House of Commons - Localisation issues in welfare reform - Communities and Local Government Committee

Localisation issues in welfare reform - Communities and Local Government Committee Contents

4 Housing Benefit

The Government's proposals

58. Housing Benefit is an income-related benefit designed to help people on low incomes pay for rented accommodation, whether in work or not. At May 2011 there were 4.88 million recipients of Housing Benefit in England, Wales and Scotland, of whom almost three-quarters were aged under 65.[123] The Government intends to replace housing assistance through Housing Benefit with an amount to help meet rent or mortgage costs included in Universal Credit for new claimants from 2013. Existing Housing Benefit customers would be migrated from Housing Benefit onto Universal Credit between 2013 and 2017.

Consequences of centralisation

59. The National Housing Federation (NHF) expressed concern about certain advantages of the current system being lost with the incorporation of Housing Benefit into Universal Credit. These included "administrative efficiencies", such as landlords rather than tenants informing the local authority when rents are increased, effective joint working between landlords and administrators, council staff's knowledge of the local housing market, and the ability to provide claimants with face-to-face meetings and advice.[124] Cllr Peter Fleming cited research carried out by the District Councils Network which indicated that on average, two-thirds of Housing Benefit claimants require some face-to-face interaction with council staff.[125] Lynne Hutton of BenX described improvements in service efficiency in local authority benefits services, the skills of their staff, and their caseloads which are small enough to allow staff to keep customers well informed about their application:

If suddenly you have a caseload of 4.9 million, for example, which is the current Housing Benefit caseload [nationally], how do you tell Mr Smith from Colchester what is happening to his claim when he comes into a local office wanting to know when he will get his rent paid?[126]

NHF posed the questions, "Can a centralised benefits system remain knowledgeable about, and responsive to, local claimants? Who or what will replace the local expertise and presence of local authority Housing Benefit staff?".[127]

60. Asked whether he was concerned that the centralisation of Housing Benefit would break an important link with local knowledge of housing markets, Steve Webb responded that "the arithmetic behind the figure [...] is determined locally and paid through a national mechanism. You are still using local knowledge of what is going on in the local market."[128] The need for face-to-face contact would, Mr Webb told us, be met by local Jobcentre Plus services.[129]

61. The loss of local discretion may also be problematic. For example, the Government plans to reduce Housing Benefit for working-age tenants whose homes are deemed to be too large for their needs. NHF pointed out that in some parts of the country, families have been purposefully allocated properties that under the new criteria would be considered too large for them. This may have been in order to prevent a concentration of children on an estate, or because there is a severe shortage of suitable smaller accommodation, and some large properties may have been specifically adapted for residents with disabilities.[130] Local authorities will retain the ability to make discretionary housing payments, but it is not clear how this will dovetail with a centralised administration system.[131]

62. The centralisation of Housing Benefit will pose practical challenges for councils, whose benefits staff will be responsible for implementing major changes in the current Housing Benefit regime right up until the introduction of Universal Credit, when the function will transfer to DWP agencies. The IRRV stated that:

The move to UC will have profound implications for many council employees, council systems, contractual arrangements with private suppliers and support services within councils. No meaningful details as to transitional plans to move to the future delivery arrangements are contained in the Bill. This raises questions as to the extent to which staffing, systems, contractual and transition costs arising from the reform such as will be met.[132]

63. The decision to take responsibility for Housing Benefit away from councils left our local authority witnesses puzzled. Cllr Peter Fleming told us that "in the current climate of localism I cannot see how any minister can talk about centralisation of a service that is working and delivering well locally for the people in our society who are the most needy".[133] Kerry Macdermott argued that "When you look at our performance, it is exemplary; it is without equal compared with other public service issues".[134] The Chartered Institute of Housing (CIH) stated that

The performance improvement achieved by local authorities in the last ten years has been so outstanding that it is now widely accepted that Housing Benefit, despite being the most complex of all benefits to administer, is now consistently the best performing service across the whole benefits system. It would be unwise to lose these skills and knowledge as we embark on the most radical restructuring of welfare for 60 years.[135]

CIH also pointed out that, for local authorities, taking on responsibility for assessment and administration of housing costs within the Universal Credit would present only a very manageable increase in caseload, compared to the extra 4.87 million customers DWP would have to deal with under a fully centralised UC.[136]

64. CIH argued that continuity in administration would help to mitigate some of the risks inherent in delivering the very complex Universal Credit to a tight timescale. Maintaining local administration of the housing costs element of Universal Credit would, CIH argued, retain the advantages of localisation—local knowledge of both employment and housing, efficient systems, links with social care and Supporting People services, and a better chance of uncovering fraud—while realising the streamlining and work incentive goals of the Universal Credit. It would allow different elements of a UC claim to be assessed in parallel, cutting down the risk that payment of the whole amount would be delayed until the most complex element—likely to be the housing costs element—had been assessed. CIH argued that, as long as assessment of income according to common rules, and the excess income deduction was applied to the combined elements of the Universal Credit, there was no practical reason why every element of UC had to be delivered through a centralised administration.[137]

65. The BenX Review Group expressed concerns about breaking the link between Housing Benefit and other local authority departments such as those responsible for local housing strategy, homelessness services, and relationships with housing providers.[138] These links could be particularly important if, as BenX speculated, changes to Housing Benefit entitlement result in a shortfall of suitable accommodation and greater call on homelessness services.[139] CIH was concerned that, in a fully centralised system, there would be little incentive for landlords to engage with their local authority, which would damage strategic partnership working.[140]

66. Cllr Peter Fleming argued that it was problematic to take away Housing Benefit administration from local authorities at the same time as they gain responsibility for the Social Fund, as the former promotes interaction with a great many people in need of the latter.[141] Dr Peter Kenway commented that "Council Tax Benefit works really well with Housing Benefit […] That is being broken and it is a real worry".[142] The change could also be confusing for customers used to dealing with only one port of call on both of these benefits, one claim form and a combined award notice.[143] Lynne Hutton told us that the group of local authorities she represented

truly welcomes welfare reform. We know that there needs to be simplification, but we feel that with two very different agendas, one about localism and one about centralisation […] it makes it extremely hard to administer it across the whole spectrum.[144]

67. Asked whether the decisions to localise Council Tax Benefit and at the same time centralise Housing Benefit were in some way at odds, Grant Shapps told us:

I do not think that is right, because housing benefits are set nationally. There is no local discretion in the way this operates, whereas, as I just mentioned, the rate and level of council tax is set by the local authority; they have to manage the budget, so it makes sense for them to manage the benefit side of that as well, because it is supposed to be an entirely local tax.[145]

However, the cost to individuals which Housing Benefit alleviates—rent levels—does vary across the country, and although rents may not be set by local authorities, councils have a very important stake in the impact that the interaction of Housing Benefit and housing costs has on their local housing market and outcomes for individuals. The Chartered Institute of Housing told us that "it is impossible to completely isolate the issue of housing affordability from other areas of local authority responsibility [...] Housing Benefit is a means by which local authorities can offer a more integrated approach to service delivery".[146]

68. We understand and are sympathetic to the policy intention behind the Universal Credit, but believe that in the case of support for housing costs, councils should retain administrative responsibility. It is incongruous for a Government committed to decentralisation to plan to remove from local authorities a function which they administer well, in which they have irreplaceable expertise, and which greatly affects other areas of local policy-making and service delivery such as housing strategy and homelessness. Furthermore, while Universal Credit aims to make the system simpler, in splitting responsibility for Council Tax Benefit and Housing Benefit it may introduce unnecessary complexity for customers.

Payment to tenants

69. The DWP intends to have a single payment of Universal Credit made to each household, but this will not necessarily therefore go to the person responsible for paying the rent. The National Housing Federation argued that these payment arrangements pose certain risks to individuals, to local authorities and to housing providers. If tenants can no longer choose to have Housing Benefit paid directly to landlords, Helen Williams argued, "the costs of rent arrears management and rent collection will go up significantly". A pilot study by London and Quadrant Housing Trust suggested that if 90% of all their tenants received their Housing Benefit payments directly, the Trust's management costs would go up by about £300,000 as staff spent time collecting arrears and helping tenants with budget management.[147] Lynne Hutton similarly predicted that more evictions and rising rates of homelessness would result.[148] Alan Barton told us that Citizens Advice was somewhat torn on this issue:

We favour people's autonomy, but in local housing allowance there is already a situation where rent is normally paid to the tenant and that people who find it rather difficult to organise their lives get into all kinds of difficulties. […] I would hope that when Housing Benefit goes into Universal Credit there will be arrangements to enable the tenant to agree that their Housing Benefit is paid direct to their landlord.[149]

70. NHF further argued that "the loss of direct payments would also be likely to have an impact on cash flow-based loan security valuations and will cut future borrowing capacity of housing associations at a time of constrained public spending."[150] Helen Williams reported that the Council of Mortgage Lenders considered expectation of direct payment to be crucial in ensuring that housing associations have access to competitive loan rates. NHF analysis predicted that the increase in the cost of existing loans to housing associations could be in the region of £30 million.[151] The Chartered Institute of Housing pointed out that even direct payment is not a guarantee of income for landlords if there are significant delays in the processing of claims, a scenario they believed to be likely if all elements of the Universal Credit are processed centrally.[152]

71. Grant Shapps told us that the Government remained to some extent open-minded on the issue of direct payment:

We are not proposing to move without evidence and testing out these things, so we are very cautious in our approach to this. Final decisions have not been made in this area at all. [...] but if you believe in Universal Credit [...] you have to find a system of having a single payment in order to support that approach [...] but within an environment where we can reassure the landlords and social landlords that they will not lose out.[153]

However, Mr Shapps was sceptical about the potential impact on the financing of new social housing: "I do not want to pour too much scorn on the NHF evidence to you, but barely a week goes past when it does not announce there will be some catastrophe".[154] Steve Webb added that

the evidence is that the numbers of landlords renting to private tenants from whom they do not get direct payments is going up every year. What we are looking at with Universal Credit is whether there are ways, for example, of carving up the money people get, whether it is direct debit, jam jar accounts or whatever it is, so that the rent gets through as painlessly as possible while still treating people like adults.[155]

72. We are concerned about the potential negative impact of direct payment arrangements for the Universal Credit on social landlords and the availability of finance for investment in the social housing sector. We are encouraged by the Minister's assurance that final decisions have not yet been made on this point, and recommend that a thorough assessment of the possible impact of direct payment on housing associations' ability to borrow be undertaken before arrangements are finalised.

123 DWP, Quarterly Statistical Summary, 17 August 2011 Back

124 Ev 33; Ev w61; Qq 11, 20 Back

125 Q 33 Back

126 Q 33 Back

127 Ev 33 Back

128 Q 83 Back

129 Q 57 Back

130 Ev 36 Back

131 Ev 36 Back

132 Ev 30 Back

133 Q 39 Back

134 Q 37 Back