Localisation issues in welfare reform

Written evidence from Kirklees Council (LWR 19)

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

1.1 The main advantage of localising CTB is the removal of the uncertainty and difficulties that a nationally administered scheme might bring. A nationally administered scheme that simply recognised liability and paid a cash sum to those entitled, would introduce significant risk of non payment. This in turn could have a catastrophic effect on LA revenue.

1.2 However, a nationally administered scheme that relied upon a system of computer interfaces would to all intents and purposes preserve the status quo, subject to any decisions around the maximum support provided in individual cases or classes of case.

1.3 It is difficult to see how localisation of CTB brings any real advantage over a nationally administered scheme that operated as a rebate and preserved the status quo. We know however that localisation is expected to bring with it a 10% saving on CTB spend for the treasury. That saving in itself brings with it enormous difficulties for LA’s.

1.4 Regardless of any decision the authority makes about eligibility criteria, a sum equivalent to that 10% must be collected to preserve the revenue stream. That 10% amounts to £3.5 Million in this borough and at the lowest CT payable would amount to a sum of £70 per year.

1.5 If certain groups (for example pensioners) are protected from any increased liability arising out of localisation then the burden of the 10% cannot be evenly spread. If the intention is that the additional burden becomes part of the incentive to find work, then the inference is that those not in work will shoulder the burden. If we were to assume that the burden for those out of work will approach 20% because of the uneven spread, the risks identified around collection and impact on the revenue stream will be amplified. Council tax is not as progressive as income tax and shifting the cost of welfare benefits on to council taxpayers will increase this.

1.6 Without further information it is very difficult to see how a localised scheme might operate any differently to the current system of support. Means testing of additional financial support appears to be the only option. If the system operates as a means test then it is conceivable that local decisions about eligibility criteria could operate to undermine the intent of Universal Credit. That fear might be unfounded if LA’s are prevented from increasing the burden for those starting work.

1.7 In summary it would appear that the 10% saving could increase the burden on those least able to pay and in so doing could compromise LA revenue streams.

2. 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)

2.1 According to figures produced in the government’s response to the recent consultation [1] two thirds of applications by people in this borough are successful with an average award across both grants and loans of £122 per household. With awards of that magnitude administrative costs will always be high in comparison.

2.2 It is also anticipated that the number of awards will decrease before decisions about distribution are made suggesting that the value of the un-ring fenced grant from government will not equate to £122 per household given the same number of successful applications. If we were to assume that funding was equivalent to £100 per successful application, the costs of administration would still be considerable.

2.3 Questions over the standard of decision-making processes are unlikely to be answered by simply reducing the money available for administration. Any scheme, regardless of how transparent or simple it might be in design, will bring with it an administrative burden.

2.4 Linking administration of a local CTB scheme with a localised CCG’s and CL’s might be desirable but for many LA’s might be unachievable. It is proposed by government that localised CCG’s and CL’s are reserved for Upper Tier La’s whilst local CTB will be the responsibility of a Billing Authority.

2.5 Localisation cannot be expected to address any concerns around variation in success rates, particularly if LA’s have freedom to design their own criteria.

2.6 The flexibility around the nature of provision is welcome but brings with it serious concerns about how appropriate that provision might be. LA’s will need to be in position to provide a range of provision, from payments in kind (maybe refurbished white goods and furniture) to cash payments.

2.7 Designing a scheme that responds to successful applications with a number of possible outcomes will increase the administrative burden, introduce greater variation and increase the number of challenges to decision making through whatever review mechanism is established.

2.8 If localisation is intended to address the issues identified in brackets in the question 2 then it is our belief that those problems will be amplified.

3. 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)

3.1 We have serious concerns about the capacity of authorities to make the decisions necessary in the time available. It is conceivable that many authorities (given absolute discretion) will purchase a ready made scheme from a third party with associated software, or pool resources in order to realise the efficiency such an approach might bring. This approach whilst expedient would undermine the principle of localisation, if in effect a national or regionalised scheme evolves.

Equally, a heavily prescriptive scheme might negate any perceived advantages of localising support.

3.2 LA’s will want to balance the risks of non payment arising out of the 10% saving, with targeting support for those in greatest need.

A means tested scheme appears to be the only sensible approach. It is impossible to contemplate a scheme that is any less complex than the current scheme, indeed additional criteria will make it more complex.

3.3 Timing is extremely important, an April 2013 start will mean that the scheme needs to respond initially to circumstances pertaining at that time, in the knowledge that from October 2013 it will also need to take account of Universal Credit and respond to both the current Social Security System and Universal Credit at the same time and would do so for a period of around 4 years.

3.4 In designing the scheme in 2012 LA’s will need to fully understand the mechanics and value of Universal Credit, something that will be very difficult to do if those details are being developed at the same time.

3.5 The taper in UC is fundamental to the design of localised means tested support for Council Tax. Regardless of how a household net CT liability is calculated, increased liability on commencing work could act as a disincentive. The extent of the effective taper will be increased.

In promoting the taper rates in Universal Credit comparisons are made between the current rate of around 97% with the expected UC rate of 65%, rarely is it explained that a full 20% of the 97% referred to is the current CTB taper rate. It is inevitable that any scheme of CT support that is means tested will impact on the UC taper rate and may go a long way to undermining the intention of Universal Credit. It is important to note that this will not be because of any negligence in the design of local CTB, if anything this effect is due to the current inadequacy in the description of the anticipated UC taper rate.

3.6 Theoretically LA’s could use data obtained for Local CTB in decision making for a localised scheme of CCG’s and CL’s, however not all CCG/CL applicants will be householders and indeed many upper tier LA’s will not hold that information. Criteria used in one might be relevant in the other but for the same reasons any synergies would be limited to Unitary and Metropolitan LA’s.

3.7 Discretion around the design of localised support for CCG’s and CL’s is perhaps less crucial than for CTB given the one off nature and value of the awards.

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

4.1 CTB is demand led, it will be difficult to accurately predict demand.

Changes to the financial regime meaning that funding is reduced by 10% in year one says nothing about how the scheme would be financed in future years. The implication of the localisation of business rates is that this will be the source of funding for any increase in CTB, however, this is likely to move in the opposite direction – ie closure of an employment site increases benefit claims and reduced business rate income.

4.2 A scheme designed to achieve that 10% reduction in year one must be financed by way of subsidy in full in future years. Whilst the number and profile of recipients will change each year as a response to economic and demographic changes certainty as to subsidy must be maintained. It would be impossible to redesign the scheme each year to maintain a 10% reduction against some theoretical assessment of what might have been paid out under the old CTB scheme.

4.3 Demand for localised CCG’s/CL’s will also be subject to those same pressures. Whilst it might be desirable to link grants in future years to spend in previous years this will be extremely difficult if LA’s choose to direct grants into complimentary services rather than individual awards. By implication spend will always equal or exceed grant. The continued viability of those services will be contingent on grant, if an LA chooses to contract with the voluntary sector certainty as to funding will be crucial to both design and sustainability.

5. What, if any, changes will be needed to the working relationship between local authorities and DWP for the reforms to work effectively? What will the requirements be in terms of information sharing between DWP and local authorities, and how should these be managed?

5.1 As a minimum current arrangements for the transfer of data should be maintained. DWP have put significant effort into making the transfer of data efficient and appropriate for the purposes of HB/CTB. LA’s have access to DWP systems through CIS and are about to go live on the 4th July with ATLAS, a system enabling high level integration between LA and DWP systems. Those systems have been developed at considerable cost and should be retained and extended. It is our understanding that the Welfare Reform Bill will broaden the purposes for which that data can be used .

6. Are local authorities equipped to deal with the attendant workload, and what new systems will they have to put in place?

6.1 Localised CTB - In the short term the answer must be, no. Over time LA’s will cease to be responsible for Housing Benefit and could redirect those resources into administration of the new scheme(s).

6.2 If we are to have live running of a localised CTB scheme by April 2013, experience suggests that some assessment must be made around individual liabilities prior to budget setting in February 2013. That is important so that once CT levels are known, individual liabilities can be established and bills issued before the start of the financial year.

6.3 We would want to have completed most assessments by January 2013. That in itself would mean that we would need to convert current recipients, plus undertake a data take on/ publicity exercise much earlier than that. In this borough that amounts to in excess of 45,000 assessments on current case load alone

6.4 The scheme itself and any software would probably need to be complete and tested by September/October 2012.

6.5 It is impossible to know how much of that would be new work, how much data might be reusable and therefore how much additional work is required, without knowing the nature of what it is that will be required. What we do know is that the complexity of what we do now in relation to Housing Benefit is changing in 2012 making those assessments more frequent and onerous.

6.6 Our assessment is that we will have insufficient resources to do both pieces of work at the same time. The Government’s assurances about funding the burden of assessment of localised CTB must understand the very peculiar nature of 2012. They must also understand the associated costs of procurement of software and the fact that existing software for HB/CTB will be insufficient/inappropriate and that HB/CTB software will remain in use until 2017 for the purposes of a decreasing HB caseload.

7. Will these changes make is easier or more difficult for claimants to access assistance? Will they complicate the system overall, or just improve its responsiveness to local circumstances?

7.1 It is our assessment that both changes will complicate the system and that they will make it more difficult than it needs to be. It is difficult to say that it is any more complex than the current system. Many claimants already contact both the LA and DWP to claim benefits however many in work currently only contact the LA for HB/CTB support. In future more people will contact both and in that sense it becomes more complex.

7.2 Without greater understanding of what is meant by "responsiveness to local circumstances" it is impossible to express an opinion. It is possible however to state that any system that is responsive (subject to change) will by definition be more complex.

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

8.1 In our opinion the localisation of CTB support by April 2013 is unrealistic. We understand that the bill introducing such a scheme is unlikely to get its first reading until December 2011. Given the concerns we have set out about our activity in 2012 it would appear wholly unachievable without significant risk across the sector, particularly given the number of decisions required of each authority.

8.2 Universal Credit is different in that the programme of transfer will be dictated by the rate at which individual circumstances change combined with a programmed approach. For example, abolition of Tax Credit means that those starting work after abolition will claim UC and therefore HB support through UC, and at that point they will transfer. The programmed approach could accommodate LA or regional transfer, or claim type approaches. This mixed approach will mean a very gradual reduction in LA workloads and timescales are less important.

8.3 If this question is more about whether a UC system can be fully functional by October 2013 then we think that is doubtful. This is very important given our concerns about UC’s very real integration with a scheme of localised CT support.

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

9.1 We had expected to have received much more information about a localised scheme by now. The DWP business Plan for MAY 2011 says at 1.7i and 1.7ii that it’s actions are complete.

1.7i Work with the Department for Communities and Local Government to develop implementation plan for localising Council Tax Benefit.

1.7ii Develop communications and stakeholder engagement strategy.

Those actions are crucial and of great interest to LA’s. I attach the DWP’s response to a freedom of information request as annex A, that response suggests that those actions are not complete and no longer constitute part of their plans.

9.2 It is difficult to know exactly why the responsibility was transferred however it would appear that the plans of DCLG are less well developed than they might have been under DWP.

The DCLG business plan is less clear with only one Action to be completed April 2013:

1.1 Viii. Lead the localisation of Council Tax Benefit, working with DWP, to enable local authorities to develop local rebate schemes for the most vulnerable people in society. Consider what flexibilities local authorities should have to keep overall levels of Council Tax down.

9.3 We hope that our description of the activity required in 2012 suggests that completion is achieved very much earlier than planned.

Summary

We have a number of concerns about the localisation of welfare support. Our main concerns are around the timing and our capacity to deliver existing support whilst implementing and delivering new systems. We are a large authority, with a good record of delivering change, our concerns are likely to be amplified for much smaller districts where capacity will be an even greater problem. Dual running of schemes both at design and implementation will bring significant additional cost and risk to LA’s, in the current climate those additional burdens must be fully funded.    

July 2011
Appendix

Thank you for your Freedom of Information request received on 6th June. You asked to see a copy of the plan referred to at 1.7 i on page 10, and the strategy referred to at 1.7 ii on the same page of the DWP business plan. These referred to an implementation plan and a communications and stakeholder engagement strategy for localising Council Tax Benefit.

DWP were (and still are) responsible for the legislation to provide for the abolition of Council Tax Benefit (CTB). Initial activity revolved around working with solicitors, and through them Parliamentary Counsel, on the drafting of a clause for inclusion in the Welfare Reform Bill in time for the Bill’s presentation to Parliament. This work was completed on time and a clause providing for the abolition of CTB is in the Welfare Reform Bill currently working its way through Parliament.

Responsibility for the localisation of council tax support (the schemes that will replace CTB) passed to the Department for Communities and Local Government in February 2011, from that date DWP were not responsible for the production of an implementation plan and, as DWP’s action on the drafting of legislation, had been successfully achieved the action was described as completed in the Department’s Business Plan. DWP continue to work with DCLG, supporting them in the work they are doing to develop proposals.

DWP facilitated initial contact between DCLG officials and stakeholders including the Local Authority Associations but more detailed work on communications and stakeholder engagement now rests with DCLG.

If you have any queries about this letter please contact me quoting the reference number above.