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

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

Communities and Local Government Committee

IMPLEMENTATION OF WELFARE REFORM BY LOCAL AUTHORITIES

MONDAY 28 JANUARY 2013

GILLIAN GUY, KATE WEBB and KEVIN DODD

MARK PRISK MP and LORD FREUD

Evidence heard in Public Questions 136 - 256

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Oral Evidence

Taken before the Communities and Local Government Committee

on Monday 28 January 2013

Members present:

Mr Clive Betts (Chair)

Bob Blackman

Simon Danczuk

Bill Esterson

James Morris

Mark Pawsey

Andy Sawford

John Stevenson

Heather Wheeler

________________

Examination of Witnesses

Witnesses: Gillian Guy, Chief Executive, Citizens Advice Bureau, Kate Webb, Senior Policy Officer, Shelter, and Kevin Dodd, Chief Executive, Wakefield and District Housing, gave evidence.

Q136Chair: Good afternoon, and welcome all of you to the third and final evidence session of our inquiry into the implementation of welfare reform. For the sake of our records, could you indicate who you are and the organisations you represent?

Gillian Guy: I am Gillian Guy, chief executive of Citizens Advice.

Kate Webb: I am Kate Webb, senior policy officer at Shelter.

Kevin Dodd: My name is Kevin Dodd, chief executive of Wakefield and District Housing.

Q137Chair: Thank you all very much for coming this afternoon to discuss with us this important issue. We have had quite a bit of evidence already, so we can reflect on that this afternoon and raise with you some of the concerns that have been raised with us. One of the concerns raised by a number of witnesses is that the two Departments most concerned, the Department for Communities and Local Government and the Department for Work and Pensions, are not necessarily working terribly well together, and that reflects itself in the problems that organisations that have to implement these measures are having. Do you have those concerns as well, or do you think things are basically going along smoothly?

Gillian Guy: Citizens Advice get communication from both sides of that, so from central Government and also local government. Our concerns would be about the reassurance between those two parts of government. If I were in government I would be concerned about the state of readiness and the degree of resource available in local government for local implementation. If I were in local government I would be very concerned about the timetable for implementation, not just the timing of it but whether it is even clear. I do not think it is particularly clear exactly what will happen when the demonstration projects are out of the way, because that keeps shifting, and that makes it quite difficult to prepare people.

Kate Webb: We would agree with that. Based on the scale of the reforms, we would perhaps expect a little more coordination between the two Departments than we have seen. There have been a few instances where contradictory policy has come out between the two. I am sure we will get into it in more detail. DWP do not always seem to be entirely aware of the legal duties that DCLG require, and vice versa. There have been a few policy issues of development that have been delayed, and our perception is that that is because of tension between the two Departments.

Q138Chair: Do you have any examples of those?

Kate Webb: Implementation of the overall benefit cap will create some quite significant challenges for local authorities who have to provide temporary accommodation for homeless households. This was raised as a concern during the Welfare Reform Act. We, MPs and peers were told that proposals for reforming the TA subsidy would address that, but the announcement on that reform was delayed for about nine months, based on our understanding of the timetable, and that seemed to be because of the inability of DWP and DCLG to resolve the issue.

Kevin Dodd: The confliction we seem to get as a housing association is that we are expected to build more homes, and yet through welfare reform there is a lack of financial capacity to build those home. In the current climate it is nearly impossible and very expensive to get resources from banks. We are in a situation where we are also expected to sell homes, and yet our waiting list of people wanting accommodation has doubled over the last seven years to 22,000. From April our organisation will experience, as will others, lost capacity of £100,000 a week in relation to the bedroom tax and the benefit cap, which is equivalent to one new home a week that we could have built.

Q139Chair: One thing that has been said to us is that the sheer number of changes coming in all at once-universal credit and changes to council tax benefit going on alongside, changes to the occupation arrangements in terms of housing benefit and benefit cap-mean that local authorities, as well as some housing authorities, are almost overwhelmed. Is that also your concern? Are you picking that up as well, whether at national or local level?

Gillian Guy: It is two things nationally. It is a massive change programme with impacts on people probably least likely to cope with that kind of change. The other part of it is that local authorities themselves are facing a programme of cuts, so they have to juggle that with the resources needed to bring in massive change. Having to provide support to communities through advice and preparation, which is under pressure and also being cut, is a particularly difficult equation to deal with.

Kate Webb: That is certainly a picture we also recognise. We are seeing huge amounts of confusion among people who will be affected by these changes. People are conflating one cut with another; it is very difficult for people to understand what is going to happen to their income, and it is local authorities, along with advice providers, who will be playing a large role in trying to help people navigate through that process. It does not seem that the phasing has been designed to make that as simple as it could be.

Kevin Dodd: I would agree with that. Housing benefit staff in local authorities, who are deluged on a normal basis, are now affected by losing their jobs because there are no TUPE rights to transfer to the new system. Therefore, the most valuable commodity is leaving the ship to a degree, so you are losing expertise in managing the transition. Equally, there was more publicity on digital switchover to make sure the nation did not lose any episodes of Coronation Street than for the changes to welfare reform. It does not just go back to the changes going forward; it goes back to supporting people. It is being reduced, and it rolls forward into local taxation.

Q140Chair: Do you think there is any more that the Government Departments could do to give guidance on these matters? On the other hand, is it right that central Government should keep their hands off and say, "We’ve got a localist agenda now. It really is down to people at local level to sort out these matters"?

Gillian Guy: The trouble with that philosophy-I understand the press towards localism-is that it makes a lot of assumptions. I do not think those assumptions are necessarily borne out. One of those is that all local authorities are in exactly the same place and have the same degree of resource and autonomy in what they can and cannot do and the same kinds of communities. One of them is that local authorities will work at the same pace and be able to cooperate with the whole of the implementation. That is not necessarily the case. We would be concerned about the kind of postcode variance that that can bring about, not just from one area to another but within an area, when you think that county and district councils have different responsibilities for these changes; and the ability of local advice to soak up all of the demand. We as an organisation are expecting a massive increase in demand. When the employment and support allowance came in we saw a 76% increase in inquiries on that subject alone, so we are expecting pretty much a deluge. The assumption that that can be picked up is quite a dangerous one. The assumptions about digital by default, monthly payments not having very much impact but getting people ready for work and about a single recipient not really having an impact are problematic. It is those things, and understanding what cumulative impact they are likely to have with other reforms as well, that will test this programme.

Kate Webb: At times we would appreciate a more hands-on role, particularly from DWP. It is a particular frustration for us that we are not always clear on the communication timescales and materials that are going out to households who will be affected. We can work with the Department for Work and Pensions on model letters and understand their timescale, but ultimately it is left to local authorities as the housing benefit administrator to inform people of individual losses. As a national advice provider, it is very hard for us to coordinate with that many local authorities, feed in ideas about best practice and get a handle on when people are going to be notified of significant changes in a lot of circumstances.

Kevin Dodd: We have a good working relationship with our local authority. We try to make sure that what we can do is done jointly. As a major housing provider in the area with 31,000 tenancies, when we get enquiries, which have increased tenfold, it is very difficult to try to give advice. We are seen, on the ground, as the provider giving advice to people who find the changes quite difficult to administer for themselves.

Q141Simon Danczuk: The Government’s argument is that direct payment of benefits encourages claimants to be individually responsible for their own finances. Would you agree with that, Kevin?

Kevin Dodd: I have some case studies that I can supply afterwards that can illustrate it. I would agree in principle that direct universal credit is about those people who could manage the money managing it, but there are a significant number who cannot manage their money and that is creating a lot of stress on them as households. In some circumstances, in the cases I have got here, they have nowhere else to turn to, and in some of the circumstances the changes that are happening are making people extremely stressed about the situation. That is an unintended consequence of the direction of travel.

Kate Webb: Shelter supports the principle of universal credit. If you look at the philosophy that underpins it, it is easy to see why Ministers have decided that, as a point of principle, direct payments make sense. You then have to set that against the reality of trying to budget on a very low income. It can be an entirely rational, responsible decision. If you know you have debt with very high interest levels, or you are going to be constantly bumping along at the bottom of the overdraft, it can be the utterly rational, responsible decision to say, "It would make my budgeting much simpler if I could choose to have my rent payment paid direct to my landlord."

Gillian Guy: For us, it is very much the same. It is another assumption that is made that by adopting a principle it is going to happen. Whether that will happen or not is a matter of thinking about the reality of the people it will impact. It will be interesting to see how the demonstration projects come out, but as far as I am aware they do not indicate that higher levels of rent are paid than under a system where rent is paid to the landlord, and it has caused serious difficulty for a large number of people. Certainly, the results of those projects are that they need a significant amount of support if they are to manage in those circumstances and not go into arrears and possibly lose their homes, which is not a good way of either proving or disproving a principle.

Q142Simon Danczuk: Do you know what preparation housing associations and charitable organisations are making before the introduction of changes to housing benefit? What are you guys doing?

Kevin Dodd: We are part of a demonstration project. We have got experiences that we are going through. Overall, we have seen an increase in debt to about 11% of the debit, which normally on 31,000 properties is 2.9%. People who came into the demonstration pilot with no arrears now have an average of £180 debt going forward. On arrears cases, we used to make five, six or eight visits; now it is 40 visits in each particular case. One thing that is not understood is that the cost of administration of the system by the landlord, which could be an extra £3 million to £5 million of bureaucracy, is being borne by full and partial rent-payers. For every rent-payer who has paid the full amount, £6 will go towards the administration costs passported by DWP to landlords to maintain an effective rent account. The social value of the work that landlords put in is a cost borne by other rent-payers. That is quite important to us as a landlord.

Kate Webb: On this change, as with the package of reform, we are looking at our own advice provision, particularly online digital advice, and trying to make sure that is promoted as widely as possible and is ready to support people. That taps into one of our concerns about the demonstration projects. There is big emphasis in the pilots on providing support for households so they can manage direct payments. It might well be that achieves what look like very positive results, but our concern is that they are very resourceintensive. We certainly could not step in to provide that on a nationwide basis to support the potential number of households who will need support, based on what people say they need to receive, to feel confident about managing their affairs.

Q143Simon Danczuk: Are you worried that in areas that are not demonstration projects there will not be the intensity of support to help vulnerable people?

Kate Webb: Yes. It is the inevitable problem you have when you pilot something. When you pilot it, you want it to work so you put in the resources. Our concern is that those results will not be replicable on a nationwide scale because the resources will not be there to replicate some of the support packages.

Q144Simon Danczuk: It has been suggested, has it not, that vulnerable people can have direct payments?

Kate Webb: The DWP have said that vulnerable households will retain them.

Q145Simon Danczuk: Is there a definition of "vulnerable"?

Kate Webb: No, and that then becomes the key question for all of us. That is why we say that a better solution is to let people choose whether or not they feel able to handle the payment. Trying to come up with a definition of vulnerability that will not make patronising assumptions about people or, worse, will let them fall through the net will be incredibly difficult. Our view is that it is far more workable if you let people self-certify as vulnerable.

Q146Simon Danczuk: There has not been anything determined on the definitions of vulnerability yet, or whether people can choose themselves. We are going to ask the Ministers in a minute.

Kate Webb: Our assumption has been that it will largely mirror what happens under local housing allowance at the moment, because for private tenants this is the status quo. They have been receiving housing benefit direct since 2008, and there is a definition of vulnerability in place where people are unlikely to pay, or have difficulty paying. Our experience is that when that was first introduced was that there were an awful lot of teething problems, particularly about the inconsistent application of it between different local authorities, but largely it has got to a pretty workable position. Our overarching plea to the DWP is not to lose lessons from the local housing allowance. There is a definition there that works okay in a lot of circumstances, but our preference would be to let people choose whether or not they feel able to manage it.

Gillian Guy: We are working on demonstration projects. We also have a pilot on budgeting that is underway at the moment, or just about to start. I echo the point that we cannot make the assumption that this level of support can just happen out there because it has happened before, because we are talking about very large numbers and high-intensity support. The pilots are not necessarily testing either the kinds of volumes or the complexity of cases we are going to face, so we need to ratchet up the support we give. We have heard from one of the pilots that, if we were not involved in trying to prepare people and help them through it, it would not be as successful as it is, which is limited anyway. The other thing to say is that if we gave people the option, we would not have to worry about how we define vulnerability.

Q147Simon Danczuk: Kate, to turn to an issue that keeps coming up in the Select Committee, do you think homelessness is getting worse, staying stable or going down?

Kate Webb: If you look at the official figures, it is definitely getting worse, so those would be statutory acceptances. You also have an underlying housing beneath that, so people who are sofa-surfing, or staying on friends’ sofas. Our anecdotal experience is that that is also getting worse.

Q148Simon Danczuk: Do you think these changes after April will make the situation better or worse, or have little effect?

Kate Webb: It is hard to see how they will not make it more challenging.

Q149Simon Danczuk: Does that mean worse?

Kate Webb: Yes.

Q150Mark Pawsey: My questions are mostly for Mr Dodd. On the principle of direct payment, the Government make all sorts of welfare payments to all sorts of people where they do not mandate how the recipient should spend it. Why should housing be different?

Kate Webb: Housing benefit is unlike most other benefits-perhaps any other benefit, apart from council tax benefit-in that it is for a very specific cost. It is not like child tax credit.

Q151Mark Pawsey: Child tax credit is for bringing up children. We do not mandate recipients to spend the money in a particular way.

Kate Webb: But there is a huge number of things on which you could choose to spend that income in the interests of your child. It might be winter shoes, school food or a museum entry; it is what you think is best for your child. Housing benefit is for a very specific cost, and it is also one where, if you are not paying the rent, the consequences are very severe-homelessness-and in all likelihood you will be deemed to be intentionally homeless, so your right to assistance from the state is then reduced.

Q152Mark Pawsey: Can I put the same question to the other two witnesses?

Gillian Guy: Can I add that this is actually a change. That is what makes it particularly different.

Q153Mark Pawsey: It is not a change for the private sector because they have been doing it for the past five years.

Gillian Guy: It is a change in the public sector, and I am sure we will bring evidence to bear on the private sector as well, because there were changes that happened as a result of that. But it is a change among a whole gamut of changes that are affecting very vulnerable families and people in positions where they are struggling to make ends meet, and there are very many different demands on the money that comes through the door. Protecting the roof over those families has been seen to be important, and continues to be important. If there is to be such a change for policy reasons, that is fine, but let’s prepare people for it and make sure the advice, support, budgeting and financial capability education is there so that they don’t get into difficulty.

Q154Mark Pawsey: I am sure we can all agree on that. Kevin, can I ask about your experience?

Kevin Dodd: If people don’t pay their rent, they can lose their house. It is about people prioritising and paying the rent with the money they get. We are saying that if people can manage it they have to prioritise paying the rent, because the issue for associations like ours is cash flow to reignite the economy, to borrow more and build more houses.

Q155Mark Pawsey: But because a small proportion of people in receipt of housing benefit may find some difficulty, you are arguing that we should not be making this change.

Kevin Dodd: I did not say that. I said that for those people who can manage their money well-there are those who are doing it with the support we give directly to them, at a cost to full rent-payers-they will succeed, but getting people prepared is intensive. If people do not pay their rent-we have examples in the demonstration pilot where people are not paying their rent because they have other life circumstances for which they choose to use that money-it deprives them of their home.

Q156Mark Pawsey: Were the people in that demonstration selfselecting, or did it involve your entire tenant base?

Kevin Dodd: We were asked to pick 2,000 people who were obviously in receipt of housing benefit, of whom 1,000 did not really want to participate in the project, so it was narrowed down to 1,000 people. For those 1,000 people, the basic ingredient was a bank account, so that was how the people were selected in a pilot area within our district.

Q157Mark Pawsey: You have told us about the additional administrative costs, but isn’t that because this is a pretty radical change; it is very new and different? Over time, won’t these problems bed down and become the norm? I was interested in Kate’s remarks about teething problems in the private sector, but now it seems to have settled down and seems to be working okay. Why can’t that happen in this sector?

Kevin Dodd: Coming back to the first question that was asked, we are expected to build, and we need capacity to build. If people don’t pay, we cannot borrow money.

Q158Mark Pawsey: The private sector is saying exactly the same thing.

Kevin Dodd: But they don’t build in the same way we are, to meet a demand. There is a genuine reduction and a reluctance to-

Q159Mark Pawsey: The private rented sector is there to meet a demand, and they are suffering losses of income in exactly the same way as your housing association.

Kevin Dodd: I can answer the question if I can get the point out. We are in a situation where 1,000 people had no debt when they went in and now they have an average debt of £180 already. We are putting in more support to get that money we used to get more conveniently before, and the costs of administration are being borne by the association, which is wasted money. If that money was put towards more effective use-building houses or providing additional support-we may get more people ready and a better economy to boot.

Q160Mark Pawsey: What circumstances would you require for direct payments to be successful?

Kevin Dodd: People having the choice whether or not they wanted direct payments, and that would be the principle of universal credit.

Q161Mark Pawsey: There are no circumstances under which you would support the move the Government are making.

Kevin Dodd: I did not say that. For those people who could adequately manage their finances, I would say that could be done.

Q162Mark Pawsey: As far as you are concerned, it all comes down to the definition of "vulnerable".

Kevin Dodd: And individual choice.

Q163Bill Esterson: Kevin, can I ask you about the people who were selected for the pilot? From the type of person who in the end took part in it, do you think that group as a whole is more or less likely to go into arrears than the total number of your tenants, if everybody came off direct payment?

Kevin Dodd: We have to accept that the 1,000 sample is a microcosm of the full 31,000, because people that did choose and came forward were no problems to us at all. We did not put any cost into managing their tenancies. They were in no arrears; they did not cause any problems relatively, so we have got a structured sample of people.

Q164Bill Esterson: Are there other people who are in arrears who did not come forward?

Kevin Dodd: If they were in arrears to a particular level, they did not get on the sample for direct payment; they were excluded as being vulnerable.

Q165Bill Esterson: The point I am trying to drive at is that for your overall 31,000 tenants, it could be worse than the sample.

Kevin Dodd: Without a shadow of a doubt. We just got a sample. Generally, we can give only ranges of the problems we may face going forward. Therefore, we can have a worstcase scenario or, hopefully, a bestcase scenario, but we can work only on ranges at present.

Q166Bill Esterson: You are a relatively large social housing provider. Do you think some social housing providers could have a problem not just with their inability to build more houses but their ability to survive?

Kevin Dodd: Bedroom tax is the one that would fundamentally hit viability. Any organisation should manage its costs in relation to the income it gets, and that will happen as part of direct payments or universal credit, but for bedroom tax the issue is about affordability. People make choices about what they can afford. If you have not got the stock-take the example of Northern Ireland, where there is not single-person accommodation for people to move into-how can you help people who from April will genuinely be paying more? They can only just manage now and they will have to pay an average of £22 more, and there is no accommodation for them to move into. It will not happen overnight, even if they want it, because people want to stay in their homes. In some examples we have, having two bedrooms is a necessity, and yet people who are disabled will be penalised for that when they need two bedrooms to sleep separately.

Q167Bill Esterson: If they cannot afford it, potentially you will end up having to evict some of these people.

Kevin Dodd: We hope not, because the court will make that decision. That is yet untested. I think the court will not make the decision to evict in certain circumstances, but if it did it exacerbates the problem. Homelessness increases and the cost goes back to the local authority. As we are quite confined in one particular area, it will come to us to rehouse them as a priority need. We might turn round and say, "We’ve got a property here that has more bedrooms," so you are penalised by the bedroom tax. That seems to be a vicious circle going forward.

Q168Bill Esterson: Do your organisations have a concern about the impact on social housing providers in the way Kevin has outlined?

Kate Webb: We have a concern about the impact on providers, but our starting concern is about the households. We echo Kevin’s points about the lack of stock. It will be extremely difficult for people to move into a situation where their housing becomes affordable again so the housing benefit covers the rent. There is also the risk that people will not be prepared to take those kinds of actions because these are people’s homes. In most cases they are secure tenancies; they have lived there for very long periods of time. Even with housing benefit cuts in the private rented sector, which is far more mobile, we have seen that people do not want to move; understandably, they are attached to their homes. Our expectation is that people will try to make up benefit shortfalls, but the obvious risk is that when you are on a very low income there is a limit to how many essential bills you can cut back on and how many times you can borrow a bit from friends or from a lender.

Gillian Guy: We have a concern for those families particularly, but it is not just about the increased payments for the extra rooms, as it were, because of the reduction in the benefit; it is also council tax going to more people than had previously been the case. You begin to add up that bill. Fuel and food costs are going up at the same time, and income is coming down. We are also concerned about the whole of the public sector having to chase bad debt, because that has a cost attached to it as well. What is the reality of realising that bad debt at any time? It probably just comes off their balance sheet again.

Q169Chair: You mentioned, at the beginning of the discussion, the issue of some case studies that you had. Would it be possible to let our secretariat have that information?

Kevin Dodd: Yes, certainly. I will do.

Q170Heather Wheeler: I would like to widen this out a little and put a question to Kevin in particular, if I may. You have made quite a big play about the fact that for every extra pound of rent you get it is £4 in your local community and it affects the amount you can borrow to build more properties. Can you flesh that out a bit more, particularly the business about how it will affect how you can borrow more money to build more houses?

Kevin Dodd: We are a business, so we need money, which is cash flow. We need to be able to use that cash flow and asset strength, which we have, to borrow more money to build more houses. For example, to build the houses needed in the locality, in conjunction with the local authority, our projection is that we will be treading water at least until we understand the impact of universal credits and the bedroom tax. We project that we will have a shortfall in income of about £100,000 a week. We have 31,000 properties in one local authority area; we are not geographically spread around the district. For every pound we put into the local community we expect to generate at least £3 to £4 social value of return. We are quite pleased that we measure that, and measure it productively. Our concern is that, if we cut back on that kind of activity, the support people need will get worse, because we are seen as people to turn to in order to provide support in times of difficulty. When I give you the case studies we have got, you will see the support we provide as a landlord to help people live hopefully happy, content and independent lives, and currently we are concerned that that might be at risk.

Q171Heather Wheeler: So, that is X number of units a year you won’t be able to build.

Kevin Dodd: It works out that that would be the case. I cannot give you exact figures, but, in light of our business plan, overall we are losing the equivalent of one house per week. Over the life of our business plan it could be £220 million to £250 million in lost capacity to build new homes, which means about 3,000 to 4,000 homes will not be provided in the Wakefield district.

Q172Heather Wheeler: It seems like a big assumption to me. I am wondering about the planning permission for the thousands of houses you are going to build, but that is another story.

Kevin Dodd: I can tell you where they are going in Wakefield, for example. We had 18 pits and 18 mining communities. Those are the areas now being reclaimed on which to put sizeable new house building in our district.

Heather Wheeler: Fascinating.

Q173Andy Sawford: My questions are about changes to the social fund. Gillian, Citizens Advice have questioned the extent to which the localised funds will be set up. The welfare reform White Paper from the Government said that local authorities will tailor support to local circumstances and target only genuine need. What do you think will happen to the money? Why do you think these local funds will not be set up?

Gillian Guy: There is not provision for them to be ring-fenced funds. I guess that at the moment local authorities are thinking about how they square the circle of reducing resources and increasing demands and having to bring about this allocation of money, when they also have to chase bad debts and have the cost of all of those things. We are working with local authorities at the moment to try to set these things up. First, there is not consistency about them, so how they will be applied and set up varies enormously, and understandably in a sense, but that makes it very difficult for people to understand what the differences will be in their locality. We understand that some will make local connection a qualification, because that is where the money is coming from, but it makes it very difficult for victims of domestic violence, who might move from one authority to another, to be able to make any claims, and that causes particular hardship. We are concerned about the administration of that. We are concerned that the opportunity may not be taken-this could be a positive element-to pool that kind of resource with other local agencies and organisations, such as Citizens Advice, to make sure there is integrated spending around families in need to try to get more impact from that. Our other concern is about what happens at the end of the year, because, even if a pot is identified, perhaps the person who comes in at the end of that time with the most compelling case has nowhere to go.

Q174Andy Sawford: Kevin, has a local scheme been established in Wakefield?

Kevin Dodd: We are in the process of establishing that, but I am not from the authority. The report to establish it is going forward as part of this year’s budget preparations, but I am not yet clear what that is in Wakefield.

Q175Andy Sawford: I put my next question to all the panel, but Kate might go first. What do you think will be the likely effect of these changes on claimants?

Kate Webb: The changes to local housing allowance give us some sort of prediction of what the effect will be. Our experience to date has been that it is extremely difficult for households to navigate their way through this process. Communication materials have not always been as clear as they could be. In some cases people are completely unaware that their benefits have even been cut, and misleading terminology can mean that one cut is conflated with another. For instance, we find that the overall benefit cap is often confused with universal credit.

Q176Andy Sawford: By whom-the authority or the claimant?

Kate Webb: Frequently by the claimant, but also often by the contact they will have via informal and formal networks for seeking advice. It is very difficult for people to understand what is happening to their income, but the impact will be that a lot of people on very low incomes will have to find a way to balance an ever-tighter budget, and that will mean cutting back on essential spending. More people will get into debt. We did some research recently which found that last year 1 million households had used a payday loan to pay their housing cost. It is very difficult to see how that sort of trend will not be exacerbated after April.

Gillian Guy: They use payday loans to pay off a payday loan as well, which is a dire situation to get into. In terms of local welfare assistance particularly, in addition to all Kate said, I would add that this is for crisis. We are talking about a situation where people have nowhere else to go and have to make out that kind of case, so the consequences can be even more dire if there is not assistance available. To go back to my earlier point, there is a difference between county and district councils here, so it is an isolated payment that may not be administered in the same way as other benefits.

Kevin Dodd: The only point I would add is about the disease of doorstep lending that this kind of system generates. It is not controlled. There needs to be more legislation to control this. Very few cases are taken to court involving unscrupulous lending. These are people who are genuinely trying to survive and are looking at other means by which they get money to have an independent life.

Q177Andy Sawford: Kate, you made a point about the advice that people may be being given. Could you comment on the basis on which you are concerned about the quality of advice? Do you have any research that you might share with us? How might we make any useful or practical recommendations as a Committee about how to ensure people are not given the wrong advice at the wrong time?

Kate Webb: It is probably most helpful if we follow that up with written evidence around some of the research we have done on what prompts people to seek advice and the channels they will go to. We know that people often rely on informal networks for advice in the first instance. The problem with that is that there is absolutely no check on the validity of the information they are being given, or that it is helpful advice. We are seeing some informal campaign groups, for instance around the bedroom tax, telling people to stand their ground and not pay, which is terrible from the perspective of advice, but if those messages are getting into communities potentially it will be quite persuasive for some people, but we would be very happy to follow up in writing with some of the research we have done on how you can encourage people to seek accurate advice promptly.

Gillian Guy: Representing a rather large advice agency, the advice is quite complicated and complex, even for those who are trained in this, because we are dealing with different people at different points of transition. We will have people under the old system, people partly under the old system moving into the new one and people who come on board under the new system. That in itself adds to the complexity and confusion, because people in informal networks will have different situations and therefore will be tempted to give the wrong advice. The other point is that we are not making sure there is capacity in communities to ensure there is sound advice, and that does take an investment. The third piece is that it is more than just advice after the event; it is preparation for the event and making sure that information is out there now. We have got 3,500 outlets, which I am ready to use now if we can get the information out to people, and that is really critical.

Kevin Dodd: One of the issues that could be addressed by the Committee is more effective data-sharing. If you can share data effectively with organisations like ourselves, we will be able to understand the changes and deal directly with the individual to explain more about the changes that have happened, or, more importantly, if the change has happened and is more adverse, to support the person to make them aware of it, not after the event when it has gone through a cycle of misunderstanding. If we could get more data-sharing, we might be in a better position to help people who may have circumstances that have been affected by some of the changes.

Andy Sawford: We will raise that with the Minister.

Q178Mark Pawsey: I would like to ask some questions about the localisation of council tax benefit schemes. Given that the amount the Government spend on council tax benefit doubled between 2007 and 2010, was it not inevitable that they would want to control expenditure? Given that the money gets spent in local communities, was it not the right decision for local councils to set up their own schemes of council tax benefits? Therefore, a number of schemes have come forward. On the basis of the schemes you have heard about, have you got any concerns about the way the process is developing?

Gillian Guy: I am a great fan of delegation. My rules of delegation are to make sure I am absolutely clear about the framework within which I delegate, so that I am pretty confident about how things are going to happen. Where we would have issue with the council tax delegation is that it is going to the authorities with two caveats. One is that there is a protected group of people which constrains local authorities, depending on their population.

Q179Mark Pawsey: Would you rather that protection was not there?

Gillian Guy: I did not say that. I said that that was a constraint, so it is different from full delegation. The second constraint is that it has been cut, so it is saying to the local authority, "It is yours to manage but you have to manage it within this kind of constraint, as opposed to within this kind of framework." Our concern is that in lots of authorities that means that families who are pretty close to the edge at the moment find they have a bill that they did not previously have, and they will have to manage that along with everything else. More than that, it will be different depending on which council you happen to refer to and work with.

Q180Mark Pawsey: Do you have any concerns about the fact that it may be different in one authority from another?

Gillian Guy: I have concerns that that could be confusing for the general public, and they do not stay within one local authority boundary for all their lives or have all of their family within local authority boundaries. In times of constraint and difficulty, there needs to be some certainty for people to know what their bills and income are likely to be. This makes it quite uncertain without some kind of framework that says, "Let’s have at least some consistency about the way this is dealt with."

Kate Webb: Shelter have been flexible on the housing benefit reforms, not the council tax benefit reforms, but the observation we have made taps into what we said at the beginning about the relationship between DWP and DCLG. We, like a lot of organisations working with benefit claimants, welcomed universal credit because it was designed to simplify the benefits system; it was meant to mean that you had to report only one change of circumstance; it was going to be a single taper on which your benefits would be drawn, and that should have made it much simpler for people to see how much better off they would be in work. They are all very positive changes for people. Unfortunately, that has been undermined by a decision quite late in the day to take council tax benefit out of universal credit and localise it, which means you now get an overlapping taper again. There will be very different schemes for withdrawal rates and that sort of thing, so a lot of the attractions of universal credit, which we would have been happy to support, have unfortunately been undermined by localising the council tax benefit.

Q181Mark Pawsey: There has been some concern that people might choose to move from one authority to another, simply to benefit from a more generous local council tax benefit scheme. Do you think there is any validity to that concern?

Kate Webb: That is not something we think would happen at all. Most people’s understanding of the different schemes is not going to be that sophisticated. We will be lucky if even advisers can see a mental league table, but also people are very attached to their areas; they do not want to move home and definitely do not want to uproot themselves. We have different council tax rates at the moment and that does not lead to people moving between local authorities.

Q182Mark Pawsey: Do you think voters may end up lobbying their local councillors about the appropriate council tax benefit scheme for their area? Will there be an element of democracy to it?

Kate Webb: It is possible. Our concern is always that changes such as these, which tend to affect a minority of sometimes the least visible households, are not necessarily the ones that engage local communities.

Kevin Dodd: I have nothing to add, other than that we have 10,000 tenants who will be affected by that. Adding to what has been said before, different schemes in operation have different complexities, and understanding it is an issue. That is how we would look at it from the landlord’s perspective.

Chair: Thank you all very much for coming along this afternoon and giving evidence to us. It is very much appreciated.

Examination of Witnesses

Witnesses: Mr Mark Prisk MP, Minister for Housing, DCLG, and Lord Freud, Parliamentary Under-Secretary of State, DWP, gave evidence.

Q183Chair: Ministers, both of you are welcome to the final evidence session of our inquiry into the implementation of welfare reform. Mark, you have already been to see us on a number of occasions in your new capacity; David, it is the first time you have been to see our Select Committee. Both of you are welcome this afternoon. One thing that has been said to us by a number of witnesses-I am sure you have had a chance to look at the evidence-is that perhaps on this, as on several other things, it is not always apparent that the objectives of the two Departments, DCLG and DWP, are in common, and certainly it is not always evident that the two Departments are absolutely working together, and that local authorities who are key to the implementation of these measures are seeing the same guidance and same indications coming from both Departments. What would you say to that criticism?

Lord Freud: We are working pretty tightly together at different levels. At ministerial level, Mark and his predecessor Grant have regular meetings. On the council tax benefit side, Brandon Lewis worked with Bob Neill on making sure that the data-sharing was working well, so we have had a strategic grip. At director general level, we have regular board meetings. Right the way down, we have always had DCLG on the welfare reform transition steering group, so at senior level we have worked very closely together, and that is working down through the process. So we have been working closely together at working level. Particularly in the area of working with local authorities, DCLG together with DWP have always been involved in work with those authorities. I could go on. It may be worth just giving an example or two.

Mr Prisk: To be fair, Lord Freud is much more the architect, particularly of welfare reforms, than I. I am a relative newcomer, although, as you rightly say, this is the third visit I have had in but a few months. I don’t know whether one gets loyalty stamps or a fresh coffee at the end of it, but I am very pleased to be back. I say I am coming to this new, because it is worth bearing in mind that in coming to it fresh and not pretending to be a great expert in the workings of the welfare system, I have genuinely been encouraged by seeing, in complex changes, a working level both between officials in the Departments but also between ourselves at ministerial level. That has been one of those areas where there is, as we all know, a natural instinct within Whitehall to have an element of the silo around it, but I genuinely have not seen that. One good example I would cite-I do not know whether David wants to touch on, for example, the demonstration projects-is the alignment of timetables over the local council tax support system alongside welfare reforms. They are complex in themselves, but what we have sought to do, and officials have been impressing upon me in starting to learn about this a few months ago, is ensure those timetables are aligned. In terms of the challenge of getting the two Departments together, as a relative newcomer to this ministerially I have been encouraged by that.

Lord Freud: You touched on the housing demonstration projects, which have been a very important and valuable set of pilots. We have two big sets of pilots: the housing demonstration projects and the local authority pilots, which we run together. For the housing demonstration projects, we are testing the direct payment of rent by individual tenants to their landlords, and we have been working very closely-DCLG and DWP-on that to work out how best to make sure that important transition is handled in the best possible way.

Q184Chair: We will come back to the demonstration projects on direct payments, because that is an important issue that we want to explore in a bit more detail in due course. I raise two issues on which concerns have been raised with us. One is a very practical issue. A lot of staff are employed in housing benefits delivery, up and down the country. These are people with a great deal of expertise in handling complicated problems, often for people with considerable difficulties. Those staff don’t have a clue what is going to happen to them when universal credit comes in. Local authorities are saying that DWP are simply not giving them any information.

Lord Freud: There is a very complicated situation going on here. Let me just try to outline this in broad terms before getting into detail. What is happening at the same time is that we are centralising the benefits system and taking the six main working age benefits into one, including housing benefit which the local authorities have been working on. At the same time, we have been localising a lot of services, whether it is the social fund and so on, and other areas have been going to local authorities. Overall, there has been quite a change in the nature of the future work of local authorities. Within that, we are looking at a structure whereby we have a standardised system for people who can handle a standardised system; people who are more vulnerable and need support are looked after on a local basis; and, more than that, local authorities have got control of enough of the levers so they can look after those people on a much more holistic basis, looking after their whole requirements, for instance because they have got own welfare system when they take the social fund. We are building a local support service for UC support, for instance, so that they can do that successfully at a local level, which is something that a national system simply could not do.

Q185Chair: What is going to happen to housing benefit staff?

Lord Freud: Without going through it in great detail, I suspect there will be some redeployment by local authorities of their total staff. We don’t know the exact figures yet.

Q186Chair: But is your Department actually talking to local authorities about this?

Lord Freud: Yes, of course we are talking to local authorities.

Q187Chair: What feedback are you getting?

Lord Freud: It is a little early for us to work out some of this approach. We are building this system and introducing it on a fairly gradual basis. For instance, we are starting it nationally in October, but on a very gentle basis. That rolls forward for four years into 2017. Some of the big moves are likely to take place a couple of years into the process.

Q188Chair: But you have a timescale and you know what you are doing. It is not too early, therefore, to talk to local authorities about this, involve them in it and get a joint approach? Why isn’t it happening? Why are we getting complaints that it is not happening?

Lord Freud: We are now putting down the main elements in some detail on which one can do that kind of detailed planning, and there is time to do that detailed planning.

Q189Chair: Even though staff may be losing their jobs next October with the beginning of the scheme, you have not started talking in detail to local authorities about it.

Lord Freud: We are going very gradually from next October, and the numbers of claimants who are going into the system are, in the scheme of things, not very substantial. I have not heard about people losing their jobs. That is up to local authorities, but they are making a presupposition there that I suspect is incorrect.

Q190Mark Pawsey: I would like to ask questions about the state of preparedness of local authorities to implement what are very significant changes. We have taken evidence where people are particularly concerned about the tightness of this timetable. Lord Freud, you said that it would be a gradual start, but it is starting in October of this year, which is not very far away. There is the tightness of the timetable allied to undertaking a significant project at a time of fewer resources. What is your assessment of how local authorities and housing providers are going to be able to cope?

Mr Prisk: We are in regular contact, both formally and more informally, which in some ways is the more important element of this dialogue. Alongside specific guidance targeted at different elements of the welfare reform, we have also sought to make sure that we provide them with direct information. There are what are known as awareness seminars, which are detailed briefings drilling down into some of the technical details. We have also been making sure that there are specific briefings for individual officers, so what we need to be saying to chief financial officers will be technically more complex than perhaps on a general briefing. We have also taken the view that we need to make sure that there is a much greater approach to looking at the way in which councils deal with the broader issues of how the other elements Lord Freud has just alluded to, not just housing, work. That means briefings awareness but regular updates, because this is an evolving animal.

To answer your question in terms of where I think they are, in all of my discussions with councils I have always said, at the end of the meeting, or whatever, "Do you feel that you will be ready?" They have always made it quite clear to us that, although there are particular challenges, problems and, quite naturally, gripes about X or Y, it is absolutely their intention to be ready, and I have no reason to doubt them.

Q191Mark Pawsey: Do you think they are being as frank with you about the tightness of the timetable as they see it? Given the evidence we have taken and the resource pressure they are facing, are they telling you what you want to hear?

Mr Prisk: No. I can assure you that we have had what might have been described a few years ago by the Foreign and Commonwealth Office as the occasional free and frank exchange of views. That is exactly as it should be, because both sides to this quite complex process need to be open with each other. I always tend to say to councils that I want to hear it as it is, even if it is not particularly pretty, because we need to make sure we get under the skin of these things.

Q192Mark Pawsey: On the issue of housing, both those in the public and private sector, the Residential Landlords Association in particular, have told us that they would see a need for more discretionary help. Do you think that discretionary help is going to be available, particularly once the changes to housing benefit come forward? Are local authorities ready for the demand that they are going to get for that kind of help?

Mr Prisk: That is one of the questions I do put to the councils. They seem quite robust on this. There is already a £400 million discretionary housing payment package. What we have looked to do is understand, particularly with registered social landlords, where the impact might be in terms of the question around direct payments. I suspect we will come to this in more detail in due course. That is an area where we have looked carefully to understand the details. Some of the evidence now coming out of the demonstration projects-it is a mixed set of details at an early stage-indicates that, as far as we can see, about 92% of people are able, after four payments, to pay their rents appropriately. That suggests to me that, although there will always be a 6% to 10% element who will struggle, as they do under current payment arrangements, some of the fears that I suspect RSLs have said to you, about whether they will lose a huge proportion of their income, are natural ones but probably unfounded.

Q193Mark Pawsey: If there is a good dialogue going on between your Department and councils, what about the recipients of benefit, the social tenants particularly? Are councils, in your view, at this stage-perhaps Lord Freud you might come in-doing enough to communicate these changes? Is there enough awareness across the country of what is about to happen?

Lord Freud: Councils have been putting a lot of effort into this, and clearly, on the introduction of universal credit and direct payments, we have got various pilots going on that all of the councils are watching very closely. On the social sector size criteria coming in in April, they have put in a lot of work. We have made available guidance, which includes model letters and leaflets. In particular, there has been work by the Chartered Institute of Housing who put out a valuable guidance manual called "Making it fit", which gave a lot of examples of what different councils are doing on that side. We have a national partnership team liaising with external stakeholders to make sure that they are up to date on housing changes and that information is going out. A lot of work is going on in this area.

Q194Mark Pawsey: Would you say that the average benefit recipient is aware that there are changes coming down the road that are likely to affect them?

Lord Freud: Those who are affected will usually have been contacted. For instance, some councils are making sure that each individual likely to be affected by the size criteria has got a personal visit. On the benefit cap, which is another change coming through in April, we have written to all people who might be affected, and will be writing again with details, so information is going to individuals on a person-by-person basis.

Q195Mark Pawsey: Do you think it likely that Members of Parliament may see more traffic to their advice surgeries once these changes are implemented? To what extent do you suggest we can expect to be busier?

Lord Freud: One of the things we are talking about is having a hotline for MPs. We have just commissioned a factsheet on the benefit cap to go to all MPs to advise their constituents, but, where people want the support of their MPs on what is a substantial set of changes coming in, we will be aiming to support MPs as much as we possibly can.

Mr Prisk: Timing is also important. We need to make sure there is general awareness, but for the individual their first question will tend to be, "What does this mean specifically for me?" We have to be careful that we do not come in too soon when the authorities have not been able to shake that down to an individual level. Of course, they need to be aware early of substantial things that will generally affect them, but it will be the last couple of months before the bills change for the individual, as it were, that is the crucial bit, because that is the moment. You cannot do it too soon. One of the dangers is that, if you tell somebody six months beforehand that there might be a change but you cannot give the detail of what it will be, you have probably lost their interest to start with. It is a tricky one to time, but we need to be persistent at it.

Q196Bill Esterson: Lord Freud, for a minute it sounded as if you were suggesting that MPs will take up the slack of a massive change because the local authorities will not be able to. I am sure that is not what you were suggesting. If you are starting a hotline for MPs, the impact this is having must be of very grave concern.

Lord Freud: To be clear, there was a direct request from MPs to make sure there was something available, to which we responded positively and have committed to making that available. I do not think it reflects anything else but a request. MPs are too hard-working to replace local authorities, and I would never suggest that.

Q197Bill Esterson: I am very pleased to hear it. Mr Prisk, I want to come to what you said about councils saying they will manage. Is there not a danger that, as with any organisation, they would be very reluctant to admit they are going to have a problem for obvious reasons of public perception and confidence? Given the fact we are going to have a 10% cut in the budget available for council tax and huge pressures for cuts to council budgets of between 30% to 50% over the coming years in some authorities, isn’t it going to be very difficult for them to manage the financial impact alone, as we heard in the last evidence session?

Mr Prisk: It is a challenge. We have to remember that, alongside the 90% of the old money, as it were-the £3.7 billion, so that money coming forward-we have said, "How do we address some of the administrative issues?" You are right to highlight those. At the moment-this will continue-we start with an additional £403 million for ongoing administrative costs. That is an important additional support. We have also recognised that there are new burdens, which you were just mentioning. As a Department we put in an additional £30 million last year, and another £33.5 million next year, so we can start to make sure, in terms of any additional things councils face, that over and above the core funding they have those additional elements to see them through. Alongside that, we recognise that all parts of government have to play their part. For example, my Department have cut their running costs by over 40%. The 10% reduction does mean that it will be challenging for councils, but it is manageable. To go back to your original point about whether organisations naturally say that they will come through this, there is a risk to that.

Q198Bill Esterson: Does that worry you?

Mr Prisk: No, because, having run organisations outside of politics in business-and indeed, I have been chairman of a school board and so on-you are right to say that a natural, and welcome, attitude of an organisation is to say, "Yes, we’ll work our way through it," but the job of myself as Minister, officials and others is to drill down into that and see just how ready they are. The demonstration projects are really about finding out where the wrinkles and genuine problems are, so we can start to unlock those and we do not find ourselves with problems we have not anticipated.

Q199Simon Danczuk: Why can’t tenants have the power to request that their housing benefit is paid directly to their landlord?

Lord Freud: That is exactly what they have today, and it has resulted in 92% of them being encouraged to have their payments paid by the state to the landlords. This is in the social housing sector. That was changed in the private rented sector when local housing allowance was introduced. For working age in the private rented sector, the current figure is that 24% have payments made state to landlord. In the introduction of universal credit we are determined that not only are there no financial barriers between someone being out of work to going into work, but that we remove non-financial barriers, one of which is that, if you get a job, suddenly your rental arrangements are thrown into disarray and it disincentivises you to make the step. If you are already responsible for making a housing rental payment, that does not act as a barrier. The trouble with having a straight choice is that, when you are in such a dominant position as a social landlord, the choice is much more likely to be with the landlord than the tenant.

Q200Simon Danczuk: What is the principle behind this?

Lord Freud: The principle is that we want to encourage as many people as can handle it to look after their own life and take responsibility for it-that includes paying rent-so that there is not an artificial barrier to those people taking a job, which is the only route for people out of poverty. Universal credit on its own is a transformation of our benefits system designed to make work pay, and to make the system simple and comprehensible. It is also designed to give responsibility back to people, so that they are no longer left dependent on the state-in a minor way for what the state does for them-and they can take control of their own lives.

Q201Simon Danczuk: It is about control and responsibility. MPs can request that IPSA directly pay their London flat landlords, can’t they? What is the difference?

Lord Freud: Well, the difference is-the difference is-

Mr Prisk: If it is not unfair to Lord Freud, I think I can say as a Member of Parliament that IPSA-

Q202Simon Danczuk: I am sure he knows what IPSA is.

Mr Prisk: We would like to make sure that our arrangements are rather more popular with our clientele, if I may put it delicately in that way, unlike the arrangements between MPs and IPSA. Sorry, there is a certain naked interest here that we all have, and I should declare that to colleagues.

Q203Simon Danczuk: But what is the difference, Lord Freud?

Lord Freud: It is probably invidious to compare any particular arrangement, but the reality is that if you are not in a job-

Q204Simon Danczuk: You are irresponsible, but if you are in a job you are responsible, and IPSA can pay it on your behalf. That is the gist of what you are saying.

Lord Freud: I don’t think that is what I said. I would like to say what I want to say, if that is all right. If you are not in a job and want to move into a job, it is a major barrier to change your rental payment structure, because at that stage you no longer have the right to be a recipient of benefits. Therefore, you have to change your systems, particularly in a context where that might fluctuate quite a lot, which for many people it does. We are trying to remove an artificial barrier for people going into work. Clearly, that is not a concern for MPs who are in work.

Q205Simon Danczuk: Which group or groups of social tenants should be defined as vulnerable and continue to have their benefits paid directly?

Lord Freud: We are aiming to avoid the word "vulnerable" and the definition of vulnerable. To give you an example, if I am heavily disabled, I am at one level to be considered vulnerable, but I might be perfectly capable of handling my financial arrangements, budgeting and everything else. Our approach is to look much more specifically at the types of support somebody is likely to require and tune our efforts in that direction, having established what their requirement is.

Q206Bill Esterson: Why can’t tenants choose to have their housing benefit paid direct to the landlord, if they want to?

Lord Freud: Because that will institutionalise them very quickly; it already has, i.e. most people who go into social rented accommodation find that in practice it is hard to do anything else but have the rent paid over from the state.

Q207Bill Esterson: But you believe in choice in lots of other areas, don’t you?

Lord Freud: I believe in choice.

Q208Bill Esterson: Why not this?

Lord Freud: It is the balance of power between the two parties. If you could give me an open choice between an all-powerful landlord and a tenant desperate to move into a particular property, I would be more convinced, but in practice that is not the power position between the two.

Q209Simon Danczuk: Can you give housing providers an assurance that they will be able to have housing benefit paid directly to them when arrears reach an agreed level?

Lord Freud: Yes. Let me just make clear exactly where we are on this. I am on record as saying that I am determined that direct payments will not undermine the financeability of housing associations.

Q210Chair: Or presumably local councils as well.

Lord Freud: Yes, obviously housing associations and local councils, although local councils do not have quite the ability to raise independent funding. That is why the test is for housing associations, and clearly that would read across to local councils. That is what we are finding with the housing demonstration projects. What are the kinds of people we just should not put on the system in the first place? We have systems like that with the private rented sector where people are not put on anyway because they are likely to find it difficult.

Q211Simon Danczuk: You are going to use a system similar to that.

Lord Freud: We hope we will get a better system.

Q212Simon Danczuk: You have only 60 days left, Lord Freud. That is what I am concerned about.

Lord Freud: No. The pilots are very gentle; we will find more with the pilots, and the volumes will gradually increase. We are working out now exactly what that should be in time to apply it. The second thing we are trying to find out from the housing demonstration projects is the right level of arrears when you switch. Some very interesting things are already coming out of the housing demonstration projects. One is that we have not got a problem of people just not paying anything at all; many of them have issues of partial payments. We need to work out the trigger for the switch-back and how you make sure that money is restored to the housing association that was not paid. All of that is vital stuff for us to make good on the commitment that we do not cause the problems people are concerned about.

Q213Simon Danczuk: You have provided that reassurance. Just before you came to give evidence we heard that homelessness is getting worse, and will get increasingly so after these benefit changes. What do you say to that?

Lord Freud: Our aim is not to increase homelessness on any substantial basis.

Simon Danczuk: That is a good start.

Lord Freud: I will ask Mark to come in in a minute. When we introduced the changes to the local housing allowance, which have now come through-they came through for the people who were in the stock, so to speak, during last year, and we started it the year before for people who flow on to the system-we had terrible warnings about the impact on homelessness. I just checked some of what we were warned about 18 months ago. We were warned that 82,000 people in London were at risk of losing their home. The latest figures we have got is for the second quarter of last year when all of this was in train. In that quarter the figures were up, but by 600. Those were the people accepted as homeless. Another estimate was that 134,000 people would have to move or become homeless, and the figure for the third quarter-we do not yet have the full year-shows that households in temporary accommodation are up but up by 900.

Q214Simon Danczuk: So your prediction is that homelessness will not increase.

Lord Freud: What I am saying is that some of the warnings we get ahead of these changes are very, very dramatic, and when you get to it it works out. We are putting in a lot of effort, working with local authorities to keep homelessness figures down to their historic lows. It is currently 2.3 per thousand households; in the mid-2000s it was six per thousand. Our objective is to keep down homelessness.

Mr Prisk: I understand the fear that there may be a danger of this. I have talked to housing associations who particularly say, "We are anxious about what this might mean for our income streams. If it goes to direct payment, what would that mean?" and so on. If you look at direct payments of housing benefit in the private rented sector, 80% is paid direct already. I understand their concerns, and we want to work through them. This is a big change, and inevitably there is a degree of uncertainty. We are absolutely committed to making sure we continue to get a net improvement in the supply of homes and, therefore, that we do not see homelessness soar away again. There are complex reasons behind why someone becomes homeless. For example, under the last Administration it peaked at twice the current rate. There are a number of complex reasons related to families, as well as what is going on in the housing market, but I do not believe that what we are doing here, as perhaps some people have characterised it, will drive up a substantial increase in homelessness.

Q215Bob Blackman: Some of the issues have already been dealt with. Housing benefit is very complicated to start with. Local authorities often have large numbers of people administering housing benefit and, very importantly, they have often outsourced those contracts. Those contracts will be coming up for renegotiation very shortly, or they’ll have a number of years to go before they are renegotiated. What guidance and advice has been given to local authorities about what they should do with these contracts?

Lord Freud: Local authorities are aware of the timing of the introduction of universal credit, and it is being done on a gradual basis. One of the happy outcomes of that is that they have got time to look at these longer-term contracts and work out when they are coming to a natural end and make sure that their run-ons are of appropriate length.

One of the things we have done with the housing element of universal credit is simplify it very, very substantially. A lot of the really complicated processes that housing officials have had to undertake have simply been removed. One simple example is that at the moment we have a rate for what your housing allowance is, but if you have recently become unemployed you are allowed a rate based on what you have been paying for the first three months. We have just stripped that out and said, "This is the rate that the state is paying," and simplified it out, which takes away a whole process of checking and everything else. We have done that at level after level after level, so it is a much simpler process from the policy perspective. We have done that very deliberately, because clearly you could not run a national system with the complexity of the current housing benefit. You would go round and need to replicate the local knowledge and everything else to run the complex system that exists today.

Q216Bob Blackman: Just to encapsulate this, because it is being simplified the reality is that councils will probably be coming to the Departments, either DCLG or DWP, to say, "Can we get on with this and implement it in our area?"

Lord Freud: Universal credit is being done at a national level, so there are elements of support for the most vulnerable that are being localised, through localising the social fund and local councils running discretionary housing payments. Local councils have had a hand in making the decisions on who should get direct payments, i.e. statetolandlord in the private rented sector. All those things I suspect could continue, and we are talking to them about how the local support service goes on. There will be complicated and individualised local areas, which include housing and other aspects of universal credit, where we will be working with local authorities and the local partnerships that they create to make sure there is a service for claimants.

Q217Mark Pawsey: We heard from the chief executive of a housing association earlier today that for every pound he invests there is £4 of additional social value. Therefore, a loss of £4 million of investment would occur as a consequence of the changes. That works out over 30 years to a loss of 2,200 new homes that would not be built as a consequence of your changes. Do you refute that approach?

Lord Freud: Let me try to break that down. We are working to make sure there is not an acute problem of arrears and we have a solution to that. To the extent that the concerns are based on sheer loss of money from rental payment and arrears, that is something we are looking to erode very significantly, if not eliminate.

The second issue-I think it is the most interesting thing to come out of the housing demonstration projects to date-is that it is quite resourceintensive to go in and support tenants. I am hearing a lot of really interesting things-I am sure the Committee is, too-about the value of that intervention. Some of the most modern and forward-looking housing associations, who see their role in a rounder social context, are using this as one of the bases to redefine the level of their relationship with their tenants and improve the lives of their tenants. You can run an argument-I suspect there is not time for it today-as to where the value of that lies in terms of turning round people’s lives, making them responsible and able to handle their budgets and their lives, and get a job and everything else. That may be the most valuable use of that resource. All I can say is that I am now looking at housing associations as potentially the strongest and greatest ally we have in the transformation of people’s lives we are trying to achieve by universal credit.

Mr Prisk: I strongly endorse that social point. I have talked to a number of housing associations about this. Initially, they have said, "Look, this is another thing we’ve got to do," but others have said they see this as a gain and an opportunity to give people, who perhaps have never been asked to manage their own household budgets and now need to do so, a great social skill. For some households this will make a big change in their hopes and aspirations. I am not naïve. There are some families here who will really struggle and we recognise that in the system, but there is a big social gain in spreading out the ability to manage household budgets, and this is a good way of doing it.

To come back to the other point that you raised, which is important, housing associations have said to me, "Despite the fact you have given us really good freedoms to be able to invest in affordable housing, if we see our collection rates drop, in terms of rents, below the standard 94% to 96%"-that sort of ballpark-"that clearly has bad implications for us." So far, we are seeing collection rates of roughly 92% with the demonstration projects for direct payments. It is early days, and it is a little too soon to take the cries of horror and any protestations of glory, but I am encouraged that at this early stage-this is very new for a lot of people-we are in that sort of ballpark.

Q218Mark Pawsey: But the fall from 98% or 96% down to 92% does involve a loss of income to the housing association and the ability to build fewer houses. Is that a matter of concern?

Mr Prisk: That is why simply seeing it drop to 92% and saying, "Well, there we go," would be the wrong thing to do. If we see it drop to 92%, the question then is, as these projects develop, how we crank it back up to where it needs to be. That is the challenge.

Q219Chair: We have now come to quite an important issue. We heard evidence from the chief executive of Wakefield and District Housing before you came in that basically they have got over 11% arrears among their demonstration pilot tenants, compared with less than 3% for the rest of their tenants in similar circumstances. That fourfold increase must be very worrying indeed. Lord Freud, I have a great deal of sympathy with the principle you enunciated at the beginning about people having the right to demonstrate the ability to control their own finances. That is an interesting principle. The problem is that, if it comes with a significant increase in arrears, which the pilots eventually prove cannot be properly controlled, and a great amount of effort to assist families, that is very laudable but it means that the extra cost will be paid by other tenants who do not require that effort. Is that fair to them? There will also be an increase in borrowing costs to authorities. Is all of that a price worth paying for the first principle you enunciated?

Lord Freud: What we are looking at in the housing demonstration projects is the falldown rate. People are then switched back. At the moment the figure of switch-back into direct payments-

Q220Bill Esterson: Why switch them in the first place?

Lord Freud: I don’t want to confuse myself. Switch-back from tenanttolandlord to statetolandlord is now running in the housing demonstration projects-it is early days-at 5%. Therefore, we are looking at arrears in Wakefield of maybe 11%; at Torfaen it is running at 3%, which is much lower. You then switch back the people who cannot handle it; you get the arrears paid, and then perhaps have another go at an appropriate time with those people to see if they can handle it. They may have needed more support to do it.

Q221Chair: Isn’t one of the problems that, if you have people who cannot cope and switch them back, they have already built up arrears, and the chances of managing their situation, even to get them to pay back the arrears, are virtually nil?

Lord Freud: That is exactly what we are going to be finding out. We now have a group who have been switched back, and we will find out what happens and what the issue is about getting the money back.

Q222Chair: Do you have any assurance that the Government won’t move over to direct payments right across the board until the results of those pilots are available and there is a chance to look at them and be consulted about the impact?

Lord Freud: We are going to take the lessons from the demonstration projects and design a system, all of which is a very open process, to make sure that we do not undermine the finances of the industry.

Q223Chair: That is helpful reassurance, but it is a slightly different position from where we were in our last inquiry about 18 months ago. Then the Government seemed to be saying they were going to push on regardless.

Lord Freud: It is not a different position; it is one of the reasons we launched the housing demonstration projects. Clearly, that has taken some time. I forget exactly when we started, but it was probably around that time. We did that exactly to build the evidence base so that we got the right answers here. Universal credit is a huge change, and maybe some of the subtleties of it were not communicated adequately. To that extent I apologise, but the reality is that we were always going to do this in a way that did not undermine housing associations. I made that commitment a good 18 months ago. We saw that right at the start. We had housing associations and local authorities in and really worked it. I have been working with rating agencies, banks, housing associations and local authorities to make sure this happens. I want to have our cake and eat it, and I think we can do that.

Q224Chair: But if the pilots prove you cannot, there is room for reconsideration.

Lord Freud: At some level there will always be a large group of people who can handle their own financial affairs. The issue is trying to find out the sweet spots here.

Q225Chair: But you are telling us that there is room for reconsideration based on the evidence from the pilots.

Lord Freud: A reconsideration sounds awfully like, "We will do a U-turn," and everything else. That is not what I am saying. I am saying we were always going to run this process in a way that got the right answer in terms of getting as many tenants as we possibly can to a position where they can move into work easily and run their own lives without undermining the finances of the housing sector.

Q226Chair: But if that means you have to make a change of approach based on the information from the pilots and that information demonstrates certain things, you will take account of those certain things in determining your eventual policy to be implemented across the board. Is that a fair comment?

Lord Freud: No.

Q227Chair: What is the point of the pilots?

Lord Freud: We have an issue of language here. We will take the lessons. The point of the pilots is to get this right. It is not about reconsidering anything; it is about getting the right figures and levels of support and groups into the different categories. That is not a reconsideration, and that is why I am sounding resistant, because I do not want those words put into my mouth.

Q228Bill Esterson: If we look again at the figures from Wakefield, 1,000 tenants have received direct payments through the project. Over 170 tenants have been served with a notice seeking possession. To put that into perspective, that compares with 1% of the whole stock. Not one of those 170 tenants was in arrears before they went into the pilot. Isn’t that very, very compelling evidence?

Mr Prisk: One of the things we have been looking at is how comparable the demographics are between some of the different pilot areas. What I do not know-we will go back and double-check Wakefield specifically-is the nature of the demographics there and whether there is a higher proportion of more vulnerable cases as part of that project. You will always get a difference.

Q229Bill Esterson: They were asked that question and said it was the other way round. They said that in the population as a whole it would be a bigger proportion.

Lord Freud: Our evidence about Wakefield is that no one has been evicted or taken to court solely as a result of rent arrears. In a very small number of cases where tenants have been taken to court, it is because of a wide range of issues. I say that because we have looked at it, and I think we leave it as a difference of opinion between DWP and Wakefield.

Mr Prisk: Looking across the piece, it is interesting that the average payment rate is 92%. I have not heard the evidence you have just heard from Wakefield; I will certainly want to have a look at that. I was looking at Oxford. I quote Val Smith from the city council: "It has been pleasing to see that [a] majority of our tenants have been able to manage direct payment of their housing benefit." She then drew the interesting contrast-it may be there is a different demographic, which is why I put it in-that, "Encouragingly the trend for each phase of people who move into the project is for arrears to steadily reduce after the initial payment. This suggests that our tenants are able to adapt to the new process quite quickly." There may be a differential there, but it would be interesting to compare and contrast the two.

Q230Chair: If you have the information about the other pilots-because we have not got that as a committee-would it be possible for us to have it?

Mr Prisk: I would be very happy to do that.

Q231Heather Wheeler: Notwithstanding how fascinating all of that was, I would like to move on. I have not yet got in my favourite bit about jamjars accounts. I am really interested in the next move, which is about the social fund and councils administering it and coping with that. There are two issues. First, councils are saying they are not receiving enough guidance and information from you guys just yet about that. It could be early days, but they would certainly welcome that. Do you have any concerns that, because the way of doing business is not a ring-fenced area, we will get total and utter localism, which I am obviously happy with, but some councils might use it as an excuse to help shore up other areas where they are a bit short of money?

Lord Freud: We are transferring this aspect of the social fund dealing with community care grants and so on, which comes to £178.2 million per year, to local authorities in England and the devolved Administrations of Scotland and Wales. We are also transferring the funds for administration, which in the next two years will be £72 million. The idea is not that the local authorities run a social fund; the idea is that they run the kind of localised welfare provision that they deem appropriate and necessary for their areas. That is what the localisation is about. To that extent, there is clearly a limit to the amount of guidance one would want to provide to those local authorities, because the whole point is they need to set up their own welfare support system. Likewise, the idea is that they are trusted with that money to do what is best needed in their areas, and it has not been ring-fenced for that reason. The feedback we have is that local authorities welcome the freedom and flexibility with which they are provided to make a difference to their own people in the way they understand how to do.

Q232Andy Sawford: My questions are about council tax benefit and the 10% reduction. Croydon Council told us that councils were at financial risk because of the threats to council tax. They tell us specifically that they have had to pass the reduction in funding on to residents through a revised scheme that will create additional demand and financial pressures through more administration, debt collection, effects on services, such as debt advice, welfare support and housing advice, and provision in areas such as adult social care. They also say that, contrary to the evidence you have given so far today, the effects on homelessness will be huge. Are they wrong?

Mr Prisk: We have been meeting Croydon on a number of other related issues only recently, so I am aware they have some particular difficulties, not least a long-standing problem about low housing supply going back seven or eight years. That has created acute issues for them. In terms of the shift away from old to new system of council tax benefit, which is at the heart of this, we are very much focused on the fact that the old system was not working. We saw it double between 1997 and 2010, a rate that frankly was unsustainable whoever was in government, but also, if we are to change this, we need to do it in a way that allows councils to reflect local circumstances. How do they square the spending circle, which is at the heart of your point?

Q233Andy Sawford: The point is that they identify a whole range of ways in which, in terms of their service provision, budgets and residents, they will be negatively affected by the change. Are they right?

Mr Prisk: I do not think we should simply say that the reduction of 10% is somehow going to lead to a wholly negative situation.

Q234Andy Sawford: They do not say it will be wholly negative. They specifically identify a range of areas. For example, they talk about administration costs. Do you acknowledge that they will increase as a result of the change? They refer to an increase in the cost of debt collection; the effect on debt advice, welfare support and housing advice. Do you accept that those costs will increase? Specifically, do you accept their point that the effect on homelessness will be huge?

Mr Prisk: We are putting in place an additional £403 million for ongoing administration, of which Croydon can have a part. We have put in an additional £30 million for the new burdens-we accept there are some-for which Croydon can apply. That was just last year; there is another £33.5 million this year. We have also put into place a £100 million transition grant specifically for those councils who would like to apply for this. It is a voluntary additional amount of money, because it relates to the challenge that councils like Croydon face. I would say to councils that they can achieve that 10% saving. There are a number of ways of doing it, not least if you look at local government finance more widely. We are bringing in new streams of income, the new homes bonus being a very good example, and also making sure that the business rate retention scheme is there. My answer to Croydon will be, "You need to make the choices you believe are right, for which you are accountable to your local electorate, but we believe we are providing the right financial package to enable you to square that circle."

Q235Andy Sawford: The overwhelming majority of councils have told the New Policy Institute, who conducted a survey recently, that they have not been able to absorb the reduction with other savings and so on, so the Government’s belief that that is possible is not something local councils believe that they can do. On homelessness specifically, the evidence from Croydon Council contrasts very starkly with what Lord Freud told us. I cannot quite remember your use of language, but they say that the effect on homelessness will be huge. Do you dispute that?

Mr Prisk: Both of us have recently met Croydon. David is more than capable of answering for himself, but the context is that we have met Croydon. They have some very specific issues that we have discussed with them and are not related to this package. I recognise they have some challenges here, but I do not think it is right simply to put them at the foot of these changes.

Lord Freud: The localisation of council tax means that local councils are able to design their own way of providing rebates. We are encouraging them to do that in a way that does not conflict with the work incentives of universal credit. There is a default on offer, but in the end local councils would look to create a rebate system that works for their areas, and it will be different in different areas.

Q236Andy Sawford: What do you say to councils who suggest that the changes will reduce council tax collection rates?

Mr Prisk: I don’t think there is any definitive evidence on that, but it is early stages.

Q237Andy Sawford: What do you say to councils who suggest that the final council tax support allocation will be a much larger cut than 10%? For example, Nottingham modelled figures for us in their evidence that show the cut will be 18%.

Mr Prisk: We have made quite clear that we are aiming for a 10% saving. There will be no further cut in the year after 2014-15. There has been some newspaper speculation about that, but our policy is quite clear on it.

Q238Andy Sawford: I want to turn to specific evidence that the Committee has received from the National Association of Local Councils. I want to read you a short paragraph from a letter they have sent to the Committee expressing their "extreme disappointment at the response from the Government to its second consultation regarding the localisation of council tax support." They say you previously gave assurances about the council tax base and that the changes would not impact on local councils, by which they mean town and parish councils. They say that you have made a U-turn and had a sudden change of mind, and this is a surprise not least because of the discussions they have held with Ministers and officials about the impact on town and parish councils, and also the timing, given that budget and precept-setting decisions are at advanced stages. How do you respond to their criticism?

Mr Prisk: I have been lobbied. My local parishes have been bending my ear on this one, so it is painfully familiar. To explain where we have come from on this, because obviously this predates not only my time in this job but it is not even my immediate responsibility, though it is a very important one. The genuine dilemma here, which is a tricky one that even the LGA have recognised, is that at the first step last year parish councils identified the risk that in our funding proposals for May of last year, which is what the NALC will be thinking about, if the billing authorities did not voluntarily pass down revenues there could be an increase in their parish precept. They were anxious about that, understandably, and we listened to that. We sought to see whether we could achieve an alternative in the council tax base consultation in August, with which I am sure members of the Committee will be familiar. The majority were supportive of that second opinion, but the problem was that it flagged up two risks that my predecessors and colleagues did identify. These were sharper than I had realised when looking at it as a constituency Member. First, 240 billing authorities with parishes would face an increased burden because of the increase in precept over time, so they would get locked into that. Second, about 66 billing authorities, with Melton leading the way, without having increased their bills, could face the need to reduce their expenditure or be tipped over into a referendum, not because of what they were doing but what was happening at parish level. I totally understand the concern of the NALC.

Q239Andy Sawford: In the interests of time, the Committee understands the concept of cause and effect. What NALC say is that this undermines the 100year principle of the independence of town and parish councils in determining their own precepts.

Mr Prisk: I am sorry if they take that view. The line we have taken is that we want the billing authorities and their parish and town councils to collaborate and work together. The voluntary route is the right one, and it avoids a particular danger. If you take Waverley Council as an example, about a third of their budget is parished. It would be in a completely invidious situation if we had gone for the first option. We recognise that and have listened to it. I understand they are concerned about it, but my message is that we should make sure the billing authorities, parishes and towns, work together, and we want to encourage that.

Q240James Morris: DWP have a policy around digital by default. I know that has been extended into jobseeker’s allowance claimants. A few issues have arisen that have come my way in my constituency surgeries about people responding to that. Is that policy to be extended to people claiming the replacement of housing benefit and council tax, and do you think there will be any problems that might be associated with that?

Lord Freud: Let me explain why we have gone with the digitalbydefault strategy. The reasoning is very similar to that for taking control of your own budget. Nowadays, to take a full part in 21st century life it is important for people to be digitally competent. It is quite hard to apply for most jobs without using digital means or the internet, and then doing those jobs without being able to handle a computer. There is an underlying social imperative.

On top of that, one of the things that is attractive for people if a service is digital is that it gives them control of it, and it means they can run their own lives and understand what is happening to them. One of the things that is desperately wrong with today’s benefit system is not that there are lots of benefits that are complicated and difficult to understand, although that is bad, but that you do not know what will happen if you change your own behaviour. If you do something, the system is too complicated to allow you to know whether, if you work another five hours and earn more money, you may lose your benefit, or something terrible may happen.

James Morris: I understand that.

Lord Freud: I am giving a bit of context. That is our ambition and drive, and we are prepared to put considerable resource behind it.

Q241James Morris: So it will be extended from where it is now.

Lord Freud: Yes, because universal credit incorporates housing, so by definition people’s housing benefit will be part of their universal credit claim. Therefore, it will be digital by default. That does not mean there are no safeguards so that people who really cannot handle the digital process are not supported.

Q242James Morris: What is the nature of the support they will be able to get? We are talking about some of the most vulnerable people.

Lord Freud: We have two types of telephone support. We have developed a service so you can do it on the telephone, and then digital support on the telephone. You will be there, working your system, and will be able to phone up someone to help you as you are on it. There will be face-to-face support for some people who need that level of support. However, all the time these support systems will be looking to help people up and on to the system, so that they run it themselves. We will not just lock people into the alternative methodology; in our systems we will be looking to help them in, and maybe the second, third or fourth time they will, we hope, be handling it digitally.

Q243James Morris: We have had some evidence from various councils that there have been problems with the ATLAS computer system handling large volumes of information. Is that true, and is it going to be able to cope with the new demands that will be placed on that system?

Lord Freud: ATLAS, which is a relatively recent system, has been a total godsend for transferring information between DWP and local authorities. Rather than the kind of individual paper-based information trails that were very late and labour-intensive to incorporate, there is now a flow of data which is machine-readable. Some of the problems have been teething problems, and some have been that local authorities have not been able to tie up the machine-readable flows of data into their own systems, or have taken a bit of time to do it. We had one incident where there was a double flow of the same information, which was confusing. Fundamentally, however, ATLAS is a hugely important link between what will be universal credit and local authorities as we use the same information.

Q244James Morris: Is it going to be able to cope with the increased volumes?

Lord Freud: Yes, absolutely. Not only will it be able to cope with sending information from the centre to local authorities, but it will be able to cope with it the other way, as well.

Q245Chair: Wasn’t one of the things to be anticipated the need to talk to local authorities about whether their computer systems could talk to ATLAS before the system was brought in?

Lord Freud: 70% to 80% of LAs have now automated the bulk of their ATLAS notifications, so that process has been and is pretty successful, and we will be looking to work with the remainder to get them on the automated system. It saves them a lot of money and effort.

Q246Bob Blackman: To move on to informationsharing between local authorities and RSLs, we have had mixed evidence about the difficulties in certain respects of computer systems talking to each other, to which the Chairman has just alluded, but also the legal aspects of transferring data between these organisations, particularly when we are talking about vulnerable people. What has been the experience in the pilot areas so far of this, and what are you doing to overcome it?

Lord Freud: To summarise it, the situation has improved but is not yet perfect. It has improved in the sense we have taken primary powers in the Welfare Reform Act to send information over to local authorities who can then share it with key agencies, in particular housing association and other landlords.

Q247Bob Blackman: From your perspective, are you saying there are no legal obstacles to sharing this information, or have you found some and they need to be corrected?

Lord Freud: The point about data gateways is that they are very, very specific. We can share data on benefit awards, the benefit cap, the blue badge, DLA assessment, DHPs, the disabled facility grants, the domiciliary care financial assessments, homelessness prevention, housing benefit, supporting people services, the social sector size criteria, troubled families and residential care financial assessments. Those are the reasons we can share, but there are other reasons that local authorities may think that having information is valuable and useful. That remains a tension for us, because we are not legally allowed to transfer that data, so we cannot respond positively in those circumstances to requests for data. That causes mutual frustration, but, as this Committee will be aware, the provision of data and the reason for it is an area of great sensitivity. That is the position we have got to. It is a lot better than it was.

Q248Bob Blackman: There are no plans to change the law to correct the legal position.

Lord Freud: We are reviewing it the whole time, and we may have to make specific moves. We are watching. This is an area to watch very closely.

Q249Bob Blackman: We have concentrated a bit on the legalities, but what about the practical difficulties of sharing?

Lord Freud: The practical difficulty is that where you want to align services for a client, sometimes it is not possible to share the data in order to do that. One of the attractions of localising more of this is that the information can be made available and the alignment process is not as necessary because the local areas are taking more complete control of the situation and have the information anyway.

Q250Bob Blackman: The evidence we have had is that landlords are a bit worried that they will not be able to get the information they need in order to assess whether or not a tenant is a good financial risk. Is that bound up with the legalities, or is that something else?

Lord Freud: We have now made it possible for local authorities to share information with landlords in a way they could not before, particularly for this reason. It may be that some of the frustrations that you are hearing in this area reflect past practice and a slow catchup with the present legal position. That was a key relaxation because of the importance of the landlord knowing some of the information, but it is an area on which I am keeping a pretty close eye.

Q251Chair: What are the impacts of the changes? A large number of people currently just claim housing benefit and council tax benefit; they are the only benefits they claim. When their income changes they go to one place: the local council. They tell them that and their benefits are recalculated. They will now have to go to two places when that happens. Is there any way that can be altered to remove the inconvenience to claimants?

Lord Freud: No. People will now go to universal credit for their housing benefit, and there will be a signpost for them saying they could be eligible for council tax rebate and directing them to the local authority. That is not hugely different from a range of passported benefits that we are looking at for all the other elements that people could get, whether they are free school meals or whatever else. That is not hugely different. We have the most elaborate passporting arrangement of any country in the world and we rely on them far more than anyone else. One of my objectives in the medium term is to simplify that system.

Q252Chair: No thought has been given to passporting along the information instead of the claimant, so he does not have to fill in another lot of forms with another agency.

Lord Freud: We have not devised a system for that, but it is not impossible that we may look at that in the medium term. As local authorities develop their own systems, it is not impossible we can find some links, but that is absolutely not something we could contemplate doing in the next couple of years, given the work stream we already have.

Q253Chair: We had evidence from Thanet District Council that was quite concerning. They said that currently the housing benefit system can relate to the local authority property database. If local authorities get four different claims for housing benefit from individuals when they know that in that property there are only two flats, immediately the alarm bells go off. Benefit fraud looms on the horizon and checks are made. We were told that under the universal credit system, however, that will not work off the local authority database, and if there is more than one claim for a property the system simply will not know and will not flash it up as a problem. Is that a worry that this could be an open goal for fraudsters to move in?

Lord Freud: We are building into universal credit something called IRIS, which is our fraud detection process. That will have electronic links to a huge number of different systems, and in practice it will pick up that kind of anomaly electronically. Where we see it, it will go up on a risk rating and we will examine it pretty closely before we go ahead.

Q254Chair: IRIS has a similar database to that which local authorities use.

Lord Freud: We are building IRIS currently, but the objective is to start matching it up with a lot of information held in both government and nongovernment arms.

Q255Chair: Presumably, the register for the council tax system itself must be one of the bases you are using.

Lord Freud: That could be one of the bases. Clearly, it has to be built. In practice, we are sending more information over than we get back, but we will be connecting with that. We will look at connecting with land registries, the DVLA and all kinds of different systems that we can start to tie together to test where it looks as if fraudulent activity is going on.

Q256Chair: Is that being done in conjunction with local authorities, because obviously they have an equal interest in making sure there are not fraudulent claims?

Mr Prisk: Yes, absolutely. It also needs to be seen in the context that it is an important joining-up point. My colleague Minister Don Foster is about to announce a further £9.5 million fund looking at grant funding for social housing fraud. It also needs to be seen in context that in the Prevention of Social Housing Fraud Bill we have now looked to make sure there are stiffer penalties in this field. By sorting out that database, putting in the funding and making sure we join those together, those additional criminal offences will help.

Lord Freud: The other thing we are doing is pulling together the different groups into a single fraud investigation service, and that is starting this year. That pulls together into a single service the efforts of local authorities, our efforts and those of HMRC, which previously had been scattered.

Chair: Ministers, thank you very much indeed for coming this afternoon and answering so many questions.

Prepared 8th February 2013