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

Conclusions and recommendations

Department co-operation

1.  The changes to welfare clearly require close co-operation between DWP and DCLG. We welcome the steps already taken by central departments to work together on welfare reforms. There may be scope to improve the arrangement—small steps such as a single contact list shared between departments can aid communication and avoid confusion. We urge the Departments responsible for implementing the changes to test their systems, in co-operation with local authorities, and to make any improvements quickly. Departments must not underestimate the tasks they are asking of local government and they must also be ready, if necessary, to provide additional support, particularly when the changes are being implemented. (Paragraph 8)

Guidance from central Government

2.  Under the welfare changes, it will be for local authorities to make decisions about how they operate local schemes. They cannot, however, draw up their schemes in a vacuum. There are still areas where information is required and DCLG and DWP must provide local authorities with the information needed in good time ahead of the start of each phase of the changes to enable authorities to make informed local decisions and to understand the changes that will affect their local residents. (Paragraph 11)

Timescale for change

3.  Changes, including those to Universal Credit are being rolled out nationally over an extended period and we agree with DCLG that this should assist local authorities implementing the changes. Local authorities need certainty about the timetable for delivering the changes to welfare. We see no pressing need for a postponement of the main changes. To ensure that the extended implementation period gives maximum benefit to local authorities, the Government needs to make sure that all guidance that it plans to produce is published well in advance of future implementation dates. The late production of guidance on the reforms starting on 1 April has affected local authority consultation plans and, in some instances, may have increased their costs because of the need to make late changes. (Paragraph 15)

Public awareness

4.  The level of awareness and understanding among benefit claimants about the changes to welfare will inevitably have some impact on the effectiveness of implementation. Ensuring that recipients are aware of the changes in their local area is best done by local authorities as they have the local knowledge to enable them to do it efficiently. There is however, a role for central Government in highlighting the scale and importance of the changes. The Government should be encouraging broader awareness and advising claimants to contact their local authority to find out more through advertising and in information relating to Universal Credit. (Paragraph 18)

"Exceptions" and "vulnerable" tenants

5.  The delay in providing a definition of what constitutes a "vulnerable" tenant and in setting out the "exceptions" that will operate for Direct Payments to tenants needs to be resolved quickly otherwise local authorities and housing associations will be unable to plan effectively. The Government must provide local authorities and housing providers with a clear set of "exceptions" to Direct Payment to claimants. In addition, whether it calls it guidance or a definition of "vulnerability", DWP must produce information on which tenants will not receive Direct Payments for local authorities and housing associations quickly. When doing this the Government should bear in mind the need for clarity for tenants and landlords and to minimise bureaucracy for housing associations and local authorities having to assess who will be eligible to have their rent paid on their behalf direct to their landlord. We recommend that any definition or guidance of what constitutes a "vulnerable" tenant should include a wide range of reasons for vulnerability to allow flexibility in its use. (Paragraph 32)

Arrears and collections costs

6.  If the Government is to meet the assurances it has given landlords, that their financial viability will not be affected by Universal Credit, it should introduce an automatic arrears trigger for switch-back similar to that available under the Local Housing Allowance. Given that this is a new system affecting significant numbers of tenants, the Government should consider starting the rollout of Direct Payments to tenants with a temporary switch-back mechanism with six weeks of arrears, later moving to eight weeks, in order to address the concerns raised by housing associations about initial levels of arrears and collection costs. (Paragraph 40)

Payment in arrears

7.  Under the new system of housing benefit payments a proportion of tenants will enter their tenancies one month in arrears. This will lead to reduced cash-flow for housing associations. In addition, we note that most social rent is currently paid on a weekly basis meaning that many housing associations may have to change their systems in order to work with monthly housing payments in arrears. We recommend that the Government hold urgent discussions with the Local Government Association and the National Housing Federation about how this new, automatic four weeks of arrears for many tenants will be managed. The Government must also set out how any reduced cash-flow will be funded. (Paragraph 43)

'Jam-jar' accounts

8.  We welcome the Government's plans to encourage the introduction of budgeting or "jam-jar" accounts which would allow tenants to see benefit payments moving in and out of their account without the risk of the money being spent on other things. This would provide both transparency for tenants and security for landlords. More information is needed from DWP, however, on how these accounts would work and who would pay for them. (Paragraph 45)

Direct Payment Demonstration Projects

9.  Information available from the Direct Payment Demonstration Projects shows that rent arrears have risen initially and then fallen back, settling at higher than the original levels. We recommend that, if arrears rise significantly when Direct Payment is rolled out nationally, the Government works with the LGA and the National Housing Federation to consider what additional measures it will put in place for tenants to help them reduce their arrears. (Paragraph 52)

10.  In this context we welcome the Government's announcement that financial education will be added to the national curriculum in 2014. However, it will take time before it has an effect and in the meantime we recommend that the Government take the opportunity offered by the changes to welfare to work with the Local Government Association and National Housing Federation to develop methods to encourage more people, particularly benefit claimants, to engage in financial education. (Paragraph 53)

Timing of the pilots

11.  We welcome assurances from the Government that the results of the Direct Payment pilots will feed into the design of Universal Credit and assist in the development of safeguards. To minimise the risk of unexpected additional expenditure and the need to make unplanned changes after implementation, we recommend that the Government ensure that the results from the pilots are published in time to allow any changes to be properly factored in to plans for the national roll-out. (Paragraph 57)

12.  The Government must clearly set out what level of arrears it thinks will be sustainable in the medium to long term for housing associations and at what level it will consider introducing additional safeguards or limiting the use of Direct Payment. (Paragraph 58)

Social Sector Size Criteria

13.  The fundamental problem has been a long-term failure to build sufficient homes. In our report on the Financing of New Housing Supply we have already made recommendations, listed in this report, which would begin to address this issue which we urge the Government to consider. The consequent shortage of properties which currently exists in most places means that there are simply not sufficient suitable properties available for people to move into in order to use existing stock effectively. In conjunction, local authorities and housing associations should develop policies and incentives to encourage tenants to move into suitable smaller properties and then to reflect the need for such properties when developing new stock. (Paragraph 62)

14.  We welcome the Government's recent announcement that serving members of the armed forces and families with children with certain disabilities would be exempt from Social Sector Size Criteria (SSSC). The Government should now look at the impact of SSSC on people with disabilities and parents who care for children part-time. (Paragraph 63)

Availability of information

15.  We recommend that the Government make available to local authorities the information they need about current Social Fund spending in their area as quickly as possible to enable them to assess accurately the level of local provision that will be needed. (Paragraph 74)

16.  We expect that there will be pressure to divert funding for replacing Social Fund provision to support Discretionary Housing Payments (DHP). It is a matter for local authorities how they allocate non-ring-fenced money from central Government to provide local support in place of the Social Fund. (Paragraph 76)

17.  The Government gave local authorities an assurance that replacing the Social Fund would not result in additional unfunded burdens. Replacing Social Fund provision locally is a new area of work for local authorities and represents a major change in their costs particularly when taken together with DHP, the demand for both of which is difficult to forecast. The Government must ensure that local authorities are provided with the funding they need to set up and administer local support schemes and deal with reasonable demands for DHP from 1 April. We recommend that the Government meet with the Local Government Association after 12 and again after 24 months to review the level of support required and decide on the appropriate level of additional funding if local authorities are incurring reasonable, unfunded costs. (Paragraph 77)

Monitoring provision

18.  We recognise and accept that the Government should not take on responsibility for monitoring how local authorities use resources locally for the replacement of the Social Fund. However, it is important that local authorities are fully accountable to the public in their area for how they use these resources. We therefore recommend that Government requires local authorities to make information about how they spend localised Social Fund money available in a format that is simple for the public to understand. At the national level, the Government should use this information for high level monitoring of the operation of the new arrangements over the next five years, to assess how local authorities are deploying these resources and whether any vulnerable residents risk falling between the gaps in provision after 1 April 2013. (Paragraph 79)

National guidelines

19.  Although we found no evidence to support fears that the localised arrangements replacing the Social Fund would provide widespread incentives for 'benefit chasing', we have concerns that problems may arise in specific areas, especially in those local authorities with significant transient populations such as rough sleepers. We recommend that the Government provide local authorities with guidance on whether they have any responsibility to provide assistance, in the absence of the national Social Fund, to rough sleepers moving into their area and how such provision should apply to rough sleepers who have recently received support from another local authority. (Paragraph 81)

20.  Local authorities that introduce a 'local connection' criteria into their local Social Fund provision should ensure that support is not denied to individuals who are displaced from their usual residence because of domestic violence. (Paragraph 82)

Work incentives

21.  As the taper reducing Universal Credit for a claimant entering employment or increasing his or her earnings is fixed at 65 per cent, the level of the local Council Tax Support (CTS) taper, set by each local authority, and how it is calculated will help either to incentivise or produce a disincentive for claimants to move into work. Given the pressures on local authorities to make savings on their CTS schemes many of them are to be commended for setting the taper at the Government's guideline of 20 per cent. These pressures are unlikely to dissipate with the passage of time. As we note later in this chapter, the grant introduced for 2013-14 to assist in the administration of CTS schemes which meet certain conditions—including a taper rate of a maximum of 25 per cent—is not due to be repeated in 2014-15. Those authorities in receipt of the grant may therefore be under greater pressure to increase the taper rate and so remove support more quickly from claimants in work and dissuade others from seeking employment or working more hours. We request that in responding to our report that Government provide information on how many local authorities are planning to apply the CTS taper to remaining (net) income and how many will combine their CTS taper with the UC taper. The Government should also provide an estimate of how many claimants will have more than 95 per cent of their additional earned income deducted. In the light of this information and given the Government's intention to encourage work incentives it should consider giving stronger guidance to local authorities. (Paragraph 93)

Bringing confusion

22.  Bringing housing benefit into Universal Credit (UC) while localising Council Tax Support means that claimants who assume that under UC all benefits will come as a single payment will still have to make two separate applications for UC and Council Tax Support (CTS) to two separate bodies. This will cause a level of confusion for some claimants. DWP should ensure in the guidance it provides for UC claimants that it makes it clear that a CTS claim has to be made separately to the local authority. (Paragraph 97)

23.  There is potential for confusion among claimants with the separation of Council Tax Benefit from housing benefit as well as for duplication of administrative tasks. This situation could be improved by making it possible to transfer information from Universal Credit to local authority Council Tax Support systems. DWP and DCLG should have begun work to develop a system to passport claimant information between Council Tax Support and Universal Credit rather than require claimants to submit the same information twice to two separate bodies. DWP should now make it a priority to achieve passporting between Council Tax Support and Universal Credit, in order to help claimants and limit confusion resulting from the separation of housing and council tax benefits. (Paragraph 102)

Time constraints

24.  We welcome the Government's introduction of a grant to assist local authorities with Council Tax Support schemes that meet certain criteria. However, we note that the lateness of the announcement and the fact that the grant is only available for 2012-13 has, regrettably, introduced confusion and uncertainty into the development of local schemes. We also note that only 59 per cent of local authorities qualify for the grant meaning that the rest will need to meet the full cost of the schemes either by reducing the money they pay to working age claimants or by making cuts in other budgets. (Paragraph 110)

Funding for administration

25.  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. (Paragraph 115)

Local authority staff

26.  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. (Paragraph 122)

Housing benefit fraud

27.  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. (Paragraph 125)

28.  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. (Paragraph 126)

Local authorities' IT systems

29.  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. (Paragraph 132)

Digital by default

30.  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 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. (Paragraph 136)

Financial risks

31.  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. (Paragraph 143)

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Prepared 3 April 2013