Communities and Local Government CommitteeWritten evidence from the Local Government Association

The Local Government Association (LGA) is the national voice of local government. We work with councils to support, promote and improve local government. We are a politically-led, cross party organisation which works on behalf of councils to ensure local government has a strong, credible voice with national Government. We aim to influence and set the political agenda on the issues that matter to councils so they are able to deliver local solutions to national problems.

The LGA covers every part of England and Wales, supporting local government as the most efficient and accountable part of the public sector. Visit www.local.gov.uk

Summary

Addressing poverty is at the core of what councils do. The LGA believes the effects of welfare reform on some claimants, the Government’s delivery risks in its reform programme, and councils’ own risks, can best be managed by taking full advantage of councils’ desire to serve their residents and their ability to lead a range of local partners. We believe the Government increasingly recognises that councils are an asset it needs to utilise if its reforms are to succeed.

The overall intention of the Government’s reforms—to simplify the benefits system and improve work incentives—is supported by the LGA. However, there are three issues causing concern for councils:

Councils anticipate many clients will need support that cannot be provided through a digital channel and it is currently not clear how that support will be provided or by whom;

Councils do not yet know the pace, cost or operational/workforce implications of the introduction of Universal Credit (UC) and pensions credit to replace Housing Benefit (HB); and

The overall reform package creates financial risks, some of them due to uncertainty about the details of UC implementation, but others due to as-yet unknown behavioural and market effects of changing the welfare system.

The LGA is working with the Department for Work and Pensions (DWP) and the Department of Communities and Local Government (DCLG) to try and address all these issues but there is still some way to go. Areas of joint work focus on:

(a)understanding the impact of benefit reforms on the housing market;

(b)designing a support offer for UC claimants through a joint taskforce and pilot projects; and

(c)linked to the support offer, aiming by next year to have a fuller understanding of the workforce implications of UC.

1. The Impact on Benefit Claimants and how Support will be Provided

1.1 The welfare reform programme will have a significant impact upon customers, particularly in relation to the digital channel. It is currently not clear how support not delivered through a digital channel will be provided and who will provide it.

1.2 Whilst the LGA and councils welcome the vision to have customers predominantly accessing benefits via online system, and only 14%1 of main benefit claimants have put in a new claim for benefits on line. 45% said they would need help or support to apply on line. With younger people and those claiming Job Seekers Allowance and Income Support more likely to access the internet in a library, customers may very well find themselves reliant upon council provided IT facilities to access the new welfare system, and receive the advice they need to make a claim.

1.3 The payment of benefit on a monthly basis rather than the current weekly system will mean that many customers will need to develop their budgeting skills and there is a risk claimants may be exploited by loan sharks and other inappropriate forms of credit Many claimants currently use different benefits, coming in at different times of the month, to pay different bills.

1.4 The advent of Universal Credit will mean that many customers will be receiving financial help with their rent as a monthly cash payment, having previously had it paid by the council direct to their landlords. Some claimants will run the risk of missing rent payments which could have a significant impact on them and on cash flows of housing providers.

1.5 Overall, the impact on claimants, especially those least prepared for independent self-management of their claims, is the central unknown in the welfare reform programme. It will be important that these risks are effectively managed with a support offer to claimants delivered locally and personally.

2. Uncertainty and Risk

2.1 While some of the financial impacts of the welfare reform agenda are clear and in principle, quantifiable, quantifying them at present may not be possible. There is uncertainty for councils as they do not yet know when the Housing Benefit caseload will start to shift over to UC and therefore when they will stop taking Housing Benefit claims for working-age claimants. Where identifiable costs are clearly and directly attributable to welfare reform, the Government is committed to compensating councils through its new burdens doctrine. Councils are likely to have to bear other costs themselves.

2.2 As a result of this uncertainty and the wider changes, we have identified potential new burdens, which reflect from both direct and indirect effects of the reforms.

2.3 The LGA has had limited involvement in the Government’s assessment of new burdens but this has not yet been completed and councils remain concerned that they do not have visibility about future costs. The assessment will need to be an ongoing process covering the full period of UC implementation to ensure that councils are fully compensated for any hidden or unforeseen pressures arising from the changes.

2.4 There is a widespread perception that the benefit cap and housing reforms may lead to an increase in homelessness, to which councils will be obliged to respond through an increase in the provision of temporary and bed & breakfast accommodation. Homelessness has, however, already increased significantly with a 9% increase in homelessness April–June 2012 compared with the same quarter in 2011 even before the main reforms have been implemented. Councils with a shortage of social housing for temporary use and claimants unable to afford the private rented sector will be faced with difficult decisions around accommodating people out of borough. This will have not only impact on the families concerned, but also on the councils to which families migrate.

2.5 There are also risks associated with the workforce. Earlier this year, DWP wrote to council Chief Executives advising that following the introduction of UC and the run down of councils’ housing benefit teams it was envisaged that there would be no opportunities for council staff to transfer to Jobcentre Plus under the TUPE regulations. This opinion has been challenged by the LGA with the result that the future role of council staff in the delivery of UC is now under active discussion. However this uncertainty could result in experienced staff electing to take up new opportunities before the completion of the roll out of UC.

2.6 Localising support for council tax at the same time as cutting the budget without the discretion on council tax discounts that the LGA sought in the Local Government Finance Act means that councils will have to bill many of the working poor for council tax for the first time. While the £100 million one-off grant announced by Baroness Hanham will go some way towards reducing the council tax burden for some, the eligibility conditions placed on the grant by DCLG mean that many councils may be unable to afford to take advantage of it. Even with the one-off grant to reduce the burden on working poor, faced with paying council tax for the first time, for one year there are many people who may find having to pay even relatively small amounts of council tax a burden too far and may either not pay or pay late. Many councils are planning for an increase in the cost of collecting council tax and a reduction in collection rates.

2.7 In addition, transferring responsibility for delivering elements of the former discretionary social fund to councils at a time when demand is likely to increase as reforms are implemented, risks councils finding it difficult to meet demand for crisis welfare support within the grant provided.

2.8 There are also risks associated with fraud. The counter fraud environment is being fundamentally altered. The creation of the Single Fraud Investigation service to tackle benefit fraud will considerably alter current fraud governance arrangements. These changes are happening against a backdrop of depressed economic activity in which the general fraud risk tends to increase.

2.9 Many local authorities have identified that tackling fraud can be a source of sizeable savings and have used innovative ways to prevent, detect and recover losses from fraud. Birmingham City Council has saved £25 million in the last five years as a result of regular data matching, Ealing Council is set to realise nearly £7 million of savings from taking action against fraudulent claims for single person discount from council tax and similar action by West Berkshire is expected to yield £4 million in three years. The risk is that the establishment of the new Single Fraud Investigation Service, charged with the investigation of benefit and tax credit fraud only, may lead to a fragmentation of the fraud investigation environment as responsibility for the investigation of other types of fraud such as tenancy and council tax fraud will remain with councils.

2.10 The total new financial risk to the sector—there are 360 housing authorities—therefore may run into hundreds of millions of pounds. Unsurprisingly, councils are taking provisions against these risks as a necessary part of prudent financial management, which increase the overall level of council reserves. Housing Associations, which also anticipate the risk of higher rent arrears, are doing likewise.

3. SolutionsCouncil Led Partnerships

3.1 The delivery and financial risks inherent in such a major programme of welfare reform can be mitigated by recognising councils as an asset with a leading role in commissioning local support to claimants. Local go government already works with the identified client base and currently supports them through a range of relationships developed with partners, such as Jobcentre Plus, the voluntary sector, and housing providers. Councils will build on these existing partnerships to help deliver the support package welfare reform will need.

3.2 Some councils, such as West Lindsay and North Dorset, are supporting tenants by trialling tenancy training courses. These are to ensure tenants have the correct financial management skills prior to signing up for new tenancies and monitoring will take place of housing accounts to check rent payments are being made.

3.3 Others are addressing concerns about claimants turning to pay day loan companies through a range of options including closer working with local Citizens Advice Bureaux (CABs) and credit unions. For example, Lewisham Council will be making an emergency loan system available. It is also looking at rolling out a pre-paid card as a mechanism of managing money.

3.4 The Government’s initial statements about its plans for delivering universal credit understandably focussed on the core, digital service. With the passage of time, however, and as the result of conversations with the LGA, the other local authority associations, and with councils, DWP Ministers and officials have publicly recognised the potential role for local government in the local face-to-face offer as part of Universal Credit.

3.5 In particular, the Minister for Welfare Reform agreed earlier this year with the LGA that pilots would be established to test the ways in which the local support offer might be delivered through council-led partnerships. Twelve council-led pilots have now been established across Great Britain to run until June next year, with eight councils engaged in seven pilots in England. They are developing ways of mitigating many of the key risks associated with the welfare reform agenda and most particularly the introduction of UC. So for example Birmingham City Council is identifying, through triage, the level of intervention required to help customers sustain and manage their finances, and improve digital literacy and financial capability, while Oxford City Council is working to assist claimants into work or if work is not available give them opportunities for beneficial activity that will increase their chances of finding work, or help reduce their dependency on benefits. North Dorset District Council on the other hand is taking a different approach by working in specified rural areas to provide services from CAB, Spectrum the local housing provider, DWP operations and a Credit Union to deliver money advice, budgeting and employability support in a rural environment and to learn lessons about the most effective approaches to deliver positive outcomes for remote customers. The LGA looks forward to further engagement with DWP as the learning from these pilots and other evidence is used to develop a formal proposition about the future local support offer.

3.6 The LGA takes the view that the best way of managing and containing the risks identified in this note is to address the needs of claimants through local service redesign based on people and places. Councils are not making a unilateral offer to deal with clients and problems that the core digital UC service cannot address, however: councils and central government need to work together over the coming months to achieve clarity about the future welfare delivery landscape and to reach the right solution.

December 2012

1 DWP Research Report No 800 2012.

Prepared 28th March 2013