Localisation issues in welfare reform

Written evidence from Citizens Advice (LWR 10)

Introduction

Citizens Advice welcomes the opportunity to respond to this inquiry from the Communities and Local Government Select Committee. In 2010/11, Citizens Advice Bureaux helped 2.1 million clients with 7.1 million enquiries, of which 191,980 were about Council Tax Benefit, 28,364 were about Community Care Grants, and 22,978 were about Crisis Loans.

We are working in coalition with a number of other representative organisations to exchange views and share work-load as the Welfare Reform Bill passes through Parliament. We have written a range of briefings to inform MPs as they scrutinise the Bill in the House of Commons, and have started to engage with Peers for discussion in the House of Lords. The proposed localisation of Council Tax Benefit and proposed abolition of elements of the discretionary Social Fund are two of the issues of common concern amongst these organisations.

We address the last question first: we are confused about the motivation for localisation of Council Tax Benefit and elements of the discretionary Social Fund, which appears to be driven by some form of bargaining between central government and local authorities, regardless of the benefit to constituents. The policies do not appear to have been thought through, and do not seem to be based on any evidence or evaluation of how effective they will be at serving the people who need them. At best, the working relationship appears uncoordinated; at worst, it seems to represent competing priorities which are not aligned in the interests of citizens, but are based on the procedural preferences of the two departments.

Localisation of Council Tax Benefit (CTB)

We can see no advantages to localisation of CTB, and are disappointed that the Government proposes to allow local authorities (LAs) to devise their own rules on council tax relief. We believe that a separate system is bound to result in either a second taper for withdrawal of benefit once the Universal Credit (UC) is introduced; or an extremely complex administrative process whereby the LA decides on who is eligible for council tax relief, calculates the amount of that relief, and relays this information to the DWP to be reflected in the amount of UC allowed to the individual, and then the LA will be responsible for collecting any outstanding council tax. The former will undermine work incentives and add complexity. The latter will result in complex administration, which – though mainly a burden on the system rather than the claimant – is likely to cause significant problems for claimants if it goes wrong, as is very likely where complex systems are required to interact.

Localisation of community care grants (CCGs) and crisis loans (CLs)

We believe that localising resources previously spent on CCGs can only result in less consistent delivery across the country. With sketchy information on a) how the Government will decide on allocation to LAs, or b) how LAs intend to use the money, we cannot give an opinion on whether the funding will be distributed more evenly amongst claimants.

We do believe, however, that LAs will make decisions on how to allocate support based on their current priorities, since there will be no new statutory duty on how the funds are to be used, and no ring-fencing. The proposals as currently described make it possible for LAs to discharge their duties by use of furniture stores, food banks and other services, meaning they could use the cash funds for other LA spending if they choose. It therefore seems likely that – far from experiencing a more consistent provision - claimants will face a post-code lottery for some of life’s basic necessities, and may be expected to rely on charitable grants instead of statutory funding.

Decision-making is currently influenced by the finite amount of money available; while the use of furniture stores and food banks might relieve some pressure on the cash funding, there is still likely to be more demand than supply, so that localisation will not necessarily resolve this problem. It may even give a false sense of resolution, if people are directed to provision which only partially solves their problem, in order to try and spread the resources more thinly – eg reconditioned white goods may be a short-term solution, but are unlikely to be guaranteed against further fault.

Since local authority budgets are allocated by function – social care, education etc – there may be problems for authorities in how to allocate emergency funding across their different departments, since household emergencies do not fall neatly into departmental categories.

The Government does not envisage LAs providing any loan facilities – which effectively abolishes crisis loans for emergency living expenses. This gives us grave concern, as CABs regularly see clients who need a crisis loan in order to buy food, or to top up their gas or electricity card. Under these proposals, we believe many more people will be forced to use high cost lenders, increasing their debts and reducing their ability to take control of their finances. (In a recent survey of CAB advisers, 67 per cent had seen clients who had resorted to high cost lenders after being refused a grant or loan from the Social Fund) [1] .

This also means that the initial funding pot can only decrease over time, as there is no facility to recover a proportion of the disbursement through loans. The funding is only guaranteed for the life of this Parliament, which suggests that there is a very real risk of the provision steadily diminishing until it no longer exists at all.

We are particularly concerned that localisation will effectively remove the right of claimants to apply for a grant or loan, since eligibility can be decided by LAs, and could therefore exclude some people in some locations, depending on local priorities. This is likely to be a particular problem for victims of domestic violence who often have to move away from their home local authority, but are likely to find that the authority to which they move refuses to help them. It will also remove any right of appeal, since – with no new statutory duties – LAs will not be required to create their own appeal mechanisms, and no central mechanism could hope to understand the application criteria for each LA in order to adjudicate over appeals.

Scope of local discretion

In the case of council tax relief and discretionary social fund payments, we prefer a national provision. However, if they must be localised, we believe that LAs should be bound by clear and rigorous rules of accountability, where spending is justified in terms of wider principles such as reducing child poverty, preventing homelessness, promoting equality, and ensuring that everyone has the basic needs, as well as due consideration of further costs to government if people are not supported to manage their immediate needs - for example, re-housing for people made homeless; impact of postponing a move from residential care if claimants can’t afford to furnish a home; health costs for people whose health deteriorates from inadequate physical support, or from the anxieties of their situation.

We believe that these proposals will create an intractable problem by localising provision on the basis of minimal control, as it is hard to see how consistent standards can be maintained without direction from central government. As far as we can see, the commitment to localise council tax relief without jeopardising the single taper of Universal Credit can only lead to a complicated administrative process (as suggested above), which would be open to error and is therefore likely to cause constant problems with calculation and delivery. It seems that it will also add an extra layer of bureaucracy, as the DWP may have to set up mechanisms to monitor local schemes to ensure that relief does align with the principles of UC.

Vulnerability of funds

This was a point of considerable discussion at the Welfare Reform Bill committee’s oral sessions in March. Committee members asked why witnesses believed that LAs would not consider it a priority to support people in emergency need.

This seems to us to show a lack of appreciation of just how difficult LA decisions will be as they manage their greatly reduced spending allocations. We have no doubt that LAs will indeed prioritise support for people in greatest need, but in practice, the definition of ‘greatest need’ is being narrowed and tightened in order to focus diminishing funds – as illustrated, for example, by trends in criteria for social care. (We would argue that there is precedent in what has happened to funds for Supporting People, where ring-fenced funding has gradually been absorbed over time). We are concerned that many people who are highly vulnerable but perhaps not the most vulnerable, will not be given support. The irony is that very vulnerable people will quickly become the most vulnerable if they are not supported to avoid their situations becoming even worse.

We reiterate the point of principle, that - regardless of the actual decisions made by local authorities - - the government’s proposals will remove the existing constitutional protection for people on very low incomes, which recognises that benefit levels are not sufficient to manage unexpected high-cost expenditure, or emergency needs.

Changes required in working relationships between DWP and LAs

As we do not know any details of how the localisation of council tax relief and social fund replacements will work, it is difficult to answer this question. Three points come to mind, however:

Firstly, there appears to be an assumption that many of the people needing emergency support are likely to be in contact with local authority services, and therefore localisation will improve the targeting of support. We do not find this convincing, as LA social services are increasingly focused on people with high levels of care needs, or where children are at risk. Many individuals and families who apply for CCGs and CLs are not eligible for social services, but still need this extra support.

Secondly, if the social fund moneys are not simply to be absorbed into LA funding, there needs to be some joint agreement on how priorities will be decided. It is hard to see how that will be achieved without some central direction - or without considerable extra administrative burden to enable formal discussions between DWP and each local authority.

Thirdly, any sharing of information will depend on effective IT systems, and efficient data processing. Citizens Advice bureaux see numerous cases of official error causing hardship to claimants, including co-ordination between HB payments which are administered locally, and other benefits delivered centrally. After the initial difficulties with tax credits, we are wary of reliance on government IT systems, and while we hope that the IT proposals for Universal Credit will be effective, we have significant concerns that they may not run as smoothly as intended. Adding an extra dimension of co-ordinating information systems between DWP and local authorities clearly adds another layer of risk.

Ability of local authorities to deal with workload

Without more detail, it is impossible to estimate what extra workload will be involved. We have already suggested that a whole new administrative mechanism may be needed to manage council tax relief if it is to be decided by LAs but reflected within UC.

If LAs choose to run local equivalents of the existing social fund, they may have to devise application processes; verification of need; delivery systems, such as access to and delivery of large items of furniture and white goods; possible cash provisions, with associated security of cash and staff; mechanisms to manage repeat applications; and – we hope – some system of appeals. These may not be required if provision is to be made by bodies other than the LA itself, but there could then potentially be requirements to commission contracts and refer claimants, together with a quality assurance process.

The survey mentioned above asked bureaux advisers about the capacity of LAs to provide replacement services for CCGs and CLs. Of 95 advisers who responded, 77 per cent did not believe that their local authority had the capacity to manage this kind of support, with 23 per cent saying they were not sure, and none saying that their LA would manage this provision with existing capacity. [2]

Impact on claimants

Claimants cannot be assessed as one homogenous group.

Regarding social fund equivalents, depending on how the LA manages the funds, it is most likely that the changes proposed will make it easier for some people to access emergency support, and more difficult for others. It may not even be more responsive to local circumstances if the LA decisions are made on narrow definitions of eligibility. We do believe that these proposals will increase pressure on grant-making charities, and we fully expect to see more people turning to high-cost credit.

Regarding localised council tax relief: as suggested above, the proposals risk either creating a second withdrawal taper, which will undermine work incentives; or administrative problems, which can have devastating impact on claimants if they do not receive benefits in time, leading to debt, rent arrears and possible homelessness.

Timescale

If the Bill becomes law early in 2012, and UC is due to be delivered in October 2013, the timescale for change is some 18 months. The way housing costs will be delivered in UC is still unclear, and if this requires as much thought and consultation as childcare has done, there is at least six months’ work ahead just in the planning. HMRC continues to reassure stakeholders that the IT system will be ready, but the history of government IT systems – especially tax credits – does not foster optimism.

We would hope that with the radical nature and wide range of these reforms, there will be time for testing and piloting, which should cover a period of six months at minimum, and preferably a year, to capture the seasonal variations in demand, in claimant behaviours, and therefore in pressures on the system.

We envisage difficulties for LAs in decisions around redundancies and re-deployment/re-training, as they could plan to manage out HB staff in time for the introduction of UC, only to find that if the government’s timetable slips, the LA could be short of staff in the transitional period. Alternatively, if staff are to be re-trained to advise claimants on the new benefit system, they will need to be ready for 2013, while still managing the transition for existing claimants.

The 2011 Welfare Reform Bill contains an unprecedented number of fundamental changes, which will have major impact on some of the most vulnerable people in society, who need reassurance and guidance at the best of times. Advice services therefore expect to face a considerable increase in demand, even as funding is under threat from changes to legal aid; limits on financial inclusion funding; and cuts to LA spending allocations.

June 2011