White Paper on Universal Credit

Written Evidence Submitted by Crisis

Summary

1. Crisis, the national charity for single homeless people, has long been calling for reform of the welfare system. We welcome the basic principle of the simplification of the benefit system through the introduction of Universal Credit and a single unified taper.

2. Whilst we welcome moves towards a universal benefit, we believe that housing support is a special case not least due to regional and local variations in rent and the importance of housing stability. A universal system needs therefore to consider carefully how housing costs will be best accommodated. In particular, levels of housing support must retain a link to local or actual rents and for those that require them there should still be the ability for payments to be made direct to the landlord, as with the present system.

3. We are also concerned at how proposals that council tax benefit remains a locally administered benefit might work in practice and the potential impact this could have on the single benefit withdrawal rate and work incentives.

4. The central administration of Universal Credit by the Department for Work and Pensions could in principle help to further lessen complexity. The key, however, will be how well any system is administered rather than where it is administered from. The new IT system will be particularly important especially for those with fluctuating incomes; this needs to be robust enough to correctly and quickly assess entitlement to Universal Credit, supported by effective training for all advising staff and education for customers on their rights and responsibilities. It is essential that any IT system to support the introduction of the Universal Credit is simple and transparent for customers, that claimants only have to report changes to one department, and that benefit payments are made correctly and on time.

5. Finally, Crisis is concerned at the proposals to strengthen conditionality in the benefit system. We do not believe that sanctions are an effective work incentive as they can in fact in further demotivate individuals, particularly those who are vulnerable and with a range of needs and/or who have been out of work for a number of years. They can also cause hardship for individuals and undermine their housing stability.

Housing support

6. It is important to note that there are far more local variations in rent than other living costs. Rents, particularly in the private rented sector, vary widely but in some areas, partly due to a lack of supply, they can be very high. The average weekly rent in England is £132 but in London for example this rises to £207 [1] . Localised support with housing costs has long been a feature of the welfare system and any changes to this particular element of support therefore needs particularly careful consideration.

7. The less local variation there is in a system of housing support, the greater the likelihood of higher rent areas across the country becoming unaffordable to those on lower incomes. This would be an undesirable policy outcome as it would exclude people on lower incomes from living in certain areas with significant implications for work incentives and mixed communities. It could also result in the creation of ‘benefit ghettos’, with higher concentrations of poorer households and impacts on communities’ aspirations, demand for and quality of services etc. Support with housing costs, in what ever form it takes, must therefore continue to reflect levels of rent in a local area.

8. We welcome the intention that, for those who rent, the housing cost element of UC will ‘be similar to the support currently provided through Housing Benefit’. However, Crisis has serious concerns over many of the changes to Housing Benefit announced in the Budget and Comprehensive Spending Review which will ultimately result in many claimants receiving a lower rate of benefit. As DWP’s own impact assessment of the Housing Benefit cuts has highlighted, these cuts will have a serious impact on those affected, reducing incomes, increasing hardship, homelessness and pressure on other budgets and services.

9. These concerns aside however, the Government has set out its intention that, in general, for those renting privately approximately 30% of properties should be affordable within Local Housing Allowance rates. Whilst Crisis has numerous concerns over this proposal, we believe that at the very least a system of Universal Credit must ensure that this proportion of properties remains affordable within LHA rates on an ongoing basis.

10. It is the Government’s intention to uprate LHA and then the housing cost element of UC by the Consumer Price Index. Government forecasts are that this will save £390million. This suggests that it is a conscious policy decision that rates will increase at a considerably lower level than had they been pegged to rents. As rents generally rise faster than CPI, over time LHA rates are likely to be eroded. Between 1991-2009 for example, CPI averaged 2.86% per year and rent only inflation 5.43%. We are concerned therefore that the link between housing benefit and rent will be broken and, what’s more as rents rise at different levels in different parts of the country (due to economic factors and the local housing market), benefit levels will cease to reflect local rent levels.

11. We are therefore very concerned that over time, the housing support element of UC will cease to reflect rent levels meaning that in many areas housing benefit will no longer meet people’s housing costs and claimants will be unable to afford to live in those areas. We are deeply concerned at the impact these changes may have on people’s ability to find and sustain accommodation in the PRS in the medium to long term. This is a particular concern at a time when the PRS is increasingly being looked to by Government to address housing need as evidenced for example by proposals that the homelessness duty can be discharged into the PRS without a household’s consent.

12. We therefore believe that any system of universal credit must build in checks to ensure that 30% of market rents in each area remain affordable. Such checks could for example be based on a similar system to the way in which LHA rates are set at present whereby rent officers calculate the rates based on actual rents. If rent officers were to continue to perform such a check on, say, an annual basis rather than monthly as at present this could help to ensure that in principle 30% of market rents remain affordable to those on benefit whilst reducing some of the complexity associated with a more frequent recalculation of rates. The Valuation Office Agency could retain its role in ensuring that housing support remains appropriate to housing costs.

13. Likewise, consideration needs to be given as to how best to uprate the caps to housing benefit which are being introduced. If they are to be uprated simply by CPI, then, over time, increasing numbers of areas, will become affected. In order to prevent this happening, at the very least, Crisis believes they should be uprated by rent inflation with consideration given to the number of areas affected by the caps. We would not like to see and do not believe it to be the Government’s intention that the caps should cover ever greater numbers of localities. There should be a review built in to ensure this doesn’t happen. This could be similar to the annual pegging of housing costs to local rents and could ensure that the caps were inflated sufficiently to prevent rates in other areas being further suppressed by them.

14. The White Paper sets out its intention that for social rented sector tenants, housing support will be based on actual rents as it is currently (with the exception of households who are ‘under occupying’ their properties). Whilst we support this principle, careful consideration needs to be given as to how such a local, indeed individual, variation in the level of support required, will fit within a universal, centralised system. One option would be to give RSLs a role in feeding in information about the level of rent a claimant is eligible to pay. The resulting amount could form the additional amount or add on for housing costs. This will of course add a degree of complexity to the system but we believe that this is necessary to ensure that people are able to meet their housing costs.

15. Another issue which requires particular consideration is that of direct payments. At present, for all social tenants, payments of housing benefit go direct to the landlord. The White Paper states that there are advantages to paying the housing component of UC to individuals but acknowledges the importance of stable rental income for social landlords. With affordable housing budgets already facing huge cuts, it is all the more important that changes to the way in which housing support is delivered does not disrupt the current ability of RSLs to borrow to finance the building of new social homes.

16. It is also important that vulnerable tenants in the PRS, who will otherwise face difficulties in paying their rents, are protected from eviction and homelessness by the provision that housing support can be paid direct to the landlord.

17. We believe that any system must therefore retain the ability for support with housing costs to be paid direct to the landlord. The White Paper briefly sets out that this could mean retaining a direct payment element or the use of direct debits alongside a protection mechanism. These proposals clearly need some detailed consideration and consultation to ensure that they can achieve the aim of protecting people’s housing stability.

18. Consideration must also be given as to how the current safeguarding criteria for vulnerable households could work in a centralised system and whether decisions on applications made under these criteria are best taken centrally or locally. It is likely that whatever the mechanism it will entail some degree of complexity but Crisis strongly believes that protecting people’s housing stability and preventing homelessness should be a guiding principle in introducing a new form of housing support.

Council tax benefit

19. We are concerned that 10% cuts to Council Tax expenditure could lead to hardship for many households. What’s more if Government intends, as is set out in the White Paper, to protect the ‘most vulnerable, particularly pensioners’, this could mean deeper cuts to support for other groups. In effect, it could mean a situation whereby households will have to pay some tax, regardless of their ability to do so and could be reminiscent of the poll tax, with local authorities chasing large numbers of low income households for relatively small amounts of council tax. As well as the hardship this could cause to low income households and public concern that it could generate, it could also pose real administrative challenges and extra costs for authorities.

20. We are also unclear as to how a localised system of council tax benefit might sit alongside Universal Credit. The White Paper is clear that it should not undermine the positive impact of UC on work incentives. Presumably, this means that the withdrawal of CTB would need to be consistent with the rate of withdrawal of UC. Otherwise, it could mean that households faced higher and different withdrawal rates undermine the very principles of UC – around simplification and increasing work incentives.

Mandatory Work Activity & Conditionality

21. We have concerns that mandatory work activity is not the right approach. We understand that there may be some value in it for a small number of benefit recipients. However, we believe these groups to be in a minority and we a re concerned that for those who’ ve been out of the labour market for a considerable period of time and clearly face barriers to finding work and particularly for those who are vulnerable, this approach could in fact be detrimental.

22. If an individual is already doing a course or undertaking other useful activity which they then have to stop in order to undertake mandatory work activity , then this could in fact b e undermine the individual’ s development and progression towards work. We are unclear how, with no employment opportunity at the end, compulsory work would help someone move closer to employment. In fact, it appears to be a mainly punitive measure and we are unclear how these work placements will significantly differ from community sentences for offenders.

23. We have additional concerns that this scheme may have a detrimental effect on more vulnerable clients, especially individuals who may, for example, have mental health problems (which may not be immediately identifiable and who may still be in receipt of the JSA element of UC ). These compulsory work trials could also serve to stigmatise individuals and put off potential employers.

24. As well as how this scheme would compare to community sentences, we are also unclear how such a scheme would sit alongside genuine volunteering. Crisis places great value on the role volunteering can play in helping people towards work. Perhaps a better route would be to offer people a suitable volunteering placement which can increase people’s confidence and motivation, build up skills and be of benefit to the community. All placements would however, need to be meaningful and of benefit to the individual undertaking them.

25. We are also concerned about proposals to increase conditionality and sanctions which could result in people’s benefits being withheld for up to 3 years. Bar a few exceptional cases, our experience is that most people on benefits want to work but face significant barriers to doing so. Reducing or stopping someone’s benefit and undermining their stability is unlikely to help them move towards work but could instead effect their ability to look after themselves and their family, to pay their rent, bills and so on. We do not want to see people facing unnecessary hardship or getting into arrears and debt as a result of this approach.

26. This is particularly the case for more vulnerable people. Any moves towards greater conditionality and a tougher sanctions regime must ensure that it has sufficient safeguards to protect more vulnerable individuals from being unduly penalised. While some individuals may appear not to be complying with the conditions placed on them, this may in fact be unintentional and due to a vulnerability, such as a mental health condition. We must ensure that advisors are trained to recognise this and that individuals are not inappropriately penalised. Crisis has particular concerns about the possibility of benefit sanctions leading to homelessness. We cannot stress strongly enough that we would be extremely concerned at the introduction of any policy which could lead to an increase in the number of people becoming homeless.

27. We are also concerned at proposals to replace hardship payments with loans and to potentially limit the ability of those facing sanctions to apply for them. We do not believe it would be desirable or help to improve work incentives, to leave people facing severe hardship or be saddled with debt which they face little prospect of being able to pay off. Debt can be particularly disastrous for those on low incomes and actually serve to undermine work incentives.

Universal Credit delivery

28. It is essential that the IT systems to support a Universal Credit should be robust, and make applications to benefit easier and more transparent. The new IT system needs to work accurately and efficiently, and avoid the previous types of errors that the HMRC Tax Credits system made in overpaying billions of pounds in benefits.

29. An automated/self-service system may exclude many of the most vulnerable people, who may not have access to computers, or be skilled in their use. It will be important that adequate phone but also face to face access routes remain available for all those who need them.

30. We also believe that a monthly payment of Universal Credit could present difficulties for more vulnerable customers who may have problems budgeting. There should therefore remain the option of more frequent payments for those that require them. Many other customers may require support with financial management skills and we would like to see an increase in the availability of such support.

About Crisis

Crisis is the national charity for single homeless people. We are dedicated to ending homelessness by delivering life-changing services and campaigning for change. Our innovative education, employment, housing and well-being services address individual needs and help people to transform their lives.

As well as delivering services, we are determined campaigners, working to prevent people from becoming homeless and advocating solutions informed by research and our direct experience. Crisis has ambitious plans for the future and we are committed to help more people in more places across the UK. We know we won’t end homelessness overnight or on our own but we take a lead, collaborate with others and, together, make change happen.

December 2010