Communities and Local Government CommitteeWritten evidence from Blackpool Council

Context

Blackpool has a large deprived population and is currently ranked the 6th most deprived authority in England under the Indices of Deprivation 2010. Poverty is also a significant factor; data released by HMRC based on the 2010 figures show that child poverty in Blackpool increased (from 29.5% to 30%) while for England and Wales it decreased over the same period (from 21.4% to 20.7% for all children).

In light of the above, welfare reform is anticipated to have a huge impact on Blackpool’s residents, the table below shows that across all benefit groups Blackpool has substantially higher proportions of claimants than England as a whole. This is likely to mean Blackpool will experience a greater local impact than many other authorities as a result of changes to welfare provision.

Benefit

Blackpool (n)

Blackpool %

England %

Population

Date

DLA

13,390

9.4%

5.0%

All

Feb-12

Income Support

6,120

6.9%

3.7%

Working Age

Feb-12

JSA (income based)

5,300

5.9%

3.2%

Working Age

Feb-12

ESA (income based)

12,460

14.0%

7.7%

Working Age

Feb-12

Housing Benefit

20,890

17.9%

10.0%

16+

Aug-12

Tax Credits

18,100

28.1%

21.7%

Households

Apr-12

Source: DWP and HMRC

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

Both government departments are simultaneously introducing changes to the welfare system that have far reaching implications for the local authority, both in terms of implementation and impact; the nature of these changes would suggest that the DWP and DCLG are not working together effectively.

Local authorities are faced with implementing numerous changes for example; localising Council Tax support, Social Fund, and changes to Local Housing Allowance. It is the volume of these changes and additional work associated with implementing them that is a problematic and unrealistic expectation from government. In particularly, having to implement them from existing resources will inevitably put pressure on how effectively services are delivered and how well the changes are implemented. At the same time local authorities are preparing for the introduction of Universal Credit and Personal Independence Payment and the impact that this will inevitably have on residents and knock on effect to the authority.

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?

The guidance that has been made available to local authorities on implementing welfare reform is generally inconsistent. In some areas it is sufficient for example; information on changes for under occupancy is sufficient, however there is no information about how Council’s will be audited to ensure that the changes have been implemented.

In other areas the guidance provided is inadequate, for example with regards to the Benefit Cap. It will be up to local authorities to implement the cap to start with but customers will still continue to receive other excess income until Universal Credit is introduced. This is contradictory and puts further pressure on local authorities as implementation will appear to be piecemeal with local authorities ensuring the cap is applied but DWP not doing so. While we wish to pro-actively assist customers, links with Job Centre’s who are dealing with customers affected by the Benefit Cap customers are poor and we will not be in a position to signpost customers unless better relationships are established.

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.

Blackpool Coastal Housing—the arms length management company for the social housing stock have commented that there is very little guidance available directly and there is no central point for information for social landlords. They have searched for information including obtaining information from other sources scanning the changes, such as HQN/Landlords Information Network.

They also state that they have not received any information from DWP with regards to how direct payments to vulnerable applicants will be managed, and what the agreed criteria for direct payments to landlords in certain circumstances will be. They have received no guidance regarding how direct payment to landlords for tenants in arrears will be managed.

BCH advise that they have heard from other sources that the Government have commenced a procurement exercise within the banking industry for so-called jam jar accounts, but have had no direct information about this, how we can access it and progress made to date. They have many questions about Welfare Reform but have been told that as an organisation providing housing services to local authority tenants, we should not have a direct relationship with the Department of Work and Pensions.

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

The timetable for implementing Welfare Reform is extremely challenging but local authorities have a long history of introducing change on time and changes from April 2013 will be done on time. The speed of reform will have a greater impact on customers (do they really know what’s coming and how they will be affected?). More time would enable better preparation and communication of changes to customers.

Given that Universal Credit is due to be introduced in less than a year and timescales are being adhered to, the number of customers in pilot projects and the initial “go live” phase now seems to be minimal, which when compared to the introduction of Local Housing Allowance is insufficient and inadequate.

Local authorities were expecting customers to start migrating onto Universal Credit in October 2013. It appears now that this will only apply to “some” claimants in “some” areas now. It is unclear which types of change in circumstances will trigger a transfer onto Universal Credit and how will the authority know if someone moves into the area who has already claimed Universal Credit elsewhere for example, in a pilot area in order to refer them to JCP? Hardly an approach that we are able to plan for!

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.

Blackpool Coastal Housing anticipates that the implementation will happen on the timescales we have been given, however is concerned that all the changes are happening almost simultaneously and the implications on social landlords and tenants are not being taken seriously. If there is likely to be slippage in the timetable this needs to be communicated as soon as possible to ensure that business plan projections can be amended accordingly and debt headroom forecast as accurately as possible.

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

Local authorities have been allocated enough resources to deliver localised Council Tax Support. However there are insufficient resources, lack of information on funding and notably a lack of clarity on the role of local authorities with regards to Universal Credit.

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

The introduction of PIP will potentially lead to a reduction in income for local authorities as people are transferred from DLA and their net disposable income reduces in turn placing an additional financial burden on Social Services departments.

Once Universal Credit is introduced and the authority no longer deals with Housing Benefit claims, there may be a reduced incentive for people to notify us of where they are living, leading to increased issues and problems regarding the collection of Council Tax.

Recovery of overpayments remains with the authority but as yet there is little information about rates of recovery from DWP benefits or data sharing protocols therefore we may have an increased administrative burden to collect monies.

Localised Council Tax Support may have a negative impact on Council Tax collection rates as people are unable to manage with the additional expenditure when budgets are already stretched and they begin to feel the impact of other reductions to their income as a result of welfare reform.

There are also significant risks to the local authority Housing Revenue Account. In particular, the direct payment to claimants of the Housing Credit element of Universal Credit means that our income stream is at risk. This could negatively impact on our ability to effectively deliver services, leading to service reductions and a risk that the housing stock falls into non-decency again.

Our social housing tenants include the most chaotic individuals within the community, suffering a variety of vulnerabilities from physical disabilities, social isolation, mental health issues, learning disabilities and substance misuse. The move to direct payments means that some of the least able people to cope with these significant changes could potentially face eviction and further poverty.

Other support services to help these individuals deal with an increase in homelessness and other social problems are required, but we are at a time when such services have received drastic cuts. At the time of these significant changes, the Council has faced and continues to face cuts in its general funding, including the cuts that will arise from moving from Council Tax benefit to a locally administered scheme. Undoubtedly, the pressures on Children’s and Adult Services and other support services will increase at a time when they are least able to deal with them.

The risks described above are not being sufficiently addressed by the DWP or DCLG.

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

Unless or until the job market within Blackpool improves, there will always be a shortfall of employment opportunities within the town, and no amount of Welfare to Work schemes will be successful in improving the ultimate outcome of reduced worklessness.

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?

There is less money to administer and fund Crisis Loans and Community Care Grants therefore the same level of support cannot be offered and new services and contracts will have to be commissioned, however we will be able to continue with some existing services but this will be in an adapted way.

The numbers of welfare benefit advice providers has reduced and therefore signposting of customers for additional help will fall on the community and voluntary sector bringing further implications for already stretched resources.

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

Once Universal Credit is introduced, it is clear that local authorities will not get a breakdown of the components of an individual’s claim and will therefore need to ask the customer to provide their initial Universal Credit entitlement letter in order to be able to remove housing costs from the UC award to establish the amount to be used for LCTS. This will potentially increase the length of time it will take for a claim to be made and processed and in some cases customers may no longer have their entitlement letter.

It is highly likely that customers will be confused about who to contact, what to provide and where to go depending on whether a local authority area has started Universal Credit or not, despite the best efforts of the authority. Customers will need to provide evidence of claims to both the DWP and the local authority; this is contradictory to the ethos of reducing avoidable contact, a DWP initiative.

Claimants have been used to both benefits being administered in the same way for many years. How will they react when a claim for Housing Benefit can be backdated but there is no such provision under LCTS? One will be a DWP benefit, the other will not. Will claimants really understand the difference in how the schemes are administered?

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

The significance of housing benefit fraud as an issue is unknown at the present time. There is a lack of detail as to how legitimate tenancies will be validated by the DWP. It should not be underestimated that the loss of local knowledge will probably lead to an increase in fraud.

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

The Direct Payment demonstration projects relate to such a small number of social sector tenants that the full impact of the change will not be understood until the introduction of direct payments. Lack of a random approach to picking customers to trial direct payments will lead to biased results.

Social landlords will potentially be faced with tenants getting less Housing Benefit due to under-occupancy, which is a major problem with the lack of affordable homes; as well as potentially less in LCTS than Council Tax Benefit, this is likely to create problems regarding collection of rent and Council Tax and increased arrears.

Blackpool Coastal Housing does not think that sufficient safeguards are in place and identifies their income stream as at significant risk as claimants have not been prepared adequately, or risk assessed to how well they can cope with managing such large amounts of money received directly.

Payment of the amounts one month in arrears will exacerbate the difficulties. Tenants may spend their rent money on other things, and this may be exacerbated by loans taken out at punitive interest rates. If we have a reduced income, then providing the housing and maintenance service will become unaffordable, homes will fall into disrepair, and housing services which are in some cases bridging the gap caused by reduced funding in other provision will also disappear.

In addition the impact of direct payments without safeguards on private landlords should not be underestimated. There is a potential for a reduction in available housing as landlords leave the market, which could in turn put additional pressure on local authority housing options and homelessness teams.

A broader impact of welfare reform for Blackpool is the impact on the private rented housing market and although the most significant changes taking place now are to tenants in social rented housing, there will still be significant adverse effects on landlords’ cash flow; this will discourage landlords from letting to people on benefits where they have alternative options. In some areas, like inner Blackpool, the “market” is dominated by landlords letting to people on Housing Benefit, and it is to these areas that people on benefits will be forced to migrate when they cannot find suitable accommodation in other areas. This further exacerbates concentrations of poverty and economic under-performance. The adverse effects on cash flow will be caused by:

Longer periods between benefits payments to tenants.

Likely reduced proportions of tenants for whom housing elements of benefits are paid direct to landlords where tenants are classed as vulnerable.

Less ability to contact benefits administrators to resolve problems when the administration is carried out remotely by DWP rather than locally by local authorities.

The change that took place early in 2012 to only pay LHA Single Room Rate to single people under 35 (instead of under 25) has reinforced demand for houses in multiple occupation that are concentrated in coastal resorts, and especially in Blackpool. The local authority is working hard to reduce the supply of HMOs and achieve a more balanced housing supply from conversions of former guest houses, but this change works against these key local priorities by bolstering demand for the unacceptable accommodation that we’re seeking to remove.

Blackpool Council has argued for years that the calculation of LHA across very large Broad Rental Market Areas, and only in relation to the small minority of private rented properties that are not let to people on benefits, artificially increases benefit rates and therefore returns to landlords letting accommodation at the bottom of the market. This is a situation that is particular to deprived northern areas where most of the private rented sector is focussed on benefits claimants and poor urban areas have a markedly more affluent suburban and rural hinterland, but shows how benefit levels should be set to meet local housing costs and not based on broad assumptions across large areas. The move to Universal Credit makes local sensitivity even more difficult to achieve, and is therefore likely to further distort the market, leading to some areas where benefits claimants cannot afford to live (in the suburban/rural parts of housing markets) and further concentrate poor people in urban areas dominated by private renting to people on benefits.

If Universal Credit sets benefits to meet housing costs on an even wider basis—for example whole regions—then there will be displacement of people from more affluent areas to poor areas.

It is clear that people on benefits will not be able to afford to live in the most expensive parts of the country—for example many areas of London—and there is likely to be a much wider displacement of people on benefits from one part of the country to another. Blackpool has a long history of people who are not economically self-supporting migrating into the area because it is well known and attractive, and has a large supply of former guest houses that have converted into accommodation let to people on benefits. Again, this will reinforce demand for the worst accommodation that just meets minimum standards but is unattractive to all but the most desperate. This is the accommodation that the Council and local residents want to see property owners converting to higher quality and more varied uses.

It is also anticipated that welfare reform will lead to increased child poverty in Blackpool. The benefit cap of £500/week for couples and £350/week for single parents will have the greatest impact on large families, while the LCTS will mean that families will have an additional bill to pay where they were previously entitled to Council Tax Benefit. The proposed move to monthly payments will cause problems for some families who may find that there is simply not enough money to effectively budget for a longer period of time, especially if there are existing debt issues.

Child poverty has already seen an increase as mentioned at the beginning of this report and the culmination of these and other changes to be implemented over the coming months are likely to make a bad situation worse for vulnerable families at a time when wider local authority support services are also being reduced.

January 2013

Prepared 28th March 2013