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

6  Implementation

111.  In this chapter we look at some of the practical implementation issues for welfare reform including staffing and administration funding of new systems by local authorities. We discuss measures being taken to detect housing fraud under Universal Credit (UC) as well as the readiness of IT systems and the move towards claiming benefits digitally. Finally, we examine the main financial risks to local authorities of the welfare changes.

Funding for administration

112.  Some witnesses raised the issue of what they saw as lack of certainty over funding arrangements. The Government has provided funding to local authorities in relation to the administration of individual programmes such as Council Tax Support (CTS) and, as we have noted, the localised Social Fund provision.[218] The funding provided to local authorities from DWP for the administration of benefits—the Benefit Administration Grant—is being reduced as the result of benefits moving into UC. Councils told us that there would be an additional overall cost to local authorities, not covered by these grants, from the need to made several significant changes at once and provide general support for claimants coping with the changes. The Association of North East Councils said that local authorities could be "penalised" through the loss of the Housing Benefit Administration Grant resulting from responsibility for housing benefit moving to DWP.[219] It said that there would be a "residual cost to councils" of providing advice and support following the separation of CTS and housing benefit.[220] Sutton Council expressed concern that funding was being removed by DWP while demand for housing and council tax benefits were increasing.[221] It said that, "despite assurances that funding for 2013-14 would remain comparable to 2012-13", it had been told that the DWP administration grant for Sutton would be reduced by £81,000.[222] The council told us that it found the increasing caseload it was experiencing and the cut in funding "difficult to reconcile".[223]

113.  Newham Council said that the funding provided to set up and administer local CTB schemes had "only been sufficient to cover software changes and consultation".[224] The council was concerned that council officers' time in developing the schemes had not been taken into account when calculating the funding level and said that "no clarity has been offered over the level of funding that will be provided in future years".[225] Newham Council told us that its administration grant from DWP had been cut by 10 per cent and gave two examples of "unfunded administration costs" for local authorities:

  • communications between local authorities and their tenants, and
  • the cost of managing appeals where benefits decisions were challenged.[226]

114.  Other councils, including Nottingham City Council, called for a new administration grant for local authorities to manage demand,[227] while Citizens Advice told us that:

As regards advice on UC, the overall funding scenario is not encouraging as local advice agencies—including our bureaux—are heavily dependent on [local authority] funding.[228]

Waverley Borough Council said that, because the Benefit Administration Grant was allocated annually and no indication had been given about future grants, there was uncertainty over funding. It said that it also saw an increased risk of fraud and error from managing a "declining service with uncertain funding and timescales".[229]

115.  The withdrawal of one element of benefit administration—for Housing Benefit—from local authorities will not proportionately reduce their administrative costs. In addition, the level of local authority involvement in administering the housing element of Universal Credit has not yet been set out by the Department for Work and Pensions. It therefore does not make sense to withdraw the Housing Benefit Administration Grant in its entirety until the actual cost to local authorities of administering Universal Credit is known. We recommend that the Department for Work and Pensions provide local authorities with certainty over the level of Benefit Administration Grant that they will receive until the end of the Spending Review period. The level of the grant should accurately reflect the level of cost to local authorities of developing and administering the welfare changes.

Local authority staff

116.  One of the aims of the reforms is to "simplify the system, making it easier for people to understand, and easier and cheaper for staff to administer".[230] The Welfare Reform Club, a group of welfare reform consultants, pointed out that in order to keep UC simple, it would not be possible to build in systems to deal with all the different needs of claimants, and that this would "inevitably" require local authorities to "provide more discretionary help, with cash-limited budgets, for those with exceptional and unusual requirements".[231]

117.  Concerns have been raised about the capacity of local authorities and advice charities to fulfil this need and manage the volume of enquiries, expected by many of our witnesses to rise significantly as a result of the welfare changes. Citizens Advice said that, despite its efforts to increase productivity, without additional funding they would be unable to meet demand for advice which would create "significant pressures on [local authorities] for advice and help with the consequences of not receiving advice".[232] They told us that:

Our experience is that major changes lead to a large increase in demand for advice in the short to medium term. Given the scale of the changes, we are expecting an unprecedented increase in demand for advice.[233]

118.  Concerns about the ability of local authorities and advice organisations to cover the additional demand on their services as the changes are introduced and beyond, focused on three areas. First, the availability of staff within local authorities to handle queries: When housing benefit migrates to UC at DWP, the staff currently based in local government will have to move. The second concern was that staff and their local authority employers were not being given clear information about future employment prospects during implementation of the reforms and in the period following implementation. The third concern was that local authority staff with the experience and skills needed to implement the changes would respond to a lack of clarity about their job prospects by leaving before implementation could be completed.

119.  In examining these concerns, we kept in mind the expectation that increased demand for local authority staff to provide services during the transition period means that the management of staffing levels in local authorities will be particularly important. We were told that there was a lack of clarity for local authority staff about their employment prospects over the implementation period and beyond because of the migration of housing benefit, currently administered by local authority housing departments, into UC, in which the role of local authorities remains uncertain.[234] Blackpool Council told us that:

we have staff who work on housing benefits who know that their jobs are at risk over the transitional period through to 2017. They are told that TUPE will not apply; they will not be able to transfer to equivalent jobs at the DWP. There is a general lack of clarification.[235]

120.  Thanet District Council said that this would have a negative effect on councils. It told us that because DWP would not be using TUPE regulations[236] to transfer staff whose roles would be migrated into UC, councils would have to "manage potentially substantial redundancy costs".[237] Witnesses including the Local Government Association were concerned that experienced staff would leave in advance of the introduction of UC as a result of this uncertainty.[238] Blackpool Council said that:

Local authorities are already seeing a migration of Housing Benefit staff due to the introduction of Universal Credit. If this continues and the timetable for Universal Credit slips, there is the real possibility that authorities will not have enough resources left to deal with residual work.[239]

Hull City Council said that the lack of clarity about the future role of local authorities in administering UC had led to "a large staff turnover as staff feel that the role of Benefit Assessor has a finite lifespan. This has also made recruitment to vacant posts problematic".[240]

121.  When we asked the Minister what communications there had been between DWP and local authorities about the consequences for local authority staffing of the changes, Lord Freud said that, in preparation for UC, DWP was "putting down the main elements in some detail on which one can do that kind of detailed planning, and there is time to do that detailed planning".[241] He added that "I suspect there will be some re-deployment by local authorities of their total staff. We don't know the exact figures yet".[242]

122.  Local authority staff as well as the large numbers of staff of contractors used by local authorities affected by the changes to welfare need certainty about whether they will be able to retain their current jobs or have the opportunity to transfer into a different role. The danger of leaving staff in the dark about the forthcoming changes is that some of the most employable of them will decide to leave before the reforms come into effect. This could put claimants at risk of receiving a reduced service and local authorities with the problem of having to find and possibly train temporary staff to fill the gaps. The Government must as a matter of urgency set out to local authorities the details of the administrative changes that they will need to make, including the timetable, so that they can give their staff and contractors the certainty that they deserve.

Housing benefit fraud

123.  DWP told us that it was "absolutely committed" to addressing benefit fraud.[243] We asked witnesses about the adequacy of measures to detect fraud under new systems. Thanet District Council was concerned that the UC IT system would not be able to distinguish between genuine and fraudulent claims. The council said that, as it understood it, the system would not work from local authority property databases and so it would not be able to detect automatically, as local systems did now, when multiple individuals made a housing benefit claim for the same property.[244] Lord Freud said that a new fraud detection service, IRIS, would be built into UC which would have a "similar database" to that used by local authorities for detecting housing benefit fraud.[245] He told us that "the objective is to start matching it up with a lot of information held in both Government and non-Government arms".[246] Mark Prisk MP, Minister for Housing at DCLG, added that funding of £9.5 million would shortly be announced for tackling social housing fraud.[247]

124.  As well as ITC systems fraud detection relies on experienced staff to spot problems. We have already referred to the Local Government Association's claim that experienced staff would be likely to leave housing departments before their jobs disappeared because of uncertainty about their prospects.[248] Waverley Council also argued that fraud would increase during the transition period to UC as local authorities made staff redundant or moved them elsewhere, removing skills and resources from combating fraud.[249]

125.  We are concerned that during the transition period before local authorities hand over Housing Benefit to DWP a reduction in experienced local authority housing department staff will leave the system more vulnerable to fraud. The Government should ensure that local authority housing departments are provided with the administrative funding they need to manage the transition to Universal Credit and prevent staff leaving prematurely.

126.  We welcome assurances from the Government that the new IT system for Universal Credit (IRIS) will incorporate local housing data to enable effective housing benefit fraud detection. However, it is worrying that the system still seems to be at the development stage. It is incumbent upon DWP to ensure that its system is ready in time for the changes. We will monitor the way in which the system is implemented and its effectiveness as the reforms progress.

Local authorities' IT systems

127.  While some functions will pass from local authorities to DWP, local authorities will take on new responsibilities. It follows that their ITC systems must be able to adapt and cope with the new arrangements. Large amounts of information will need to be exchanged quickly between these systems. The importance of ITC to the success of the reforms cannot be overstated. We asked whether local authorities had experienced problems in developing their IT systems or in working with central IT systems. Several witnesses pointed out that the implementation process relied on information-sharing between central and local government and housing associations. The particular issues identified were the volume of changes in claimants' information that needed to be processed on a monthly basis, and compatibility of IT systems between local authorities and DWP.

128.  DWP introduced the Automated Information Transfers to Local Authority Systems (ATLAS) system in 2011. It sends claimants' details including changes of address and contact details to local authorities and will be an essential part of implementing welfare reforms. The system is designed to allow information to be transferred efficiently in machine-readable form making the process much less labour intensive than previously. There have been problems reported with the operation of this system as recently as late 2012.[250] Leeds Council told us that:

Local councils may find themselves overwhelmed by change notifications coming from DWP as a result of Universal Credit. This relates more to Council Tax Support and the expectation is that every change reported under Universal Credit will be sent through to local councils. Councils are struggling already to deal with the volume of notifications issued by DWP and this issue will worsen considerably under Universal Credit.[251]

Cllr Graham Chapman, Deputy Leader of Nottingham City Council, added that ATLAS was "giving too much information at once, and a lot of it [...] is information that you do not really need, but which nevertheless creates a change unless we deal with it".[252] Blackpool Council raised concerns about the types of data transfers due to take place through ATLAS:

The plan to send benefit cap details via ATLAS is also inadequate as some local authorities already have significant backlogs in this area which means that there is the real possibility that cases will not always be picked up in time. It is anticipated that this will be the same for Universal Credit where STOP notifications for Universal Credit claimants to end HB are also planned to come through ATLAS.[253]

129.  We asked Lord Freud whether DWP had anticipated the need to talk to local authorities about whether their systems would be compatible before ATLAS was brought in. He said that there had been "teething problems" with the system when some information had been sent out in duplicate and that some authorities had been unable initially to tie up their existing systems with the machine-readable data from ATLAS.[254] Lord Freud told us that the ATLAS system was however "a total godsend for transferring information".[255] He said that:

70% to 80% of LAs have now automated the bulk of their ATLAS notifications, so that process has been and is pretty successful, and we will be looking to work with the remainder to get them on the automated system.[256]

130.  Of the local authorities giving evidence, only Camden Council said that it had not had any problems with ATLAS because its existing system was compatible. We asked whether this was through luck or judgement, and we were told by Camden Council's Assistant Director of Finance, Lesley Pigott, that:

I would say judgment by picking the system, but luck that that is the one that has seemed to be able to handle the duplicate changes.[257]

131.  The ATLAS system is intended to share information needed for local Council Tax Support (CTS) schemes between DWP and local systems. This would mean that local authorities should not have to collect all of the information from claimants of CTS separately. Some of our witnesses raised concerns that it would not be ready to perform this function in time for the switch to local CTS on 1 April. Camden Council told us that:

The promise is there that ATLAS will still pick up information that we need, so that we can take information from the Universal Credit and feed it straight through into the council tax schemes. However, obviously we need to see that, and I think the fear that local authorities have is that that is not a priority for DWP. The priority is getting the IT system to work for Universal Credit, not for it to work for our council tax requirements.[258]

132.  Sharing information effectively through ICT systems will be critical to the implementation of welfare reform. Some councils have been able to handle data transferred to them by DWP through ATLAS but this may have been more by luck than planning. DWP told us that it was confident that ATLAS would cope. It is less clear that it gave sufficient attention to ensuring that local authority systems would be compatible with ATLAS and we recorded a significant level of dissatisfaction from them. The consequences of ICT system failure would be significant as large volumes of data will be transferred between DWP and local authorities. It is therefore of crucial importance that the necessary ICT systems are integrated and working efficiently in time for the changes.


133.  The Government committed to a "digital by default" strategy for service delivery across Government in the Chancellor's March 2012 Budget statement.[259] In the context of welfare this would mean claimants moving towards applying and managing their claims online and so reducing the volume of claims that local authorities as well as DWP would have to process manually or handle over the phone. While it is widely recognised that the move to digital will, in the longer term, be a cost saving measure, worries were raised about the implementation of online claims. Local authorities expressed concerns as to whether they would have the resources to provide support to those who experienced difficulties or were unable to claim online for local authority or national benefits.[260]

134.  Lord Freud told us that the Government was keen to promote the move to digital which gave individuals control of their information because there was a "social imperative" to move services online adding that: "we are prepared to put significant resources behind it".[261] Lord Freud said that people who "really cannot handle the digital process" would be given support through a telephone service and, if necessary, face-to-face support.[262] DCLG told us that "these services will be funded but the full resource implications will be explored when the details have been further developed".[263] Lord Freud explained that DWP wanted to avoid 'locking' people into an alternative system and would encourage and support them to move to using digital.[264]

135.  The Royal National Institute of Blind People (RNIB) questioned whether the required level of support would be available in time for the changes. RNIB raised specific concerns about the ability of people with visual impairments to cope with online applications.[265] It said that:

more needs to be done—and fast—to ensure customers who cannot make an online claim for Universal Credit are provided with the help they need. It is assumed some of this help will be made available through or via councils and other local organisations but we are yet to see much evidence of these alternative plans being put in place.[266]

136.  Moving claims and services online has the potential to result in reduced costs for both central government and local authorities in the longer term. However, savings from the move to digital claims should not be achieved at the expense of failing to provide transitional funding for local and central government to provide support to vulnerable claimants. Whether local authorities or advice charities should take the lead in offering such services needs to be determined and the Government should set out what specific funding will be available within the next five months.

Financial risks

137.  Local authorities will be taking on new areas of responsibility and delivering new schemes as a result of the changes to welfare some of which will transfer responsibility for managing cash-limited budgets to local authorities. We have considered what the overall effects of the changes might be and what, if any, new financial risks there might be for local authorities. The National Housing Federation said that:

the cumulative impact of the reforms, including the changes to budgeting and payment patterns under Universal Credit, the introduction of the social sector size criteria and benefit cap, the localisation of the social fund and support for Council Tax and the limiting of annual increases to most working-age benefits and tax credits to 1%, remains unknown.[267]

138.  Several witnesses pointed out that no overall assessment had been made of the likely effects of the reforms in their entirety on local authorities and claimants. The RNIB called for a "proper cumulative impact assessment of the Government's welfare reforms; both the impact on disabled people and the impacts on local authorities".[268] The Chartered Institute of Housing said that:

We are concerned that the cumulative effect of under-occupation measures, council tax benefit reductions and other welfare reform measures are not being thought through effectively by some [local authorities] and social landlords. It is not clear to what extent (if any) guidance is prompting people to join these things together.[269]

139.  The Government explained that, as part of the "New Burdens Doctrine", it "has agreed the process and timetable for assessing new administrative burdens on local authorities arising from our welfare reforms".[270] DCLG told us that:

The Government recognises that local authorities may incur one-off costs associated with decommissioning housing benefit services and is working with local authorities to understand these impacts so that we may meet our obligations under New Burdens Doctrine.[271]

140.  Two specific additional financial risks to local authorities resulting from the changes were identified: increased pressure to find affordable accommodation if housing providers reduce their investment or participation in social housing; and additional costs resulting from having to source affordable accommodation for families unable to afford their rent. Housing groups including the National Landlords Association (NLA) warned that the removal of their ability to request housing benefit payments to come direct to them would lead to many providers leaving the social housing sector.[272] A survey of NLA members operating in the social sector showed that over 85 per cent would "withdraw from the market" if the automatic arrears trigger were withdrawn.[273] The NLA said that the "cost to local authorities of finding alternative accommodation from other sources is likely to be considerable".[274]

141.  London Councils told us that they had "serious" concerns that welfare reforms such as the Benefit Cap and Social Sector Size Criteria would result in "additional costs in maintaining or sourcing housing for families who find themselves unable to afford their rent".[275] One London Borough Council, they told us, had estimated the cost of this at £2.5 million for 2013-14.[276] London Councils said that the Government had indicated that it would not provide funding for local authorities to deal with any potential increase in homelessness as a result of the combined effect changes or to cover the additional cost of "sourcing accommodation for homeless households".[277] They told us that:

There has been no indication from government that work is underway to quantify these additional costs or any consideration given to funding these additional costs through the New Burdens Doctrine.[278]

142.  In this report we have identified a number of changes and uncertainties, which Welfare Reform throws up for local authorities, that may add to the overall burden on authorities. These include:

  • the impact of Direct Payments to tenants on rent arrears;[279]
  • the impact of paying the housing element of UC a month in arrears on landlords' cash flow;[280]
  • the arrangements to support the Government's undertaking to protect the financial viability of housing associations;[281]
  • the impact on levels of demand for welfare advice services and the levels of funding that will be available for advice and support;[282]
  • the impact on the demand for Discretionary Housing Payments;[283]
  • the need to establish the current level of demand for the Social Fund;[284]
  • the cost of finding affordable accommodation for claimants affected by the Social Sector Size Criteria;[285]
  • the cost of providing advice and support for claimants having to make their claims online;[286]
  • the costs of ensuring compatibility with central Government ICT systems;[287]
  • the level of local authority involvement in administering the housing element of UC and the level of grant support for administrative functions that DWP will provide;[288] and
  • the costs of redeployment and redundancy payments to local authority staff.[289]

143.  We welcome the Government's assurance that it will assess the total cumulative cost to local authorities of its reforms. We hope that this assessment will be comprehensive rather than simply assessing each reform separately and include an indication of what additional funding would be available where additional burdens are identified. We have called in this report for the Government to meet with the Local Government Association to discuss the effects of specific burdens on local authorities. These meetings should include discussion about the overall impact of the changes.

218   Ev w100-w101, para 5.7 [London Borough of Newham], Ev w95 [The Association of North East Councils] and Ev w89-w90 [London Borough of Sutton] Back

219   Ev w95 Back

220   As above Back

221   Ev w89 Back

222   As above Back

223   As above Back

224   Ev w100-w101, para 5.7 Back

225   As above Back

226   Ev w100 para 5.6 Back

227   Ev 57, para 4.7 Back

228   Ev 81, para 2.4 Back

229   Ev w119 Back

230   Ev 89, para 3 [DCLG] Back

231   Ev 70, para 11 Back

232   Ev 81, para 2.4 Back

233   As above Back

234   Ev 80, para 2.1 [Citizens Advice], Ev w28-w29 and Ev w30, para 3.3 and 3.7 [Southwark Borough Council], Ev 66 [Blackpool City Council], Ev w39, para 2 [East Riding of Yorkshire Council] and Ev w46 28, para 3.3.6 [London Borough of Croydon] Back

235   Q 110 [Steve Thompson] Back

236   Transfer of Undertakings (Protection of Employment) Regulations 2006, also known as TUPE. Back

237   Ev 64 Back

238   Ev 54, para 2.5 Back

239   Ev 66; see also Ev 64 [Thanet District Council]. Back

240   Ev w98 Back

241   Q 188 Back

242   Q 185 Back

243   Ev 95, para 55 Back

244   Q 110 [Andrew Stevens] Back

245   Qq 253-54 Back

246   Q 254 Back

247   Q 256 Back

248   Ev 54, para 2.5 Back

249   Ev w120 para 9 Back

250   Inside Housing Online, 23 November 2012,  Back

251   Ev w65, para 8a Back

252   Q 102 Back

253   Ev 66 Back

254   Q 243 Back

255   As above Back

256   Q 245 Back

257   Q 105 Back

258   Q 108 Back

259   HC Deb, 21 March 2012, col 793 ff Back

260   Ev w46 [London Borough of Croydon] and Ev w61 [Rochdale Council] Back

261   Q 240 Back

262   Qq 241-42 Back

263   Ev 93, para 38 Back

264   Q 242 Back

265   Ev w125, para 3.3.7 Back

266   Ev w124, para 2.8 Back

267   Ev 47, para 4.1 Back

268   Ev w122, para 1.3 [RNIB]; see also Ev 81, para 2.2 [Citizens Advice] Ev 53 [Local Government Association] and Ev w21, para 4.1 [Core Cities Group] Back

269   Ev 49 Back

270   The New Burdens Doctrine is a measure designed by the Government to ensure that taxpayers do not face excessive charges as a result of unjustified new burdens on local government spending. Back

271   Ev 93, para 35 Back

272   Ev w2, para16; see also Ev w2, para15 [National Landlords Association], Ev 46 [National Housing Federation] and Ev 73 [Residential Landlords Association]. Back

273   Ev w2, para17 Back

274   Ev w2, para18 Back

275   Ev w14, para 2.1 Back

276   Ev w14, para 2.2 Back

277   Ev w14, para 2.6 Back

278   Ev w14, para 2.6 Back

279   See para 21 ff above. Back

280   See para 41 ff above. Back

281   See para 33 ff above. Back

282   See para 112 ff above, Ev w47 [London Borough of Croydon] and Ev w60 [Rochdale Council] Back

283   See para 76 ff above. Back

284   See para 73 ff above, Ev w61 [Rochdale Council], and also Ev w102 [London Borough of Newham]. Back

285   See para 59 ff above. Back

286   See para 133 ff above. Back

287   See para 127 ff above. Back

288   See para 137 ff above. Back

289   See para 115 ff above and Ev 64 [Thanet Borough Council]. Back

previous page contents next page

© Parliamentary copyright 2013
Prepared 3 April 2013