Localisation issues in welfare reform

Written evidence from the Convention of Scottish Local Authorities (LWR 16)

1. The Convention of Scotish Local Authorities has made several submissions to the House of Commons Bill Committee on Welfare Reform. We welcome further consideration of the implications of the Welfare Reform agenda, especially in light of the speed at which the proposals are progressing and the lack of detail currently available from UK government departments. Many of the issues addressed in the questions below are as relevant to Scottish Local Authorties as they are to the Members of the Local Government Association and we hope that this submission makes a positive contribution to the committee’s deliverations.

Q1: What are the advantages and disadvantages of localisation of council tax benefit? Are concerns that it will undermine the intent of Universal Credit valid?

2. COSLA believes that any change to the status quo presents a risk to local authorities in terms of income from, and the administration of, Council Tax Benefit. On balance however, COSLA believes that the risks of centralising CTB into the Universal Credit are greater than those posed by devolution. There are many positive reasons why COSLA supports the devolution of CTB and the localised provision of CTB by local authorities but it is worth pointing out that in part, this position is driven by the desire to avoid the disadvantages perceived from the potential to centralise the CTB into the Universal Credit. As such the first part of this evidence will detail what those perceived risks are and why COSLA welcomes the UK Government decision to devolve responsibility for CTB.

Centralisation of CTB

The following have been identified as further risks of centralising CTB into the Universal Credit

· Firstly, this would break the link between liability for Council Tax and Benefits. Councils set Council Tax and, rightly, they are the proper authority to apply Benefits and any other discounts. We believe this promotes transparency as the Benefit entitlement is directly linked to the personal liability for Council Tax. COSLA take a similar position with regard to housing Benefit.

· The Universal Credit may indeed prove to be simpler for the UK Government to administer. However, it is unlikely to be simpler for recipients, many of whom are vulnerable and/or come from chaotic backgrounds. They will have to manage very tight household budgets and making ends meet will prove very difficult for most, if not all. Within this context, the UK Government is suggesting that it will be simpler for these families to make their own arrangements to pay multiple providers of essentials such as Council Tax, housing, social care services etc. It may be possible for some benefit recipients to manage these responsibilities but certainly not for a substantial number.

· Centralising all benefits under the Universal Credit may also be cheaper for the UK Government to administer but it is unlikely to be cheaper for the public purse. If Council Tax Benefit was to be centralised then Local Authorities would almost certainly have to introduce added layers of bureaucracy for collection of payments, arrears control, debt management and prosecution for non payment. Any savings for central government would come at the expense of local government, with the likelihood that the cost of meeting these extra administrative burdens would be passed on to the local tax payer.

· Councils have a statutory duty to recover arrears and have striven hard to improve collection rates. Many MPs should also be mindful that they are often the first to criticise Councils for their collection rates and for not pursuing arrears more vigorously and whilst we would argue that Councils have an excellent track record in recovering arrears robustly but fairly, this will come under severe pressure if responsibility for Council Tax Benefit is taken away from Councils and Direct Payments to benefit recipients implemented.

· Centralisation also removes the role which Councils play in supporting individuals into work and into sustainable environments where they and their children are likely to achieve the best outcomes. Those in receipt of Council Tax Benefit and Housing Benefit have a relationship with the Council which goes beyond simply the application of Benefits themselves. Very often these are the most vulnerable people in our communities and they have access to the wide range of advice and support from Councils which goes hand in hand with the assessment of Benefit entitlement. Centralising those services currently within the auspices of the Local Authority limits our ability to stretch the public pound and ‘achieve more with less.’ Indeed – it may even jeopardise the future viability of those services.

· Finally, it is worth noting that COSLA believes that Centralisation of CTB into the Universal Credit would impinge upon the devolved settlements. There is already concern that the Welfare Reform Bill is being considered from a purely Westminster perspective and not recognising the specific circumstances relevant to devolved administrations. Therefore it is incumbent on us to make the following arguments with regards to Welfare Reform from a Scottish local government perspective.

Scotland is devolved and has powers on taxation which are central to devolution, therefore any changes to the Benefits system which have a bearing on these powers needs to be carefully considered. Devolution has meant that Scotland has and can make different policy based decisions to the rest of the UK. The Scotland Act further protects these powers and we are very aware that all of the Scottish Political parties have taken positions in relation to Local Taxation Policy.

Regardless of what each of the political parties’ positions are, they all operate within a devolved context and COSLA would not want to see a system being introduced that closes doors or restricts the ability for self determination. If the UK Government reverts to centralising Council Tax Benefit this would inhibit Scotland’s future influence and control over local taxation.

Devolving CTB

3. COSLA believes that there are significant advantages to devolving CTB to local authorities. As explained above, many of these are drawn from the fact that it will avoid the adverse implications of centralising the CTB into Universal Credit. However, the following are a list of further advantages to devolving CTB to local authorities.

· Devolution would allow for the local discretion to design schemes with sufficient flexibility to meet local needs. While relevant to all local authorities this is particularly welcome in those local authorities with very unique local circumstances such as those in remote and rural Scotland.

· Local Authorities could ensure a more holistic approach to CTB, and wider discounts and exemption policies.

· The CTB would reflect local liability for Council Tax

· The current system of CTB is bureaucratic in its content and any devolved management as well as local administration would make simplification easier to achieve.

· The administration of CTB in Scotland has already experienced year on year cuts from the DWP and local authorities have worked hard to design shared services for administrative delivery which capitalise on economies of scale by operating in an integrated way with other local authority financial services. Devolving CTB to local authorities would allow us to build upon this approach rather than establishing a new centralised model of administration.

· Payments would be made direct to the local authority thereby avoiding the added cost of collection and the potential losses from non-payment, debt and arrears.

4. However, we accept that there are some risks posed by devolution which will need to be addressed as part of any agreement to transfer responsibility either direct to Local Authorities or through the Scottish Government. Most of the risks posed by devolving CTB are financial and come from the UK Government’s cuts agenda around welfare reform. COSLA is particularly concerned about how the financial package for devolution is to be calculated; how the 10%cut will be calculated and how future liability might be addressed. However, we do not believe that these issues are insurmountable. Our concerns are explained in more detail below.

· 10% cut to CTB if devolved

The UK Government have not yet been clear about how the 10% cut will be calculated. This is an important point for COSLA. Indiscriminate cutting of budgets act as a disincentive to local fiscal responsibility. Since 2008/09 Councils have frozen CT and therefore the CTB bill has not risen. The UK Government have thereby financially benefitted from this policy by around 3% year-on-year savings. Applying a blanket 10% cut to CTB in a devolved settlement for Local Schemes will not reflect this and could place a greater than 10% cut on the CTB actually received by Scottish claimants.

· The UK Government must provide for current and future liability in a devolved setting

If CTB is devolved, the transfer of finance needs to match the transfer of responsibility. Currently, Local Authorities estimate that 65% of those eligible actually take up CTB. Demand for benefit is likely to grow in the immediate future by virtue of economic and employment predictions and therefore this must be reflected in the transfer of resource in future years.

Q2: Will localisation of Community Care Grants and Crisis Loans resolve identified problems with these funds? (such as uneven distribution of funding, variation in success rates for applicants with similar needs across the country, high administrative costs, questions over the standard of decision-making processes)

5. Unlike CTB, there is some question over the rationale for devolving this fund outwith the wider centrally administered Universal Credit system when the purpose of the fund is to support those receiving the Universal Credit who find themselves in financial crisis.

6. This issue aside, COSLA is clear that any suggestion that the Social Fund should be devolved to Local Authorities in Scotland presents significant risks to councils. Most or these risks are financial in that it is widely accepted that demand for this type of financial relief does and will increasingly outstrip the supply available. However, we are equally concerned that Local Authorities are not best placed to administer this fund due to our other income maximisation roles and the legal duties prescribed in Scotland to professional groups such as Social Work. Unless the risks posed to local authorities can be resolved in partnership with the Scottish Government we will be looking to resist the further devolution of this responsibility to Local Government.

How much local discretion will/should be allowed in criteria, systems, decision-making and so on? What, if anything, should be off-limits to local decision-making? (For example, DWP has committed to ensuring that localisation of council tax benefit does not jeopardise the single taper feature of Universal Credit)

7. COSLA is in agreement with, and supportive of the aims behind Welfare Reform, namely, to decrease bureaucracy in the system, and to remove any barriers to employment which promote dependency and trap people on benefit. There is no reason why devolution of CTB should compromise these aims. However, equally, it is appropriate that these aims are pursued in a way which is locally relevant and restrictions should not therefore be applied to local authority discretion.

How vulnerable will the funds available be to pressures on general local authority finances?

8. It would be equally appropriate to ask ‘how vulnerable will local authority finances be to the pressures being imposed by welfare reform’. Welfare reform and the regulatory changes around it will impose a level of reduced income for local authorities which could seriously undermine their financial stability. Not least of these are the combined effect of the cuts being imposed to Housing Benefit and the Disability Living Allowance.

9. UK Parliamentary pressure should be placed on the UK Government to take responsibility for balancing the wider public purse rather than transferring financial burdens onto Local Authorities in order to balance the Treasury books. Local Authorities are very aware that in the end the taxpayer will be at a disadvantage and that these reforms and cuts could further jeopardise constituents’ rights to local services.

Is the timescale for change (including the rolling of Housing Benefit into the Universal Credit) realistic?

10. COSLA has consistently made the argument that it is unrealistic to suggest that Local Authorities should have a new scheme established by April 2013 when the Bill abolishes CTB. The timelines are so tight as to be unworkable as new arrangements would involve public consultation, political approval, design specifications for IT, tendering processes, modelling and testing periods, and finally, delivery and charging policy. With regards to HB, the lack of transitional arrangements takes no account of how possible it is to deliver the system requirements associated with welfare reform nor whether Local Authorities and RSLs have the required stock to accommodate change. COSLA will work with the DWP to try and ensure that the transition period happens as seamlessly as possible but more meaningful engagement is urgently needed to achieve this. Wider issues will need to be resolved such as the cost of running two systems over a prolonged period, meeting the cost of any contractual penalties, TUPE implications for staff, and the future role Local Government could have in relation to the Universal Credit.

How is the process of policy formation reflecting, in your view, on the working relationship between DCLG and DWP?

11. There is no externally obvious relationship between the DWP and the DCLG. Equally, both departments have been slow to engage with external partners but particularly with partners in the devolved administrations. Efforts to address this are now being made by the DWP but this engagement is more focused on the pragmatic business of delivery and operational concerns rather than at a policy based or strategic level. While committed to working with the DWP and DCLG, Local Authorities in Scotland have expressed both concern and dismay at this. We hope that some accommodation can be reached in future.

June 2011