Communities and Local Government CommitteeWritten evidence from Nottingham City Council

Nottingham is the second largest city in the East Midlands with a population of 305,700.1 It is also one of the eight members of the English Core Cities network. The Nottingham Urban Area has a population of approximately 640,9002 and it is the eighth largest urban area in the United Kingdom.

43,120 people aged 16–64 in Nottingham City were claiming one or more Department for Work and Pensions benefits in February 2012.

The total number of claimants increased by 4.7% in the City between February 2011 and February 2012, compared to a 2.3% increase nationally.

Executive Summary

Welfare Reform

The welfare reforms present significant challenges to local government including significant financial risks.

The timetable for implementation of Universal Credit (UC), Council Tax Support Schemes and Emergency Hardship/Welfare Schemes is very challenging.

Council Tax Support

Not integrating Council Tax Support with UC may undermine the policy intent of UC, especially in relation to simplification and improving incentives to work.

The shortfall in funding for Nottingham will be £6.2 million in 2013–14 and £7.4 million in 2014–15—nearer to an 18% reduction in funding.

Universal Credit

Further data sharing is needed between Local Authorities and the DWP so that authorities can prepare better for the implementation of UC and other welfare reforms.

There is a need for greater dialogue and greater transparency from DWP in relation to UC.

Housing Benefit

Changes to Housing Benefit will affect up to 7,000 people in Nottingham. Nottingham City Homes (our ALMO) estimate that this will mean that they will have to collect an extra £2.3 million in rent.

The significant reductions in benefit awards (capping and under occupancy) and single monthly payment of UC direct to benefit recipients may well result in more households falling into rent arrears and increased financial hardship.

Communications

Nottingham would welcome closer working with the DWP on transition and communication planning (locally and nationally) for the move to UC, the administration of housing costs within UC and the abolition of the Discretionary Social Fund. Nottingham City Council response to the Communities and Local Government Committee inquiry on the implementation of welfare reform by local authorities

1. How effectively are the Department for Work and Pensions and the Department for Communities and Local Government working together to implement Welfare Reform?

1.1 The welfare reforms introduced already and the further changes proposed present significant challenges to local government and some of the most deprived communities that we serve. Given these significant challenges, the DWP and DCLG at times do not appear to be working together as effectively as they might, both in terms of policy design and in terms of the practical preparations needed.

1.2 Nottingham City Council has particular concerns regarding the reforms in relation to Local Council Tax Support, Housing Benefits and Universal Credit.

1.3 Like many Authorities, Nottingham does not understand why the government decided to pass responsibility for help with Council Tax to local authorities rather than integrate it with Universal Credit. As a consequence, local authorities have faced an unprecedented task in designing their own local Council Tax Support Schemes while facing a significant reduction in Central Government funding and preparing for launch in time for April 2013. There will be a wide range of Council Tax Support Schemes that differ across local authorities, which may well be confusing for citizens. These local schemes will sit alongside a number of other benefit changes happening at the same time which is likely to add to confusion and hardship for citizens.

1.4 Choosing to not integrate Council Tax Support with Universal Credit may well undermine the overall policy intent of Universal Credit, especially in relation to simplification and improving incentives to work. And, in the longer term, separating the claims process for Council Tax Support and housing costs (which go into UC) may well cause confusion for citizens.

1.5 There is also a need for further data sharing between local authorities and the DWP so that authorities can prepare better for the implementation of Universal Credit and other welfare reforms and identify and support those citizens affected. We would also welcome closer working with the DWP on transition planning and communication planning for the move to UC.

2. Is the guidance available to local authorities from central government on implementing welfare reform adequate? Are there areas where more or better guidance is required?

2.1 Guidance on the localisation of welfare reform has been mixed.

2.2 In terms of Council Tax Support, while the policy intent has been to pass responsibility for scheme design to local authorities, the guidance has been quite prescriptive, such as prescribing in regulations the inclusion in local schemes of the protection of low income pensioners.

2.3 Given that DCLG were aware of the work happening in local authorities to design and consult on proposals for local Council Tax Support Schemes, the announcement of the £100 million transition funding from DCLG could have been timed at a more helpful point in the process.

2.4 There is a need for greater dialogue and greater transparency from DWP in relation to UC so that local authorities can help to make sure that the introduction of UC by DWP does not create significant disruption and concern to local people and within local communities. We do have concerns about the lack of time for the findings of the from the UC pilots to influence the implementation of the new UC system.

3. Is the Government’s timetable for implementing Welfare Reform achievable?

3.1 The timetable for implementation for both Council Tax Support Schemes and local emergency hardship support in lieu of the Discretionary Social Fund is very challenging for Local Authorities and perhaps fails to recognise the complexity of activities required at a local level to design and implement these new policies. The activities required include:

full and proper needs analysis;

insight and evaluation of data;

consultation periods;

decision making and governance arrangements;

procurement and commissioning; and

practical operational implementation.

3.2 The timetable for the implementation of UC looks very challenging for the Government, given that successful implementation relies on two new IT systems being delivered on time and to specification. This presents significant risks since there will be considerable disruption to claimants if the IT systems are not fit for purpose. It is essential that contingency plans for this and other risks are shared with local authorities and others who may be required to help, particularly as citizens are likely to come to local authorities for assistance. We ask for contingency plans for IT failure and risk management to be shared with Local Authorities.

4. Are local authorities being allocated sufficient resources to deliver services such as localised Council Tax Support and advice to claimants on Universal Credit?

4.1 No.

Council Tax Support

4.2 The Government is giving Local Authorities responsibility for Council Tax Support and is reducing the funding by 10%. Based on our assumptions of how the Government will calculate the final Council Tax Support allocation, we estimate that the shortfall in funding for Nottingham will be £6.2 million in 2013–14 and £7.4 million in 2014–15—nearer to an 18% reduction in funding.

4.3 Given the reduction in Government funding for Council Tax Support and wider budget challenges we face, Nottingham’s proposed local Council Tax Support Scheme will mean that all working age people may have to pay something towards their Council Tax bill, although Nottingham proposals for it’s Council Tax Support Scheme do comply with the criteria required to access the recently announced DCLG transition funding (the proposals are that working age households who get 100% help with their Council Tax bills now can receive a maximum of 91.5% help in 2013–14 and all working age households will pay at least 8.5% of their Council Tax bill in 2013–14).

4.4 The DCLG transition grant funding of £775k only goes some way to reducing the impact on Nottingham City.

4.5 The Government did provide some transitional administration funding to assist with the preparations required to develop local Council Tax Support Schemes. For Nottingham, this was £84k. However, the suppliers of the Council Tax system software are charging a standard fee of £65k to make the software system adjustments required, which will absorb a large proportion of the funding and means that the council still faces the other significant costs to operationally implement the changes.

Wider welfare changes

4.6 Nottingham City Council has already allocated a significant amount of resources to prepare for welfare changes; for example:

4.61Dealing with the under occupancy and Benefit cap welfare change—Local Authorities have invested time and money working with Registered Social Landlords to identify households directly affected, which has required purchase of software and significant manual intervention.

4.62Notifying and informing all affected households as appropriate.

4.63Responding to feedback and queries from citizens about the welfare changes and communicating these changes to citizens, councillors, colleagues, partners and local communities.

4.64Providing additional support and advice through advice networks.

4.7 Recognition of this additional expenditure, activity and use of local resources, perhaps via additional administration grant, would be welcome.

5. Are there financial risks to local authorities from Welfare Reform changes? Are such risks being adequately addressed?

5.1 Yes, welfare reform is creating financial risks to Local Authorities.

Council Tax Support

5.2 The Government is giving Local Authorities responsibility for Council Tax Support and is reducing the funding by 10%. Based on our assumptions of how the Government will calculate the final Council Tax Support allocation, we estimate that the shortfall in funding for Nottingham will be £6.2 million in 2013–14 and £7.4 million in 2014–15—nearer to an 18% reduction in funding.

Housing benefit—Under occupancy

5.3 The “under-occupancy” changes to Housing Benefit will affect up to 7,000 people in Nottingham. This will have an impact on social housing landlords—for example, Nottingham City Homes (our ALMO) estimate that this will mean that they will have to collect an extra £2.3 million in rent from the households affected. This will also involve additional transaction costs.

5.4 This is likely to drive demand for help via Discretionary Housing Payments, which, though due to increase in 2013–14, is a limited pot of funding and is not likely to meet the increased demand as a result of HB changes.

5.5 We are also seeing an increase in demand for services, such as money advice and debt advice and welfare rights advice as well as housing and homelessness advice. Discussions with other cities suggest that this is being mirrored across the Core Cities.

6. What impact have Welfare to Work schemes had, or are likely to have, on the numbers of benefit claimants?

6.1 The Work Programme has so far achieved only modest outcomes within Nottingham, at a level previously achieved by other, less costly means. This largely reflects the insular way that the prime contractors operate. Their reluctance to engage or partner with the City Council or other local providers in working with the unemployed means they have thus far missed a significant opportunity to gain work outcomes for local people.

7. What evidence is there that local authorities are able to use effectively existing services or contracts for the delivery of new local Social Fund schemes?

7.1 In Nottingham, we anticipate that existing services are likely to be used to deal with assessment and decision making about access to emergency hardship assistance, but that the provision of resources whether it is goods or emergency finance will need to be commissioned as additional provision.

7.2 In Nottingham, demand for Discretionary Social Fund assistance has consistently exceeded available funding. In 2009–10 15,980 applications were made with only 67% of those receiving an award, in 2010–11 applications increased to 17,490 receiving an award and in 2011–12 there were 15,780 applications with only 77% of CL applications and 45% of CCG applications granted.

7.3 In addition, those voluntary organisations in Nottingham that already provide some services to help meet hardship such as a range of food banks and providers of recycled/donated furniture tell us that demand for their help is also oversubscribed. They already provide “top up” help with hardship to those awarded CCGs/CLs that are lower than they need as well as helping those unable to access CCGs/CLs.

8. How will the separation of the administration of Council Tax Benefit and Housing Benefit affect claimants?

8.1 As Universal Credit is rolled out, we are concerned that the separation of the administration of Council Tax Support and Housing Benefit/housing costs is likely to result in confusion for citizens who are used to using a single organisation to make/update a claim for both Housing Benefit and Council Tax Benefit.

8.2 Citizens already have a relationship with their Local Authority, particularly those receiving housing benefits. Therefore we are likely to be the first point of contact for citizens who have questions about how UC will work and what it will mean for them. Data sharing will be absolutely vital to ensure that where possible the impact is mitigated, along with legislation to enable the collection of Council Tax arrears direct from claimants’ Universal Credit payments to avoid Council Tax arrears and indebtedness.

8.3 Given that Local Authorities currently administer Housing Benefit and that transition to UC will include housing costs, it is essential that we know how the DWP plans to communicate with citizens both locally and nationally.

9. How significant an issue is housing benefit fraud under the proposed new system and what measures are being taken to address it? Which new scheme?

9.1 Universal Credit will encompass Housing Benefit and therefore Housing Benefit fraud will be the responsibility of the DWP. Legacy overpayments as a consequence of past Housing Benefit fraud will be a significant issue for Local Authorities, if under the Universal Credit system Local Authorities are not able to recoup the money from ongoing benefit entitlement.

10. Are there sufficient safeguards to protect social landlords from financial harm resulting from the payment of housing benefit direct to claimants?

10.1 It is uncertain at this time if there are sufficient safeguards to protect social landlords from financial harm resulting from the payment of Housing Benefit direct to claimants.

10.2 Registered Social Landlord’s and tenants have expressed concerns about the impact of payment of HB direct to tenants, regardless of whether the tenant wants this to happen or not. They fear that levels of rent arrears will increase, as will the risk of homelessness, and in Nottingham, they are currently active in bringing in new approaches to enable people to get their rent accounts into payment in advance, working with credit unions to look at Jam Jar accounts and checking alternatives for households that may be affected by the under-occupancy rules. 

10.3 The significant reductions in benefit awards (capping and under occupancy) and single monthly payment of UC direct to benefit recipients (without a breakdown of what the single payment is for) may well result in more households falling into rent arrears, which will affect the finances of social housing landlords. If this results in increased homelessness, then there will also be additional financial pressures on local authorities.

10.4 The direct payment pilots are critical to understanding how UC will work and the role to be played by Local Authorities. We understand that the evidence so far suggests that communication and effective engagement with tenants is important and findings suggest that a range of communication methods may be required to inform tenants of changes to welfare systems and how they might be affected. We do have concerns about the lack of time for the findings from the UC pilots to influence the implementation of the new UC system.

January 2013

1 Census 2011

2 Census 2011

Prepared 28th March 2013