that are to be delivered through
Universal Credit, there will be a considerable number of losers.
A simplified system will simply be unable to cater for the diverse
range of customer needs.
4.6 We know that Universal Credit is likely to be
less generous than the existing schemes if the Emergency Budget
and Comprehensive Spending Review announcements are paving the
way for Universal Credit. The change to the 30th percentile, the
increase in non-dependant deductions, the introduction of the
benefit cap, the cuts to Child Benefit and Tax Credits, more rigorous
testing for disability benefits, the sanction for unemployed in
receipt of JSA for 12 months, the uprating of benefits using CPI
instead of RPI, all signify warnings regarding a reduction in
payments via Universal Credit.
4.7 The vast majority of Housing Benefit claimants
are pensioners, disabled or carers, and people in low paid jobs,
with a minority of people being unemployed. Redesigning the welfare
system under the premise of getting people back to work and reducing
perceived escalating costs ignores the fact that it is actually
the safety net for the most vulnerable within our society.
December 2010
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