Communities and Local Government CommitteeWritten evidence from Citizens Advice

1. Introduction

1.1 Citizens Advice welcomes the opportunity to submit evidence to this inquiry, which concerns a complex combination of centralising and localising measures:

Substantial cuts in Housing Benefit (HB) accompanied by increases in cash-limited Discretionary Housing Payment (DHP) pots.

HB to be abolished and incorporated into a centralised Universal Credit (UC) payment—but with an (as yet unclear) local authority (LA) assisting role.

Council Tax Benefit (CTB) to be abolished and replaced by localised cash-limited Council Tax Support (CTS) schemes.

The Social Fund (SF) to be abolished and the resources previously spent on Community Care Grants (CCGs) and Crisis Loans to be distributed to LAs, with wide discretion as to how to spend the money.

1.2 In 2011–12, Citizens Advice Bureaux saw two million clients and helped with almost seven million enquiries, including:

HB:1 233,615.

CTB: 188,215.

SF CCGs: 24,843.

SF Crisis Loans: 20,482.

SF Budgeting Loans: 12,134.

SF debt problems: 14,638.

Rent arrears (private rented sector): 28,223.

Rent arrears (social rented sector): 75,833.

1.3 We consider that the advent of UC, combined with increased recourse to local discretionary and cash-limited provision, will prove to be a major social policy issue in the coming years and a leading source of enquiries to bureaux.

2. The Consultation Questions2

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

The striking example here is localised CTS. The exclusion of CTB from Universal Credit and its replacement with local schemes cuts right across the objectives of UC.

As regards the dissolved Social Fund, the DWP has made available much material on the current scheme, but we understand that neither Department intends to be substantially engaged with LAs’ decisions as to how to deploy the transferred resources.

As regards Universal Credit, the DWP is clearly the lead Department, but as the role of local authorities in UC delivery is not yet clear, neither is that of the DCLG.

2.2 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?

This varies. Guidance on DHPs is well-established and although the recent update seemed to have been put together hastily, this is familiar territory for administrators and advisers. Of course, the task of trying to prioritise one case of hardship above another when each claimant is below basic benefit levels after paying the rent, is intrinsically problematic, however good the guidance.

We have yet to receive feedback on guidance provided to LAs involved in the UC pilots and pathfinders and this will in any case be a moving picture at present. Bureaux in these areas will be seeking to engage with their LAs to see how they can best work together.

Little or no specific guidance has been provided around CTS, beyond the criteria for the recently-announced transitional funding. (The default scheme is not intended as guidance). Our impression is that the DWP sees this as a matter for the DCLG; while the DCLG sees it as a matter for LAs.

As noted above, DWP material regarding the dissolved Social Fund seems mainly to relate to the old scheme, to help LAs with profiling. The DWP does not see its role as providing a lead on what might take its place.

A general point here is that that there is not enough cross-cutting information, providing LAs with a picture of the cumulative impact of various changes.

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

This remains to be seen. There are certainly concerns. Relevant variables include:

The extent to which knowledge of and preparedness for digital inclusion has been taken forward locally;

The extent to which money advice and budgeting support has been developed locally;

The extent to which information and communications technology systems perform without mishap; and

The extent to which LAs are able to put in place coherent local CTS schemes at relatively short notice for such a major change.

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

As regards localised CTS, if delivery refers to the substance of the service itself, the answer is no, as a funding shortfall is built in. If delivery refers to administration, we do not have the evidence to say.

As regards DHPs and the dissolved Social Fund, there are no official adequacy criteria against which to assess the range and amounts of payments. Again, we do not have evidence on administrative costs. Both award decisions and administrative problems feature regularly in enquiries brought to bureaux regarding DHPs and the Social Fund.

Client has applied for a DHP, but been refused on grounds that his problem is not short term, [Bureau in London, referring to 54-year-old unemployed claimant].

Client has applied [for a DHP] but was turned down as there was too much of a shortfall. She has re-applied and is waiting to hear. [Bureau in London, referring to 27-year-old lone mother].

Client was told she should have sufficient income to meet the [HB] shortfall. Client thinks that they may have included the money she gets as a student to cover childcare costs. [Bureau in Cheshire, referring to 20-year-old lone mother].

See 2.7 below for examples relating to the Social Fund.

As regards advice on UC, the overall funding scenario is not encouraging, as local advice agencies —including our bureaux—are heavily dependent on LA funding, which is under severe pressure.

Our experience is that major benefit changes lead to a large increase in demand for advice in the short to medium term. Given the scale of the current changes, we are expecting an unprecedented increase in demand for advice.

To prepare for this, we are modelling innovative ways of maximising our productivity. Nevertheless, we will not be able adequately to supply this service without additional funds from local and/or national Government. Failing this, there will be significant additional pressures on LAs—for advice and for help with the consequences of not receiving advice.

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

In a general sense, reduced spending power among local people will result in reduced ability to pay local taxes and charges and to get by in the community without social services help. Increased poverty is also associated with adverse outcomes (and associated costs) in areas including health, education and crime. The Government would argue that its measures will ultimately reduce poverty by increasing employment and the rewards from work, but this claim lacks evidence.

More specifically, localised CTS, default payment of rent money to claimants rather than landlords and the extension of HB size criteria to the social rented sector (the “bedroom tax”) all entail financial risk to LAs.

As regards direct payment of rent money to claimants: the evidence we have seen from the local “Demonstration Projects” suggests that preparing claimants for this change needs significantly more resources than was anticipated. We also understand that some LAs have found that this work has impacted adversely on their day-to-day activity, including rent collection and arrears recovery.

One CAB in a Demonstration Project area has reported 19 clients who have experienced problems arising from their inclusion, some being threatened with eviction for arrears.

As noted above, increased but unmet demand for advice also carries its own risks.

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

Claimant numbers can be reduced through welfare-to-work strategies in positive and negative ways. Some will move into work and earn enough to lift them clear of in-work means-tested benefits. Others will remain out of work but lose benefit entitlement, notably if moved from a contributory to a means-tested regime and then failing the means test, perhaps because of a partner’s earnings—an effect that will become more extensive with the time-limiting for many claimants of contributory Employment and Support Allowance (ESA).

We are not aware that there has been any comprehensive quantitative analysis of these interactions.

2.7 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?

This begs the question of how far there will be local schemes. LAs will often find it easier to channel these funds into some existing resource without ring-fencing them separately—for example, the DHP pot or the voluntary sector funding programme. The “Social Fund money” might be difficult to identify separately in such cases, especially if it is partially offsetting cuts to voluntary sector funding rather than creating a net increase in resources. We intend to monitor what happens in practice.

This can only exacerbate existing difficulties with Social Fund cash-limits, rationing and access problems.

A bureau in Lancashire reports a client refused a CCG. He is a 42- year-old single man living in privately rented accommodation, thanks to his family raising the deposit. He has lived a nomadic lifestyle for the last three years, sleeping at various family residences until his welcome ran out. Due to this lifestyle, he has no possessions and as the flat is unfurnished, he is living without the basic necessities to sleep, cook etc. His application for a COG having been refused, he is unable to establish a suitable home. He has had mental health issues (depression and alcoholism) which he hopes he has overcome, but this setback is taking its toll on his fairly fragile constitution. When his family gathered the deposit for his flat, he felt this was a new beginning for him but the problems he is facing are not helping.

A bureau in Yorkshire reports a lone parent with one child who sought help because she had no gas or electricity (being on prepayment meters and having already used her emergency credit) and no food. This was because the radiator in her bedroom had burst and she had spent her limited money on cleaning products and replacing damaged bedding. She would not have any money (she receives ESA) until Friday (this was Tuesday). She requires various tablets, which must be taken with food. It was quickly identified that the situation was an emergency and that she needed to apply for a Crisis Loan. The bureau telephoned and waited on the line for 50 minutes, without answer. The client then went to Jobcentre Plus, but was referred back to the bureau, an adviser again telephoned for 40 minutes without answer. [Eventually] the client was given some food that could be eaten cold from reserves at the bureau. She still had no heat, lighting or hot water.

In our view, whatever arrangements emerge in the wake of the Social Fund, there should be a clearly identifiable resource to help people in times of crisis and to support independent living.

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

HB is to be incorporated into UC, whereas CTB is not. This will create overlapping tapers, whereby, over a range of income, UC withdrawal may occur alongside CTS withdrawal under a local scheme, defeating the intention to simplify the system and make clear the gain from increasing earnings. The DWP has tried to minimise this risk through revised earnings disregards, but has not eliminated it.

However, we take this question to be more about administration than structure. The key issue here will be the effectiveness or otherwise of information flows between systems. Separate reporting of changes of circumstances to different agencies would be burdensome and inefficient. The volume of queries from members of the public, both to LAs and to advice agencies, will also be strongly influenced by this.

3. Conclusions and Recommendations

3.1 As noted above, we expect the introduction of UC, combined with an increased role for local discretionary and cash-limited pots, to create a major surge in demand for advice, at a time when our bureaux across the country are grappling with cuts.

3.2 We have encouraged bureaux to engage with LAs as these various changes are planned and implemented.

3.3 Bureaux can play a key role in providing information, advice and advocacy and helping to address financial education and money advice requirements.

LAs’ ongoing support of bureaux needs to take into account these pressures and opportunities.

The DWP and DCLG should consider providing new funding to bureaux for this purpose. We are talking to Government about financing a new model where we can deliver more advice and support on benefits in a more cost effective manner.

3.4 It should be noted that there would be much less pressure on LAs, advice agencies and claimants if some of the recent and emerging problems with mainstream benefits were recognised and addressed. As regards rents eligible for HB—and in due course the rental element of UC—we fully accept that HB/UC cannot be expected to meet any rent, however high. But limits must take account of the consequences for poverty and hardship. The Government has commissioned a substantial research project into the cuts to HB in the private rented sector since April 2011. Meanwhile, bureaux are picking up growing numbers of cases where HB cuts are causing hardship and threatening homelessness.

If DWP-commissioned independent monitoring shows that there have been substantial adverse personal and social consequences, then the question of rents eligible for HB and UC should be revisited by Government, this time from the perspective of tackling poverty and promoting social inclusion.

3.5 Meanwhile, in the social rented sector, there are the impending “size criteria” from April 2013. Restriction of HB payable for accommodation of various sizes has been a feature of the scheme in the private rented sector from the outset. From April 2013, size restrictions will be extended to social housing. This has become known as the “bedroom tax”, as the DWP’s own impact assessment expects less than a fifth of affected claimants to move—so the measure is widely perceived as a levy on benefits rather than a genuine attempt to reduce under-occupation. Furthermore, in the private rented sector also, it is arguable that a spare room for the occasional guest should be seen as part of normal social interaction. We therefore believe that:

HB/UC should be payable for a spare room, as part of normal social interaction.

In the social rented sector, under-occupation should be seen as a matter for housing management, not benefit cuts.

3.6 As regards the payment of HB/UC to claimants rather than landlords: already the default position for HB in the private rented sector, it is intended that this will be the case in all sectors when UC is introduced. The six Demonstration Projects are testing this approach. There will be exceptions, relating to vulnerability and/or rent arrears. We expect that arrears will be a significant problem. This approach also denies choice.

Unless there is a reason for mandatory direct payment to the landlord (rent arrears above a specified level or vulnerability issues such as drug or alcohol abuse) the choice should lie with the claimant as to who—claimant or landlord—should receive benefit payments for rent. This could be on an “opt in” basis (analogous to setting up a direct debit) to satisfy the Government’s concern with active claimant engagement.

3.7 The benefit cap will also exacerbate local pressures. Ensuring that work pays should be a matter of bolstering in-work incomes, not cutting out-of-work benefits. In any case, it is illogical to include benefits that are available on similar terms both in and out of work—notably HB/the rental component of UC; Child Tax Credits/the children’s elements of UC; and Child Benefit.

The benefit cap should not apply to benefits that are available on similar terms both in and out of work.

3.8 As regards the abolition of CTB and substitution of localised cash-limited CTS: this is expected to create a situation whereby very poor people will be required to pay small amounts of council tax that they cannot afford, creating major problems of collection, enforcement and debt. As noted above, local tapers will also interfere with the working of UC.

A bureau in South Wales reports a 51-year-old client who lives alone and receives income-based ESA because of depression and anxiety. Debts include arrears of rent, council tax, gas, water and around £500 owed to friends. The total amount owed is at least £2,500. The client has been visited multiple times by bailiffs in pursuit of £15 council tax, with additional fees and costs of more than £100. The bureau contacted the LA and questioned why bailiffs had been instructed to recover such a small amount. The LA admitted that this was inappropriate and undertook to investigate.

Benefit for council tax should be incorporated into UC and Pension Credit and claimants given the option to have it paid direct to the LA, to minimise arrears.

3.9 As regards the dissolved Social Fund:

LAs should be required to provide to the public detailed information as to how these resources are being deployed. LAs should be able to identify clearly a resource to help people in times of crisis and to support independent living.

3.10 As noted above, cuts to a range of benefits will often impact on the same individuals and families, having a multiple effect and causing great hardship.

Proposals for benefit legislation should be accompanied by a poverty impact assessment sufficiently sophisticated to provide estimates of multiple effects.

December 2012

1 Including 5,054 concerning DHPs—an area we expect to increase rapidly, given current policies.

2 Please note that we have not responded to the final two questions (concerning HB fraud and social landlords’ financial vulnerabilities) as we regard these as primarily matters for Las and social landlords.

Prepared 28th March 2013