UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 833-ii

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Communities and Local Government Committee

Implementation of welfare reform by local authorities

Monday 7 January 2013

Councillor graham chapman, lesley pigott, steve thompson and andrew stevens

paul howarth, Chris town and steve white

Evidence heard in Public Questions 60 – 135

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Oral Evidence

Taken before the Communities and Local Government Committee

on Monday 7 January 2013

Members present:

Mr Clive Betts (Chair)

Simon Danczuk

Bill Esterson

James Morris

Mark Pawsey

Andy Sawford

John Stevenson

Heather Wheeler

________________

Examination of Witnesses

Witnesses: Councillor Graham Chapman, Deputy Leader, Nottingham City Council, Lesley Pigott, Assistant Director of Finance, Camden Council, Steve Thompson, Assistant Chief Executive, Treasurer Services, Blackpool Council, and Andrew Stevens, Assistant Director, Customer Delivery, Thanet District Council, gave evidence.

Chair: Welcome to our second evidence session on the inquiry into the implementation of welfare reform. You are all most welcome this afternoon. Could you just say who you are and the organisation you represent?

Cllr Chapman: Councillor Graham Chapman, Deputy Leader of Nottingham City Council.

Steve Thompson: Steve Thompson, Borough Treasurer of Blackpool Council.

Lesley Pigott: I am Lesley Pigott, Assistant Director of Finance at London Borough of Camden. I am also an advisor to the LGA and London Councils.

Andrew Stevens: I am Andrew Stevens, Assistant Director for Customer Delivery for Thanet District Council, and also serve on the National DWP Steering Group.

Q60 Chair: Given the formula of the panel, if you find that someone says something you agree with, can you just indicate that, rather than repeating exactly what they said? It helps us get through all the issues we want to discuss with you this afternoon. Thank you very much.

We have had quite a lot of evidence in from local authorities in their written submissions that suggests that one of the problems you are facing is that the Department for Communities and Local Government and the Department for Work and Pensions do not always seem to be working together as closely as they might be. Is that a fair comment? Do you have one or two examples of the difficulty that is causing you? Or, indeed, if you do not think it is the case, just tell us that everything is perfect and there are no problems, and we can move on from there. Who would like to start?

Lesley Pigott: I am happy to go at the start. There are a couple of examples we could share with the Committee. One that springs to mind is the issue that we are very worried about, particularly in London, around homelessness, and the issues around the application of the benefit cap. DWP are obviously trying to encourage local authorities to find people accommodation outside London, which will be affordable, because there is very little affordable in central London. The DCLG guidance, however, is still that we have to be very careful: if people are made homeless because they cannot afford their current rent in London, then in order to fulfil our statutory obligations around homelessness we should be looking to house them within the locality. Bits of guidance coming from both Departments are not really gelling for a local authority.

Cllr Chapman: The example I am getting amongst my constituents, at the moment, is sanctions and what the approach is towards sanctions. They seem to have tightened up quite substantially recently, which means a number of people are not getting any money, because the sanctions are being applied quite mechanically. Moreover, the communications with the people who are being sanctioned are very poor, so often they do not know why they are being sanctioned, they do not know what the next steps are and how they become unsanctioned. I have had a lot of correspondence with the DWP, and they have been very helpful, but I think the system itself is not working, irrespective of how hard some of the people there are trying.

Andrew Stevens: An example I would give is the localisation of council tax support. Where it used to be under the directorate of the Department for Work and Pensions, obviously it is now under the directorate of the Department for Communities and Local Government. DCLG, I would say, have had to pick it up from scratch, and have done an enormous amount of work in a very short space of time, but the impression sometimes is that they perhaps have not had the cooperation from DWP that they should have had.

Steve Thompson: The problem for us is just the sheer extent of change taking place. We have the localisation of council tax support, changes within the housing benefit rules prior to Universal Credit and the business rates retention scheme coming along, which is generally being managed and monitored by the same revenues and benefits staff. It is the sheer magnitude, which is, from the people I have spoken to, the greatest change in their whole career, and greater than the move of housing benefits to local government in 1982.

Chair: I think we will move on to some of those specific issues that you have identified there, and look at those in a bit more detail.

Q61 John Stevenson: Turning specifically to housing benefit, I would be interested to know how each of you feels that your own individual authority is getting on with the preparations. Will you be ready in time when the new regime comes in?

Cllr Chapman: Our problem is we do not know how the new operating system is going to work. We do not know what the role is for councils. We do not know who is going to manage it, especially when it is integrated into Universal Credit. We are finding it very, very difficult to plan. Our other concern, of course, is that it will not work: the IT will not work. Our council tax system will not integrate with the Universal Credit system and they will not be able to talk to each other. We need that information to operate our system.

We are very, very concerned that that is not happening. The problem is, of course, what is the Plan B when it does not happen? I must say that our feeling is it is not going to work on time, and there is no Plan B. Even under Plan A, we are not too sure what the different functions will be.

Steve Thompson: It is the whole sequencing of events, because the two are dovetailed: localisation of council tax, or the council tax reduction scheme, will be determined to some extent by the level of Universal Credit, and the way the two talk to one another, through electronic transfer of data or ATLAS. We are finding in Blackpool that we are receiving roughly 10,000 changes per month. That is 2,500 per week, 500 per day, some of which are just initials, commas or slight tweaks to addresses, but every one has to be manually filtered to determine whether it is important or has a significant impact upon the benefit change.

Cllr Chapman: That is costing an enormous amount of money. We have had to take on additional staff to manage that.

Q62 John Stevenson: How is your authority getting on?

Lesley Pigott: I would say in general local authorities have an excellent track record of delivering these kind of changes. The problems we are facing at the moment are the amount of change and the volume that is facing us, starting from next April. So many changes all at once make it very hard not only to prepare your local authority, but to prepare claimants. Also one of the biggest issues for my authority is trying to gauge the cumulative impact of all these changes. You are not just looking at one small change and trying to work out how you put in support mechanisms for people. You have to look across a range of changes, and that is what is making it difficult-coupled with late changes, late announcements. For instance, a couple of days before Christmas, a change to the announcement about the benefit cap has completely unhinged all the work that has been going on in my local authority to deal with people and make them aware that their benefit will be reduced in April. It will be very hard to go back to those people and reengage with them, and say, "Your benefit will not go down in April, but it is still going to go down, and you need to engage with us and work with us, and we need to get you workready and skill you up." That is making it very difficult for us to prepare properly.

Andrew Stevens: To echo Lesley’s point, as far as local authorities are concerned I think we have generally done a sterling job in preparing for change and being ready to deliver this change. The example of the benefits cap is a good one. We have been holding joint surgeries with the local Jobcentre, inviting claimants in to tell them about how it will affect them, writing to them to tell them, and then, with no warning at all, it has been pushed back, potentially for months. It is very difficult now to go back to the customers and to explain when it will affect them, and how much it will affect them by, because at this point we do not know. We are ready, but the lastminute interventions really are not helping.

Q63 John Stevenson: Councillor Chapman, you indicated that it was IT that seemed to be one of the biggest issues. Would you say that is the most important issue that you have, or do you foresee other issues as being more important?

Cllr Chapman: No, I think the most important issue is communication. Most of my constituents still do not have a clue what Universal Credit is. They do not have a clue, so they do not know what will be hitting them. They do not understand the expectations about going online, and they do not understand that they will be paid retrospectively. They do not understand yet that their housing benefit will go into the Universal Credit system and they will have to pay it. It is the human side that I think will be a problem. However, we have spoken to the private sector, and they are equally concerned that on top of that, the IT will not synchronise.

Q64 John Stevenson: You have a similar view, Mr Thompson.

Steve Thompson: I do, yes. When I first read about the benefit cap, I naively felt it would impact upon inner London or urban authorities. I was surprised at the last count to see 340 couples within Blackpool affected by this. Clearly a further sixmonth deferment will give us more time to speak with those people, and of course it is a moveable feast. It may be a different composition of people in the next few months. It will be useful to provide that support by the local authority.

We are also finding that already Jobcentre Plus are directing claimants to the Central Library across the road to access the IT there. As you are aware, local authorities are facing some significant funding cuts. We are looking to protect libraries, thankfully, but our customer services within the town hall are being significantly affected, so we will see a shift, as well, and it will be difficult for staff to gear up to provide that support.

Q65 John Stevenson: Ms Pigott, you indicated less about the IT issue. Do you foresee IT being a problem, or are you managing to cope with it in your authority?

Lesley Pigott: I am worried about the IT, but in fairness, the approach we have taken in Camden, by necessity, is that whilst we are concerned about the implementation of the Universal Credit and whether the IT will work, the changes we are facing from next April are so great that we are prioritising trying to get claimants through those April changes first, and then start looking towards Universal Credit. That will only impact new claimants from next October. We do not yet know when our existing caseload will migrate to Universal Credit. The likelihood for central London, from the early work I have seen, is that it will not be until 2016. It is less of a priority, purely through timing, but it will become a greater and greater issue, and I think the IT is something the DWP should be worried about, because the scale of the system they will need to handle all those changes will be immense.

Q66 Bill Esterson: Can I ask you about the effect on landlords of housing costs being paid direct to tenants, whether that is in the social sector or the private sector? What do you think the impact will be?

Cllr Chapman: I will start on this, because I used to run a housing association. When I left the housing association, they decided they would have the money directly paid to the tenants. It was mainly for homeless people, so they were more difficult tenants, and the housing association went bust, because the money did not come in. Our concern is that you will increase the costs of collection-already our housing company is looking at putting aside £600,000, which will be collection costs and provision for bad debt. You will have rising debt and increasing collection costs. There is a whiff of the poll tax about this, because we have to implement it, and we have to get that debt in. We cannot leave it, and therefore you are talking about making people homeless.

That is the Armageddon scenario, but I have to say that I have had some experience with this and it could be very, very bad. What is interesting is that in the pilots that have been brought forward, most of the people who signed up for it were volunteers, so the pilots are not giving you the proper view of the situation. As far as I have been informed-I stand to be corrected-they were volunteers.

Q67 Bill Esterson: Does anybody else want to comment on the impact? We have the evidence from the pilots. What do you think that will show? Or does this point about it being selfselecting mean that it is not that valid as evidence?

Steve Thompson: I think it will vary from authority to authority. There are parallels between housing benefit and council tax, as you say, and parallels with the community charge in the early 1990s. We currently pay landlords-about 20% of benefit goes directly to landlords-because of vulnerabilities around certain people with a history of arrears or substance abuse and so forth. The fact that Universal Credit will be paid four weeks in arrears makes you wonder what claimants’ priorities for payment of debt will be, and the impact upon collection. We are already making assumptions around increasing bad debt provision, which will impact upon our bottom line.

Q68 Bill Esterson: In the evidence you gave, you suggested it would have an impact on the availability of housing stock in this process. Would you like to expand on that?

Steve Thompson: I think we will see a concentration in the more deprived areas, which attract more vulnerable people, but on the periphery we may see a reduction in housing supply, as landlords leave the market because of the cost of collection for themselves, the cost of maintaining their properties, and the rates of return.

Cllr Chapman: If the Government could change one thing, I think it would be this-it is the one thing that would have the biggest impact, if you are talking about changes, for the least cost. It is madness to go down this line, given all my experience. It seems to be an ideological approach they are taking, which defies practicality. They could change that and have a very positive impact for very little cost.

Q69 Bill Esterson: Lesley and Andrew, do you share the concerns of Graham?

Lesley Pigott: I do. I would just like to say that not only are we concerned about the impact rent direct would have on our own housing rental income, echoing what has been said about the enormous amount of cost that will be incurred by paying people and then having to collect the money from them, not to mention the fact that most people will not understand why we are paying them money with one hand and then asking for it back with the other.

We would just like to say that the use of the private rented sector is really important to a London authority, not only in discharge of our homelessness duties, but also for temporary accommodation. What I would like the Committee to consider is that it is absolutely impossible for us to see a situation where we would be able to continue to procure property in the private rented sector for temporary accommodation if people are paid directly, because people in temporary accommodation often only spend a night or a couple of nights in that accommodation before they move on. If they are paid directly, four weeks in arrears, the likelihood of that money ever ending up at the landlord is minimal.

Andrew Stevens: Just to add to that, a while ago the Department for Work and Pensions amended their definition of "vulnerable" in their payment direct criteria to include a provision where, if it meant payment direct to the landlord would secure or maintain a tenancy, that was okay to do. We have operated that very successfully with Thanet District Council to prevent homelessness. If paying the landlord direct or not is the difference between having a roof over somebody’s head or not, we would much prefer it to be done that way.

Q70 Bill Esterson: So the definition of vulnerable is absolutely crucial here.

Andrew Stevens: Yes.

Q71 Bill Esterson: Does anybody want to add anything on that point? Do you think that Andrew has set that out sensibly?

Lesley Pigott: There is a danger in defining "vulnerable" too tightly. In the situation that Andrew and I have just outlined, we would consider anybody who is seeking temporary accommodation to be vulnerable. We need to keep a roof over their head in order for them to be able to get a stable lifestyle, if they are to hope to look for work or to secure permanent, stable education for their children. They are vulnerable in that sense. It is not only people who perhaps have health or mental health problems.

Q72 Bill Esterson: Talking about the impact of arrears and the problems that will cause, you all almost seem to be saying, "Do not have direct payments if you want to avoid arrears". Does it go as far as that, or are there other safeguards, before you get to that point, that you think could solve that problem?

Lesley Pigott: It comes at a cost. The safeguards that we would have to put in would be going back to the days when you were employing far more local authority staff to go out and do debt advice, rent collection. You are looking at going back to the days when you had rent collectors going round estates to make sure that you are top of the list of people who are being paid.

Q73 Bill Esterson: So safeguards would come at a significant cost?

Lesley Pigott: Absolutely.

Cllr Chapman: There are bailiff costs, court costs, costs of homelessness, and it is so unnecessary. It is so impractical.

Steve Thompson: There is talk of the solution of "jamjar accounts"-if any providers could distribute the Universal Credit into particular jam jars to pay these bills-but it defeats the object of a universal benefit, does it not?

Andrew Stevens: I do not think is has to be either/or. At the moment, housing benefits are paid directly to the tenant in some circumstances, the landlord in some circumstances. If a landlord approached us and said, "I will not take this tenant unless housing benefit is paid to me," then to us that is a very persuasive argument to pay direct to the landlord.

Q74 Bill Esterson: And you would like to keep that system?

Andrew Stevens: Absolutely. I think that should be in Universal Credit.

Q75 Mark Pawsey: I want to ask some questions about the Social Fund, but can I stick with universal benefits for the moment? Do none of you believe that benefit recipients are responsible people, able to manage their finances and make allocations of money in a suitable way, in the way that the remainder of the population does? You seem to have a very negative approach.

Lesley Pigott: I do not think it is negative. Some people are well able to manage their finances, and some are not. What we are arguing against is the blanket decision that it should always be paid directly-

Q76 Mark Pawsey: But there is this concession for "vulnerable", so the fact that it is not all going direct to landlords means that many people should be and will be enabled to stand on their own two feet, make the payment and get back into a more familiar method of running their lives.

Lesley Pigott: But it remains a fact that many landlords see this category of tenant as not the most desirable, and if we are trying to encourage them to rent to these people, one of the mechanisms we have used very successfully up until now is by negotiating with the landlord and with the tenant, and paying their housing benefit directly.

Q77 Mark Pawsey: That still will be an option to you.

Lesley Pigott: We have not yet seen the definition of what "vulnerable" will be within Universal Credit.

Q78 Mark Pawsey: So as an alternative, your catchall is that it all goes direct to landlords?

Lesley Pigott: No, I think, as Andrew said, we are asking that there is a provision that, as now, a decision can be made.

Q79 Mark Pawsey: I will move on to the Social Fund. That is being replaced with locally based schemes. I will ask you how you are getting on with managing your schemes. There is always more demand for the Social Fund than can ever be fulfilled. I think that Nottingham, in their evidence, said that in 20092010, only 67% of those applying for an award actually received one. I am imagining that you will tell me that you are not getting enough money, but there was never enough money. How does the allocationofmoney side of things look?

Cllr Chapman: We have not said there is not enough money, and certainly for the moment, we are getting enough money. The difficulty will be predicting what the demand will be, particularly when you have some people who will be hit three or four ways by benefit cuts. You will have what is called a bedroom tax, they will have to pay a portion of council tax, and there is a whole range of other benefits they could be losing. If they are receiving a triple or quadruple whammy, they will be in a different position. Our problem is that we cannot predict it.

Q80 Mark Pawsey: So it is not a matter that you do not have enough; it is that you do not know what you need.

Cllr Chapman: No, we do not know what we need, and therefore it will be difficult to set the criteria. We are having to do so, and we are trying to set the criteria as to who will get it, but it does not mean to say there will not be the demand.

Q81 Mark Pawsey: In terms of the other councils, do you think you are getting enough?

Steve Thompson: You do not know what you do not know. If you compare our allocation with previous years, it is less, and I suspect that with the economic downturn, the demand will be greater, but our criteria will be more robust. It will be based on residency. It will be based on one claim per annum, with exceptions such as domestic abuse, and we will monitor it very, very closely. However, it will be a case of rationing.

Q82 Mark Pawsey: You have preempted my second question, which is: is your scheme in place, bearing in mind that you have to implement it in April this year-three and a bit months away?

Cllr Chapman: Yes, we have a scheme.

Steve Thompson: The concept is in place; it will be formally approved by the council in March. We are looking to use the third sector where possible, and cashless ways of providing this through existing voluntary sector groups, be that through food parcels, clothing, et cetera.

Lesley Pigott: I would agree that the funding that Camden has received is less than was paid out by Jobcentre Plus two years ago. The problem is that we could estimate demand if there were not the rest of the welfare reform changes coming in in April, which means there could be greater demand, so we are concerned about whether we have enough. Similarly, we are not looking to administer the scheme ourselves for the first year. We are going out for a third party supplier, in the hope that that will minimise the admin costs, so we have more money to pay out for people.

Q83 Mark Pawsey: Given the closer contact you have with the residents of your borough, do you think you know better what the likely need would be than a much bigger body that has been administering it up to now? Do you have a better handle on what the likely need will be?

Lesley Pigott: In some cases, but not in all. Some people have circumstances that would be common up and down the country. One of the concerns I have about the Social Fund being localised is particularly around people like rough sleepers, the idea of a postcode lottery. If neighbouring boroughs, particularly in London, do not have identical schemes-some have more generous schemes, some have tougher residency criteria-then we could be creating a situation where people are applying crossboundary. For instance, when you think about rough sleepers, who do not have a residence in one borough, it is a concern within London as to how we track where those people might be claiming, and where the best place is for them to claim.

Q84 Mark Pawsey: Mr Stevens, have Thanet got a scheme in place?

Andrew Stevens: Ours is a slightly different situation, because we are in a twotier area and the function is going to the County Council. Kent County Council are dealing with it in year one, and they are responsible for devising their own scheme.

Q85 Mark Pawsey: There is some evidence in Kent that district councils are resisting the transfer of powers to them. Is that the case in Thanet?

Andrew Stevens: I think it was the case for the district councils in Kent that whilst we had the choice, it was too many changes at one time to deal with. Obviously, colleagues in unitaries and London boroughs did not have that choice, but in twotier areas we did have that choice.

Q86 Mark Pawsey: But you are happy to take the responsibility at a later stage, when things perhaps have settled down?

Andrew Stevens: What happens then will be up for discussion in about 20142015.

Q87 Simon Danczuk: I wanted to ask about implementation of the localisation of council tax benefit. From what I have heard so far, I think it is fair to say it all sounds a bit of a nightmare, to be quite honest. Has the timescale been realistic for this implementation, do you think?

Cllr Chapman: Have timescales been realistic? They are manageable, but again I will come back to the IT. I think the IT will be a major, major issue for us if we cannot get access to DWP systems, or if the DWP system is not working properly. That is one of the problems. The other difficulty is that nationally you have now set up 365 different systems. We tried to coordinate first of all with our neighbouring boroughs. We work very well with our neighbouring boroughs, irrespective of political party, and there are some very good people there, but we could not manage to do it because of the different circumstances. We then went on to try to coordinate with two other cities in the area, Derby and Leicester. We had a perfect scheme that we all agreed on in order to be able to get the same system, and then it got bust, and it got bust simply because two of them decided they would not take the transitional money from the Government, and we decided we would. That has caused a number of problems.

The other difficulty is that you offset some of the deficit. We are losing £6.2 million on this, because of the 10% slice cut off. We can offset some of that by getting rid of the exemption on council tax on empty properties. However, we do not have enough empty properties to offset a lot of the costs. Therefore, we will have to cut our benefit levels for our people far more than the neighbouring boroughs, whereas Rushcliffe does have the voids and could actually make a profit on it. You have this silly, arbitrary system that is not at all helpful, and people get very confused. We will just have to manage. I think it almost goes against the whole philosophy of having Universal Credit, because on the other side you have a fragmented council tax benefit system. It is 365 systems.

Q88 Simon Danczuk: Steve, have the timescales been realistic?

Steve Thompson: I would say yes and no. We received early notice about the changes to the system, and we undertook a threemonth consultation, I think from August. During that period, the counteroffer of the transition grant came out, which scuppered the consultation for some people. I am aware of some authorities who would like to take the transition grant, but whose IT systems cannot cope with that, so they have a real dilemma.

Notwithstanding that, we only learned what our council tax reduction scheme grant was on 19 or 20 December. We have to have a scheme formally in place by 31 January. The local democratic process requires us to put that in the public domain by midJanuary, and you have Christmas and New Year in the middle. I would say in that respect, no, it is not, but we will have one in place.

Lesley Pigott: Timescales have been very, very tight, and as a result of that most of the schemes you will look at up and down the country stay pretty close to the existing council tax benefit scheme. There simply has not been any time to do anything more innovative or very different, least of all because you have to carry on processing housing benefit claims to the existing criteria, and therefore the further you veer away from that, the more cost you incur in trying to calculate entitlement for a council tax reduction scheme. I think in London we did, in the early days, look at the possibility of getting a Londonwide scheme, conscious of the fact that would help claimants. It very quickly became apparent that there just was not the time to go through the public consultation, consulting with councillors of 30 different boroughs and different political persuasions, and of course the biggest challenge, as well, is the different finances. A lot of the financial impact of the scheme depends on what percentage of your claimants are pensioners.

Simon Danczuk: Of course it does.

Lesley Pigott: That features quite highly in whether or not you will be able to get a scheme that you can share with your neighbouring borough. We are hopeful that after the first year, we might be able to look at this again in London, but those challenges will still exist.

Andrew Stevens: The timescale has been extremely aggressive. I have been in benefits for some time and this is the most challenging implementation in the timescale that we have been given. I must say that it has not been helped by some lastminute announcements on transitional grant; I think we only saw the regulations in December; the funding was announced on 21 December, the last Friday before Christmas. We have parish councils in Thanet, and treatment of benefit claimants in those areas was announced very late in the day. I think we are still waiting for some details. I understand we still do not have details about how the appeal system will work. We have managed to get a scheme in place and approved, but I will say it has been extremely demanding.

Q89 Simon Danczuk: Let me just ask a quick question to answer in a couple of words. What would be the effect of any delays in the implementation of welfare reform changes, or would a planned delay be welcome? Is that a good idea or a bad idea, Graham, quickly?

Cllr Chapman: Again I think it will depend on where we are with the IT in particular, but I also think it would be welcomed-

Q90 Simon Danczuk: Do you think a delay would be welcomed now: yes or no?

Cllr Chapman: Yes, I think so, for communications and IT reasons.

Steve Thompson: I think it depends on your perspective as an officer. As the Treasurer of the council I think a delay would improve our cashflow, so in that respect, yes.

Simon Danczuk: Smart answer.

Lesley Pigott: A similar vein: as finance person in the Council, there is a tremendous risk on the authority going forward about a funding gap. From the claimant’s perspective I think any delay is welcome if it gives us longer to work with them.

Simon Danczuk: I will come back to that, because that is a good point.

Andrew Stevens: Yes. Any delay in reductions for claimants is to be welcomed; however, we have done a whole load of publicity telling them this is happening from April, and I would be worried about that.

Q91 Simon Danczuk: My final question is whether, irrespective of whether you or I agree or disagree with the policy changes that are being proposed, many people will be affected simply because of the technical implementation of this policy. Do you see what I mean-the fact that it has been rushed through, the IT changes? Will there be many people adversely affected, not because of the policy changes but because of the technical changes that are taking place, do you think?

Cllr Chapman: Yes. I think there are three areas: firstly, the IT and the expectation that they will do stuff online. Secondly, the retrospective payment, which will cause some very poor families problems with cashflow. And thirdly, direct payments, which are technical. Those are the three areas that will cause us real problems.

Steve Thompson: Notwithstanding the policy implications, no, I do not.

Simon Danczuk: You think they will be all right.

Lesley Pigott: I think the policy implications are huge for claimants, but as I said at the very beginning, local authorities will do their level best to support people through this, and we have a good track record of doing that.

Andrew Stevens: When Universal Credit comes in, for people who are receiving a partial award of Universal Credit, they will not be told how much their housing element is in their award, so that is a technical issue that could rebound on them. They will not know which element of their Universal Credit is supposed to pay their rent-for people who receive the partial award, not the full award.

Q92 Heather Wheeler: I am interested in hearing from any of you guys some good ideas that you have on how you are saving this 10%. You have been working on it for some months now, and there are all sort of different council schemes. Before Christmas, the New Policy Institute had a website and database and at that point 53 schemes were up and running on there, and now it is 110. It has jumped enormously, so councils are out there doing it. What good ideas have you got for sorting out your 10% savings?

Steve Thompson: Blackpool’s 10% is 11.4%, to start with.

Heather Wheeler: Okay, very good.

Steve Thompson: It is still to be approved by the members, but we will be looking to pass that on to the claimant.

Q93 Heather Wheeler: Just a straight pass forward? You have not looked at anything innovative at all? You have just decided on a straight pass forward?

Steve Thompson: We have looked at the use of changes to discounts, and we will probably use the equivalent to set up a discretionary hardship fund for such things as backdating claims, but it equates to £3 million, and the only way you can deliver £3 million is to create more claimants, because you would be losing jobs within the council.

Q94 Heather Wheeler: Have you already taken out the discounts for second homes in Blackpool? You would have loads of second homes in Blackpool.

Steve Thompson: Only landlord second homes. We have very few tourist second homes in Blackpool.

Heather Wheeler: I am stunned.

Steve Thompson: Honest.

Q95 Heather Wheeler: Any other innovative ideas? Or is it just a straight pass forward?

Lesley Pigott: I think, as I said at the beginning, the innovative ideas have been hampered by the timetable to bring things in. The more innovative you are, the more cost is involved in trying to get the IT to support it. For Camden the decision was that we were going to stick pretty close to the existing scheme for this year, so we were looking to pass the cost on. In Camden the 10% equates to around 15% for working–age people.

When the additional £100 million funding was announced, that again was another straitlace if you like on the sort of innovation that a council could consider, because either you turn down that money that is being offered, or you take it, but by taking it you are constrained to making sure that people are no more than 8.5% worse off. That is quite a hard choice. That is the choice we have made in Camden. We have taken advantage of all the changes to the second homes, but that money was already earmarked by politicians to do other things that they wanted to do within the budget, because we have had a round of cuts for a number of years. They have been looking at other things around supporting play and childcare. It is a straight choice: do you go ahead with that, or do you cut the money there?

Andrew Stevens: As far as Thanet is concerned, we have taken the freedoms we have been given on the council tax changes. We have removed the 10% discount for second home owners; that will be going from next April. There are about 1,400 in the Thanet area. We have also completely removed the class C exemption for council tax, which is the empty property exemption, so if the property is empty, the owner will have no exemption from council tax. Removing those two aspects of the council tax discounts and exemptions has left us with about a 5% to 6% reduction from people’s benefits that we will be making from next April. We are looking at options on what to do with the transitional grant. We are automatically entitled to apply for that, and we are looking at things like debt counselling in year one. We want to help people as much as we can.

Q96 Mark Pawsey: I would like to ask about computer systems, and you have already told us a little about the computer systems and your concerns about the systems working. Can I just go from the perspective of benefit claimants-those people who are applying for housing benefit and council tax benefits? Will they be able to make their application online in the way the Government is intending? I know, Ms Pigott, your authority has spoken about the additional resources that the council might need in order to get people to do that, but presumably that is just a shortterm thing, because once people have got used to applying online, you will not need an army of clerks to help them do it.

Lesley Pigott: That assumes that the person who claims online is the only person who ever then continues to claim online. There are always new people who come along who will require some support. I think as well it is complicated by the fact that divorcing support for council tax from housing benefits means that people need to put in two different claims with two different sets of criteria, so that will always complicate it for people.

Q97 Mark Pawsey: Do the other witnesses have any thoughts on people applying online, challenges in implementing the system with people making online applications?

Lesley Pigott: Could I just add as well-this may have changed, but we have been advised that in the beginning for the Universal Credit claims, when you start to make your claim online, you have to complete it. You cannot do what I think most people will be familiar with when you go on to an Amazon site or something, where your details are stored. If they get part of the way through their claim and they find there is a piece of information missing or they need some support, and they walk away, all of that is lost. That will be a huge challenge for people in the early days, not only for the people making the claim, but for-

Q98 Mark Pawsey: Do we know why that is the case and why that has been written into the system? Have we challenged this?

Lesley Pigott: I suspect it has not been written in; I suspect it has not been written out as yet.

Q99 Mark Pawsey: Right. But have requests been made?

Lesley Pigott: We have made representations that that does not seem very sensible.

Q100 Mark Pawsey: Right. And what was the outcome of your representation?

Lesley Pigott: I think at the moment it follows on from some of the concerns that have been raised by my colleagues about whether the IT will be ready. I think that is maybe a piece of finesse that is stage two.

Q101 Mark Pawsey: So that might come in at a later date. Can I ask those of you who may have some experience with the ATLAS system, which is the DWP IT system? I know that Inside Housing ran a story saying that it was unable to deal with the volumes of information. Has that impacted on any of your councils? Councillor Chapman, you are nodding. Can you tell us a little bit more about the problem?

Cllr Chapman: I think we have had loads and loads of information dumped on us, and at the beginning we just did not realise how much was going to happen, so it has had a knockon effect on the whole of the rest of the system. We got into backlogs, and once we got into backlogs we had to then bring in agency staff in order to try to clear it, and we are still trying to clear some of it. That-

Q102 Mark Pawsey: So it is not a fault with the system; it is just that it gave you too much information at once?

Cllr Chapman: It is giving too much information at once, and a lot of it-I think the sort of information that you were talking about-is information that you do not really need, but which nevertheless creates a change unless we deal with it.

Q103 Mark Pawsey: So it is not a failure with the system, then?

Cllr Chapman: I think it is probably a failure of the system. It is a failure with the timing, and part of the timing is a failure of the system.

Steve Thompson: I gave some indicative figures before. One example is that if somebody fails to sign on in the morning, they may have their benefit suspended. That will trigger a data entry that goes back to the local authority, who will then suspend their council tax benefit, and they may come in in the afternoon and sign on. You have two or three different actions triggering from just one, and in the end you may end up deleting their claim and having to reinput it.

Cllr Chapman: We have made 90,000 changes, apparently, as a result of this. I have just received information that it has cost us about £300,000.

Q104 Mark Pawsey: In staff time to input?

Cllr Chapman: Yes, yes. Everything we are talking about now has a cost, and it has a cost to local government. On the train I was trying to add it up; you are talking about several million in Nottingham.

Lesley Pigott: I feel I need to add that Camden has been very supportive of the ATLAS process. It has worked very well in Camden. A lot of that, with due deference to my colleagues here, has to do with the housing benefit processing system that is used by the local authority, and it just so happens that for us it has worked very well, and we have welcomed it.

Q105 Mark Pawsey: Was that by luck or judgment on Camden’s part?

Lesley Pigott: I would say judgment by picking the system, but luck that that is the one that has seemed to be able to handle the duplicate changes. I just wanted to pick up the point you were making about the changes during the day. It is worth pointing out that with Universal Credit and the way it works, there could be a change to people’s income every month, so there is likely to be an ATLAS change every month for everybody, which is different from now.

Q106 Mark Pawsey: Can I just ask: does all this have to be put in manually because the systems cannot effectively talk to one another? A great deal about the system relies on data sharing. Does there need to be some flexibility moving forward with the systems that are run by local authorities and organisations such as DWP, so that when you are provided with data it can be automatically uploaded rather than having to have an army of people available to do it?

Cllr Chapman: Yes. That is entirely what we want, but the chances of getting that are virtually nil, and then you have to go through 365 different versions of it.

Mark Pawsey: Why are they virtually nil? Why cannot local authorities strive to work together with a national agency to have data systems that are compatible with one another?

Q107 Heather Wheeler: Now that you have heard that it works in Camden, will you ask your officers to find out how much the system in Camden costs?

Andrew Stevens: To be honest, with the introduction of Universal Credit, I am not sure many local authorities will be investing in housing benefit technology until our role is made clear in the future.

Heather Wheeler: That is a fair point.

Q108 Chair: One point was made about the issue of the claimants, because in the end they are the people who are actually important and who will be affected by this. It is a very pertinent point that in future, when someone’s income changes, they have to go to two different places now, for their council tax benefit and for their housing benefit. Are DWP talking to local authorities about how to get one point of contact? They said they would do so 12 months ago, and I have not heard any evidence yet that there might be some effort made to enable people to go to one point.

Lesley Pigott: I think we are still waiting. The promise is there that ATLAS will still pick up information that we need, so that we can take information from the Universal Credit and feed it straight through into the council tax schemes. However, obviously we need to see that, and I think the fear that local authorities have is that that is not a priority for DWP. The priority is getting the IT system to work for Universal Credit, not for it to work for our council tax requirements.

Q109 Chair: So they are not talking to you at all at present?

Lesley Pigott: They are; the promise is there, but we have not seen anything.

Q110 Chair: The promise is the talk, but does that mean actual talk or simply, "We will get round to you in due course"?

Steve Thompson: I do not believe so. We would welcome clarification on the role of local authorities with Universal Credit. We have staff who work on housing benefits who know that their jobs are at risk over the transitional period throught to 2017. They are told that TUPE will not apply; they will not be able to transfer to equivalent jobs at the DWP. There is a general lack of clarification. If local authorities perhaps were the sole interface, then you would have that matching between the two benefits.

Andrew Stevens: The DWP will need our help with Universal Credit. As I understand it, the Universal Credit computer system will not work off the property database, and that is very significant. At the moment, if we have four claims, for example, from a property that only has two flats in it, our council tax database, our property database, will pick up instantly that there is fraud there. In the future, the Universal Credit computer system will not know that there are 15 or 16 claims arriving from one particular house or flat. We have a property database; as far as I understand it, the Universal Credit computer system does not have that, or will not link into our systems. It is a check and a balance that we have at the point of assessing the claim.

Q111 Chair: Did anyone ask the DWP why that is?

Andrew Stevens: We have been raising that for at least two years, maybe more.

Q112 Chair: So what you are saying is the system is wide open to fraud?

Andrew Stevens: Tenancy fraud is a real concern for us, because as I say we have landlords who, in the past, may have put in more claims than there were actually properties. It is normally flats in buildings, or rooms in buildings. We have a property database that can crosscheck against that instantly. If the claims are being processed remotely with no property database, what is stopping 15 people from putting in a housing cost claim for one flat? There is nothing stopping them.

Chair: Something getting people talking to each other about those problems might be a good start. Thank you very much indeed for coming in this afternoon and giving evidence to us. Thank you very much.


Examination of Witnesses

Witnesses: Steve White, Chief Executive, The Hyde Group, Chris Town, Vice Chair, Residential Landlords Association, and Paul Howarth, Director, Welfare Reform Club, gave evidence.

Q113 Chair: Welcome, and thank you very much for joining us for this second session this afternoon on welfare reform. Perhaps just for our records you could say who you are and the organisation you represent?

Steve White: Yes, good afternoon. My name is Steve White, and I am the Chief Executive of The Hyde Group, a Housing Association, based out of London and the south and east of England.

Chris Town: Chris Town; I am Vice Chair of the Residential Landlords Association.

Paul Howarth: I am Paul Howarth, Director of the Welfare Reform Club, which is committed to giving support to local authorities in the implementation of welfare reform.

Q114 Chair: You are all most welcome this afternoon. You have probably heard some of the discussions we have just been having about slightly mixed messages and Departments not speaking to each other, and whether DCLG and DWP have slightly different objectives and maybe do not talk together as often as they should. Are you picking up, from your various perspectives, mixed messages and confusion that is causing you any concern?

Steve White: We do not see the level of detail our colleagues do from the councils, so we cannot comment. There are some policy inconsistencies, though, which are perhaps making implementation of the Government’s policy a bit more difficult than it might be. If I may give you one example, the current policy or guidance that DCLG gives to local authorities and Housing Associations for allocations is quite different from the DWP’s guidance on allocation rules for under and overoccupation.

What does that mean? It means that the two different rules are competing against each other. The practical reality will be that we could be asked to house somebody today, and in three or four months’ time, when the underoccupation rules come into play, we will be subject to a penalty. Those two things could do with being aligned. There is a broader issue that I have-the Committee may want some information on this-about the extent to which the welfare reform proposals push against the Government’s affordable housing programme and the ability for housing associations and others to build new homes.

Q115 Chair: Do you just want to elaborate on that, and we will come back to the other witnesses?

Steve White: Sure. Colleagues will be aware that the Affordable Homes Programme provides housing associations and others the ability to build homes by linking the rent to the market value up to 80%, but of course in the case where there is a benefit cap of £500, that effectively limits the extent to which one can apply rent. The general acceptance in the sector is that you should not charge more than onethird of an individual’s disposable income for rent, so taking the benefit cap, that equates to about £170 to £180 per week. That practically means it is very, very difficult economically to build large homes in places where it is expensive to build, like London and the south-east of England.

Chris Town: From the private sector’s point of view, the conflict between DCLG and DWP is on the under35s change. That is where the single room rate is now applied to people under 35, when it was under 25. That is DWP policy. On the DCLG side, there is the article 4 direction that limits the amount of HMOs in local authority areas where they take up that option. On the one hand you have a higher demand for single rooms, and on the other hand you have a restriction being put in place by article 4 directions. That is the main conflict that we find between the two Departments.

Q116 Chair: Have you asked the two Departments if they could manage to explain the-

Chris Town: We have asked the Minister, and we have asked the Departments as well on several occasions to look at this issue. The Minister did say he would look at it, but nothing has come through so far. You will recall, of course, that article 4 is an option that local authorities can take up. It is not a Government policy as such, and about 34 local authorities have taken this policy up.

Paul Howarth: You may know that I retired a year ago from DWP after 38 years, so I know quite a bit about what DWP and DCLG did up to that point. I can assure you that there was a lot of liaison and a lot of talking. I am sure that is now continuing and is probably even stronger. Some of the reports we have had are that the close working does seem to exist pretty well, although more could perhaps be done. I think it is important to remember that different Departments will have different perspectives on these issues. DWP is obviously completely focused on the work agenda. DCLG is obviously concerned about housing and about localisation. I think there are bound to be some tensions in there, but the important thing is that they continue to talk and resolve issues where they can. I think that does happen.

Q117 John Stevenson: At the end of the day, what matters is delivery: getting the reforms through and making them work. Do you believe the Government’s timetable is achievable, and do you think the local authorities are ready for these changes?

Steve White: Some aspects of the Government’s reform programme have been sensibly tested in pilots or have been phased, and I think that aspect of the timetable is good. There are other aspects, though, that are not being phased or tested in that way, and I do worry a little that those reforms, particularly the under–occupation changes from this April, which have not been tested, will have a potentially fairly significant impact on the overall programme for the Government, and for stakeholders. It does concern me somewhat that that might slow the machinery down. I am happy to elaborate a bit more if you would like that.

Chris Town: From our perspective, a lot of the regulation is not written yet, so it is very difficult to know exactly. It was mentioned by the earlier witnesses, particularly on vulnerability. However, the one thing that really surprised us about this particular benefit change was the fact that the experience of the private sector under local housing allowance has seemingly not been used at all in this process. We were given to understand when local housing allowance came in that that would be the forerunner of this particular benefit. It seems that that experience-it is now almost nine years, I believe, since the pathfinders came in-has not been used. Listening to the other witnesses from the local authority side and so on, who are trying to get a grip on this, it seems a very valuable resource, which has been built up over several years by the private sector, is not being used, and we find that quite surprising really.

Q118 John Stevenson: I was going to ask you, exactly on that point, whether you think the Government is right in its approach with direct payment.

Chris Town: No.

Q119 John Stevenson: Would you therefore think that they should also reverse their position with regard to the private sector as well?

Chris Town: Of course, yes. When local housing allowance came in, it was going to be applied to the social sector, and of course it never was, because the social sector, we believe, lobbied very strongly against it. This time it seems it will be applied to them. I think this was mentioned earlier: it is very important to recognise that there are many people on benefits who are perfectly able to pay the rent successfully and we have no problems with whatsoever, but there is an element who are not able to carry that out, and this is the fear within the private sector. We know-we have long experience of this-and again, we feel that that experience is not being used successfully. The experience of the private sector in this matter could help our social sector, as well.

Q120 John Stevenson: Could I ask, then, what would your advice to the Government be? What approach should they take?

Chris Town: To reiterate, I believe that the local housing allowance experience should be used. That has been trialled and run for several years now. It is not without its problems, and many landlords have suffered significant losses as a result, but what our members are telling us-more than 90% have said that they would get out of the sector if they can-is that seemingly the safety net that is there in the local housing allowance, where a landlord could request, or insist, if you like, on direct payment once arrears of eight weeks have been reached, will only be a request in future. The certainty that you will at least stop the bleeding, as it were, will not be there. From a business standpoint, that is completely untenable, from a business point of view. Renting property is a business, after all. It has serious implications, and again we feel that that has not really been considered. We understand the driver for this is to make people financially responsible, but we also do not accept that we should be the sufferers of that, effectively.

Paul Howarth: I was very much involved in the development of the local housing allowance while I was working in DWP. I think that the lessons should be learned and are in fact being learned. I do not think, as far as I am aware, we have yet heard the final word on what the exceptions will be in terms of direct payments to landlords. I think that is an issue that is still being discussed and developed. In a sense, the local housing allowance is a forerunner of Universal Credit in this respect, because the whole idea was to try to get people financially literate, to try to get people ready to work, and indeed to try to encourage people to work.

The whole point about Universal Credit is that it is founded on the idea that it should be like a salary. Universal Credit is paid monthly in arrears; it is paid into a bank account. That is how it will work, and that is the right way to go. In terms of direct payments, where at all possible, the payment should go to the tenant to use in the way we have described, but there should be some safeguards. If you have direct payments to landlords, and you are trying to encourage people to work, even with the current housing benefits system, the issue is that if people do get a job, they will start to lose their housing benefit. As their earnings increase they will lose more of it, and direct payments to the landlord become impossible. The real concept here is to ensure that where possible, we pay the money to the tenant.

Steve White: Can I just offer another view that might be helpful in terms of the initial question, which was about the Government’s timetable? The earlier group talked about the level of awareness among their residents being very low, and that is absolutely something that our experience echoes. We wrote to 6,000-

Q121 John Stevenson: I was going to come on to that. I will widen the question, then, and ask: what do you see as being the main administrative challenges for local authorities in implementing these new policies?

Steve White: I think local authority colleagues should perhaps answer that for themselves. Housing associations have a fair few things to scratch their heads about in terms of administration.

Q122 John Stevenson: We have already talked about communication.

Steve White: Yes, and communication is a very significant issue. The point I was going to make was that we identified, based upon information that local authority colleagues shared with us, 6,000 Hyde residents who would be affected by the changes in the occupation penalty from this April. Only 48 residents responded to that mailing of 6,000, requesting further information, guidance or support. In addition to that, we put messages on our phone systems and have sent magazines. That experience has been echoed in some of the demonstration projects. My own organisation, and I suspect local authorities, to answer your question, will have to spend quite a bit of time quite literally knocking on doors over the coming weeks, preparing people and increasing the level of awareness about the changes that will be effected or implemented from April.

Q123 John Stevenson: Mr Town, what do you see as the main hurdles or challenges for councils?

Chris Town: Again it is the communication issue. I have tenants; I am a landlord, and I speak to them about these changes, which completely baffle them. Their question is, "Why are they changing this? Why is this happening?" They do not understand it. Nobody I have spoken to so far has been aware of it. From our perspective as a landlord organisation we have just introduced a Universal Credit training module, which clearly is incomplete, but gives a background to the benefit changes and how it could impact on landlords. I can tell you that it is selling very, very well among members, because there is a hunger for information on this. I know it will be ramped in relatively gradually, but nevertheless people need to be prepared for that. The communication issue is the big one; there is no doubt about that.

Paul Howarth: I think the challenges for local authorities are quite significant. First of all, they have a direct role in delivering welfare reform; we have heard about council tax support and the Social Fund, but there are discretionary housing payments, and aspects of the housing benefit scheme will still be delivered by local authorities, such as supported housing provision. There is the direct role in delivering welfare reform, and then they will have a role in delivering Universal Credit: first of all the transition over the fouryear period, and then still an unanswered question about the level to which they will deliver facetoface support for those people who need it. I think there will be some people who need it, despite the intention to try and put this online.

There are two big challenges there, simply in the amount of involvement in welfare reform that local authorities will have. Flowing from that, one of the big challenges will be to identify, through data matching and various other sources, who exactly are the vulnerable people, if you like, to whom they want to give most help.

Q124 John Stevenson: I am going to pick you up on the IT issue. The evidence we have had is that there are some major concerns about IT. Do you think the DWP is up to it in terms of their IT capacity?

Paul Howarth: I do not know the ins and outs of the DWP’s IT capacity now, but I would say that yes, it is up to it.

Q125 John Stevenson: You do not foresee issues around IT in relation to local authorities and the DWP working together?

Paul Howarth: I think that is a slightly different question, in a sense. Yes, there are issues with the IT in terms of the transfer of information and data to local authorities. My point is that local authorities have a crucial role in the delivery of welfare reform and therefore data transfer, information flows and so on between DWP and local authorities is crucial if that is to succeed. Where there are potential problems, they need to be addressed.

Chris Town: Just on the IT, I do not know whether this is accurate, but we have heard that the IT system will not be ready until 2014, which is a long time after implementation. That is the information I have been given.

Q126 John Stevenson: What was your source, if I may ask?

Chris Town: That was from the DWP.

Q127 Bill Esterson: Coming back to the point about direct payments, Paul, we have heard a lot of evidence from all the other witnesses, one way or another, that there is a huge concern that a significant number of people will struggle with paying their rent out of the housing component, and that this will have an effect on them in terms of being made homeless, but also have an effect on private landlords, who will decide to sell up, and social landlords, who will struggle to remain viable. Do you think that this concern is sufficiently addressed by the definition of "vulnerable"?

Paul Howarth: I think the definition of "vulnerable" is one of the big issues that have not yet been fully resolved. I do not think you can have a very easy definition of "vulnerable". You cannot describe categories of people as vulnerable. There will be some people who perhaps have learning difficulties who may be vulnerable, but others might be coping very well. It is very difficult to come up with a definition. This comes back to the challenges to local authorities. I think one of the challenges will be for them to identify who these vulnerable people are, and to help in the process of ensuring-

Q128 Bill Esterson: The point I am really asking you about is anybody who struggles for whatever reason with paying their rent and avoiding getting into arrears, which involves them being evicted with the consequent impact on housing providers, with then a knockon effect on the housing stock. That is a very, very real concern we have heard almost unanimously. Is it not absolutely vital that that is sorted out?

Paul Howarth: You have the demonstration pilots looking at some of these issues. The one I know about best is the one in Oxford, and that involves, I think, about 1,800 tenants altogether. At the last count, arrears had gone up from, I think, a normal arrangement of about 2% to about 5%, but they are doing a lot of work directed at communicating and ensuring that they identify the tenants who need the support and the help. That is the critical thing. Clearly we cannot simply pay all tenants Universal Credit without any provision for support and help for those who need it, and that definitely needs to happen.

Q129 Bill Esterson: The suggestion earlier was that landlords be able to request, as they can now, and negotiate with local authorities, as they can now, on the housing component. Do you think that that has merit?

Paul Howarth: There has to be provision, or some safeguards, similar, as Chris was saying just now, to the provisions in the local housing allowance. There are safeguards in the local housing allowance for those people who cannot manage their finances very well or who have had a proven track record of wilfully not managing their rent payments. I do not think, as I say, this has been finalised yet, but those are the sorts of safeguards that could be carried forward into Universal Credit, and I think that is right, because you are then protecting those people.

However, I do not think that we can continue with the arrangement whereby we just reach an arrangement with the landlord, because that defeats the fundamental objectives, as I mentioned earlier, about what Universal Credit is trying to do. The fact is that in terms of housing benefit in the private rented sector, since November 2008 we have seen nearly an extra million people claiming housing benefit in the private rented sector, and those people are obviously being housed by private landlords. Of that million, a good proportion-in fact, I think over a quarter of current housing benefit recipients-are now in work. This is what we want to encourage, and direct payments do not work in that context very well.

Q130 Bill Esterson: Chris, do you want to respond to that?

Chris Town: Yes. Clearly, I am drawing on experience from local housing allowance and when that was first introduced. I am a landlord in Leeds, which was one of the pathfinder areas, so we worked very closely with the local authority in developing their policy on vulnerability and so on. One of the things we got as a concession was that if the rent payment was delayed beyond four weeks then it would go to the tenant in the form of a cheque in the name of the landlord, to prevent fraud. Fraud still was committed, because some tenants managed to get the cheque cashed somehow, but nevertheless that was one concession.

That was the first hurdle, and that also signified the start of the claim. One thing that concerns us regarding Universal Credit is that we will not know when the claim starts. We will not have any information, as we understand it. Where we have a relationship with the local authority as a landlord now for benefit claimants, when Universal Credit comes in, we understand that that will not be the case; we will not have that relationship, so we will be completely in the dark. That is another concern.

As far as vulnerability is concerned, there were certain criteria: if tenants had issues with substance abuse, or alcohol or gambling or whatever, and they were documented, that was fine, but of course you do not really know who is vulnerable to taking their rent, let us say, until it happens. We discovered quite a few people were far more vulnerable than they realised, let us say. What I am trying to say is that you can put policies in place, but it does not necessarily follow that those will be particularly accurate, and there will be losses. I think the demonstration project so far has shown that even with handpicked claimants who volunteered, they have still not been able to make their rent payments in quite a large proportion, in relative terms. So there will be losses; there is no doubt about that. It is the chasing around that is the problem: trying to track people down, trying basically to find out what is going on will be the real issue, as it was in the local housing allowance. As I say, we did have the safeguards there.

Q131 Bill Esterson: What is the view in the social sector?

Steve White: On vulnerability, I think we agree with everything that has just been said. That needs to be set as wide as possible, taking into account information that the housing associations and colleagues outside in the private sector are offering. In terms of direct payments, I think there are three issues there that are impediments. There are skills-a lot of these individuals simply do not have the skills yet, and they need to be assisted and supported to develop those budgeting skills to enable them to manage their own financial affairs in the way that is intended. Access to the internet is a problem, if there is a heavy reliance on use of online facilities: not only are the knowledge and skill to be able to do that an issue, as was shared in the previous evidence session, but also access to the internet is a problem.

What has not been said so far is also an additional point that is worth considering: the level of indebtedness that exists amongst a large proportion of these residents is already very high. We have 50,000 homes and 1,000 homes have had direct support from us in the last eight months to help them budget better, because they have and are carrying very significant levels of debt. That needs to be factored into the decisions around vulnerability. The earlier team also talked about the types of debt. I do worry about people having to make decisions about whether to pay the rent, or to pay the guy who is knocking on the door on a Friday night, looking for repayment of a loan, illicit or otherwise. I think those types of factors also need to be taken into consideration.

Q132 Bill Esterson: Do you have concerns about your viability as a housing association?

Steve White: I have concerns that our financial strength will be impaired. I do not believe that this will fundamentally change my organisation’s viability, but we will have to spend more money-considerably more money-to collect our rent and support our residents than is the case at the moment. All that money hitherto would have been spent on building more homes. That is significant. Next year, for my organisation, before Universal Credit is fully deployed, we are expecting a £1.5 million additional cost. That is a lot of money.

Q133 Heather Wheeler: I am interested, Mr Howarth, in whether local authorities ought to have more of an input into Universal Credit. Should they be doing it, not the DWP?

Paul Howarth: I think they should be doing it with the DWP. My view is that this is a massive series of changes, and one of the issues is the cumulative impact of it all. It will take more than one organisation or one agency to implement this successfully and deliver this successfully. There are things in Universal Credit where it is right and proper that that is done centrally, and that there is the central system to do that; but I think there are things that can only be done locally, and where local authorities should have a bigger role.

Ideally, I would give local authorities access to the Universal Credit IT systems, so they could process claims where it was necessary, but short of that, we need to have really effective data flows between the two, and we need to clarify very quickly what exactly local authorities will be expected to do, and what funding they will receive.

Q134 Heather Wheeler: You just used an interesting phrase there, "data flows". How do you think private landlords ought to be able to get access to data from local authorities, to make sure that there are not the gaps between where the money is coming from and where it is going out. Local authorities will work very closely with the CAB and all these other people to help people with their budgeting. Nobody seems to have been worried about them paying their water bills, their electricity bills or their gas bills, but we are worried about them paying their rent. Part of the new exercise may be jamjar accounts or something like that. Maybe that is where we will go and where local authorities can help, but how do the private landlords deal with the data protection stuff with local authorities to help make it as seamless as possible?

Paul Howarth: In the way of delivering that I have just described, I would envisage that there would still be a role for local authorities to liaise with private landlords over some of these issues. I understand exactly what Chris has said on this: there is clearly a role for liaising with landlords, and those relationships and that engagement that have been developed over the years should not just disappear. It is not clear whether DWP will do that or whether it will be a role for local authorities. I suspect local authorities, because they are local and because they are on the ground, as it were, are probably better placed to do it, but I do not think that has been decided yet.

Q135 Heather Wheeler: I know social housing is not exactly private landlord, but do you feel you will be able to bridge the data protection issues?

Chris Town: We do now. The delivery of local housing allowance was very patchy at the beginning; there is no doubt about that, and there was a huge learning curve. I think local authorities, talking broadly, deliver a good service now, whereas it was patchy before for various reasons. There is an element in the application that allows the landlord access to certain parts of information that the tenant gives, and on which the local authority communicates with the landlord and the tenant.

We have all used call centres, and the thing that strikes fear in most landlords I speak to is that they will no longer have this relationship with the local authority. We will be dealing with a call centre, and we know how call centres operate. That is not to say there are any cosy relationships going on between local authorities and landlords-it is a businesslike relationship, but they understand the issues, they understand the system and the relationship between landlord and tenant. It works very well in most cases, and we do not feel it is broken and we do not see why it should be fixed if it is not broken.

Steve White: My answer is pretty much the same, really: reliance upon good-quality data that is provided quickly from the DWP is essential. The systems points made earlier are ones that we would absolutely echo.

Chair: Thank you very much indeed for coming in this afternoon, and for giving us some very interesting evidence.

Prepared 11th January 2013