Implementation of welfare reform by local authorities - Communities and Local Government Committee Contents


From 1 April 2013 some of the most far reaching reforms to the welfare system in 60 years will start to be implemented. These changes will affect local authorities, their housing tenants and those who receive support to help pay their rents and council tax. Local authorities have a long track record of delivering significant reforms and we found evidence of concerted efforts to implement the changes on time.

The significance, timetable and volume of the reforms should not, however, be underestimated. The changes will see Housing Benefit, currently administered by local authorities, transferring into Universal Credit (UC), to be administered by the Department for Work and Pensions (DWP). Moving in the other direction, Council Tax Benefit and parts of the Social Fund will be replaced with schemes designed and administered by local authorities. We welcome the specific localist dimension to the changes and are clear that local authorities have a valuable contribution to make in planning and targeting local welfare provision.

Our report focuses on implementation and the part that local authorities are playing. We identified four key areas that will be crucial to the successful implementation of the changes. None merit a red card but the Government will need to act swiftly to address a number of concerns.

First, these reforms require close interdepartmental working, particularly between the Department for Communities and Local Government and DWP. While satisfied that they may be operating well at a high level in Whitehall, the Departments could do more to assist authorities, especially with information. Of particular importance is the provision of spending data on the Social Fund, to allow local decisions to be made in an informed way. Central Government can also do more to get the national aspects of the changes—the scale and timetable and where to get advice—across to the public and claimants.

Second, while the Government is alive to the new burdens placed on local authorities by specific welfare changes—both in terms of implementation and operation—it needs to work with the Local Government Association to assess the cumulative impact of the entire programme on local authorities' resources.

Third, at the heart of the changes to welfare is the simplification of benefits, making it easier for claimants to manage their own finances and to make the transition into work. The Government is therefore switching the payment of housing support from the landlord directly to the claimant. There will be a cost to housing associations and local authorities of providing support and information to tenants, many of whom will be managing rent as well as council tax for the first time. Housing associations may face increased rent arrears and collection costs, though the Government has agreed that this may be offset by excluding "vulnerable" tenants and an automatic switchback mechanism (paying rent to the landlord when a tenant's arrears hit a threshold level). In addition, it is vital that DWP makes good on its assurances that the financial viability of housing associations will not be damaged by the welfare reforms. This is crucial to ensure that scarce resources for investment in new housing are not diverted to paying for cash flow problems. Of particular value to housing associations will be the results of the Direct Payment pilots some of which are now emerging. These will inform how the new system can limit burdens on landlords. It is also vital for the Government to provide as soon as possible a clear definition or guidance for what will constitute a "vulnerable" tenant. Information from the Direct Payment pilots including levels of arrears must be made available before the rollout of Direct Payment to tenants.

Fourth, we heard concerns about the readiness of ICT systems, specifically that the systems for fraud detection within UC were still at early development even though implementation is now advanced. DWP must provide swift assurance that the benefit system will not be left vulnerable to fraud either during or after the transition to UC.

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Prepared 3 April 2013