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

1  Introduction

1.  The Welfare Reform Act 2012, which received Royal Assent on 8 March 2012, makes the most significant reforms to the welfare system for 60 years. They will include the introduction of Universal Credit (UC), a single unified benefit payment which will subsume income-based Jobseeker's Allowance, income-related Employment and Support Allowance, Income Support, Child Tax Credits, Working Tax Credits and Housing Benefit. Council Tax Benefit, which is a tax relief, will be replaced by local Council Tax Support administered separately by local authorities. In addition, the discretionary parts of the Social Fund—Crisis Loans and Community Care Grants—will also be abolished with funding transferred to local authorities to provide local support. The aims of the Government in designing the changes are to make the welfare system:

  • "fairer and more affordable" by capping benefits;
  • more effective at tackling "poverty and worklessness". Specifically the new system would "strengthen work incentives" by tapering the withdrawal of payments more gradually when claimants enter work preventing loss of benefit being a disincentive to work; and
  • a means to "promote personal responsibility" by making UC operate like a normal wage paid monthly direct to claimants.[1]

2.  After the Welfare Reform Bill was published in February 2011, we conducted an inquiry into the implications of the Bill for local government, Localisation issues in welfare reform.[2] We looked at all aspects of the changes, including policy and implementation. On implementation we had the following concerns.

  • "The potential negative impact of direct payment arrangements for [the housing aspect of] UC on social landlords and the availability of finance for investment in the social housing sector".[3]
  • The separation of Council Tax Benefit from Housing Benefit under UC "may introduce unnecessary complexity for customers".[4]
  • The timescale proposed for the changes to Council Tax Benefit was too short to ensure systems put in place were "robust".[5]
  • Funding for local replacements for the discretionary Social Fund would not be accurately calculated to address demand.[6]

3.  With implementation due to start from April 2013 and with reports of concerns that the process might not go smoothly we decided to carry out this inquiry to re-examine the implementation of the changes. Drawing on our 2011 Report and the evidence we received during this inquiry we identified the following key pressure points.

  • The volume of changes and the timescale for implementation require that the Departments for Work and Pensions and Communities and Local Government work closely together to provide joined-up policy and guidance to local authorities. We examine the extent to which this has been achieved in chapter 2.
  • Following from concerns raised in our 2011 Report,[7] we consider what are the consequences of paying the housing element of UC direct to tenants, including what effect this would have on the financial viability of housing associations. This issue is examined in chapter 3.
  • We consider, further to concerns we raised in 2011,[8] whether sufficient time and funding is being provided to local authorities for them to set up properly tailored local schemes in place of the Social Fund. This issue is discussed in chapter 4.
  • We review the effects of the separation of Housing Benefit and Council Tax Support, in chapter 5.
  • The administrative challenges for local authorities in implementing the reforms and the level of financial risk to councils is covered in chapter 6. The chapter also covers the operation of ICT systems.

4.  We are conscious that we are not the only committee working on these changes. Our colleagues on the Work and Pensions Committee published their Report, Universal credit implementation: meeting the needs of vulnerable claimants in 2012, some aspects of which overlap with our inquiry.[9] We, however, approached the changes from the perspective of local authorities and consequently examine different areas of the implementation process.

5.  During this inquiry we received 52 written evidence submissions and held three oral evidence sessions—on 19 December 2012 and 7 and 28 January 2013. We are grateful to all those who participated and provided memoranda.

1   Ev 88 [DCLG] Back

2   Communities and Local Government Committee, Fifth Report of Session 2010-12, Localisation issues in welfare reform, HC 1406, para 73-76 Back

3   HC (2010-12) 1406, para 72 Back

4   HC (2010-12) 1406, para 68 Back

5   HC (2010-12) 1406, para 56 Back

6   HC (2010-12) 1406, paras 56, 68 and 21 Back

7   HC (2010-12) 1406, para 72 Back

8   HC (2010-12) 1406, para 21 Back

9   Work and Pensions Committee, Third Report of Session 2012-13, Universal Credit: meeting the needs of vulnerable claimants, HC 576, paras 243-246 Back

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Prepared 3 April 2013