Communities and Local Government CommitteeWritten evidence from The Welfare Reform Club

About the Welfare Reform Club

1. The Welfare Reform Club was founded by three experienced experts in welfare policy and its implementation.

Paul Howarth retired in October 2011 after 38 years working for the DWP where he was responsible for Housing Benefit, Council Tax Benefit and Support for Mortgage Interest. Paul has a detailed insight into the relationship between central and local government; he helped to transform the relationship with local authorities through better engagement and communication.

Malcolm Gardner has worked as a manager and a consultant for local authority revenues and benefits departments since 1996 and has successfully transformed several revenues and benefit teams into smarter services, offering real value for money.

Deven Ghelani is one of the architects of Universal Credit. He has worked on it since its inception at the Centre for Social Justice, where he leads on welfare, employment and public spending policy. He has also published several books on these subjects. He has a background in consultancy and supports the implementation of policy through the Welfare Reform Club.

2. With over 40 local authority members, and commissioned work with local authorities on the Universal Credit pilots, and on council tax support schemes, the Welfare Reform Club is ideally placed to assess progress on welfare reform implementation. The Welfare Reform Club is dedicated to help local authorities plan for, and understand the impact of, proposed changes to the welfare system, primarily the introduction of Universal Credit and its interaction with local welfare support through changes in housing and council tax support, and the social fund.

3. The Welfare Reform Club has three core objectives:

To promote local delivery of welfare reform where appropriate and support local authorities deliver the reforms.

To help local authorities engage constructively with central government on welfare reform.

To help central government to make better policy decisions, through better communication with local authorities and a clear, evidence-based understanding of the impact of policy changes at a local level.

4. We would be happy to provide further assistance to the Select Committee if required, or to give evidence in person to the Committee.

General Implementation Challenges

5. Universal Credit is a radical re-casting of the benefit system, shaping it into a system that supports positive decisions in the lives of recipients. These decisions include in particular: to move into work, to progress in work and to take steps toward independence.

6. Our understanding is that the broad principles of Universal Credit retain cross-party support, and are backed by welfare rights groups and of the majority of the British public. Those with experience of the current welfare system want a simpler, more accessible system.

7. It is critical that the implementation of Universal Credit is properly scrutinised. A change on the scale of Universal Credit will undoubtedly raise concerns and create uncertainty. Citizens and welfare organisations will want to know how it will affect them. And there will undoubtedly be difficulties in the implementation of Universal Credit, and legitimate questions asked about the decisions that were made along the way.

8. However, we firmly believe that the implementation challenges can be overcome, through the full co-operation and commitment of central government departments, local authorities and other local stakeholders. The implementation challenges should not derail a fundamental reform of the benefit system that is long overdue.

9. In our view, Universal Credit will succeed only if its structure remains reasonably simple. In bringing together four income-related benefits with tax credits, Universal Credit is a major simplification of the benefit system.

10. However, it cannot possibly cater for every individual circumstance without becoming just as complex as its predecessors. So there is a vitally important role for local authorities to help develop solutions to the challenges that this raises.

11. In order to keep Universal Credit relatively simple, local authorities will inevitably need to provide more discretionary help, with cash-limited budgets, for those with exceptional and unusual requirements.

12. This means having the systems and processes in place to be able to manage this discretionary support effectively. This presents another implementation challenge; but if it is not recognised, and does not succeed, it will put implementation of Universal Credit at risk as well.

13. Local authorities also have a very important role in the delivery of Universal Credit itself. Apart from handling the transition (particularly from Housing Benefit to Universal Credit), local authorities will be the key provider of face-to-face support for those people who need it.

14. This could well be a bigger task than the central departments currently planning for, particularly in the early days, so it will be vital that local authorities are appropriately resourced and that they have access to the Universal Credit data needed to provide helpful and accurate advice to the customer.

15. This is particularly true of the housing element of Universal Credit. Whilst we support in principle the integration of Housing Benefit into Universal Credit, its delivery by local authorities from 1982 until now has facilitated close links with local authority housing departments. It will be important to develop new effective links between those responsible for the delivery of Universal Credit and those responsible for housing strategy and the delivery of local services.

16. This means that central departments must work closely with a range of partners, particularly local authorities. They are doing some of this but could do more—delivery of Universal Credit is a partnership and all partners need to work effectively together. To be truly effective, this may mean giving local authorities a more active role in the administration of Universal Credit.

Specific Implementation Challenges

17. This response focuses on specific challenges to the design and implementation of Universal Credit and local welfare schemes:

How effectively are the DWP and the Department for Communities and Local Government working together to implement welfare reform?

There is a lot of liaison taking place, and a clear recognition of the need for close working between the DWP and DCLG.

However, the two departments inevitably have different perspectives. The main difference focuses on central versus local service delivery. Also, the departments need to respect decisions that have been made, for example on localisation of council tax support, and concentrate on effective implementation of the agreed Government position. If policy disagreements re-surface, implementation of welfare reform will be severely hindered.

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

There is a limit to the amount of guidance that should be provided in a localised environment. Many local authorities have proposed significant policy changes in their council tax support schemes, partly to reflect local circumstances. Central departments need to trust local authorities to make the right decisions.

In any case, central departments cannot provide guidance on every possible local policy, nor should they, even though local authorities are used to receiving direction from central departments and may struggle most where they have been asked to take on new responsibilities and need to come up with new designs.

Rather than guidance it may be more helpful, particularly for smaller authorities, to co-ordinate best practice, something the Welfare Reform Club are facilitating through our work with leading local authorities.

That said, central departments have provided a good deal of advice, guidance and statements of intent, some very helpful, some less so.

For example, one point where more advice might have been provided is on how to make the 10% cut in council tax support schemes. The inference is that DCLG would prefer local authorities to adopt the default scheme, with no cuts, and find the resources to fund the gap from elsewhere. This is not very helpful, as those local authorities who have decided they have no option but to implement the 10% cut in their scheme are left with no pointers on the best way of protecting work incentives in these circumstances.

Is the government’s timetable for implementing welfare reform achievable?

The Government has allowed four years for the transition to Universal Credit, so in theory it should be achievable. However, this assumes no delay to the planned implementation timetable. There is a risk that the main part of the transition will be crammed into the latter part of the four year window. Central departments may have underestimated the complexities of Housing Benefit and this may yet prove problematic.

Central departments will need to work effectively with local partners to achieve successful implementation.

The timetable for council tax support schemes is very stretching and many local authorities have concluded that they can implement only an interim solution from April 2013.

Delays, even within the constraints of the existing time frame, could have a financially detrimental effect on local authority budgets, as it will be difficult to plan for appropriate resources and enter into cost-effective contracts with software suppliers.

Are local authorities being allocated sufficient resources to deliver services such as localised council tax support and advice to claimants on Universal Credit?

Overall, almost certainly not (although some local authority budgets will be decided later this year).

It is very likely that the local authority contribution to the successful delivery of Universal Credit will be a bigger task than central departments currently envisage. Funding is by no means the only issue (for example there are gaps in information and expertise) but it warrants careful examination. This is a clear DCLG responsibility, in conjunction with Treasury.

Local authorities will need to find ways to overcome gaps in resources as well, with respect to staff and expertise as well as funding. This comes at a time of challenging financial constraints and reductions in skills, as local authority staff are being made redundant or being redeployed.

The Government envisaged a skills transfer to the private sector, and that the private sector would also be picking up public sector work. However, the reality in many areas is that public sector skills are being lost as former local authority staff move to different types of employment in the private sector.

Are there financial risks to local authorities from welfare reform changes and are such risks being adequately addressed?

The main risk is that local authorities will find that they have to do more than currently planned in order to help deliver welfare reform. In particular, local authorities are devoting a lot of resources to designing council tax support schemes. This is a new responsibility, so they have either to develop new skills quickly or buy them in. With a tight timescales and uncertainty over information available from central government, this presents a significant financial risk. The 10% cut in council tax support budgets could easily backfire.

There is some evidence that local authorities are shedding staff with skills in delivering revenues and benefits services. This is unlikely to be very prudent in the short-term.

Central departments need to be alive to these risks and be prepared to act quickly if necessary.

What impact have welfare to work schemes had, or are likely to have, on the numbers of benefit claimants?

Latest results clearly show that there is more work to be done. The sound principles behind the Work Programme are not yet working effectively in practice. The latest statistics tend to suggest that the existing schemes are not as effective as they could be.

Local schemes, which see partnering between local authority and local business groups, underpinned by a national scheme, are likely to deliver better opportunities to get people back into work.

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?

Local authorities have put a great deal of thought and effort in creating local schemes. Some authorities have chosen to reinvest the funding into existing support schemes, therefore targeting known vulnerable families, while other such as Wolverhampton, have developed schemes that make full use of local providers and third parties to create a cashless financial support for families in crisis.

How will the separation of the administration of council tax benefit and housing benefit affect claimants?

The local administration of council tax support provides a very clear case for sharing information between DWP and local authorities in order to achieve the broader aims of simplifying the administration of benefits and enhancing work incentives.

It may cause some difficulty for customers in the short-term as they will be used to having Housing Benefit and Council Tax Benefit processed together.

It will take time for people to appreciate that their housing costs will in most cases be included in their Universal Credit. Effective communication will be vital.

The biggest risk is that the drivers for council tax support and Universal Credit may be different if local authorities do not have shared ownership of Universal Credit delivery. Council tax schemes may work against Universal Credit and create a disincentive to work. If local authorities were more involved in the delivery of Universal Credit, it would allow for more creativity and greater likelihood of a consistent approach.

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

Some fraud and error will be eradicated under the new arrangements (for example failure to declare tax credits when claiming Housing Benefit).

But fraud and error will always be a significant feature of income-related benefits. Housing Benefit fraud is often linked to housing fraud, with the same family involved in both types of fraud at the same time.

Therefore the links with housing and other local authority services need to be catered for under the new system. It is hard to see how the Single Fraud Investigation Service will address the nature of what is, in effect, a cross-boundary activity.

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

The DWP demonstration projects are addressing this issue. But it is vital that Universal Credit looks and feels like a salary and therefore it should, with some limited safeguards, be paid directly to the household and not the landlord.

Financial advice and support will of course be important in making this work. But social landlords should not in effect rely on benefit dependency to provide their credit rating with lenders.

Despite the willingness of some welfare recipients to manage their own affairs, it is likely the rent arrears will increase, at least in the short-term. This should not come as a great surprise. There has been some increase in rent arrears in the private-rented sector as a result of the Local Housing Allowance, particularly where authorities have kept strictly to the policy to pay landlords only in very limited circumstances. If more people are presented with an opportunity to default, whether or not they receive benefits, a proportion of them will do so.

Landlords already have to manage rent arrears for those not receiving benefits, or not enough benefits to make direct payments possible, and they are likely to have to extend and enhance these processes at least to some degree.

People who are likely to have difficulty managing their finances, for whatever reason, are often well known the local authority, for example through troubled families schemes and child protection. Local knowledge will be essential to inform decisions about the nature of help to be offered to such people, including direct payments. Local delivery of welfare will help this process, but it will be just as important to ensure that communications between central departments and local authorities are highly effective. It is central to welfare reform that as many people as possible are encouraged to be independent and resourceful, but at the same time there should be reasonable protection for social landlords, particularly during the transition.

Concluding Statement

18. Universal Credit is the most important welfare reform since the beginning of the welfare state. It has the potential to bring long-promised radical simplification of the benefit system, and greatly enhanced work incentives. It could really help to change people’s lives. So it is vital that as much effort goes into implementation as it has into design. Local authorities have a vital role to play and there has been some recognition of this by central departments.

19. Local authorities are keen to play a significant role. Whilst not necessarily agreeing with every reform, they appreciate that the wider objectives around work will have a positive impact on the local economy. Welfare reform is a mixture of national and local programmes. To work well, it will require national and local agencies to work together in a dynamic and equal partnership.

January 2013

Prepared 28th March 2013